8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

Amendment No. 1

Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

November 12, 2005

Date of Report (Date of earliest event reported)

OSI PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation) 0-15190
(Commission
File Number) 13-3159796
(I.R.S. Employer
Identification No.)

58 South Service Road
Melville, NY 11747
(Address of principal executive offices)

(631) 962-2000
(Registrant’s telephone number, including area code)

N/A
(Former name or former address,
if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-23.1: CONSENT OF ERNST & YOUNG LLP

EX-99.2: CONSOLIDATED FINANCIAL STATEMENTS

EX-99.3: UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

EX-99.4: UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     This Current Report on Form 8-K/A (“Form 8-K/A”) amends the Form 8-K filed by OSI Pharmaceuticals, Inc. (“OSI”) on November 16, 2005 (the “Original 8-K”) to include the information required by Item 9.01 of the Form 8-K in connection with OSI’s recent acquisition of Eyetech Pharmaceuticals, Inc. (“Eyetech”).

ITEM 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

     The consolidated financial statements of Eyetech, including the report of the independent registered public accounting firm, Ernst & Young LLP, required by this item appear at Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated by reference herein.

     The unaudited consolidated financial statements of Eyetech required by this item appear at Exhibit 99.3 to this Current Report on Form 8-K/A and are incorporated by reference herein.

(b) Pro Forma Financial Information

     The pro forma financial information required by this item appear at Exhibit 99.4 to this Current Report on Form 8-K/A and are incorporated by reference herein.

Safe Harbor for Forward-Looking Statements

     Information set forth or incorporated by reference in this document contains financial estimates and other “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are typically preceded by words such as “believes,” “ expects,” “anticipates,” “intends,” “will,” “may,” “should,” or similar expressions. These forward-looking statements are subject to risks and uncertainties that may cause actual future experience and results to differ materially from those discussed in these forward-looking statements. Important factors that might cause such a difference include, but are not limited to, the challenges and costs of integrating the operations and personnel of Eyetech; reaction of customers of Eyetech and OSI and related risks of maintaining pre-existing relationships of Eyetech and OSI; the impact of acquisitions and divestitures on the synergies of OSI’s programs; competitive factors, including pricing pressures; the success of research and development activities; and other events and factors disclosed previously and from time to time in OSI’s filings with the Securities and Exchange Commission, including OSI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. Except for OSI’s ongoing obligations to disclose material information under the federal securities laws, OSI disclaims any obligation to update any forward-looking statements after the date of this document.

(c) Exhibits.

Exhibit No.		Description
	2.1	Agreement and Plan of Merger, dated August 21, 2005, among OSI Pharmaceuticals, Inc., Merger EP Corporation, and Eyetech Pharmaceuticals, Inc., filed with the Securities and Exchange Commission on August 22, 2005 by OSI as an exhibit to a Current Report on Form 8-K (file no. 000-15190), and incorporated herein by reference.
	10.1*	OSI Pharmaceuticals, Inc. Stock Incentive Plan for Pre-Merger Employees of Eyetech Pharmaceuticals, Inc.
	10.2*	OSI Pharmaceuticals, Inc. Stock Plan for Assumed Options of Pre-Merger Employees of Eyetech Pharmaceuticals, Inc.
	23.1	Consent of Independent Registered Public Accounting Firm — Ernst & Young LLP to Eyetech Pharmaceuticals, Inc.
	99.1*	Press Release, dated November 14, 2005.
	99.2	Consolidated Financial Statements of Eyetech Pharmaceuticals, Inc.
	99.3	Unaudited Consolidated Financial Statements of Eyetech Pharmaceuticals, Inc.
	99.4	Unaudited Pro Forma Condensed Combined Financial Statements

* Previously filed with the Original 8-K.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 9, 2005	OSI PHARMACEUTICALS, INC.
	By:	/s/ BARBARA A. WOOD
		Barbara A. Wood
		Vice President, General Counsel and Secretary

3

EXHIBIT INDEX

Exhibit No.		Description
	2.1	Agreement and Plan of Merger, dated August 21, 2005, among OSI Pharmaceuticals, Inc., Merger EP Corporation, and Eyetech Pharmaceuticals, Inc., filed with the Securities and Exchange Commission on August 22, 2005 by OSI as an exhibit to a Current Report on Form 8-K (file no. 000-15190), and incorporated herein by reference.
	10.1*	OSI Pharmaceuticals, Inc. Stock Incentive Plan for Pre-Merger Employees of Eyetech Pharmaceuticals, Inc.
	10.2*	OSI Pharmaceuticals, Inc. Stock Plan for Assumed Options of Pre-Merger Employees of Eyetech Pharmaceuticals, Inc.
	23.1	Consent of Independent Registered Public Accounting Firm — Ernst & Young LLP to Eyetech Pharmaceuticals, Inc.
	99.1*	Press Release, dated November 14, 2005.
	99.2	Consolidated Financial Statements of Eyetech Pharmaceuticals, Inc.
	99.3	Unaudited Consolidated Financial Statements of Eyetech Pharmaceuticals, Inc.
	99.4	Unaudited Pro Forma Condensed Combined Financial Statements

* Previously filed with the Original 8-K.

4

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the use of our report dated February 11, 2005, with respect to the consolidated financial statements of Eyetech Pharmaceuticals, Inc. as of December 31, 2004 and 2003 and the three years ended December 31, 2004 included in this current report on Form 8-K/A.

/s/ Ernst & Young LLP

MetroPark, New Jersey
December 6, 2005

EX-99.2

Exhibit 99.2

EYETECH PHARMACEUTICALS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2003 and 2004	F-3
Consolidated Statements of Operations for the Years ended December 31, 2002, 2003 and 2004	F-4
Consolidated Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2002, 2003 and 2004	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004	F-7
Notes to Consolidated Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Eyetech Pharmaceuticals, Inc.

      We have audited the accompanying consolidated balance sheets of Eyetech Pharmaceuticals, Inc. as of December 31, 2003 and 2004, and the related consolidated statements of operations, stockholders’ (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’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. An audit includes 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 Company’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 consolidated financial position of Eyetech Pharmaceuticals, Inc. at December 31, 2003 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with United States generally accepted accounting principles.

/s/ Ernst & Young LLP

MetroPark, New Jersey

February 11, 2005

F-2

EYETECH PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

		December 31,
		2003			2004
Current assets:
	Cash and cash equivalents	$	25,013,756		$	40,779,860
	Marketable securities		106,360,073			170,715,315
	Collaboration receivable		2,562,000			91,965,888
	Prepaid expenses and other current assets		1,301,027			7,868,007
Total current assets			135,236,856			311,329,071
Property and equipment, net			5,867,582			17,817,388
Restricted cash			5,623,865			5,927,360
Other assets			2,751,375			4,385,189
Total assets		$	149,479,678		$	339,459,007
Current liabilities:
	Accounts payable and accrued expenses	$	14,308,103		$	25,103,180
	Deferred license fee revenue, current portion		5,000,000			13,692,958
	Capital lease obligations, current portion		618,350			1,459,544
	Deferred rent liability, current portion		171,856			1,038,407
Total current liabilities			20,098,309			41,294,089
Deferred license fee revenue, net of current portion			65,416,663			159,705,676
Capital lease obligations, net of current portion			1,038,279			1,254,645
Other liabilities, net of current portion			425,761			6,066,546
Redeemable convertible preferred stock — $.01 par value; 29,093,695 shares authorized; 25,062,278 and no shares issued and outstanding at December 31, 2003 and 2004, respectively, liquidation preference of $252,053,310 as of December 31, 2003			185,506,532			—
Stockholders’ (deficit) equity:
	Convertible preferred stock — $.01 par value; 120,000 and none authorized, issued and outstanding at December 31, 2003 and 2004, respectively; liquidation preference of $225,000 as of December 31, 2003		150,000			—
	Preferred stock $.01 par value; 5,000,000 shares authorized, none issued and outstanding at December 31, 2003 and 2004		—			—
	Common stock — $.01 par value; 60,000,000 and 125,000,000 shares authorized at December 31, 2003 and 2004, respectively; 4,527,736 issued and 4,102,736 outstanding at December 31, 2003; and 42,329,499 issued and 41,904,499 outstanding at December 31, 2004		45,277			423,295
	Additional paid-in capital		28,804,713			382,176,673
	Loans to stockholders		(430,666	)		—
	Deferred compensation		(13,956,265	)		(11,817,358	)
	Treasury stock, at cost		(255,000	)		(255,000	)
	Accumulated other comprehensive income		130,831			(572,984	)
	Accumulated deficit		(137,494,756	)		(238,816,575	)
Total stockholders’ (deficit) equity			(123,005,866	)		131,138,050
Total liabilities and stockholders’ (deficit) equity		$	149,479,678		$	339,459,007

See accompanying notes.

F-3

EYETECH PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

		Year Ended December 31,
		2002			2003			2004
Collaboration revenue:
	License fees	$	—		$	4,583,337		$	5,722,499
	Reimbursement of development costs		—			36,835,829			43,629,406
Total collaboration revenue			—			41,419,166			49,351,904
Operating expenses:
	Research and development		39,663,303			70,931,916			102,738,907
	Sales and marketing		—			4,598,588			33,342,575
	General and administrative		5,286,707			6,822,949			17,435,387
Total operating expenses			44,950,010			82,353,453			153,516,868
Loss from operations			(44,950,010	)		(40,934,287	)		(104,164,964	)
Interest income			1,808,727			2,171,226			3,810,429
Interest expense			(32,179	)		(248,184	)		(151,272	)
Loss before income taxes			(43,173,462	)		(39,011,245	)		(100,505,807	)
Provision for income taxes			—			(1,688,000	)		—
Net loss			(43,173,462	)		(40,699,245	)		(100,505,807	)
Preferred stock accretion			(5,096,282	)		(9,160,382	)		(816,013	)
Net loss attributable to common stockholders		$	(48,269,744	)	$	(49,859,627	)	$	(101,321,820	)
Historical — Basic and diluted net loss attributable to common stockholders per share		$	(13.06	)	$	(12.62	)	$	(2.70	)
Weighted average shares outstanding — historical basic and diluted			3,697,192			3,950,481			37,587,299
Pro forma — Basic and diluted net loss attributable to common stockholders per share (Note 2)					$	(1.77	)	$	(2.56	)
Pro forma weighted average shares outstanding — basic and diluted (Note 2)						28,094,165			39,651,420

See accompanying notes.

F-4

EYETECH PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

For the Years Ended December 31, 2002, 2003 and 2004

		Series A Convertible
		Preferred Stock						Common Stock
												Additional			Loans to			Deferred
		Shares			Amount			Shares		Amount		Paid-In Capital			Stockholders			Compensation
Balance at December 31, 2001			120,000			150,000			4,152,000		41,520		5,294,812			(300,000	)		(203,000	)
Warrants issued in connection with the issuance of Series C-2													3,384,794
Deferred compensation related to stock options and restricted Stock, net of cancellations													1,334,763						(1,334,763	)
Amortization of deferred compensation																			238,600
Exercise of stock options									10,000		100		5,900
Loan to purchase restricted stock													57,000			(102,000	)
Repayment of loan to purchase restricted stock																5,000
Options granted to nonemployees													1,048,539
Preferred stock accretion
Net loss
Other comprehensive loss:
	Unrealized depreciation on marketable securities
Comprehensive loss
Balance at December 31, 2002			120,000			150,000			4,162,000		41,620		11,125,808			(397,000	)		(1,299,163	)
Deferred compensation related to stock options, net of cancellations													15,001,255						(15,001,255	)
Amortization of deferred compensation																			2,344,153
Exercise of stock options									365,736		3,657		280,496			(34,416	)
Repayment of loan to purchase restricted stock																750
Options granted to nonemployees													2,397,154
Preferred stock accretion
Net loss
Other comprehensive loss:
	Unrealized depreciation on marketable securities
Comprehensive loss
Balance at December 31, 2003			120,000		$	150,000			4,527,736	$	45,277	$	28,804,713		$	(430,666	)	$	(13,956,265	)
Deferred compensation related to stock options and restricted stock, net of cancellations													4,729,871						(4,729,871	)
Comp charge in connection with acceleration													775,132
Amortization of deferred compensation																			6,868,778
Common stock issued pursuant to equity compensation plans									1,651,302		16,513		3,769,701
Conversion of series A convertible preferred stock			(120,000	)		(150,000	)		120,000		1,200		148,800
Conversion of redeemable convertible preferred stock									27,398,762		273,988		189,189,945
Common stock issued pursuant to cashless exercise of warrants									680,509		6,805		(6,805	)
Common stock issued pursuant to IPO, net of offering costs of $14,154,225									7,951,190		79,512		152,741,050
Options granted to non-employees													2,024,266
Repayment of loan by officer																430,666
Net loss
Other comprehensive loss:
	Unrealized depreciation on marketable securities
Comprehensive loss
Balance at December 31, 2004			—			—			42,329,499	$	423,295	$	382,176,673			—		$	(11,817,358	)

F-5

								Other
		Treasury Stock						Comprehensive						Total
								Income			Accumulated			Stockholders’
		Shares			Amount			(Loss)			Deficit			Deficit
Balance at December 31, 2001			500,000			(300,000	)		354,695			(39,365,385	)		(34,327,358	)
Warrants issued in connection with the issuance of Series C-2															3,384,794
Deferred compensation related to stock options, net of cancellations															—
Amortization of deferred compensation															238,600
Exercise of stock options															6,000
Loan to purchase restricted stock			(75,000	)		45,000									—
Repayment of loan to purchase restricted stock															5,000
Options granted to nonemployees															1,048,539
Preferred stock accretion												(5,096,282	)		(5,096,282	)
Net loss												(43,173,462	)		(43,173,462	)
Other comprehensive loss:
	Unrealized depreciation on marketable securities								(121,907	)					(121,907	)
Comprehensive loss															(43,295,369	)
Balance at December 31, 2002			425,000			(255,000	)		232,788			(87,635,129	)		(78,036,076	)
Deferred compensation related to stock options, net of cancellations															—
Amortization of deferred compensation															2,344,153
Exercise of stock options															249,737
Repayment of loan to purchase restricted stock															750
Options granted to nonemployees															2,397,154
Preferred stock accretion												(9,160,382	)		(9,160,382	)
Net loss												(40,699,245	)		(40,699,245	)
Other comprehensive loss:
	Unrealized depreciation on marketable securities								(101,957	)					(101,957	)
Comprehensive loss															(40,801,202	)
Balance at December 31, 2003			425,000		$	(255,000	)	$	130,831		$	(137,494,756	)	$	(123,005,866	)
Deferred compensation related to stock options and restricted stock, net of cancellations Compensation charge in connection with acceleration of options															775,132
Amortization of deferred compensation															6,868,778
Common stock issued pursuant to equity compensation plans															3,786,214
Conversion of Series A convertible preferred stock
Conversion of redeemable convertible preferred stock															189,463,932
Common stock issued pursuant to cashless exercise of warrants
Common stock issued pursuant to IPO, net of offering costs of $14,154,225															152,820,562
Options granted to non-employees															2,024,266
Preferred stock accretion												(816,012	)		(816,012	)
Repayment of loan by officer															430,666
Net loss												(100,505,807	)		(100,505,807	)
Other comprehensive loss:
	Unrealized depreciation on marketable securities								(703,815	)					(703,815	)
Comprehensive loss															(101,209,622	)
Balance at December 31, 2004			425,000		$	(255,000	)	$	(572,984	)	$	(238,816,575	)	$	131,138,050

See accompanying notes.

F-6

EYETECH PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Year Ended December 31,
			2002			2003			2004
Operating activities
Net loss			$	(43,173,462	)	$	(40,699,245	)	$	(100,505,807	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Depreciation and amortization			316,728			891,177			2,195,911
	Loss on disposal of assets			—			31,268			141,765
	Noncash stock-based compensation			1,287,134			4,741,307			9,668,176
	Loss on lease termination			—			—			2,475,070
	Gain on sale of marketable securities			(333,235	)		(16,077	)		28,470
	Changes in operating assets and liabilities:
		Collaboration receivable		—			(2,562,000	)		(89,403,888	)
		Prepaid expenses and other current assets		(43,073	)		77,643			(6,088,997	)
		Other assets		—			(260,757	)		(3,335,037	)
		Accounts payable and accrued expenses		1,626,614			6,865,625			11,296,041
		Deferred license fee revenue		—			70,416,663			102,981,971
		Other liabilities		498,212			(44,859	)		4,032,265
Net cash provided by (used in) operating activities				(39,821,082	)		39,440,745			(66,514,060	)
Investing activities
Purchases of property and equipment				(582,330	)		(3,778,026	)		(12,532,316	)
Purchase of marketable securities				(136,447,734	)		(400,556,838	)		(3,382,237,258	)
Proceeds from sale of marketable securities				126,796,094			357,470,013			3,317,149,730
Increase in restricted cash				(1,084,543	)		(2,958,225	)		(303,495	)
Repayment of loan to stockholders				255,000			750			430,666
Increase in prepaid expenses and other current assets				(39,538	)		(407,663	)		(477,983	)
Increase in other assets				(839,395	)		(1,701,223	)		—
Net cash (used in) investing activities				(11,942,446	)		(51,931,212	)		(77,970,655	)
Financing activities
Proceeds from issuance of common stock				6,000			249,737			154,521,783
Proceeds from exercise of stock options				—			—			3,786,214
Proceeds from issuance of redeemable convertible preferred stock and warrants, net				54,154,200			32,022,769			2,640,427
Repayment of capital lease obligations				(127,184	)		(560,128	)		(697,605	)
Net cash provided by financing activities				54,033,016			31,712,378			160,250,818
Net increase in cash and cash equivalents				2,269,488			19,221,911			15,766,104
Cash and cash equivalents at beginning of period				3,522,357			5,791,845			25,013,756
Cash and cash equivalents at end of period			$	5,791,845		$	25,013,756		$	40,779,860
Noncash financing and investing activities
Fixed assets capitalized using capital leases			$	2,355,686		$	—		$	1,755,166
Loans to stockholders in connection with exercise of stock options and stock purchase			$	102,000		$	34,416		$	—
Supplemental disclosures of cash flow information
Cash paid during the period for:
	Interest		$	32,179		$	248,184		$	151,272
	Income taxes paid		$	—		$	1,709,890		$	—

See accompanying notes.

F-7

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004

1. Organization and Description of Business

      Eyetech Pharmaceuticals, Inc. and its wholly owned subsidiaries (collectively, “Eyetech” or the “Company”), is a biopharmaceutical company that specializes in the development and commercialization of novel therapeutics to treat diseases of the eye. The Company’s initial focus is on diseases affecting the back of the eye, particularly the retina. In December 2004, the Company received approval from the FDA to market its first product, Macugen® (pegaptanib sodium injection), for the treatment of neovascular (wet) age-related macular degeneration, known as neovascular AMD, in the United States. The Company began selling Macugen in the United States in January 2005. Macugen is being sold to a limited number of specialty distributors who in turn sell Macugen to physicians, physician group practices, hospitals, federal government buying groups and clinics. The Company is also further developing Macugen for the treatment of neovascular AMD and developing Macugen for the treatment of diabetic macular edema, known as DME, which is a complication of diabetic retinopathy, and retinal vein occlusion, known as RVO, and other agreed upon ophthalmic indications.

      The Company formed a wholly owned subsidiary in Ireland in 2002. There has been no activity in this company since inception in 2002. In November 2004, concurrent with the acquisition of a potential second-source manufacturing facility for Macugen, the Company established a wholly owned subsidiary to hold these assets. Revenues and expenses from this acquisition were not material to the Company’s results at December 31, 2004. The Company operates in a single business segment.

      On February 4, 2004, the Company successfully completed an initial public offering (IPO) of its common stock. The IPO consisted of the sale of 6,500,000 shares of common stock at a price of $21.00 per share. As part of the offering, the Company granted to the underwriters an option to purchase an additional 975,000 shares within 30 days of the IPO to cover over-allotments. This option was exercised in tandem with the IPO. In addition, 476,190 shares of common stock were purchased concurrently with the IPO by Pfizer for $10,000,000 as part of its commitment under Pfizer’s collaboration with the Company. (Note 11)

      Net proceeds from the IPO, including the sale of stock to Pfizer, after deducting underwriter’s discounts and commission and offering expenses were $152,821,000. An additional $2,600,000 was received for the issuance of 469,360 shares of preferred stock in connection with the exercise of preferred stock warrants. An additional 1,867,124 shares of preferred stock were issued on a cashless basis to the holders of 2,728,661 preferred stock warrants, who surrendered 861,567 preferred stock warrants as payment for those shares. All outstanding shares of preferred stock, including those shares issued in connection with warrant exercises, automatically converted to common shares upon the completion of the IPO.

2. Basis of Presentation and Significant Accounting Policies

Consolidation

      The accompanying consolidated financial statements include the accounts of Eyetech Pharmaceuticals, Inc. and its wholly owned subsidiaries. All material intercompany account balances and transactions have been eliminated in consolidation.

Use of Estimates

      The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

F-8

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

Cash Equivalents

      The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2004 the Company has substantially all of its cash and cash equivalents deposited with one financial institution.

Marketable Securities

      Marketable securities are classified as “available-for-sale” and are carried at market value with unrealized gains and losses reported as other comprehensive income or loss, which is a separate component of stockholders’(deficit) equity.

Restricted Cash

      Restricted cash of $5,927,000 at December 31, 2004 collateralizes $5,927,000 of outstanding letters of credit associated with the leases of the Company’s office and laboratory facilities. The funds are invested in certificates of deposit (Note 13).

Concentration of Credit Risk

      Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash equivalents and marketable securities. The Company has established guidelines relating to diversification and maturities that allows the Company to manage risk.

Fair Value of Financial Instruments

      The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, accounts payable and accrued expenses, approximate their fair values. The estimated fair value of the redeemable convertible preferred stock at December 31, 2003 was $526,000,000, based on the IPO common stock value of $21.00 per share. At December 31, 2004, the redeemable convertible preferred stock has been converted to common stock.

Inventory

      At December 31, 2004, the Company has not capitalized any inventory as all costs associated with Macugen’s active pharmaceutical ingredient and work in process were expensed as research and development costs prior to the approval by the FDA of Macugen on December 17, 2004. There were no finished goods as of December 31, 2004.

Property and Equipment

      Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from three to seven years. Leasehold improvements are amortized over the estimated useful lives of the assets or related lease terms, whichever is shorter.

Impairment of Long-Lived Asset

      The Company assesses impairment of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). Assessments of the recoverability of long-lived assets are conducted when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based upon the ability to recover the asset from the expected future

F-9

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

undiscounted cash flows of related operations. No events have been identified that caused an evaluation of the recoverability of the long-lived assets for the years ended December 31, 2002, 2003 and 2004.

Revenue Recognition

      Revenues associated with the Company’s collaboration with Pfizer consist of non-refundable, up-front license fees and reimbursement of development expenses.

      The Company uses revenue recognition criteria outlined in Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” and Emerging Issues Task Force (“EITF”) Issue 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). Accordingly, revenues from licensing agreements are recognized based on the performance requirements of the agreement. Non-refundable up-front license fees, where the Company has an ongoing involvement or performance obligation, are generally recorded as deferred revenue in the balance sheet and amortized into license fees in the statement of operations over the term of the performance obligation. The Company also receives non-refundable license payments based on the achievement of certain regulatory and sales events. The Company records deferred license revenue when all contractual obligations related to a non-refundable payment have been satisfied and amortizes the payments into license fees in the statement of operations over the remaining term of the related performance obligation.

      Revenues derived from reimbursements of costs associated with the development of Macugen are recorded in compliance with EITF Issue 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent” (“EITF 99-19”), and EITF Issue 01-14, “Income Statement Characterization of Reimbursements Received For “Out-of-Pocket” Expenses Incurred” (“EITF 01-14”). According to the criteria established by these EITF Issues, in transactions where the Company acts as a principal, with discretion to choose suppliers, bears credit risk and performs part of the services required in the transaction, the Company has met the criteria to record revenue for the gross amount of the reimbursements.

Research and Development Costs

      Research and development costs are expensed as incurred.

Stock-Based Compensation

      In December 2002, SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of FASB Statement No. 123” (“SFAS No. 148”) was issued. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation from the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). The Company adopted the disclosure requirements of SFAS No. 148 effective December 31, 2002. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting prescribed in APB No. 25 and, accordingly, does not recognize compensation expense for stock option grants made at an exercise price equal to or in excess of the fair market value of the stock at the date of grant.

F-10

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

      Had compensation cost for the Company’s outstanding employee stock options been determined based on the fair value at the grant dates for those options consistent with SFAS No. 123, the Company’s net loss and basic and diluted net loss per share, would have been changed to the following pro forma amounts:

	Year Ended December 31,
	2002			2003			2004
Net loss attributable to common stockholders, as reported	$	(48,269,744	)	$	(49,859,627	)	$	(101,321,820	)
Add: Non-cash employee compensation as reported		238,600			2,344,153			6,868,778
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(350,877	)		(2,450,510	)		(11,973,703	)
SFAS No. 123 pro forma net loss	$	(48,382,021	)	$	(49,965,984	)	$	(106,426,745	)
Basic and diluted loss attributable to common stockholders per share, as reported	$	(13.06	)	$	(12.62	)	$	(2.70	)
Basic and diluted loss attributable to common stockholders per share, SFAS No. 123 pro forma	$	(13.09	)	$	(12.65	)	$	(2.83	)
Unaudited pro forma basic and diluted net loss attributable to common stockholders per share, SFAS No. 123 pro forma				$	(1.78	)	$	(2.68	)

      SFAS No. 123 pro forma information regarding net loss is required by SFAS No. 123, and has been determined as if the Company had accounted for its stock-based employee compensation under the fair value method prescribed in SFAS No. 123. For periods prior to our IPO on February 4, 2004, the fair value of the options was estimated at the date of grant using the minimum value pricing model. Subsequent to that date the Company began using the Black-Scholes option pricing model. The following assumptions have been used to compute fair market value under each model:

	Year Ended December 31,
	2002	2003	2004
Volatility	—	—	72%
Risk-free interest rate	3.5% - 5.0%	2.8% - 4.2%	3.9% - 4.75%
Dividend yield	0%	0%	0%
Expected life	7 years	5 years	5 years

      The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts. Pro forma compensation related to stock option grants is expensed over their respective vesting periods.

      The Company accounts for options issued to non-employees under SFAS 123 and EITF Issue 96-18, “Accounting for Equity Investments that are Issued to Other than Employees for Acquiring or in Conjunction with Selling Goods or Services” (“EITF 96-18”). As such, the value of such unvested options is periodically re-measured and income or expense is recognized during their vesting terms.

Comprehensive Loss

      The Company reports comprehensive loss in accordance with SFAS No. 130, “Reporting Comprehensive Income” (“SFAS No. 130”). SFAS 130 establishes rules for the reporting and display of comprehensive loss and its components. SFAS No. 130 requires unrealized gains on available-for-sale securities to be included in other comprehensive loss.

F-11

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

Income Taxes

      The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Net Loss Per Share

      The Company computes net loss per share in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share” (“SFAS No. 128”). Under the provisions of SFAS No. 128, basic net loss per common share (“Basic EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding, excluding shares of common stock which are subject to repurchase and are not vested. Diluted net loss per common share (“Diluted EPS”) is computed by dividing net loss by the weighted-average number of common shares, excluding shares of common stock which are subject to repurchase and are not vested and dilutive common share equivalents then outstanding. Common share equivalents consist of the incremental common shares issuable upon the conversion of preferred stock, shares issuable upon the exercise of stock options and the conversion of preferred stock upon the exercise of warrants. Diluted EPS is identical to Basic EPS since common equivalent shares are excluded from the calculation, as their effect is anti-dilutive.

Pro Forma Information (Unaudited)

      Pro forma basic and diluted net loss per share is computed using the weighted average number of common shares outstanding, including the pro forma effects of the automatic conversion of all outstanding convertible preferred stock into shares of the Company’s common stock effective upon the closing of the Company’s IPO, as if such conversion had occurred at the date of the original issuance. Accordingly, pro forma basic and diluted net loss per common share has been calculated assuming the preferred stock was converted as of the original date of issuance of the preferred stock. Pro forma weighted average shares of 28,094,165 and 39,651,420 is based on the weighted average conversion of 24,143,684 and 2,064,121 shares of our convertible preferred stock for the year ended December 31, 2003 and 2004, respectively.

Reclassification

      Certain prior period amounts have been reclassified to conform to current year presentation.

Recently Issued Accounting Pronouncements

      On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), which is a revision of FASB Statement No. 123 (“SFAS No. 123”), “Accounting for Stock-Based Compensation”. SFAS No. 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and amends SFAS No. 95, “Statement of Cash Flows” (“SFAS No. 95”). Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure will no longer be allowable.

      SFAS No. 123(R) must be adopted no later than July 1, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. The Company expects to adopt SFAS No. 123(R) on July 1, 2005.

F-12

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

      The Company will adopt the “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remain unvested on the effective date.

      As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have a significant impact on the Company’s results of operations, although it will have no impact on the Company’s overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share in Note 2 to the Company’s consolidated financial statements.

3. Available for Sale Investments

      Available for sale investments consist primarily of federal agency notes, asset backed securities, mortgage backed securities, corporate debt, United States treasury notes and municipal bonds. The following is a summary of available for sale investments as of December 31, 2003 and 2004:

				Gross		Gross
				Unrealized		Unrealized
		Cost		Gains		Losses			Fair Value
December 31, 2003
Maturities within one year:
	Corporate notes	$	24,386,443	$	9,725	$	(7,720	)	$	24,388,448
	Federal agency notes		23,951,489		10,670		(1,695	)		23,960,464
	Asset-backed securities		32,023,764		100,669		(2,463	)		32,121,970
			80,361,696		121,064		(11,878	)		80,470,882
Maturities between one to two years:
	Corporate notes		16,316,113		12,833		(3,658	)		16,325,288
	Federal agency notes		6,909,507		1,031		(14,664	)		6,895,874
	Mortgage-backed securities		730,202		8,486		—			738,688
	Municipal bonds		1,911,724		17,617		—			1,929,341
			25,867,546		39,967		(18,322	)		25,889,191
Total		$	106,229,242	$	161,031	$	(30,200	)	$	106,360,073

F-13

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

				Gross		Gross
				Unrealized		Unrealized
		Cost		Gains		Losses			Fair Value
December 31, 2004
Maturities within one year:
	Corporate notes	$	42,226,280	$	4,417	$	(85,206	)	$	40,717,367
	Federal agency notes		10,181,803		2,851		(16,566	)		10,025,965
			52,408,083		7,268		(101,773	)		50,743,332
Maturities between one to two years:
	Corporate notes		45,891,785		6,714		(197,840	)		45,370,563
	Federal agency notes		9,140,212		987		(93,782	)		8,980,323
	Mortgage-backed securities		3,479,739		—		(17,991	)		3,404,501
	Asset-backed securities		52,746,356		6,448		(129,770	)		52,032,551
	Municipal bonds		3,309,543		10,870		—			3,248,732
	U.S. Treasury Notes		6,997,773		—		(62,845	)		6,935,313
			121,565,408		25,019		(502,227	)		119,971,983
Total		$	173,973,491	$	32,287	$	(604,000	)	$	170,715,315

4. Property and Equipment

      Property and equipment consists of the following:

	December 31,
	2003			2004
Furniture and office equipment	$	562,826		$	965,028
Computer equipment		1,728,918			3,626,825
Laboratory equipment		4,348,071			7,082,596
Manufacturing equipment		—			5,115,637
Leasehold improvements		559,108			4,554,554
		7,198,923			21,344,640
Accumulated depreciation and amortization		(1,331,341	)		(3,527,252	)
	$	5,867,582		$	17,817,388

      Included in property and equipment are assets recorded under capital leases with a cost of approximately $2,355,686 and $4,110,852 at December 31, 2003 and 2004, respectively. Amortization of the assets recorded under capital leases is included with depreciation expense. The accumulated amortization related to these assets under capital leases was approximately $649,000 and $1,149,000 at December 31, 2003 and 2004, respectively.

F-14

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

5. Accounts Payable and Accrued Expenses

      Accounts payable and accrued expenses consist of the following:

	December 31,
	2003		2004
Milestones	$	—	$	6,000,000
Clinical development expenses		3,862,646		3,725,479
Manufacturing expenses		2,469,740		2,597,638
Payroll and related expenses		2,483,688		6,272,244
Professional fees		1,876,267		1,516,321
Collaboration payable		715,000		2,142,000
Other expenses		2,900,762		2,849,499
	$	14,308,103	$	25,103,180

6. Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity

Common Stock

      As of December 31, 2004, the Company is authorized to issue 125,000,000 shares of common stock and 5,000,000 shares of preferred stock issuable in one or more series to be designated by the Company’s Board of Directors. Each holder of common stock is entitled to one vote for each share of common stock held of record on all matters on which stockholders generally are entitled to vote.

      The Company had reserved shares of common stock for issuance as follows:

	December 31,
	2003		2004
Common stock options and restricted stock grants		9,049,250		7,688,783
Conversion of Series A preferred stock		120,000		—
Conversion of Series B preferred stock		5,790,331		—
Conversion of Series C-1 and C-2 preferred stock		16,524,694		—
Conversion of Series D preferred stock		2,747,253		—
Exercise of warrants to purchase Series B, C-1 and C-2 preferred stock		4,031,414		—
		38,262,942		7,688,783

F-15

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

Convertible Preferred Stock

      The following table provides details of the issuance of preferred stock by the Company:

Preferred						Converted at IPO		Outstanding at
Issue	Issue Date	Shares		Proceeds		to Common		12/31/04
Series A	March 2000		120,000	$	150,000		120,000		—
Series B	April 2000		5,766,332	$	34,473,000		5,766,332		—
Series B	January 2001		20,666	$	124,000		20,666		—
Series C-1	July 2001		7,964,229	$	53,461,000		7,964,229		—
Series C-2	August 2001		7,521,777	$	54,157,000		7,521,777		—
Series D	December 2002		2,747,253	$	24,737,000		2,747,253		—
Totals			24,140,257	$	167,102,000		24,140,257		—

      Concurrent with the closing of the Company’s IPO in February 2004, all outstanding shares of preferred stock were converted on a one to one basis into common stock.

Preferred Stock Warrants

      The following table provides details of the issuance of warrants in connection with the sale of preferred stock by the Company:

													Warrants
													Surrendered
Preferred					Exercise		Fair Value		Cash		Cashless		in Cashless		Outstanding
Stock Series		Issue Date	Warrants		Price		at Issuance		Exercise		Exercise		Exercise		at 12/31/04
	Series B	March 2000		1,142,902	$	6.00	$	1,040,000		149,566		709,517		283,819		—
	Series C-1	July 2001		1,592,846	$	6.80	$	2,134,000		688,134		611,746		292,966		—
	Series C-2	August 2001		1,504,354	$	7.20	$	3,385,000		673,681		545,861		284,812		—
Total				4,240,102			$	6,559,000		1,511,381		1,867,124		861,597		—

      Proceeds from the exercises of warrants aggregated $7,286,000 and $2,640,000 through December 31, 2003 and 2004, respectively. In addition, other warrant holders exercised warrants, utilizing the cashless exercise provisions of the warrant agreements, to purchase 1,867,124 by exchanging 861,597 warrants at the IPO price of $21.00 per share. At completion of the IPO, 833,333 warrants to purchase Series B redeemable convertible preferred stock automatically converted into warrants to purchase 833,333 shares of common stock. These warrants were exercised through the surrender of 152,824 warrants at an average market price of $26.72. No warrants remain outstanding at December 31, 2004.

Voting

      Preferred stockholders were entitled to the number of votes equal to the number of shares of common stock into which each share of preferred stock was convertible.

Dividends

      The holders of Series A, Series B, Series C-1, Series C-2 and Series D were entitled to annual non-cumulative dividends when, and if, declared, prior and in preference to any dividends payable on common stock, at a rates from $0.10 per share to $0.73 per share. In connection with the conversion of preferred stock into common stock upon the completion of the IPO, all dividend rights ceased.

F-16

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

Liquidation

      In the event of a defined liquidation event (“Liquidation Event”), that results in the transfer of 50% or more of the outstanding voting power of the Company or a sale of substantially all the assets of the Company, preferred stockholders were entitled to, prior and in preference to any other stockholders, a liquidation preference distribution of the sum of 1.5 times the original per share purchase price paid to the Company, plus all declared and unpaid dividends. The Series B, Series C-1, Series C-2 and Series D preferred stockholders rank senior in preference to the Series A preferred stockholders. After payment of full preferential amounts to preferred stockholders, the remaining assets shall be distributed ratably among the holders of common stock.

      The following table summarizes convertible preferred stock issued and outstanding (excluding preferred stock warrants of 4,031,414), with liquidation preferences for each series at December 31, 2003:

	Authorized		Issued and		Liquidation
	Shares		Outstanding		Preference
Series A		120,000		120,000	$	225,000
Series B		7,763,233		5,790,331		52,112,979
Series C-1		9,557,077		8,496,054		86,659,751
Series C-2		9,026,132		8,028,640		86,709,312
Series D		2,747,253		2,747,253		37,500,003
		29,213,695		25,182,278	$	263,207,045

      In connection with the conversion of preferred stock into common stock upon the completion of the IPO, all liquidation rights ceased.

Conversion

      Each holder of preferred stock had the ability to convert at any time, at its option, shares of preferred into common stock on a one-for-one basis subject to certain adjustments. All series of preferred stock were converted into common shares at the completion of the IPO.

Redemption

      At any time on or after July 20, 2010, the Company shall redeem for cash convertible preferred stock at the greater of the sum of 1.5 times the original series issue price plus declared but unpaid dividends or the amount per share as would have been payable had each share been converted into common stock. Accordingly, through the closing date of the Company’s IPO, the Company recorded and accreted the Series B, Series C-1, Series C-2 and Series D to its defined redemption value. In connection with the conversion of preferred stock to common upon completion of the IPO, all redemption rights ceased.

7. Stock Options

      The Company maintains several equity compensation plans and has reserved a maximum of 4,400,000 shares under the Company’s 2003 Stock Incentive Plan (the “2003 Incentive Plan”), 500,000 shares under the Company’s 2003 Employee Stock Purchase Plan (the “2003 Purchase Plan”), 8,175,000 shares under the Company’s 2001 Stock Option Plan (the “2001 Plan”) and 2,747,500 shares for stock options granted prior to the adoption of the 2001 Plan. Stock options and restricted stock awards may be granted to employees and consultants. Beginning in 2005, the 2003 Incentive Plan, is subject to annual increases in accordance with the terms of the 2003 Incentive Plan. Upon effectiveness of the 2003 Incentive

F-17

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

Plan at completion of the Company’s IPO, the Company stopped granting stock options or other awards under the Company’s 2001 Plan.

      Granted stock options generally vest over a four-year period with substantially all options vesting with respect to 25% of the shares on the first anniversary of the grant date and thereafter in thirty-six monthly installments and restricted stock awards typically vest 25% per year over a four year period. Options expire ten years from date of grant. Additionally, under the terms of the 2001 Plan, granted options may be exercised immediately into restricted shares. Options that are exercised into restricted shares of common stock continue to vest under the original terms of the related options. Under the terms of the Plan, should the employee terminate employment with the Company, the Company may repurchase those shares that are unvested at the termination date at the original purchase price.

      The following table summarizes option activity for the Company:

		Common Stock			Weighted-Average
		Options			Exercise Price
Outstanding at January 1, 2002			1,983,500		$	1.24
	Granted		1,885,000			1.38
	Exercised		(10,000	)		0.60
	Cancelled		(105,084	)		0.89
Outstanding at December 31, 2002			3,753,416		$	0.98
	Granted		1,518,500			5.18
	Exercised		(365,736	)		0.78
	Cancelled		(209,264	)		2.33
Outstanding at December 31, 2003			4,696,916		$	2.30
	Granted		2,683,919			34.97
	Exercised		(1,547,711	)		1.99
	Cancelled		(450,495	)		8.58
Outstanding at December 31, 2004			5,382,629		$	18.16

      The following table summarizes information about vested stock options outstanding:

	December 31,
	2002		2003		2004
Vested stock options		1,210,891		1,844,793		1,490,855
Weighted average exercise price	$	0.60	$	0.87	$	3.17

F-18

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

      The following table summarizes information about stock options outstanding at December 31, 2004:

							Stock Options
							Outstanding and
	Stock Options Outstanding						Exercisable
			Weighted		Weighted				Weighted
			Average		Average				Average
			Remaining		Exercise				Exercise
Range of Exercise Prices	Shares		Contractual Life		Price		Shares		Price
$ 0.60 to $ 1.40		1,437,234		6.71	$	1.01		1,437,234	$	1.01
$ 1.41 to $10.00		1,443,706		8.42		4.48		1,443,706		4.48
$10.01 to $30.00		1,018,927		9.11		28.63		117,926		18.15
$30.01 to $47.95		1,482,762		9.67		40.90		—
Total		5,382,629		8.44	$	18.16		2,998,866	$	3.39

      In connection with the granting of employee stock options and restricted stock awards in 2002, 2003 and 2004, the Company recorded deferred compensation, net of forfeitures and cancellations of approximately $1,335,000, $15,001,000 and $4,730,000, respectively. Deferred compensation is being amortized over the vesting period of the grants resulting in non-cash stock-based compensation expense of approximately $239,000, $2,344,000 and $6,869,000 for the years ended December 31, 2002, 2003 and 2004, respectively. Included in the calculation of deferred compensation and compensation expense for 2004 were 121,626 shares of restricted stock that the Company granted to employees only.

      For the years ended December 31, 2002, 2003, and 2004, the Company granted a total of 137,500, 5,000 and 22,500 respectively, in stock options to certain consultants and Scientific Advisory Board members. The Company has accounted for these options in accordance with EITF 96-18 and, accordingly, recorded non-cash expense of $1,049,000, $2,397,000 and $2,024,000 for the years ended December 31, 2002, 2003, and 2004, respectively. The Company will continue to re-measure the fair value of unvested stock options to these consultants and Scientific Advisory Board members until vesting is complete.

      On September 10, 2003, the Company’s Board of Directors approved the Company’s 2003 Stock Incentive Plan (the “2003 Incentive Plan”). The 2003 Incentive Plan, which was approved by stockholders in December 2003, became effective on February 4, 2004, the date that the registration statement relating to the Company’s IPO was declared effective.

      On September 10, 2003, the Company’s Board of Directors approved the Company’s 2003 Employee Stock Purchase Plan (the “2003 Purchase Plan”). The 2003 Purchase Plan, which was approved by stockholders in December 2003, became effective on February 4, 2004, the date that the registration statement relating to the Company’s IPO was declared effective. Under the 2003 Purchase Plan, 500,000 shares of common stock are reserved for sale to participating employees at an amount equal to 85% of the lower of the closing price of our common stock on the first day or the last day of the offering period. During the year ended December 31, 2004, 39,715 shares were issued to employees at a price of $17.85, resulting in proceeds of $709,000. The 2003 Purchase Plan qualifies under the requirements of Section 423 of the Internal Revenue Code as a non-compensatory plan and is therefore considered under APB 25 to be non-compensatory. As a result, the Company did not record any expense in connection with the 2003 Purchase Plan during the year ended December 31, 2004.

F-19

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

8. Loss Per Share

      The following table sets forth the computation of basic and diluted net loss attributable to common stockholders per share.

		Year Ended December 31,
		2002			2003			2004
Numerator:
	Net loss	$	(43,173,462	)	$	(40,699,245	)	$	(100,505,807	)
	Preferred stock accretion		(5,096,282	)		(9,160,382	)		(816,013	)
Numerator for basic and diluted net loss attributable to common stockholders per share — net loss attributable to common stockholders		$	(48,269,744	)	$	(49,859,627	)	$	(101,321,820	)
Denominator:
	Denominator for basic and diluted net loss attributable to common stockholders per share — weighted average shares		3,697,192			3,950,481			37,587,299
Basic and diluted net loss attributable to common stockholders per share		$	(13.06	)	$	(12.62	)	$	(2.70	)
Denominator for unaudited pro forma basic and diluted net loss attributable to common stockholders per share — weighted average shares (Note 2)						28,094,165			39,651,420
Unaudited pro forma basic and diluted net loss attributable to common stockholders per share (Note 2)					$	(1.77	)	$	(2.56	)

      The following table shows dilutive common share equivalents outstanding, which are not included in the above historical calculations, as the effect of their inclusion is anti-dilutive during each period:

	Year Ended December 31,
	2002		2003		2004
Preferred stock		21,393,004		25,182,278		—
Options		3,753,416		4,696,916		5,382,629
Warrants		5,073,435		4,031,414		—
		30,219,855		33,910,608		5,382,629

9. Income Taxes

      At December 31, 2004, the Company has a net operating loss for federal income tax purposes of approximately $174,804,000, of which $24 million is attributable to stock option exercises, which begins to expire in 2020.

      The Company has research and development tax credit carryforwards at December 31, 2004 of approximately $3,458,107, which will begin to expire in 2022. The Company also has alternative minimum tax credit carryforwards at December 31, 2004 of approximately $666,556, which are available for use against the Company’s regular tax liability in the future. If an ownership change, as defined under Internal Revenue Code Section 382, occurs, the use of these carry forwards may be subject to limitation.

F-20

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

      Provision for income tax at December 31, 2002, 2003 and 2004 consists of:

	2002		2003		2004
Current Federal alternative minimum tax	$	—	$	833,000	$	—
Current State taxes		—		855,000		—
	$	—	$	1,688,000	$	—

      Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred tax assets relate primarily to net operating loss carryforwards and deferred license fee revenue. The change in valuation allowance was approximately $17,703,000 and $51,764,000 for the years ended December 31, 2003 and 2004, respectively. At December 31, 2003 and 2004, a valuation allowance was recorded to fully offset the net deferred tax asset. Significant components of the Company’s deferred tax assets are as follows:

		Year Ending December 31,
		2003			2004
Deferred tax assets:
	Net operating loss carryforwards	$	17,326,000		$	69,921,000
	Stock-based compensation		2,286,000			—
	Start-up costs, net of amortization		122,000			9,000
	Deferred license fee revenue		28,167,000			26,167,000
	Alternative minimum tax credit		833,000			667,000
	Research and development tax credit		1,027,000			3,458,000
	Deferred rent liability		197,000			2,813,000
Total gross deferred tax assets			49,958,000			103,035,000
Deferred tax liabilities:
	Depreciation		(993,000	)		(2,306,000	)
Total gross deferred tax liabilities			(993,000	)		(2,306,000	)
Valuation allowance			(48,965,000	)		(100,729,000	)
Net deferred tax assets		$	—		$	—

      A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2002, 2003 and 2004 is as follows:

	Year Ended
	December 31,
	2002			2003			2004
Statutory rate		(34	)%		(34	)%		(34	)%
State and local income taxes (net of federal tax benefit)		(6	)		(4	)		(6	)
Tax credits		—			(3	)		(2	)
Change in valuation allowance		40			45			42
		0	%		4	%		0	%

F-21

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

10. Loans to Stockholders

      The Company had made loans to certain current and former executive officers and a consultant in connection with the exercise of stock options and purchases of common stock from the Company. The total outstanding balance of these loans at December 31, 2003 was $430,666 and was collateralized by 633,333 shares of common stock, which were held by the Company. During the year ended December 31, 2004, these loans were repaid in full and the common stock collateral was released by the Company. At December 31, 2004, the Company has no outstanding loans to stockholders.

11. Collaboration Agreements

      In March 2000, the Company licensed the rights to certain technology from a corporate licensor in exchange for an up-front license fee of $7,000,000 and a warrant to purchase 833,333 shares of Series B convertible preferred stock at an exercise price of $6.00 per share. The warrant was converted to a warrant to purchase common shares at the close of the Company’s IPO and is exercisable at any time through March 30, 2005. During 2004, the warrant was exercised into 680,509 shares of common stock on a cashless basis in exchange for the surrender of 152,824 warrants. During 2004, the Company recognized as research and development expense $8,000,000 in license fees in connection with regulatory filings and will pay an additional $7,000,000 in connection with the commercial launch of Macugen in 2005. In addition, the Company may be required to make additional payments aggregating up to $10,000,000 upon the achievement of future development and commercial launch milestones specified in the licensing agreement.

      In December 2001, the Company signed a license agreement for the nonexclusive rights to certain technology from a corporate licensor in exchange for an initial irrevocable and nonrefundable license fee of $2,000,000, which was paid in 2002. During 2004, the Company recorded $1,000,000 in license fees upon filing with the FDA for marketing approval of Macugen. At the time FDA approval of Macugen was received, the Company recorded $3,000,000 in license fees payable on this license agreement and will amortize this amount over the remaining life of the patent on the licensed technology. Additionally, the Company may be required to make additional payments aggregating up to $2,750,000 upon the achievement of specified regulatory milestones with respect to the use of Macugen for other therapeutic indications.

      In February 2002, the Company entered into a license, manufacturing and supply agreement for the use of certain technology rights to certain patents of a component of Macugen. The contract calls for specified pricing based on quantities purchased. The Company paid an up-front license fee of $1,500,000 at signing. For the year ended December 31, 2004, the Company recognized $1,500,000 as research and development expense in license fees paid in connection with regulatory filings for Macugen. At December 31, 2004, the Company recorded $3,000,000 due this licensor as prepaid royalty expense which will be credited against future royalties due the licensor in connection with sales of Macugen.

      In December 2002, Pfizer and the Company entered into several concurrent agreements to jointly develop and commercialize Macugen. Under the terms of the agreement, which became effective February 3, 2003 when government approval was obtained, Pfizer made initial payments of $100,000,000 which included the purchase of 2,747,253 shares of the Company’s Series D preferred stock for $24,736,944, net of issuance costs and a $75,000,000 initial license fee which is being amortized over the expected term of the agreement (estimated at 15 years). In addition, Pfizer agreed to purchase from the Company, up to an additional $25,000,000 of the Company’s capital stock at the then current market price upon the completion of certain events, including $10,000,000 of the Company’s common stock at the IPO price concurrently with the successful completion of an IPO. Concurrent with the IPO during 2004, Pfizer purchased 476,190 shares of common stock at $21.00 per share and is obligated to purchase the remaining $15,000,000 of common stock in connection with the approval of Macugen. (Note 16)

F-22

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

      During 2004, the Company received an additional $15.5 million in license fees based on regulatory filings in the United States and European Union and has recorded a receivable of $90 million in connection with the FDA approval of Macugen. These license fees are being amortized over the remaining expected term of the agreement (estimated at approximately 13 years).

      Based on the achievement of certain specified worldwide regulatory submission and approvals, the Company would be eligible to receive up to an additional $90,000,000 in license payments. The Company also has the potential to receive up to an additional $450,000,000 in milestone payments, which are contingent upon successful commercialization of Macugen and which are based on attainment of agreed-upon sales levels. Pfizer may terminate the collaboration relationship upon six to twelve months’ prior notice, depending on when such notice is given.

      Upon commercial launch in 2005, Macugen will be co-promoted by the Company and Pfizer in the United States where Eyetech will have an ophthalmology sales force, maintain the inventory and book all United States product sales. The Company and Pfizer will share in profits and losses from the sale of Macugen products in the United States. Outside the United States, Pfizer will market the product exclusively under a license, for which the Company will receive royalty income.

      Under the terms of the agreement, both parties will expend funds related to the co-promotion and development of Macugen. Pfizer will generally fund a majority of the ongoing development costs incurred pursuant to an agreed upon development plan covering the development of Macugen for AMD, DME, RVO and other agreed upon ophthalmic indications. In certain instances, the Company will reimburse Pfizer for the Company’s share of costs that Pfizer incurs.

      The following table details the revenues and expenses incurred for research and development and marketing expenses in connection with this agreement:

			Year Ended December 31,
			2003		2004
License fee amortization			$	4,583,337	$	5,722,499
Reimbursement of development expense			$	36,835,829	$	43,629,406
Development and marketing expense			$	3,305,552	$	8,224,000
Payments received from Pfizer			$	31,683,277	$	41,329,917
	Collaboration Receivable and Payable:
Collaboration receivable			$	2,562,000	$	294,000
Equipment receivable			$	—	$	1,671,888
Milestone receivable			$	—	$	90,000,000
		Total Receivable	$	2,562,000	$	91,965,888
Deferred license fee revenue			$	70,416,633	$	170,213,235
Deferred collaboration revenue					$	3,185,399
Collaboration payable			$	715,000	$	2,142,000
	Total Deferred Revenues and Payable *		$	71,131,663	$	175,540,634

*  Deferred license fee revenues are payments received in connection with up-front license fees and are amortized to license fee revenue over the life of the contract. Deferred collaboration revenues are payments received in advance of the incurrence of collaboration costs and costs related to the reimbursement of certain capital expenditures. Collaboration payable represents the Company’s share of costs incurred by Pfizer which the Company is contractually liable to pay to Pfizer.

F-23

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

12. Capital Leases

      The Company leases laboratory equipment and other equipment under capital leases that bear interest from 8.6% to 10.1% and expire in 2006. The following is a schedule of the future minimum lease payments under these capital leases as of December 31, 2004:

Year Ending December 31,
2005	$	1,625,844
2006		1,329,057
Total		2,954,901
Less amount representing interest		240,712
Present value of the minimum lease payments		2,714,189
Less current portion of capital lease obligations		1,459,544
	$	1,254,645

13. Commitments

      The Company leases office and laboratory space in New York, New York, Cedar Knolls, New Jersey and Lexington, Massachusetts. Under existing lease agreements, the Company has secured bank letters of credit totaling approximately $5,927,000, which are fully cash collateralized and the cash is categorized as restricted cash in the balance sheet.

      Rent expense for the years ended December 31, 2002, 2003 and December 31, 2004 was approximately $1,380,000, $1,316,000, and $4,806,000, respectively. In connection with the Company’s decision to relocate its corporate headquarters in New York, New York and its research laboratories in Woburn, Massachusetts, the Company recognized a loss of $2,475,000. The loss is based on the present value of the cash flows associated with the current leases. The Company used a risk adjusted interest rate of 7.5% to discount the cash flows and assigned probabilities to various sub-lease scenarios to arrive at a weighted average probability of loss as required by SFAS 146.

      Future minimum lease commitments, net of sublease income, are as follows:

Year Ending December 31,
2005	$	3,903,770
2006		5,546,538
2007		5,564,783
2008		4,911,431
2009		5,185,517
Thereafter		54,008,866
	$	79,120,905

      Under certain of the Company’s collaborative agreements, it is obligated to make specified payments upon achieving specified milestones relating to the development and regulatory approval of Macugen. These contingent payment obligations are not included in the above table.

14. 401(k) Plan

      The Company maintains a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited by the maximum amounts

F-24

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2004

allowable under federal tax regulations. The Company has discretion to make contributions to the plan. However, to date no contributions have been made.

15. Selected Quarterly Financial Data (Unaudited)

	Quarter Ended
	March 31			June 30			September 30			December 31
2002
Net loss	$	(8,747,753	)	$	(9,631,821	)	$	(10,697,851	)	$	(14,096,037	)
Net loss attributable to common stockholders		(9,833,552	)		(10,717,620	)		(11,971,922	)		(15,746,650	)
Basic and diluted net (loss) per common share*	$	(2.69	)	$	(2.93	)	$	(3.20	)	$	(4.22	)
2003*
License fees	$	833,334		$	1,250,001		$	1,250,001		$	1,250,001
Reimbursement of development costs		6,475,830			9,948,756			11,143,313			9,267,930
Net loss		(5,422,172	)		(9,071,789	)		(14,308,255	)		(11,897,029	)
Net loss attributable to common stockholders		(7,681,135	)		(11,330,753	)		(16,583,830	)		(14,263,909	)
Basic and diluted net (loss) per common share*	$	(2.04	)	$	(2.88	)	$	(4.12	)	$	(3.50	)
2004
License fees		1,250,000			1,250,000			1,407,613			1,814,884
Reimbursement of development costs		10,462,600			11,299,799			12,058,749			9,808,259
Net loss		(15,011,745	)		(31,021,698	)		(24,716,974	)		(29,755,389	)
Net loss attributable to common stockholders		(15,827,757	)		(31,021,698	)		(24,716,974	)		(29,755,389	)
Basic and diluted net (loss) per common share*		(0.57	)		(0.77	)		(0.60	)		(0.72	)

*  Per common share amounts for the quarters and full years have been calculated separately. Accordingly, quarterly amounts do not add to the annual amount because of differences in the weighted average common shares outstanding during each period principally due to the effect of the Company’s issuing shares of its common stock during the year.

Diluted EPS is identical to Basic EPS since common equivalent shares are excluded from the calculation as their effect is anti-dilutive.

16. Subsequent Event

      In February 2005, in connection with the approval of Macugen by the FDA in December 2004, the Company issued to Pfizer 344,000 shares of common stock at a purchase price of approximately $43.60 per share. Gross proceeds of this sale were $15,000,000. Pfizer is not obligated to purchase any additional shares of the Company’s common stock.

F-25 EX-99.3 4 y15246exv99w3.htm EX-99.3: UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

EXHIBIT 99.3

FINANCIAL INFORMATION

EYETECH PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and shares)	September 30,			December 31,
	2005			2004
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	40,664		$	40,780
Marketable securities		190,814			170,715
Accounts receivable, net of allowances		92,568			—
Collaboration receivable		7,378			91,966
Inventory		10,039			—
Prepaid expenses and other current assets		4,811			7,868
Total current assets		346,274			311,329
Property and equipment, net		21,453			17,817
Restricted cash		5,927			5,927
Other assets		10,584			4,386
Total assets	$	384,238		$	339,459
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	36,610		$	25,103
Collaboration profit share payable		40,760			—
Deferred revenue, current portion		13,406			13,693
Capital lease obligations, current portion		1,405			1,460
Deferred rent liability, current portion		1,016			1,038
Total current liabilities		93,197			41,294
Deferred revenue, net of current portion		149,820			159,706
Capital lease obligations, net of current portion		194			1,254
Deferred rent liability, net of current portion		7,965			6,067
Stockholders’ equity:
Preferred stock $.01 par value; 5,000,000 shares authorized, none issued and outstanding at June 30, 2005 and December 31, 2004		—			—
Common stock $.01 par value; 125,000,000 shares authorized;
45,290,793 issued and 44,851,764 outstanding at June 30, 2005;
42,329,499 issued and 41,904,499 outstanding at December 31, 2004		457			423
Additional paid-in capital		423,729			382,177
Deferred compensation		(23,096	)		(11,817	)
Treasury stock, at cost		(854	)		(255	)
Accumulated other comprehensive income		(699	)		(573	)
Accumulated deficit		(266,475	)		(238,817	)
Total stockholders’ equity		133,062			131,138
Total liabilities and stockholders’ equity	$	384,238		$	339,459

See accompanying notes.

1

EYETECH PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(in thousands, except per share amounts)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
Revenue:
Gross product revenue	$	58,649		$	—		$	133,725		$	—
Less: Distribution service fees, allowances, and returns		(3,171	)		—			(7,594	)		—
Net product revenue		55,478			—			126,131			—
License fees		3,061			1,408			9,208			3,908
Reimbursement of development costs		7,678			12,058			21,748			33,821
Other revenue		1,161			—			1,976			—
Total revenue		67,378			13,466			159,063			37,729
Operating expenses:
Cost of goods sold		11,640			—			26,158			—
Research and development		23,326			25,879			66,688			81,723
Sales and marketing		10,698			9,342			33,062			19,230
Collaboration profit sharing		22,005			—			50,226			—
General and administrative		6,921			3,962			16,065			9,924
Total operating expenses		74,590			39,183			192,199			110,966
Loss from operations		(7,212	)		(25,717	)		(33,136	)		(73,238	)
Interest income		2,056			1,033			5,648			2,604
Interest expense		(46	)		(33	)		(171	)		(117	)
Net loss		(5,202	)		(24,717	)		(27,659	)		(70,750	)
Preferred stock accretion		—			—			—			(816	)
Net loss attributable to common stockholders		(5,202	)		(24,717	)		(27,659	)		(71,566	)
Basic and diluted net loss attributable to common stockholders per share	$	(0.12	)	$	(0.60	)	$	(0.64	)	$	(1.97	)
Weighted average shares outstanding — basic and diluted		43,801			40,912			43,349			36,294
Pro forma basic and diluted net loss per share attributable to common stockholders										$	(1.83	)
Weighted average shares outstanding — pro forma basic and diluted											39,059

See accompanying notes.

2

EYETECH PHARMACEUTICALS INC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(in thousands)	Nine Months Ended September 30,
	2005			2004
Operating activities
Net loss	$	(27,659	)	$	(70,750	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		3,514			1,371
Noncash stock-based compensation		11,181			6,021
Loss on disposal of assets		(8	)		153
(Gain) loss on sale of marketable securities		(6	)		28
Changes in operating assets and liabilities:
Collaboration receivable		84,588			(4,100	)
Accounts receivable		(92,568	)		—
Prepaid expenses and other current assets		2,993			(2,770	)
Inventory		(10,039	)		—
Other assets		(6,199	)		(201	)
Accounts payable and accrued expenses and collaboration profit sharing payable		52,270			6,580
Deferred revenue		(10,173	)		14,046
Other liabilities		1,876			3,338
Net cash provided by (used in) operating activities		9,772			(46,285	)
Investing activities
Purchases of property and equipment		(7,142	)		(5,793	)
Purchase of marketable securities		(1,645,611	)		(2,954,754	)
Proceeds from sale and maturities of marketable securities		1,625,390			2,888,593
Increase in restricted cash		—			(303	)
Repayment of loan to stockholders		—			431
Interest receivable		63			(478	)
Net cash used in investing activities		(27,299	)		(72,305	)
Financing activities
Proceeds from issuance of common stock, net		14,993			154,522
Proceeds from exercise of stock options		4,132			—
Proceeds from issuance of redeemable convertible preferred stock and warrants, net		—			2,640
Purchase of treasury stock		(599	)		—
Repayment of capital leases		(1,115	)		(458	)
Net cash provided by financing activities		17,411			158,628
Net increase in cash and cash equivalents		(116	)		40,038
Cash and cash equivalents at beginning of period		40,780			25,014
Cash and cash equivalents at end of period	$	40,664		$	65,052
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	171		$	117
Issuance of redeemable preferred stock on conditional exercise of warrants	$	—		$	501
Conversion of redeemable and convertible preferred stock to common stock	$	—		$	189,614
Expenses in connection with initial public offering of common stock reclassified to additional paid in capital	$	—		$	1,701

See accompanying notes.

EYETECH PHARMACEUTICALS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2005

1. Organization and Description of Business

Eyetech Pharmaceuticals, Inc., together with its wholly owned subsidiaries (collectively, “Eyetech” or the “Company”), is a biopharmaceutical company that specializes in the development and commercialization of novel therapeutics to treat diseases of the eye. The Company’s initial focus is on diseases affecting the back of the eye, particularly the retina. In December 2004, the Company received approval from the United States Food and Drug Administration (FDA) to market its first product, Macugen® (pegaptanib sodium injection), for the treatment of neovascular (wet) age-related macular degeneration, known as neovascular AMD. The Company began selling Macugen in the United States in January 2005. Macugen is being sold to a limited number of specialty distributors who in turn sell Macugen to physicians, a limited number of specialty pharmacy providers and federal government buying groups. The Company is also further developing Macugen for the treatment of neovascular AMD and developing Macugen for the treatment of diabetic macular edema, known as DME, which is a complication of diabetic retinopathy, retinal vein occlusion, known as RVO, and other indications.

In November 2004, concurrent with the acquisition of a potential second-source manufacturing facility for Macugen, the Company established a wholly owned subsidiary to hold these assets. The Company operates in a single business segment.

On August 21, 2005 the Company and OSI Pharmaceuticals, Inc. announced a definitive merger agreement (“the merger”) whereby OSI agreed to acquire the Company. Under the merger agreement, OSI will acquire all outstanding shares of the Company’s common stock in a combination of cash and OSI common stock. The merger agreement calls for $15 per share to be paid in cash with the remaining consideration to be paid in OSI common stock using an exchange ratio of 0.12275 OSI shares for each share of Company stock. The acquisition is subject to a number of closing conditions, including Eyetech stockholder approval and regulatory approvals. The Company has received notice from the FTC and the SEC that the transaction will not be reviewed by either agency. On November 10, 2005, the Company held a special meeting of stockholders to consider adoption of the merger agreement with OSI. At the meeting, more than 71% of the Company’s outstanding shares of common stock were voted in favor of adoption of the merger agreement, which is in excess of the majority of outstanding shares required to adopt the merger agreement under Delaware law.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Quarterly Report on Form 10-Q. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows for the periods presented.

The results of operations for the three-month and nine-month periods ended September 30, 2005 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2005. These condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At September 30, 2005, the Company had substantially all of its cash and cash equivalents deposited with one financial institution.

Marketable Securities

Marketable securities are classified as “available-for-sale” and are carried at market value with unrealized gains and losses reported as other comprehensive income or loss, which is a separate component of stockholders’ equity.

Restricted Cash

Restricted cash of $5.9 million at September 30, 2005 and December 31, 2004 collateralizes $5.9 million of outstanding letters of credit associated with the leases of the Company’s office and laboratory facilities. The funds are invested in certificates of deposit.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash equivalents and marketable securities. The Company has established guidelines relating to diversification and maturities that allow the Company to manage risk.

Revenue Recognition

     Product Revenue

The Company sells Macugen primarily to distributors, who, in turn, sell to physicians, a limited number of specialty pharmacy providers and federal government buying groups. The Company does not recognize revenue from product sales until there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed and determinable, the buyer is obligated to pay the Company, the obligation to pay is not contingent on resale of the product, the buyer has economic substance apart from the Company, the Company has no obligation to bring about sale of the product, the amount of returns can be reasonably estimated and collectibility is reasonably assured.

The Company reports product revenue on a gross basis for sales in the United States. The Company has determined that it is qualified as a principal under the criteria set forth in Emerging Issues Task Force (“EITF”), Issue 99-19, “Reporting Gross Revenue as a Principal vs. Net as an Agent,” based on the Company’s responsibilities under the Company’s contracts with Pfizer Inc., which include manufacture of product for sale in the United States, distribution, ownership of product inventory and credit risk from customers.

The Company records allowances for distribution fees, product returns and governmental rebates for products sold in the United States at the time of sale, and reports revenue net of such allowances. The Company must make significant judgments and estimates in determining these allowances. For instance:

• The Company’s distributors have a limited right of return for unopened product during a specified time period based on the product’s labeled expiration date. As a result, in calculating the allowance for product returns, the Company estimates the likelihood that product sold to distributors might be returned within a specific timeframe. The Company determines its estimates using actual product data from distributors, industry data on products with similar characteristics

and the expiration dates of product sold.

• Certain government buying groups that purchase the Company’s product from wholesalers have the right to receive a discounted price from the Company. As a result, the Company estimates the amount of product which will ultimately be sold to these buying groups. The Company determines its estimates using actual product data from distributors and historical industry trends.

If actual results differ from the Company’s estimates, the Company will be required to make adjustments to these allowances in the future.

     Reimbursement of Development Costs and License Revenue

Revenues associated with the Company’s collaboration with Pfizer consist of non-refundable, up-front license fees and reimbursement of development expenses.

The Company uses revenue recognition criteria outlined in Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” and EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). Accordingly, revenues from licensing agreements are recognized based on the performance requirements of the agreement. Non-refundable license fees, where the Company has an ongoing involvement or performance obligation, are recorded as deferred revenue in the balance sheet and amortized into license fees in the statement of operations over the term of the performance obligation.

Revenues derived from reimbursements of costs associated with the development of Macugen are recorded in compliance with EITF Issue 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent” (“EITF 99-19”), and EITF Issue 01-14, “Income Statement Characterization of Reimbursements Received For ‘Out-of-Pocket’ Expenses Incurred” (“EITF 01-14”). According to the criteria established by these EITF Issues, in transactions where the Company acts as a principal, with discretion to choose suppliers, bears credit risk and performs part of the services required in the transaction, the Company has met the criteria to record revenue for the gross amount of the reimbursements.

Research and Development Costs

Research and development costs are expensed as incurred.

Inventory

Inventory is stated at the lower of cost or market value. Inventory is comprised of three components: raw materials, which are purchased directly by the Company; work in process, which is primarily Macugen’s active pharmaceutical ingredient (API) where title has transferred from our contract manufacturer to the Company; and finished goods, which is packaged product ready for commercial sale. Prior to FDA approval of Macugen in December 2004, the Company purchased raw materials and manufactured API, the costs of which were expensed as research and development. Accordingly, cost of goods sold for the nine months ended September 30, 2005 does not include costs associated with the manufacture of the API component of Macugen. There were no finished goods produced before the FDA approval.

The major classes of inventory were as follows (in thousands):

	September 30,		September 30,
Inventory	2005		2004
Raw materials	$	1,530	$	—
Work-in-progress		2,176		—
Finished goods		6,333		—
Total inventory	$	10,039	$	—

Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of FASB Statement No. 123” (“SFAS No. 148”). SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation from the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). The Company adopted the disclosure requirements of SFAS No. 148 effective December 31, 2002. As allowed by SFAS No.123, the Company has elected to continue to apply the intrinsic value-based method of accounting prescribed in APB No. 25 and, accordingly, does not recognize compensation expense for stock option grants made at an exercise price equal to or in excess of the fair market value of the stock at the date of grant.

During the second quarter of 2005, the Company broadly issued restricted stock awards to officers, employees and board members to encourage performance and retention. Under this program, the Company issued 1,481,611 restricted shares that have a purchase price of $0.01 per share and a grant date fair value of $12.78 per share. The right to sell the shares vests on the one year anniversary of the grant based upon continued employment. Additionally, the restricted shares were granted with a change in control provision whereby the shares would become 100% vested upon the occurrence of a change in control event, as that term is defined under the Company’s 2003 Equity Compensation Plan. Pursuant to APB 25, the Company will record compensation expense for the grant date fair value of the award on a straight-line basis over the vesting period.

During the second quarter of 2005, the Company accelerated the vesting of unvested stock options previously awarded to employees and officers under its stock option plans which had exercise prices greater than $22.44, which was two times the closing price of the stock on June 15, 2005. Unvested options to purchase approximately 3 million shares became fully vested and exercisable as a result of the vesting acceleration. The purpose of the accelerated vesting was to enable the Company to minimize the compensation expense associated with these options in future periods, upon adoption of SFAS 123R (Share-Based Payment) in January 2006. The pretax charge to the income statement that will be avoided in future periods amounts to approximately $54 million, of which $17 million would have been incurred during 2006. The effect of the acceleration on June 28, 2005, caused pro-forma stock-based compensation expense to increase for the quarter ended June 30, 2005 over the corresponding 2004 by approximately $57 million pretax.

Had compensation cost for the Company’s outstanding employee stock options been determined based on the fair value at the grant dates for those options consistent with SFAS No. 123, the Company’s net loss and basic and diluted net loss per share, would have been changed to the following pro forma amounts (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net loss attributable to common stockholders, as reported	$	(5,202	)	$	(24,717	)	$	(27,659	)	$	(71,566	)
Add: Non-cash employee compensation as reported		5,936			1,217			11,545			4,782
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(766	)		(3,476	)		(65,962	)		(8,007	)
SFAS 123 pro forma loss	$	(31	)	$	(26,976	)	$	(82,076	)	$	(74,791	)
Basic and diluted loss attributable to common stockholders per share, as reported	$	(0.12	)	$	(0.60	)	$	(0.64	)	$	(1.97	)
Basic and diluted loss attributable to common stockholders per share, SFAS 123 pro forma	$	(0.00	)	$	(0.66	)	$	(1.89	)	$	(2.06	)

SFAS No. 123 pro forma information regarding net loss is required by SFAS No.123, and has been determined as if the Company had accounted for its stock-based employee compensation under the fair value method prescribed in SFAS No.123. The fair value of the options prior to completion of the Company’s initial public offering was estimated at the date of grant using the minimum value pricing model. Upon completion of the initial public offering in February 2004, the Company began using the Black-Scholes model to estimate fair value. The following assumptions were utilized for the calculations during each period:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Risk-free interest rate		4.1% - 4.34	%		4.5	%		4.1% - 4.5	%		3.9% - 4.75
Dividend yield		0	%		0	%		0	%		0	%
Expected life	6.25 years			5 years			6.25 years			5 years
Volatility		77	%		76	%		74	%		73	%

The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. Pro forma compensation related to stock option grants is expensed over their respective vesting periods.

The Company accounts for options issued to non-employees under SFAS No.123 and EITF Issue 96-18, “Accounting for Equity Investments that are Issued to Other than Employees for Acquiring or in Conjunction with Selling Goods or Services”. As such, the value of such unvested options is periodically re-measured and income or expense is recognized during their vesting terms.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Recently Issued Accounting Pronouncements

On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), which is a revision SFAS No. 123. SFAS No. 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and amends SFAS No. 95, “Statement of Cash Flows” (“SFAS No. 95”). Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure will no longer be allowable.

SFAS No. 123(R) must be adopted no later than January 1, 2006. Early adoption is permitted in periods in which financial statements have not yet been issued. The Company has decided not to adopt SFAS No. 123(R) prior to January 1, 2006. The Company expects to adopt the “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remain unvested on the effective date.

As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have a significant impact on the Company’s results of operations, although it will have no impact on the Company’s overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share as disclosed above in “Stock Based Compensation.”

3. Net Loss Per Share

The Company computes net loss per share in accordance with SFAS No. 128, “Earnings per Share” (“SFAS No.128”). Under the provisions of SFAS No. 128, basic net loss per common share (“Basic EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted net loss per common share (“Diluted EPS”) is computed by dividing net loss by the weighted-average number of common shares and dilutive common share equivalents then outstanding. Common equivalent shares consist of the incremental common shares issuable upon the conversion of preferred stock, shares issuable upon the exercise of stock options and the conversion of preferred stock upon the exercise of warrants. Diluted EPS is identical to Basic EPS since common equivalent shares are excluded from the calculation, as their effect is anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per share for the three-month and nine-month periods ended September 30, 2005 and 2004 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Numerator:
Net Loss	$	(5,202	)	$	(24,717	)	$	(27,659	)	$	(70,750	)
Preferred stock accretion		—			—			—			(816	)
Numerator for basic and diluted net loss attributable to common stockholders per share — net loss attributable to common stockholders	$	(5,202	)	$	(24,717	)	$	(27,659	)	$	(71,566	)
Denominator:
Denominator for basic and dilutive net loss attributable to common stockholders per share — weighted-average shares		43,801			40,912			43,349			36,294
Basic and diluted net loss attributable to common stockholders per share	$	(0.12	)	$	(0.60	)	$	(0.64	)	$	(1.97	)
Denominator for unaudited pro forma basic and diluted net loss attributable to common stockholders per share — weighted average shares											39,059
Unaudited pro forma basic and diluted net loss attributable to common stockholders per share										$	(1.83	)

Pro forma basic and diluted net loss per share is computed using the weighted average number of common shares outstanding, including the pro forma effects of the automatic conversion of all outstanding convertible preferred stock into shares of the Company’s common stock effective upon the closing of the Company’s initial public offering, as if such conversion had occurred at the date of the original issuance. Accordingly, pro forma basic and diluted net loss per common share has been calculated assuming the preferred stock was converted as of the original date of issuance of the preferred stock.

The following table shows dilutive common share equivalents outstanding on a weighted average basis, which are not included in the above historical calculations, as the effect of their inclusion is anti-dilutive during each period (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Preferred Stock		—		—		—		2,765
Options		4,500		5,797		4,500		5,636
Warrants		—		—		—		613
		4,500		5,797		4,500		9,014

4. Comprehensive Loss

Comprehensive losses are primarily comprised of net losses and unrealized gains and losses on available for sales securities. Comprehensive losses for the three months and nine months ended September 30, 2005 and 2004 are detailed below (in thousands).

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
Net loss	$	(5,202	)	$	(24,717	)	$	(27,659	)	$	(70,750	)
Unrealized (loss) gain on available for sale securities		(122	)		184			(126	)		(506	)
Comprehensive loss	$	(5,324	)	$	(24,533	)	$	(27,785	)	$	(71,256	)

5. Pfizer Collaboration

In December 2002, Pfizer and the Company entered into several concurrent agreements to jointly develop and commercialize Macugen. Under the terms of the agreement, which became effective February 3, 2003 when government approval was obtained, Pfizer made initial payments of $100 million which included the purchase of 2,747,253 shares of the Company’s Series D preferred stock for $24.7 million, net of issuance costs and a $75 million initial license fee which is being amortized over the expected term of the agreement (estimated at 15 years). In addition, Pfizer agreed to purchase from the Company, up to an additional $25 million of the Company’s capital stock at the then current market price upon the completion of certain events. Such $25 million of capital stock was purchased from the Company as follows: in February 2004, Pfizer purchased approximately $10 million of common stock (476,190 shares of common stock) at $21.00 per share in connection with the Company’s initial public offering and, in February 2005, Pfizer purchased $15 million of common stock (344,000 shares of common stock) at approximately $43.60 per share in connection with the approval of Macugen in the United States.

During 2004, the Company received an additional $15.5 million in license fees based on regulatory filings in the United States and European Union and in 2005 received $90 million in connection with the FDA approval of Macugen. These license fees are being amortized on a straight line basis over the remaining expected term of the agreement (currently estimated at approximately 13 years).

Based on the achievement of certain specified worldwide regulatory submission and approvals, the Company would be eligible to receive up to an additional $90 million in license payments. The Company also has the potential to receive up to an additional $450 million in milestone payments, which are contingent upon successful commercialization of Macugen and which are based on attainment of agreed-upon sales levels. Pfizer may terminate the collaboration relationship upon six to twelve months’ prior notice, depending on when such notice is given.

Following commercial launch in January 2005, Macugen is being co-promoted by the Company and Pfizer in the United States where the Company has an ophthalmology sales force, maintains the inventory and records as revenue all United States product sales. The Company and Pfizer will share in profits and losses from the sale of Macugen products in the United States. Outside the United States, Pfizer will market the product exclusively under a license, in connection with which the Company will be entitled to receive royalty income.

Under the terms of the agreement, both parties will expend funds related to the co-promotion and development of Macugen. Pfizer will generally fund a majority of the ongoing development costs incurred pursuant to an agreed upon development plan covering the development of Macugen for AMD, DME, RVO and other agreed upon ophthalmic indications. In certain instances, the Company will reimburse Pfizer for the Company’s share of costs that Pfizer incurs.

6. Termination Benefits

On June 28, 2005, the Company notified 25 employees that their employment would be involuntarily terminated as part of a strategic workforce restructuring.

As a result at June 30, the Company recorded a charge of $1.5 million for termination benefits, primarily severance payments, in connection with the restructuring. Costs associated with this charge have been recorded in the profit and loss line items where expenses for the affected employees are customarily expensed. All employees affected by this reduction were off payroll by mid-July 2005.

2005 Termination Benefits

	Termination
	Benefits
Beginning liability at June 30, 2005	$	1,467
Provisions		—
Payments		1,253
Ending liability at September 30, 2005	$	214

7. Subsequent Event

On November 10, 2005, the Company held a special meeting of stockholders to consider adoption of the merger agreement with OSI Pharmaceuticals, Inc. (“OSI”). At the meeting, more than 71% of the Company’s outstanding shares of common stock were voted in favor of adoption of the merger agreement, which is in excess of the majority of outstanding shares required to adopt the merger agreement under Delaware law. As a result, On November 14, 2005, OSI completed its acquisition of Eyetech. OSI acquired Eyetech for approximately $690 million in cash and approximately 5.7 million shares of OSI common stock.

EX-99.3

EX-99.3

EX-99.4

Exhibit 99.4

OSI PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined balance sheet combines the historical unaudited consolidated balance sheets of OSI Pharmaceuticals, Inc., or OSI, and Eyetech Pharmaceuticals, Inc, or Eyetech, as of September 30, 2005, prepared in accordance with U.S. GAAP, giving effect to the merger as if it occurred on September 30, 2005. The following unaudited pro forma condensed combined statements of operations for the year ended September 30, 2004, the three-month transition period ended December 31, 2004 and the nine-month period ended September 30, 2005 combine the historical consolidated financial statements of OSI and Eyetech giving effect to the merger as if it occurred on October 1, 2003, reflecting only pro forma adjustments expected to have a continuing impact on the combined results. The unaudited pro forma statement of operations for the year ended September 30, 2004 combines the historical consolidated statements of operations of OSI for the year ended September 30, 2004 and Eyetech for the year ended December 31, 2004. In December 2004, OSI changed its fiscal year end to December 31 and filed a transition report on Form 10-QT for the three-month period ended December 31, 2004. The unaudited pro forma condensed combined statement of operations for the three-month period ended December 31, 2004 combines the historical consolidated statements of operations of OSI and Eyetech for the three-month periods ended December 31, 2004. Accordingly, the historical consolidated statement of operations for Eyetech for the three months ended December 31, 2004 are included in the unaudited condensed pro forma statements of operations for both the year ended September 30, 2004 and the three months ended December 31, 2004. The unaudited pro forma condensed statement of operations for the nine-month period ended September 30, 2005 combines the historical consolidated statements of OSI and Eyetech for the nine-month period ended September 30, 2005.

     Under the purchase method of accounting, the total estimated purchase price is allocated to the net tangible and intangible assets of the acquired entity based on their estimated fair values as of the completion of the transaction. A final determination of these estimated fair values will be based on a valuation of the actual net tangible and intangible assets of Eyetech that exists as of the closing date of the transaction. The Company has engaged an outside valuation firm to assist in determining fair values of the assets acquired and liabilities assumed.

     These unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have actually been obtained had the merger been completed on the assumed dates or for the periods presented, or which may be realized in the future. To produce the pro forma financial information, OSI allocated the purchase price using its best estimates of fair value. These estimates are based on the information available at the time the registration statement was declared effective. In addition to the independent third-party valuation, the impact of the integration activities, the timing of the completion of the transaction in November 2005 and other changes in Eyetech’s net tangible and intangible assets that may have occurred prior to completion of the transaction could cause material differences from the information presented below. Accordingly, the purchase accounting adjustments reflected in these unaudited pro forma condensed combined financial statements are preliminary and subject to change and do not reflect potential changes in the market assumptions from those used in the initial valuation models. Further, the unaudited pro forma condensed combined financial statements do not include any adjustments for restructuring liabilities that may result from integration activities, as management of OSI has not yet finalized the nature and extent of these activities. The unaudited pro forma financial information does not reflect any potential operating efficiencies. The unaudited pro forma condensed combined financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and accompanying notes of OSI and Eyetech in their respective Form 10-K’s and Form 10-Q’s.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 30, 2005

	Historical			Historical			Pro Forma					OSI Pro Forma
	OSI			Eyetech			Adjustments			Notes		Combined
	(Amounts in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	162,855		$	40,664		$	(124,704	)		C,G	$	78,815
Investment securities		392,962			190,814			(583,776	)		C		—
Restricted investment securities — short-term		4,833			—								4,833
Receivables		37,363			99,946								137,309
Inventory — net		16,990			10,039			8,909			A		35,938
Interest receivables		2,920			—								2,920
Prepaid expenses and other current assets		8,127			4,811								12,938
Total current assets		626,050			346,274			(699,571	)				272,753
Restricted cash and investment securities — long-term		—			5,927								5,927
Property, equipment and leasehold improvements — net		44,608			21,453								66,061
Debt issuance costs — net		3,095			—								3,095
Goodwill		39,091			—			157,581			H		196,672
Other intangible assets — net		11,960			—			386,000			H		397,960
Other assets		2,830			10,584								13,414
TOTAL ASSETS	$	727,634		$	384,238		$	(155,990	)			$	955,882
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	35,327		$	36,610		$					$	71,937
Unearned revenue — current		9,275			13,406			(13,406	)		B		9,275
Collaboration profit share payable		—			40,760								40,760
Capital leases payable and deferred rent — current		—			2,421								2,421
Total current liabilities		44,602			93,197			(13,406	)				124,393
Other liabilities:
Capital leases payable and deferred rent — long term		2,206			8,159								10,365
Unearned revenue — long-term		26,668			149,820			(149,820	)		B		26,668
Convertible senior subordinated notes — long-term		150,000			—								150,000
Contingent value rights		22,047			—								22,047
Accrued post-retirement benefit		5,066			—								5,066
Total liabilities		250,589			251,176			(163,226	)				338,539
Stockholders’ equity:
Common stock, $.01 Par Value		529			457			(457	)		E		586
								57			F
Additional paid-in capital		1,391,994			423,729			(423,729	)		E		1,607,619
								205,335			F
								1,906			F
								8,384			L
Deferred compensation		(762	)		(23,096	)		23,096			E		(9,146	)
								(8,384	)		L
Accumulated deficit		(891,424	)		(266,475	)		266,475			E		(958,424	)
								(67,000	)		D
Accumulated other comprehensive income		2,159			(699	)		699			E		2,159
Less: Treasury stock		(25,451	)		(854	)		854			E		(25,451	)
Total stockholders’ equity		477,045			133,062			7,236					617,343
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	727,634		$	384,238		$	(155,990	)			$	955,882

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Twelve Months Ended September 30, 2004

												OSI
	Historical			Historical			Pro Forma					Pro forma
	OSI			Eyetech			Adjustments			Notes		Combined
	(Amounts in thousands, except per share amounts)
Revenues:
Product sales and sales commissions	$	35,525		$	—		$					$	35,525
Reimbursement of development costs		—			43,629								43,629
License, milestone and other revenues		7,275			5,723			(5,000	)		N		7,998
Total revenues		42,800			49,352			(5,000	)				87,152
Expenses:
Cost of product sales		8,985			—								8,985
Research and development		110,398			102,739			2,225			L		215,362
Acquired in-process research and development		32,785			—			67,000			D		99,785
Selling, general and administrative		98,909			50,778			2,719			L		152,406
Impairment of intangible asset		24,599			—								24,599
Amortization of intangibles		18,606			—			30,880			I		49,486
Total operating expenses		294,282			153,517			102,824					550,623
Loss from operations		(251,482	)		(104,165	)		(107,824	)				(463,471	)
Other income (expense):
Investment income — net		5,259			3,810			(9,069	)		J		—
Interest expense		(13,436	)		(151	)		(15,891	)		M		(29,478	)
Other income (expense) — net		(712	)		—								(712	)
Net loss		(260,371	)		(100,506	)		(132,784	)				(493,661	)
Preferred stock accretion		—			(816	)		816			O		—
Net loss	$	(260,371	)	$	(101,322	)	$	(131,968	)			$	(493,661	)
Basic and diluted net loss per common share	$	(6.50	)	$	(2.70	)						$	(10.79	)
Weighted average shares of common stock outstanding		40,083			37,587			(37,587	)		K		45,737
								5,654			K

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Three Months Ended December 31, 2004

												OSI
	Historical			Historical			Pro Forma					Pro forma
	OSI			Eyetech			Adjustments			Notes		Combined
	(Amounts in thousands, except per share amounts)
Revenues:
Product sales and sales commissions	$	11,756		$	—		$					$	11,756
Reimbursement of development costs		—			9,808								9,808
License, milestone and other revenues		591			1,815			(1,250	)		N		1,156
Total revenues		12,347			11,623			(1,250	)				22,720
Expenses:
Cost of product sales		(1,247	)		—								(1,247	)
Research and development		31,913			21,016			512			L		53,441
Net expense from unconsolidated joint business		7,661			—								7,661
Selling, general and administrative		20,313			21,534			625			L		42,472
Amortization of intangibles		3,804			—			7,720			I		11,524
Total operating expenses		62,444			42,550			8,857					113,851
Loss from operations		(50,097	)		(30,927	)		(10,107	)				(91,131	)
Other income (expense):
Investment income — net		2,380			1,205			(3,585	)		J		—
Interest expense		(1,219	)		(34	)		(5,568	)		M		(6,821	)
Other income (expense) — net		541			—								541
Net loss	$	(48,395	)	$	(29,756	)	$	(19,260	)			$	(97,411	)
Basic and diluted net loss per common share	$	(1.02	)	$	(0.72	)						$	(1.84	)
Weighted average shares of common stock outstanding		47,375			41,326			(41,326	)		K		53,029
								5,654			K

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2005

												OSI
	Historical			Historical			Pro Forma					Pro forma
	OSI			Eyetech			Adjustments			Notes		Combined
	(Amounts in thousands, except per share amounts)
Revenues:
Net revenue from unconsolidated joint business	$	54,892		$	—		$					$	54,892
Royalties on product sales		1,952			—								1,952
Product sales and sales commissions		22,103			126,131								148,234
Reimbursement of development costs		—			21,748								21,748
License, milestone and other revenues		8,737			11,184			(3,750	)		N		16,171
Total revenues		87,684			159,063			(3,750	)				242,997
Expenses:
Cost of product sales		3,636			26,158								29,794
Research and development		86,007			66,688			522			L		153,217
Acquired in-process research and development		3,542			—								3,542
Collaboration profit sharing		—			50,226								50,226
Selling, general and administrative		65,765			49,127			639			L		115,531
Amortization of intangibles		11,435			—			23,160			I		34,595
Total operating expenses		170,385			192,199			24,321					386,905
Loss from operations		(82,701	)		(33,136	)		(28,071	)				(143,908	)
Other income (expense):
Investment income — net		10,563			5,648			(12,950	)		J		3,261
Interest expense		(3,657	)		(171	)							(3,828	)
Other income (expense) — net		(1,283	)		—								(1,283	)
Net loss	$	(77,078	)	$	(27,659	)	$	(41,021	)			$	(145,758	)
Basic and diluted net loss per common share	$	(1.50	)	$	(0.64	)						$	(2.56	)
Weighted average shares of common stock outstanding		51,284			43,349			(43,349	)		K		56,938
								5,654			K

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS

1. Description of Transaction and Basis of Presentation

     On November 14, 2005, OSI consummated its merger with Eyetech. In the merger, Merger EP, a specially formed, wholly-owned subsidiary of OSI, merged with and into Eyetech. Eyetech is the surviving corporation and will continue to exist under Delaware law as a wholly-owned subsidiary of OSI. At the time of the merger, the surviving corporation was renamed (OSI) Eyetech, Inc. The by-laws of Merger EP, as in effect immediately before the merger, are the by-laws of the surviving corporation. At the effective time of the merger, the certificate of incorporation of the surviving corporation was amended so as to contain the provisions of the certificate of incorporation annexed to the merger agreement as Exhibit B, which is substantially the same as the certificate of incorporation of Merger EP as in effect immediately before the merger.

     Under the terms of the merger agreement, each share of common stock of Eyetech outstanding at the effective time of the merger was converted automatically into the right to receive $15.00 in cash and 0.12275 shares of OSI common stock. Eyetech had granted options to purchase shares of its common stock under its 2003 Stock Incentive Plan and its 2001 Stock Plan. Eyetech had also granted options outside of its plans. Each outstanding option granted under the 2003 Stock Incentive Plan or granted outside of a plan that was unvested prior to the effective time of the merger was accelerated in full and became immediately vested and exercisable. Any of these options that remained unexercised as of the effective time of the merger were terminated or cancelled in accordance with their terms. Each outstanding option that was granted under the Eyetech 2001 Stock Plan which was not exercised prior to the effective time of the merger was assumed by OSI at the effective time of the merger and became an option to purchase shares of OSI common stock on the same terms and conditions as were applicable to the option immediately prior to the effective time. The number of shares of OSI common stock subject to each assumed option was determined by multiplying the number of shares of Eyetech common stock that were subject to each option prior to the effective time of the merger by a conversion ratio of 0.491, and rounding that result down to the nearest whole number of shares of OSI common stock. The per share exercise price for the assumed options was determined by dividing the per share exercise price of the Eyetech common stock subject to each option as in effect immediately prior to the effective time by the conversion ratio of 0.491, and rounding that result up to the nearest whole cent.

2. Purchase Price

     A preliminary estimate of the purchase price is as follows (table in thousands):

Cash consideration	$	690,858
Equity consideration		207,298
Transaction costs and fees		10,450
Preliminary estimated purchase price	$	908,606

     The fair value of the OSI shares used in determining the purchase price was $36.33 per share based on the average of the closing price of OSI common stock for the period two days before and two days after the August 21, 2005 merger agreement announcement date. The fair value of the OSI stock options issued was determined using the Black-Scholes option pricing model with the following assumptions: stock price of $36.33, which is the value ascribed to the OSI shares in determining the purchase price; volatility of 58%; risk-free interest rate of 3.9%; and the remaining expected life of the option.

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS — (Continued)

     The preliminary estimated purchase price has been allocated to the tangible and intangible assets and liabilities to be acquired based on their estimated fair values as of September 30, 2005 (table in thousands):

Fair value of net tangible assets acquired	$	298,025
Identifiable intangible assets acquired — core technology		386,000
In-process research and development		67,000
Goodwill		157,581
Value assigned to net tangible and intangible assets acquired	$	908,606

     The allocation of the estimated purchase price is preliminary. The final determination of the purchase price allocation will be based on the fair value of assets acquired, including the fair values of in-process research and development, other identifiable intangibles and the fair values of liabilities assumed as of the date that the merger was consummated. The allocation of the purchase price requires a series of assumptions, estimates and the exercise of judgment including the assignment of values to tangible and intangible assets.

     The purchase price allocation will remain preliminary until a valuation of significant identifiable intangible assets acquired (including in-process research and development) is completed and OSI determines the fair values of other identifiable assets acquired and liabilities assumed. The Company has engaged an outside valuation firm to assist in determining fair values of the assets acquired and liabilities assumed. The revised determination of the purchase price allocation is expected to be completed as soon as practicable after consummation of the merger. The revised amounts allocated to assets acquired and liabilities assumed could differ significantly from the amounts presented in the unaudited pro forma condensed combined financial statements.

     The estimated fair value attributed to core technology, which relates to Eyetech’s existing FDA-approved product, Macugen, was determined based on a discounted forecast of the estimated net future cash flows to be generated from the technology. The estimated fair value attributed to core technology will be amortized over the best estimate of its useful life. The method of amortization will reflect the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. For purposes of preparing the accompanying pro forma statements of operations, straight-line amortization over 12.5 years was assumed.

     The amount allocated to in-process research and development represents an estimate of the fair value of purchased in-process technology for research projects that, as of the closing date of the merger, will not have reached technological feasibility and have no alternative future use. Only those research projects that had advanced to a stage of development where management believed reasonable net future cash flow forecasts could be prepared and a reasonable likelihood of technical success existed were included in the estimated fair value. The estimated fair value of the in-process research and development was determined based on a discounted forecast of the estimated net future cash flows for each project, adjusted for the estimated probability of technical success and FDA approval for each research project. In-process research and development will be expensed immediately following consummation of the merger.

3. Pro Forma Adjustments

(A) To eliminate Eyetech’s historical carrying value for inventory and record the estimated fair value of the acquired inventory. The fair value step-up of inventory will result in a $8.9 million decrease in gross margin as the inventory is sold, following consummation of the merger. This impact has not been reflected in the pro forma condensed combined statements of operations because it is a material non-recurring charge that will be reflected in operations in the 12-month period following the merger.

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS — (Continued)

(B)	To eliminate Eyetech’s unearned revenue, as there are no performance obligations assumed by OSI related to the payments that resulted in the recognition of Eyetech’s as unearned revenue.
(C)	To record cash consideration payable of $690.9 million to Eyetech stockholders under the merger agreement consisting of $107.1 million of cash and $583.8 million of investment securities.
(D)	To record the estimated fair value of the in-process research and development acquired in the merger.
(E)	To eliminate Eyetech stockholders’ equity accounts.
(F)	To record the issuance of approximately 5.7 million shares of OSI common stock to Eyetech stockholders and other equity consideration (stock options) exchanged in the merger.
(G)	To record the estimated transaction costs and fees incurred or expected to be incurred by OSI of $10.4 million in connection with the merger, which will be considered part of the purchase price. Also includes $10.7 million of transaction costs and fees incurred by Eyetech related to the merger and that will be expensed by Eyetech and $3.5 million of cash received from the exercise of Eyetech options prior to the merger consummation date.
(H)	To record the preliminary estimated identifiable intangible assets and goodwill from the merger.
(I)	To record the amortization of acquired intangible identifiable assets with definitive lives from the merger. The preliminary estimated intangible asset and its estimated useful life is as follows:

	Preliminary Estimated		Estimated
Intangible Asset	Fair Value		Useful Life
	(In thousands)
Core technology	$	386,000	12.5 Years

(J)	To record the reduction in investment income resulting from the reduced cash, cash equivalents and investment balances after payments to effect the merger.
(K)	Pro forma basic and diluted income (loss) per common share amounts for the year ended September 30, 2004, the three-month period ended December 31, 2004, and the nine-month period ended September 30, 2005 are based upon the historical weighted average number of OSI common shares outstanding, adjusted to reflect the issuance of approximately 5.7 million shares of OSI common stock as a result of the acquisition.
(L)	To record the deferred stock-based compensation related to unvested Eyetech restricted shares and options assumed by OSI in the merger of $8.3 million. The amount of the deferred compensation was based on the portion of the intrinsic value of the Eyetech options and restricted stock that relates to the future vesting period. The intrinsic value of the unvested options was measured as the difference between the assumed value of the OSI common stock of $25.38 per share at the consummation date of the merger and the exercise price of the assumed Eyetech options after giving consideration to the exchange of the Eyetech options for OSI options. The deferred compensation is being amortized over the remaining vesting period of the assumed options. The amortization expense has been recorded in the expense category associated with the departmental classification of the grantee.
(M)	To record additional interest expense related to an assumed borrowing arrangement as a result of the combined entities not having sufficient cash to consummate the merger as of October 1, 2003. The interest rate was assumed to be 6.51%. The average borrowings for the twelve months ended September 30, 2004 and the three months ended December 31, 2004 were $244 million and $303 million, respectively. The actual amount to be borrowed in connection with the completion of the merger, if any, may differ significantly from the pro forma amounts used to derive amounts to be borrowed and the pro forma interest expense. A change of 0.125% in the interest rate would result in a change in interest expense and net loss of $305,000 and $107,000 for the year ended September 30, 2004 and the three months ended December 31, 2004.

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS — (Continued)

(N)	To eliminate the recognition of deferred revenue related to deferred revenue recorded on Eyetech’s balance sheet as of January 1, 2004.
(O)	To eliminate Eyetech’s accretion charge on its preferred stock.