8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

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

November 2, 2006

Date of Report (Date of earliest event reported)

OSI PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

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

41 Pinelawn 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))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

      On November 6, 2006, OSI Pharmaceuticals, Inc. (“OSI”) issued a press release regarding its financial results for the quarter ended September 30, 2006. A copy of this release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

      The information in this Item 2.02 (including Exhibit 99.1) is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this report, except as shall be expressly set forth by specific reference in such filing.

ITEM 2.05. COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

      On November 6, 2006, OSI also announced the decision of its board of directors to exit its eye disease business. OSI’s board of directors reached this decision because a key strategic goal of the acquisition of this business in November 2005 — the generation of significant positive cash flow from its eye disease business in the 2006 through 2008 fiscal years — will not be realized. OSI will seek to maximize the value of the eye disease business through licensing, partnering or selling Macugen^® (pegaptanib sodium injection) and OSI’s other eye disease-related assets within the next six to nine months.

      OSI expects to incur costs in connection with its exit of the eye disease business, including costs related to employee severance and the consolidation of facilities. However, as of the date of this Current Report on Form 8-K, OSI is unable to make a good faith determination of an estimate or range of estimates of the costs expected to be incurred in connection with this exit, or of each major type of cost associated with the exit, or of the amount of any charges that will result in additional future cash expenditures. These costs and charges are subject to a number of assumptions, and may vary depending on the form of strategic transaction that OSI enters into with respect to its eye disease business. Accordingly, as permitted by Item 2.05 of Form 8-K, OSI will file an amendment to this report under Item 2.05 within four business days after OSI completes its determination of such estimates or range of estimates.

ITEM 8.01. OTHER EVENTS

      On November 7, 2006, OSI held a webcast conference call regarding its financial results for the quarter ended September 30, 2006. A textual representation of certain portions of the conference call is attached as Exhibit 99.2 to this Form 8-K and is incorporated herein by reference.

      This Current Report on Form 8-K contains “forward-looking statements” that do not convey historical information, but relate to predicted or potential future events, such as statements of our plans, strategies and intentions. These statements can often be identified by the

use of forward-looking terminology such as “believe,” “expect,” “intend,” “may,” “will,” “should,” or “anticipate” or similar terminology. All statements other than statements of historical facts included in this Current Report on Form 8-K, including statements regarding OSI’s plans to exit its eye disease business and the potential exit-related costs and charges, are forward-looking statements. All forward-looking statements speak only as of the date of this Current Report on Form 8-K. Except for OSI’s ongoing obligations to disclose material information under the federal securities laws, OSI undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition to the risks and uncertainties of ordinary business operations and conditions in the general economy and the markets in which OSI competes, the forward-looking statements of the Company contained in this Current Report on Form 8-K are also subject various risks and uncertainties, including those set forth in Item 1A, “Risk Factors”, in OSI’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2005, and in its subsequent filings made with the Securities and Exchange Commission.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

Exhibit No.		Description
	99.1	Press release, dated November 6, 2006.
	99.2	Textual representation of certain portions of the webcast conference call held on November 7, 2006.

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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: November 8, 2006	OSI PHARMACEUTICALS, INC.
	By:	/s/ Barbara A. Wood
		Barbara A. Wood
		Vice President, General Counsel and Secretary

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EXHIBIT INDEX

Exhibit No.		Description
	99.1	Press release, dated November 6, 2006.
	99.2	Textual representation of certain portions of the webcast conference call held on November 7, 2006.

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EX-99.1

Exhibit 99.1

NEWS RELEASE

Contacts:
OSI Pharmaceuticals, Inc.	Burns McClellan, Inc. (representing OSI)
Kathy Galante (investors/media)	Justin Jackson (media)
631-962-2000	Laura Siino (investors)
Kim Wittig (media)	(212) 213-0006
212-824-3204

OSI Pharmaceuticals Announces Third Quarter 2006 Financial Results

— Company Announces it Plans to Exit Eye Disease Business —

MELVILLE, NY — November 6, 2006 — OSI Pharmaceuticals, Inc. (Nasdaq: OSIP) announced today its financial results for the third quarter of 2006. The Company reported total revenues of $74 million for the three months ended September 30, 2006, an increase of $40 million (or 118%) compared to revenues of $34 million for the same period last year. Revenues increased $205 million (or 233%) to $292 million for the nine months ended September 30, 2006 compared to revenue of $88 million for the same period last year. The increases were primarily due to the growth in revenues arising from worldwide Tarceva^® (erlotinib) sales, and the addition of Macugen^® (pegaptanib sodium injection)-related revenue streams. Total worldwide net sales of Tarceva reported by the Company’s collaborators for Tarceva, Genentech, Inc. and Roche, were $170 million and $460 million for the three and nine months ended September 30, 2006, respectively. Total U.S. Macugen sales were $9 million and $96 million for the three and nine months ended September 30, 2006, respectively.

On an adjusted basis, the Company reported a net loss of $13.4 million (or $0.23 per share) for three months ended September 30, 2006, compared to a net loss of $20.0 million (or $0.39 per share) a year ago. On a GAAP basis, the Company reported a net loss of $21.3 million (or $0.37 per share) for three months ended September 30, 2006, compared with a net loss of $20.0 million (or $0.39 per share) for the comparable prior year period.

Total revenues are comprised of the following key items:

• Net revenues from the unconsolidated joint business for Tarceva of $39.8 million and $114.7 million for the three and nine months ended September 30, 2006, respectively, compared to $21.5 million and $54.9 million for the comparable prior year periods. These revenues resulted from the Company’s co-promotion arrangement with Genentech. The net revenues were based on total U.S. Tarceva net sales of $100 million and $296 million for the three and nine months ended September 30, 2006, respectively, compared to $73 million and $191 million for the comparable prior year periods;

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• Macugen sales in the U.S. and its territories of $9 million and $96 million for the three and nine months ended September 30, 2006, respectively. The Company began recording Macugen sales in the fourth quarter of 2005 following the acquisition of Eyetech Pharmaceuticals, Inc.;

• Royalty revenues from Roche, the Company’s international partner for Tarceva, of $14.2 million and $33.2 million for the three and nine months ended September 30, 2006, respectively, compared to $1.5 million and $2.0 million for the comparable prior year periods. The royalty revenues were based on total rest of world net sales of $70 million and $164 million for the three and nine months ended September 30, 2006, respectively, compared to $7 million and $10 million for the three and nine months ended September 30, 2005, respectively;

• Other revenue totaling $10.4 million compared to $11.1 million for the three months ended September 30, 2006 and 2005, respectively, including sales commissions from oncology sales of Novantrone^®, license fees, milestones, and collaborative program revenues.

On a GAAP basis, including an adjustment of $870,000 to the second quarter impairment charge related to goodwill, total operating expenses for the three months ended September 30, 2006 were $95.2 million, an increase of $39.8 million compared to $55.4 million for the same period last year. Cost of goods sold increased $5.2 million to $6.7 million from $1.5 million, with the increase associated with the supply of both Macugen and Tarceva. Pfizer’s gross profit share from U.S. sales of Macugen was $3.0 million and was shown in operating expenses for 2006 as a new expense following the completion of the Eyetech acquisition. Research and development expense increased by $14.4 million to $43.1 million for the three months ended September 30, 2006 and includes both transitional and on-going Eyetech research and development expense and increased expenditures on the Tarceva development program conducted in collaboration with Genentech and Roche and equity based compensation. Partially offsetting these increases were reductions in expenses for non-Tarceva related oncology programs. Selling, general and administration expenses increased $15.2 million to $36.6 million primarily driven by the expenses associated with the Company’s eye disease commercial organization and equity based compensation. Partially offsetting these increases was a decline in maintenance fees for Novantrone^®.

On an adjusted basis, operating expenses were $87.3 million for the three months ended September 30, 2006, compared to $55.4 million for the comparable prior year period, and excludes purchase accounting adjustments, merger-related costs, the impairment charge related to goodwill and certain other significant items. For the three months ended September 30, 2006, both GAAP and adjusted basis expenses include $4.5 million of equity based compensation expense.

The accompanying table details the charges excluded in the calculation of the Company’s adjusted amounts and includes adjustments for a one-time extraordinary gain together with purchase accounting adjustments, merger related costs and other significant items. Management believes that these charges are not reflective of the Company’s normal on-going operations. The adjusted financial results can assist in making meaningful period-over-period

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comparisons and in identifying operating trends that could otherwise be masked or distorted by the items subject to the adjustments. Management uses the adjusted results internally to evaluate the performance of the business, including the allocation of resources as well as the planning and forecasting of future periods and believes these results are useful to others in analyzing operating performance and trends of the Company. A reconciliation to reported U.S. GAAP amounts is provided in the table accompanying this report. The adjusted amounts are not, and should not be viewed as, substitutes for U.S. GAAP amounts.

Planned Exit of Eye Business
The Company also announced that it plans to exit its eye disease business and seek to maximize value for Macugen and its research assets in the area through either out-licensing, partnering or an out-right sale of the business.

“We continue to believe that Macugen’s product profile, our induction/maintenance strategy and promising data in the diabetic retinopathy area will ultimately result in a meaningful place for Macugen in treating retinal eye disease. However, it is evident that a key strategic goal behind our acquisition of Eyetech — that of generating positive cash-flow from the eye business in the 2006-2008 period — will not be realized,” stated Colin Goddard, Ph.D., Chief Executive Officer of OSI Pharmaceuticals. “This — and our reluctance to invest near-term in the eye disease business given our priorities in the oncology and diabetes areas — have led us to conclude that we can better realize value from these assets through strategic partnering strategies. In the near-term we, and our marketing partner, Pfizer, intend to continue to support the brand commercially.”

Conference Call
OSI will host a conference call reviewing the Company’s financial results, product portfolio and business developments on November 7, 2006 at 8:00AM (Eastern Time). To access the live call or the fourteen-day archive via the Internet, log on to www.osip.com. Please connect to the Company’s website at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to access the webcast. Alternatively, please call 800-289-0572 (U.S.) or 913-981-5543 (international) to listen to the call. Telephone replay is available approximately two hours after the call through November 21, 2006. To access the replay, please call 888-203-1112 (U.S.) or 719-457-0820 (international). The conference ID number is 3475806.

About OSI Pharmaceuticals
OSI Pharmaceuticals is committed to “shaping medicine and changing lives” by discovering, developing and commercializing high-quality and novel pharmaceutical products designed to extend life and/or improve the quality of life for patients with cancer, eye diseases and diabetes. (OSI) Oncology is focused on developing molecular targeted therapies designed to change the paradigm of cancer care. (OSI) Eyetech specializes in the development and commercialization of novel therapeutics to treat diseases of the eye. (OSI) Prosidion is committed to the generation of novel, targeted therapies for the treatment of type 2 diabetes and obesity. OSI’s flagship product, Tarceva^® (erlotinib), is the first drug discovered and developed by OSI to obtain FDA approval and the only EGFR inhibitor to have demonstrated the ability to improve survival in both non-small cell lung cancer and pancreatic cancer patients in certain settings. OSI markets Tarceva through partnerships with Genentech, Inc. in the United States and with Roche throughout the rest of the world. Macugen^® (pegaptanib sodium injection) is approved in the United States and Europe for the treatment of neovascular

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age-related macular degeneration. OSI commercializes Macugen in partnership with Pfizer Inc. For additional information about OSI, please visit http://www.osip.com.

This news release contains forward-looking statements. These statements are subject to known and unknown risks and uncertainties that may cause actual future experience and results to differ materially from the statements made. Factors that might cause such a difference include, among others, the completion of clinical trials, the FDA review process and other governmental regulation, OSI’s and its collaborators’ abilities to successfully develop and commercialize drug candidates, competition from other pharmaceutical companies, the ability to effectively market products, and other factors described in OSI Pharmaceuticals’ filings with the Securities and Exchange Commission.

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OSI Pharmaceuticals, Inc. and Subsidiaries
Selected Financial Information

Consolidated Statements of Operations
(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	Unaudited			Unaudited			Unaudited			Unaudited
Revenues:
Net revenue from unconsolidated joint business	$	39,833		$	21,464		$	114,699		$	54,892
Product sales		9,078			(51	)		96,972			525
Royalties on product sales		14,647			1,453			33,671			1,952
Sales commissions		1,639			7,610			11,058			21,578
License, milestone and other revenues		2,575			3,512			16,716			8,737
Collaborative agreement revenues		6,221			—			19,294			—
Total revenues		73,993			33,988			292,410			87,684
Expenses:
Cost of goods sold		6,660			1,464			45,883			3,636
Collaborative profit share		3,007			—			39,190			—
Research and development		43,080			28,698			133,065			86,007
Acquired in-process research and development		—			—			—			3,542
Selling, general and administrative		36,599			21,363			117,934			65,765
Goodwill impairment		870			—			320,261			—
Amortization of intangibles		4,979			3,831			14,930			11,435
Total expenses		95,195			55,356			671,263			170,385
Loss from operations		(21,202	)		(21,368	)		(378,853	)		(82,701	)
Other income (expense):
Investment income — net		2,503			2,393			5,902			10,563
Interest expense		(1,906	)		(1,219	)		(5,672	)		(3,657	)
Other (expense) income — net		(652	)		157			(2,464	)		(1,283	)
		(21,257	)		(20,037	)		(381,087	)		(77,078	)
Extraordinary gain net of tax		—			—			22,046			—
Net loss	$	(21,257	)	$	(20,037	)	$	(359,041	)	$	(77,078	)
Basic and diluted net loss per common share:
Loss before extraordinary gain	$	(0.37	)	$	(0.39	)	$	(6.70	)	$	(1.50	)
Extraordinary gain net of tax		—			—			0.39			—
Net loss	$	(0.37	)	$	(0.39	)	$	(6.31	)	$	(1.50	)
Weighted average shares of common stock outstanding		56,974			51,439			56,918			51,284
Condensed Consolidated Balance Sheet	September 30,			December 31,
(In thousands)	2006			2005 *
	Unaudited
Cash and investments securities (including restricted investments)	$	210,167		$	179,606
Total assets	$	676,926		$	1,058,582
Total stockholders’ equity	$	241,476		$	578,466

* Condensed from audited financial statements.

OSI Pharmaceuticals, Inc. and Subsidiaries
Reconciliation From Reported Net Loss and Reported Loss Per Share to Adjusted Loss Per Share
Unaudited
(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Reported net loss	$	(21,257	)	$	(20,037	)	$	(359,041	)	$	(77,078	)
Purchase accounting adjustments		5,896			—			32,199			3,542
Merger related costs		1,107			—			5,355			1,380
Other significant items		870			—			300,820			1,780
Adjusted net loss	$	(13,384	)	$	(20,037	)	$	(20,667	)	$	(70,376	)
Reported basic and diluted loss per common share	$	(0.37	)	$	(0.39	)	$	(6.31	)	$	(1.50	)
Purchase accounting adjustments		0.10			—			0.57			0.07
Merger related costs		0.02			—			0.09			0.03
Other significant items		0.02			—			5.29			0.03
Adjusted basic and diluted loss per common share	$	(0.23	)	$	(0.39	)	$	(0.36	)	$	(1.37	)

Adjusted net loss and adjusted diluted per share shown
above include the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2006		2005		2006			2005
Purchase accounting adjustments:
Sale of acquired inventory written up to fair value (a)	$	1,370	$	—	$	18,621		$	—
Intangible amortization (b)		4,526		—		13,578			—
Acquired IPR&D Prosidion buyout (c)		—		—		—			3,542
Total purchase accounting adjustments		5,896		—		32,199			3,542
Merger related costs:
Restructuring costs (d)		1,107		—		5,355			—
Buyout of Prosidion options (e)		—		—		—			1,380
Total merger related costs		1,107		—		5,355			1,380
Other significant items:
Goodwill impairment (f)		870		—		320,261			—
Facility related restructuring charges (g)		—		—		2,605			1,780
Extraordinary gain (h)		—		—		(22,046	)		—
Total other significant items		870		—		300,820			1,780
Total adjustments	$	7,873	$	—	$	338,374		$	6,702

(a)	Represents the excess of the fair value over historical cost related to the sale of Macugen inventory written up to fair value in the acquisition of Eyetech Pharmaceuticals, Inc. in November 2005.
(b)	Represents the amortization of the Macugen intangible assets recognized with the acquisition of Eyetech Pharmaceuticals.
(c)	Represents an in process R&D charge for the acquisition of the minority interest of Prosidion Limited in April of 2005.
(d)	Represents a charge for severance related to planned Eyetech workforce reductions of $368 included in R&D and $739 included in SG&A for the three months ended September 30, 2006. Represents a charge for severance related to planned Eyetech workforce reductions of $3,469 included in R&D and $1,886 included in SG&A for the nine months ended September 30, 2006.
(e)	Represents a charge for the buyout of Prosidion options ($577 included in R&D and $803 included in SG&A).
(f)	Represents an adjustment of $870 to the preliminary goodwill impairment charge of $319,391 recorded in the second quarter of 2006 in connection with the assessment of Eyetech related goodwill.
(g)	Represents facility restructuring charges included in SG&A.
(h)	Represents an extraordinary gain recognized as a result of the reversal of the contingent consideration recorded in the Cell Pathways, Inc. acquisition which, in our judgment, will not be paid.

Reconciliation of adjusted operating expenses included in the text of this press release.

Adjusted operating expenses of $87,322 for the three months ended September 30, 2006 excluded from the reported expenses of $95,195 the adjustments shown above.

EX-99.2

Exhibit 99.2

On November 7, 2006, OSI Pharmaceuticals, Inc. (the “Company”) held a webcast conference call regarding its financial results for the quarter ended September 30, 2006 as well as an update on the Company’s business. The following represents a textual representation of certain portions of the transcript of the webcast conference call consisting of remarks by Colin Goddard, Ph.D., Chief Executive Officer of the Company and Michael G. Atieh, Executive Vice President and Chief Financial Officer of the Company.

OPERATOR

[Operator’s Introduction]

DR. COLIN GODDARD

[Colin Goddard’s Introduction]

MIKE ATIEH

Thank you, Colin, and good morning, everyone.

Before I begin, I would like to remind you that we will be making forward-looking statements relating to financial results and clinical and regulatory development on the call today. These statements cover many events that are outside of OSI’s control and are subject to various risks that could cause the results to differ materially from those expressed in any forward-looking statement. I refer you to our SEC filings for a detailed description of the risk factors affecting our business and these forward-looking statements.

[Michael Atieh discusses quarterly information]

DR. COLIN GODDARD

Thanks, Mike.

Obviously while we expected a difficult third quarter for Macugen in the face of a strong Lucentis launch and continued widespread use of Avastin, we’re disappointed in the Macugen number. The ability of the brand to recover will be directly tied to whether or not our induction maintenance strategy can take hold. We continue to believe that the overall safety, frequency of administration and costs will ultimately favor Macugen and allow for meaningful presence in the marketplace. Indeed, some lead indicators like our market research of approximately 150 retinal treaters, which indicate that the message is resonating with docs and the rapid accrual to our level study where we have already enrolled 142 patients suggest that there is considerable interest in induction maintenance.

In addition, we’ve recently witnessed some accounts reordering Macugen after a long hiatus, and we expect the publication shortly of a Hughes paper which will show 43% three-line vision gain at 54 weeks and a 20 patient cohort we would generally induce with a single injection of Avastin and then maintain with Macugen. These developments, along with promising data from Macugen in diabetic retinopathy, lead us to conclude there is still potential for considerable long-term value in the brand and in our overall eye disease franchise.

Nonetheless, as we indicated on our last call, it is evident that Macugen is not going to provide the kind of positive cash flow that was key to our strategy at the time of the acquisition, and we are in the current circumstances obviously constrained in our ability to invest in the Eye Business given our strategic priority in the oncology and diabetes arenas and our intention of delivering credible profitability in 2007.

We have continued to refine our overall business strategy in light of this situation and have reached the conclusion that we need to exit the Eye Business. We are, therefore, committing to an orderly process of

seeking maximum value through either licensing, partnering or an outright sale of Macugen and our research assets in the Eye Business area with a goal of identifying the strategic partner or partners with a more appropriate business fit and the ability to exploit the long-term value we continue to believe is inherent in these assets to the benefit of our shareholders and theirs. It is reasonable to expect that a process of this type will take approximately six to nine months to conclude. In the interim, while we continue to work closely with our partners to support the brand commercially, we intend to aggressively manage cost in the R&D and G&A areas and work to sublet our 3 Times Square facility as quickly as possible.

We also continue to be committed to our efforts in the diabetes area where our Prosidion research team has continue to be productive, advancing our serotonin 1A agonist and monogmine reuptake inhibitor or S1RUP anti-obesity program for the IND track stage this quarter with he lead candidate being PSN602. This positive development for the diabetes franchise was tempered somewhat by the failure of our glycogen phosphorylase inhibitor, PSN357, to overcome in Phase IIa trials the tachyphylaxis issues historically associated with this class, and we have, therefore, taken the decision to halt this program.

The approval of Merck’s DP-IV inhibitor, JANUVIA, on October 17th with a strong label and the anticipated upcoming approval of Galvus in this area are important developments for diabetes patients and financially important to OSI. We anticipate average overall royalties from these two agents will be in the 2% range, while the average will be lower during the launch your.

In light of the JANUVIA approval and with no clear side effect issues apparent in the label, we have chosen to delay the internal clinical development of our own DP-IV inhibitor, PSN9301, pending the successful identification of a partner to carry the program forward. This decision reflects in part our assessment that we cannot justify the risk and expense of large Phase IIb/Phase III trials of this project given the failure of Macugen to generate positive cash flows to offset the cost and the already stated strategic priorities of delivering credible profitability in 2007 while focusing the bulk of our R&D spend on Tarceva and our primary oncology business.

In the near-term, we intend to focus our diabetes efforts on establishing a value of our early pipeline with S1RUP and GPR119 in the forefront and taking these projects through to a Phase IIa proof of concept. We expect to be able to validate this concept with our glucokinase activator program, PSN010, which is currently completing early clinical trials. We are signing an out-licensing deal for this over the next several months.

In 2007 we believe that we have the ability to operate our diabetes research efforts with minimal investment after the generation of offsetting license fees and milestones.

Moving on to our primary business in oncology, we have continued to make steady progress in our early R&D efforts behind Tarceva. OSI-930, our kit/VEGF inhibitor continues to progress in Phase I trials, and we are still on track following a pre-IND meeting with the FDA to begin a Phase I trial for our IGF-1R, OSI-906, over the next three months.

Turning to Tarceva. The slight drop in US third-quarter sales versus second-quarter sales appears to reflect some seasonality with a particularly soft July driving the 3Q number. In addition, softness in the market reflected by new patient starts and marketshare penetration during the quarter was also seen for other oral anti-cancer drugs and may reflect some impact on the Part D doughnut hole effect. Nonetheless, competition remains fierce in the second line setting, and it is likely that introduction of Avastin in the first line setting has complicated the overall non-small cell lung cancer marketplace in the near-term at least.

We continue to enroll in our Phase II frontline study looking at patient selection by IHC and FISH, and we anticipate that each year our positive selective groups will likely be the driver for growth in early stage non-small cell lung cancer.

We also continue to see good penetration rates in the pancreatic setting and believe that we can continue to build the brand steadily in the US during 2007. Key data publications, including one year survival from the Avastin/Tarceva Phase II study and the new maximum tolerated dose Phase I study for smokers, which we expect to be at least at the dose where we expect to be at least 300 milligrams per day, will be valuable additions to physicians understanding the broad potential utility and value of Tarceva.

We continue to see our ex-US partner Roche execute a strong European launch, and it is noteworthy that the strong third-quarter sales are still absent price reimbursement in Italy and the UK. Japanese approval is continuing on track. This quarter we also initiated on our recurring patients to RADIANT, our Phase III adjuvant non-small cell lung cancer study and the key SATURN study in first line maintenance is making good progress.

I will now turn back to Mike who will take you through our updated guidance for the 2006 fiscal year, after which I will host the Q&A session

MIKE ATIEH

Thank you, Colin.

The updated guidance I will provide replaces all prior guidance for 2006. Now similar to our third-quarter call from last year, guidance is now being provided at single point estimates.

For Tarceva revenues, our previous guidance was US sales of $410 to $420 million. Colin has already commented on current trends in the US market. Based on these trends, we now estimate US sales of Tarceva will be approximately $410 million. Please note that this reflects our view and not necessarily that of our collaborator, Genentech.

We believe that the conversion factor, which is averaged slightly less than 39% for the first night months of the year, may decline in Q4 based on a planned increase in marketing spending relative to the previous three quarters. However, we believe the full year will still average 38% versus our previous guidance of 37%.

With respect to international sales of Tarceva, our previous guidance was that they would exceed $200 million in 2006. We believe they are now likely to reach $235 million, resulting in $47 million of royalties to OSI. Again, this reflects our view and not necessarily that of our collaborator, Roche.

With respect to expenses, R&D expenses for 2006 will be approximately $170 million as we continue to streamline the cost of our R&D infrastructure. We expect SG&A expenses for 2006 to be approximately $135 million. Our expense guidance for both R&D and SG&A excludes equity-based compensation, severance-related costs and costs related to facility closures. Equity-based compensation is expected to be $20 million for 2006. Severance-related costs and costs from facility closures will be approximately $8 million for 2006.

Finally, in light of our plan to exit the Eye Disease business, we will no longer be providing guidance on Macugen or Macugen-related revenue items. In addition, it is our intention to provide financial guidance in the future which excludes the operating results of the Eye Disease business.

Thank you.

[A question and answer session followed Mr. Atieh’s presentation]