10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     .

Commission file number 0-15190

OSI Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware	13-3159796
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
41 Pinelawn Road, Melville, New York	11747
(Address of principal executive offices)	(Zip Code)

631-962-2000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

At May 4, 2007, the registrant had outstanding 57,660,629 shares of common stock, $.01 par value.

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

	Page No.
PART I. FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Consolidated Balance Sheets March 31, 2007 (Unaudited) and December 31, 2006		1
Consolidated Statements of Operations — Three Months Ended March 31, 2007 and 2006 (Unaudited)		2
Consolidated Statements of Cash Flows — Three Months Ended March 31, 2007 and 2006 (Unaudited)		3
Notes to Consolidated Financial Statements (Unaudited)		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures About Market Risks		35
Item 4. Controls and Procedures		36
PART II. OTHER INFORMATION		37
Item 1. Legal Proceedings		37
Item 1A. Risk Factors		37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		37
Item 3. Defaults Upon Senior Securities		37
Item 4. Submission of Matters to a Vote of Security Holders		37
Item 5. Other Information		38
Item 6. Exhibits		38
SIGNATURES		40
INDEX TO EXHIBITS		41
EX-10.3: AMENDED AND RESTATED LICENSE AGREEMENT, DATED APRIL 20, 2007
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

i

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except per share data)

	March 31,			December 31,
	2007			2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	101,925		$	42,028
Investment securities		129,393			164,786
Restricted investment securities		9,790			9,554
Accounts receivables – net		70,849			80,075
Inventory – net		20,716			36,860
Interest receivable		3,937			3,674
Prepaid expenses and other current assets		8,781			9,102
Assets related to discontinued operations		37,501			—
Total current assets		382,892			346,079
Property, equipment and leasehold improvements – net		50,040			56,223
Debt issuance costs – net		4,444			4,910
Goodwill		39,386			39,373
Other intangible assets – net		6,303			6,742
Other assets		2,195			4,405
	$	485,260		$	457,732
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		42,698			54,741
Collaboration profit share payable		—			12,039
Unearned revenue – current		25,925			12,803
Liabilities related to discontinued operations		49,387			—
Total current liabilities		118,010			79,583
Other liabilities:
Rent obligations and deferred rent expenses		11,157			10,044
Unearned revenue – long-term		39,071			66,089
Convertible senior subordinated notes		265,000			265,000
Accrued postretirement benefit cost and other		8,829			8,422
Total liabilities		442,067			429,138
Stockholders’ equity:
Preferred stock, $.01 par value; 5,000 shares authorized; no shares issued at March 31, 2007 and December 31, 2006		—			—
Common stock, $.01 par value; 200,000 shares authorized, 59,335 and 59,179 shares issued at March 31, 2007 and December 31, 2006, respectively		593			592
Additional paid-in capital		1,624,451			1,616,874
Accumulated deficit		(1,547,365	)		(1,554,005	)
Accumulated other comprehensive income		2,735			2,354
		80,414			65,815
Less: treasury stock, at cost; 1,943 shares at March 31, 2007 and December 31, 2006		(37,221	)		(37,221	)
Total stockholders’ equity		43,193			28,594
Commitments and contingencies	$	485,260		$	457,732

See accompanying notes to consolidated financial statements.

1

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands except per share data)

	Three Months Ended
	March 31,
	2007			2006
Revenues:
Net revenue from unconsolidated joint business	$	39,122		$	35,655
Royalties on product licenses		19,293			8,014
License, milestone and other revenues		19,054			15,586
		77,469			59,255
Expenses:
Cost of goods sold		1,904			2,222
Research and development		30,626			27,078
Selling, general and administrative		25,129			27,808
Amortization of intangibles		458			448
		58,117			57,556
Operating income from continuing operations		19,352			1,699
Other income (expense):
Investment income — net		3,095			1,367
Interest expense		(1,803	)		(1,798	)
Other (expense) income — net		(949	)		(892	)
Income from continuing operations		19,695			376
Loss from discontinued operations		(13,054	)		(18,231	)
Net income (loss)	$	6,641		$	(17,855	)
Basic and diluted income (loss) per common share:
Basic earnings (loss):
Income from continuing operations	$	0.34		$	0.01
Loss from discontinued operations	$	(0.23	)	$	(0.32	)
Net income (loss)	$	0.12		$	(0.31	)
Diluted earnings (loss):
Income from continuing operations	$	0.33		$	0.01
Loss from discontinued operations	$	(0.21	)	$	(0.32	)
Net income (loss)	$	0.12		$	(0.31	)
Shares used in calculation of income (loss) per common share:
Basic		57,302			56,815
Diluted		61,733			57,262

See accompanying notes to consolidated financial statements.

2

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	Three Months Ended
	March 31,
	2007			2006
Cash flows from operating activities:
Net income (loss)	$	6,641		$	(17,855	)
Adjustments to reconcile net income (loss) to net cash provide by (used in) operating activities: Loss on sale of investment		2			—
Gain on sale and disposals of equipment		(31	)		—
Depreciation and amortization		2,835			9,128
Non-cash compensation charges		4,641			3,854
Other non-cash charges-net		107			131
Impact of inventory step-up related to inventory sold		965			11,161
Changes in assets and liabilities:
Receivables		(2,475	)		(526	)
Inventory		(4,125	)		37
Prepaid expenses and other current assets		(1,142	)		(3,107	)
Other assets		1,366			421
Accounts payable and accrued expenses		(5,764	)		(13,760	)
Unearned revenue		18,120			(1,031	)
Accrued postretirement benefit cost		406			393
Net cash provided by (used in) operating activities		21,546			(11,154	)
Cash flows from investing activities:
Purchases of investments (restricted and unrestricted)		(47,468	)		(50,032	)
Maturities and sales of investments (restricted and unrestricted)		83,561			2,437
Net additions to property, equipment and leasehold improvements		(729	)		(5,722	)
Proceeds from sale of equipment		31			786
Additions to compound library assets		(3	)		—
Net cash provided by (used in) investing activities		35,392			(52,531	)
Cash flows from financing activities:
Proceeds from the exercise of stock options and employee purchase plan		2,946			809
Other		—			(450	)
Net cash provided by financing activities		2,946			359
Net increase (decrease) in cash and cash equivalents		59,884			(63,326	)
Effect of exchange rate changes on cash and cash equivalents		13			(108	)
Cash and cash equivalents at beginning of period		42,028			164,084
Cash and cash equivalents at end of period	$	101,925		$	100,650
Non-cash activities:
Issuance of common stock to directors	$	—		$	128
Purchase accounting adjustments	$	—		$	614
Cash paid for interest	$	2,438		$	2,438

See accompanying notes to consolidated financial statements.

3

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

     In this Quarterly Report on Form 10-Q, “OSI,” “our company,” “we,” “us,” and “our” refer to OSI Pharmaceuticals, Inc. and its subsidiaries. We own or have rights to use various copyrights, trademarks and trade names used in our business, including the following: Tarceva® (erlotinib), Macugen® (pegaptanib sodium injection) and Novantrone® (mitoxantrone for injection concentrate). This Form 10-Q also includes trademarks, service marks and trade names of other companies. As a result of our decision to divest the eye disease business held by our wholly-owned subsidiary, (OSI) Eyetech, Inc., or Eyetech, the operating results for Eyetech are shown as discontinued operations for all periods presented in the accompanying consolidated statement of operations. The Eyetech-related assets and liabilities which, as a result of the divestiture, will be either sold or no longer result in ongoing cash in-flows or outflows, have been classified as assets and liabilities related to discontinued operations in our March 31, 2007 consolidated balance sheets.

(1) Basis of Presentation

     In the opinion of management, the accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2007. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

(2) Revenue Recognition

Net revenue from unconsolidated joint business

     Net revenue from unconsolidated joint business is related to our co-promotion and manufacturing agreements with Genentech, Inc., our U.S. partner for Tarceva, our small molecule epidermal growth factor inhibitor which is currently approved for treatment of second and third line advanced non-small cell lung cancer, and, in combination with gemcitabine, for first line advanced unresectable or metastatic pancreatic cancer. It consists of our share of the pretax co-promotion profit generated from our co-promotion arrangement with Genentech for Tarceva, the partial reimbursement from Genentech of our sales and marketing costs related to Tarceva, and the reimbursement from Genentech of our manufacturing costs related to Tarceva. Under the co-promotion arrangement, all U.S. sales of Tarceva and associated costs and expenses, except for a portion of our sales related costs, are recognized by Genentech. For the three months ended March 31, 2007 and 2006, Genentech recorded $102 million and $93 million, respectively, in net sales of Tarceva in the United States and its territories. We record our 50% share of the co-promotion pretax profit on a quarterly basis, as set forth in our agreement with Genentech. Pretax co-promotion profit under the co-promotion arrangement is derived by calculating U.S. net sales of Tarceva to third-party customers and deducting costs of sales, distribution, and selling and marketing expenses incurred by Genentech and us. The costs

4

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

incurred during the respective periods represent estimated costs of both parties and are subject to further adjustment based on each party’s final review. Based on past experience, we do not believe that these adjustments, if any, will be significant to our consolidated financial statements. The partial reimbursement of our sales and marketing costs related to Tarceva is recognized as revenue as the related costs are incurred. We defer the recognition of the reimbursement of our manufacturing costs related to Tarceva until the time Genentech ships the product to third-party customers at which time our risk of inventory loss no longer exists. The unearned revenue related to shipments by our third party manufacturers of Tarceva to Genentech that have not been shipped to third-party customers was $5.3 million and $5.9 million as of March 31, 2007 and December 31, 2006, respectively, and is included in unearned revenue-current in the accompanying consolidated balance sheet.

     Net revenues from unconsolidated joint business consisted of the following (in thousands):

	Three Months Ended
	March 31,
	2007		2006
Co-promotion profit and reimbursement of sales force and marketing related costs	$	36,660	$	32,874
Reimbursement of manufacturing costs		2,462		2,781
Net revenue from unconsolidated joint business	$	39,122	$	35,655

Royalties on Product Licenses

     We estimate royalty revenue and royalty receivables in the periods these royalties are earned, in advance of collection. Our estimate of royalty revenue and receivables is based upon communication with our collaborative partners. Differences between actual revenues and estimated royalty revenue, if any, are adjusted for in the period which they become known, typically the following quarter. Historically, such adjustments have not been material to our consolidated financial condition or results of operations.

Licenses, Milestones and Other Revenues

     Our revenue recognition policies for all nonrefundable upfront license fees and milestone arrangements are in accordance with the guidance provided in the Securities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” as amended by SEC Staff Accounting Bulletin No. 104, “Revenue Recognition.” In addition, in fiscal 2004, we adopted the provisions of EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables,” or ETIF 00-21, for multiple element revenue arrangements entered into or materially amended after September 30, 2003 with respect to recognition of upfront and milestone payments received under collaborative research agreements. Milestones which have been received from Genentech are being recognized over the term of our Manufacturing and Supply Agreement with Genentech, under which the last items of performance to be delivered to Genentech are set forth, on a straight-line basis, which approximates the expected level of

5

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

performance under the Manufacturing and Supply Agreement. The milestone payments received from Roche, including a $4.0 million payment received during the quarter ended March 31, 2007, are recognized over the expected term of the research and development collaboration. At March 31, 2007, we had unearned revenue of $42.8 million relating to Genentech and Roche payments, of which $3.7 million was classified as short-term.

     We recognized $8.8 million and $7.3 million of revenue in the three months ended March 31, 2007 and 2006, respectively, in connection with our receipt of upfront payments, milestones, and royalties under license agreements granted under our patent portfolio covering the use of dipeptidyl peptidase IV, or DPIV, inhibitors for the treatment of type 2 diabetes and related indications. We recognize revenue from license agreements where we have no future obligations under the license agreements and the collection of payments is reasonably assured.

     In January 2007, we licensed our glucokinase activator, or GKA, program, including our clinical candidate PSN010, which is in Phase I studies, to Eli Lilly and Company for an upfront fee of $25 million and up to $360 million in potential development and sales milestones and other payments plus royalties on any compounds successfully commercialized from this program. We have deferred the initial recognition of the $25 million upfront fee based upon our obligation under the agreement to provide technical support during a transitional period of nine months from the date of execution. Accordingly, we are amortizing the $25 million upfront fee over the nine month transition period and recognized $8.3 million in the three months ended March 31, 2007.

     In the second quarter of 2006, we received a $35 million milestone payment from Pfizer Inc. upon the launch of Macugen in select European countries. The milestone payment was recorded as unearned revenue and is being recognized as revenue on a straight-line basis over the expected term of our collaboration and license agreements with Pfizer, which approximates the expected level of performance under these agreements with Pfizer. The amortization of the unearned revenue and the related unrecognized revenue is included in discontinued operations. As discussed in “Subsequent Events” below, in April 2007 we terminated our collaboration agreement with Pfizer and amended and restated the license agreement. As a result, the amortization of the remaining balance of the unearned revenue may change based on our review of the amended and restated license agreement. Any remaining balance of deferred revenue related to this milestone payment will be reversed upon the sale of the eye disease business.

     Other revenues includes miscellaneous revenue sources, including sales commissions representing commissions earned on the sales of the drug, Novantrone, in the United States for oncology indications pursuant to a co-promotion agreement dated March 11, 2003 with Ares Trading S.A., an affiliate of Serono, S.A.

(3) Earnings Per Share

     Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period increased to include all additional common shares that would have

6

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

been outstanding assuming potentially dilutive common share equivalents had been issued. Dilutive common share equivalents include (1) the dilutive effect of in-the-money shares related to stock options, which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an option, the average amount of compensation cost, if any, for future service that we have not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital, if any, when the option is exercised, are assumed to be used to repurchase shares in the current period (2) the dilutive effect of unvested restricted share units and restricted stock and (3) the conversion of convertible debt which is calculated using an “if-converted” basis. In addition, when computing the dilutive effect of convertible debt, the numerator is adjusted to add back the after-tax amount of interest recognized in the period.

     The computations for basic and diluted income per share from continuing operations were as follows (in thousands, except per share amounts):

	Three Months Ended
	March 31,
	2007		2006
	-
Income from continuing operations – basic	$	19,695	$	376
Add: Interest related to 2025 Notes		776		—
	-
Income from continuing operations – diluted	$	20,471	$	376
Weighted average common shares outstanding – basic		57,302		56,815
Dilutive effect of options and restricted stock		523		447
Dilutive effect of 2025 Notes		3,908		—
	-
Weighted-average common shares and dilutive potential common shares – diluted		61,733		57,262
Income per share from continuing operations:
Basic	$	0.34	$	0.01
Diluted	$	0.33	$	0.01

     Under the “if-converted” method, common share equivalents related to our 2.0% convertible senior due 2025, or our 2025 Notes, were included in diluted earnings per share for the three months ended March 31, 2007 but our 3.25% convertible senior subordinated notes due 2023, or our 2023 Notes, were not because their effect would be anti-dilutive. For the three months ended March 31, 2006, common share equivalents related to our 2023 Notes and our 2025 Notes were not included in diluted earnings per share because their effect would be anti-dilutive. Such common share equivalents for the three months ended March 31, 2007 and 2006 amounted to 3 million and 6.9 million, respectively.

(4) Discontinued Operations

     On November 6, 2006, we announced our intention to divest our eye disease business, a process which we expect to complete in mid-2007. Our eye disease business consists principally of Macugen, our marketed product for the treatment of neovascular age-related macular

7

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

degeneration, or wet AMD , as well as research assets in the eye disease area. We made the decision to exit the eye disease business because we believe that a key strategic goal of the acquisition of the business in November 2005 — the generation of significant cash flow from the business in the 2006 through 2008 fiscal years — has not been and will not be realized. Given the financial constraints resulting from the decline in Macugen sales on our overall research and development budget, we do not believe that we can optimally develop the research and development assets in our eye disease business and continue to support Macugen in the face of competing priorities in the oncology and diabetes and obesity areas.

     We finalized our exit plan during the first quarter of 2007 and began to actively market our eye disease business. In April 2007, we restructured our relationship with Pfizer for Macugen, which resulted in the return to us of U.S. rights to Macugen in exchange for a royalty-free license to Pfizer to commercialize Macugen in the rest of the world. We are currently in discussions with several parties regarding the sale of the eye disease business for an upfront fee and/or future milestones and royalties. We intend to structure the sale in a manner which will allow us to be compensated for any future success of Macugen and the pipeline assets in the eye disease business – primarily our PDGF aptamer program – in the form of future royalties and/or milestone payments. These future royalties are not expected to qualify as direct cash flows in accordance with EITF 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations.” As a result of our decision to divest this business, the financial information associated with these operations is presented as discontinued operations in the accompanying financial statements.

     In accordance with provision of Statement of Financial Accounting Standards, or SFAS, No. 144 “Accounting for the Impairment or Disposal of Long Lived Assets,” the results of operations of Eyetech for the current and prior period have been reported as discontinued operations. In addition, assets and liabilities of Eyetech have been classified as assets and liabilities related to discontinued operations, including those held for sale. Net assets held for sale have been reflected at the lower of carrying amount or fair value, less cost to sell. We did not recognize any adjustment or loss upon the classification of the eye disease net assets as held for sale as of March 31, 2007.

     Operating results of Eyetech for the three months ended March 31, 2007 and 2006 are summarized as follows (in thousands):

	Three Months Ended
	March 31,
	2007			2006
Net revenue	$	10,430		$	57,187
Pretax loss		(13,369	)		(18,231	)
Loss from discontinued operations	$	(13,054	)	$	(18,231	)

     As of March 31, 2007, certain assets and liabilities related to the Eyetech operations have been classified as assets or liabilities related to discontinued operations. The category includes not only assets which are held for sale, but also assets and liabilities which will no longer result in ongoing cash inflows or outflows after the divestiture.

8

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

     The summary of the assets and liabilities related to discontinued operations as of March 31, 2007 is as follows:

Assets:
Accounts receivable	$	11,464
Prepaid expenses and other assets		2,130
Inventories (assets held for sale)		19,302
Property, plant and equipment (assets held for sale)		4,605
Assets related to discontinued operations	$	37,501
Liabilities:
Accounts payable and accrued expenses	$	14,842
Collaboration profit share		2,529
Unearned revenue		32,016
Total liabilities	$	49,387

Eyetech Integration – Severance Costs

     In connection with the acquisition of Eyetech on November 14, 2005, we implemented a plan to consolidate certain facilities and reduce the workforce. Included in the liabilities assumed in the acquisition, we recognized $6.2 million for the termination benefits and relocation cost of employees. Additional terminations occurred throughout 2006 for transition employees. In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” these termination payments and benefits were deemed to represent retention bonuses associated with future service. For the quarter ended March 31, 2006, we recognized an additional $2.7 million of retention bonus costs that are included in the loss from discontinued operations.

     The activity for the three months ended March 31, 2007 and 2006 was as follows (in thousands):

	Three Months Ended
	March 31,
	2007			2006
Opening liability January 1	$	699		$	4,870
Accrual for severance, relocation and retention bonuses		—			2,650
Cash paid for severance, relocation and retention bonuses		(699	)		(3,982	)
Ending liability	$	—		$	3,538

Eyetech Divestiture – Severance Costs

     As a result of our decision to exit our eye disease business, we committed to a plan to re-scale the eye disease business in November 2006. The plan includes consolidation of facilities as well as a reduction in the workforce. We recognized $3.6 million of this cost in the fourth quarter

9

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

of 2006. Included in this charge is $2.6 million for severance payments and $1.0 million related to the impairment of long-term assets. The plan includes additional reductions in the workforce for transitional employees throughout 2007 and is expected to cost between $6.0 million and $8.0 million. Termination costs are expected to be incurred through the second quarter of 2007. During the three months ended March 31, 2007, we recorded additional costs of $2.3 million which are included in the loss from discontinued operations.

     The activity for the three months ended March 31, 2007 was as follows (in thousands):

Opening liability at January 1, 2007	$	2,584
Accrual for severance and retention bonuses		2,290
Cash paid for severance and retention bonuses		(3,397	)
Ending liability at March 31, 2007	$	1,477

Eyetech Integration — Facility Restructuring

     In connection with the acquisition of Eyetech on November 14, 2005, we implemented a plan to consolidate certain facilities. Included in the liabilities assumed in the acquisition, we recognized $5.4 million for the present value of future lease commitments. The facilities included in the accrual were Lexington, Massachusetts, a portion of the New York City office and one of our leased facilities in Boulder, Colorado. The present value of the lease payments was determined based upon the date that we plan to exit the facility and the remaining lease expiration, offset by estimated sublease income. Rental payments for the facilities prior to closure were included in operating expense. During 2006, the Boulder facility was sold, and we subleased a portion of the New York City office. The Lexington facility and the remaining portion of the New York City office were closed during 2006. During the first quarter of 2007, we re-evaluated our rental assumptions based upon the current rental market and recorded $2.7 million of additional expense in discontinued operations related to the New York City and Lexington facilities. These accruals were not included in the liabilities related to discontinued operations as of March 31, 2007 since the obligations will remain with us after the divestiture of the eye disease business.

     The activity for the three months ended March 31, 2007 and 2006 was as follows (in thousands):

	Three Months Ended
	March 31,
	2007			2006
Opening liability at January 1	$	2,053		$	5,391
Accrual for lease termination costs		2,710			(268	)
Accretion expense		35			151
Cash paid for rent		(338	)		(151	)
Ending liability	$	4,460		$	5,123

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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

(5) Accounting for Stock–Based Compensation

     We have 13 equity plans pursuant to which there are shares available for future grant and/or outstanding grants issued to our employees, officers, directors and consultants. Three of these plans still have shares available for future grant: the 1999 Incentive and Non-Qualified Stock Option Plan, the Amended and Restated Stock Incentive Plan and the Stock Incentive Plan for New Hires. All of our plans are administered by the Compensation Committee of the Board of Directors, which may grant stock options and, in the case of the Amended and Restated Stock Incentive Plan and Stock Incentive Plan for New Hires, restricted stock and restricted stock units. The Compensation Committee determines the terms of all equity grants under the plans. Our equity grants vest over various periods and expire no later than 10 years from date of grant. The total authorized shares under these plans are 11,609,500, of which 1,412,753 shares were available for future grant as of March 31, 2007.

     We have an employee stock purchase plan under which eligible employees may contribute up to 10% of their base earnings toward the quarterly purchase of our common stock. The employee’s purchase price is derived from a formula based on the fair market value of the common stock. As of March 31, 2007, we had 496,265 shares of common stock available for future grant under this plan.

     We sponsor a stock purchase plan for our UK-based employees. Under the terms of the plan, eligible employees may contribute between £5 and £250 of their base earnings, in 36 monthly installments towards the purchase of our common stock. As of March 31, 2007, we had 81,363 shares of our common stock available for future grant in connection with this plan.

     Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), “Share-Based Payments,” which establishes the accounting for employee stock-based awards. Under the provisions of SFAS No. 123(R), stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant).

     Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of, stock options, restricted stock and restricted stock units. Compensation expense related to continuing operations and attributable to net stock-based compensation for the quarter ended March 31, 2007 and 2006 was $4.0 million and $2.8 million, respectively, or $0.07 and $0.05 for diluted earnings per share, respectively. Compensation expense related to discontinued operations and attributable to net stock-based compensation for the quarter ended March 31, 2007 and 2006 was $900,000 and $2.2 million, respectively. At March 31, 2007, total remaining unrecognized compensation cost related to unvested stock-based payment awards was $45.8 million. That cost is expected to be recognized over a weighted average period of 3.5 years.

Stock Options

     We estimate the fair value of stock options using the Black-Scholes option-pricing model. We believe that the valuation technique and the approach utilized to develop the

11

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

underlying assumptions are appropriate in calculating the fair values of our granted stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards. Historically, we have satisfied the exercise of options by issuing new shares.

     The per share weighted average fair value of stock options granted during the three months ended March 31, 2007 and 2006 was $15.99 and $15.14, respectively. In addition to the exercise and grant date prices of the awards, certain weighted average assumptions that were used to estimate the fair value of stock option grants in the respective periods are listed in the table below:

	Three Months Ended
	March 31,
	2007			2006
Expected dividend yield		0	%		0	%
Expected volatility		50.48	%		61.28	%
Risk-free interest rate		4.71	%		4.49	%
Expected term (years)		4.57			4.32

     A summary of our stock option programs as of March 31, 2007, and changes during the three-month period then ended, is presented below (shares in thousands):

						Aggregate Intrinsic		Weighted Average
				Weighted-Average		Value (1)		Contractual Life
	Shares			Exercise Price		(in millions)		Remaining in Years
Outstanding at December 31, 2006		6,737		$	36.00
Granted at fair value		15		$	33.94
Exercised at fair value		(183	)	$	18.42
Expired		—
Forfeited		(250	)	$	31.57
Outstanding at March 31, 2007		6,319		$	36.68	$	25.1		5.57
Exercisable at March 31, 2007		4,576		$	39.24	$	16.4		5.38
Unvested at March 31, 2007		1,743		$	29.94	$	8.7		6.09

(1) The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option.

     The total intrinsic value of stock options exercised during the quarter ended March 31, 2007 and 2006 was $2.8 million and $532,000, respectively.

     Options granted prior to June 1, 2005 have exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of ten years and a vesting period of three years. Options granted subsequent to May 31, 2005 have exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of seven years and a vesting period of four years. For the quarter ended March 31, 2007, a projected forfeiture rate based upon

12

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

historical experience of 21.8% was utilized for non-executive employees and no forfeitures for executive employees was assumed for purposes of recognizing compensation expense.

     We estimate expected volatility based upon a combination of historical, implied and adjusted historical stock prices. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. Commencing in the second quarter of fiscal 2005, the fair value of the options was estimated at the date of grant using a Black-Scholes option pricing model with the expected option term determined using a Monte Carlo simulation model that incorporates historical employee exercise behavior and post-vesting employee termination rates.

Restricted Stock

     Our outstanding shares of restricted stock vest annually over a two or four year period depending on the award and are valued at the stock price on date of grant and are subject to certain additional terms and conditions. We also assumed 339,439 shares of restricted stock issued by Eyetech Pharmaceuticals, Inc. in connection with the acquisition of Eyetech. Pursuant to the terms of the acquisition agreement, each share of restricted stock converted into the right to receive 0.12275 shares of our common stock and $15.00 cash payment upon vesting. As a result, on November 14, 2005, we reserved for issuance 41,666 shares of our common stock and $5.1 million in cash in connection with these restricted shares. As of March 31, 2007, 4,147 unvested shares of our common stock and $508,000 in cash remained subject to these restricted shares, representing $611,000 of unrecognized compensation expense.

     The following is a summary of the status of our restricted stock (excluding the assumed restricted shares in the Eyetech merger) as of March 31, 2007 and activity during the three months ended March 31, 2007:

				Weighted
				Average Grant
	No. Shares			Date Fair
	(in thousands)			Value
Outstanding at December 31, 2006		191		$	31.15
Granted at fair value		—			—
Vested at fair value		—			—
Forfeited		(16	)	$	31.37
Outstanding at March 31, 2007		175		$	31.13

Restricted Stock Units

     Our outstanding restricted stock units vest annually over a four year period, are valued at the stock price on date of grant, and are subject to the continued employment of the employee. These awards are also subject to the provisions of the agreement under which the restricted stock units are granted. As of March 31, 2007, 412,692 restricted stock units were outstanding representing $12.7 million of unrecognized compensation expense. That cost is expected to be recognized over a weighted average period of 3.7 years. The aggregate intrinsic value was $13.6 million as of March 31, 2007.

13

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

     The following is a summary of the status of our outstanding restricted stock units as of March 31, 2007 and activity during the three months ended March 31, 2007:

				Weighted
				Average Grant
	No. Shares			Date Fair
	(in thousands)			Value
Outstanding at December 31, 2006		432		$	37.70
Granted at fair value		—			—
Vested at fair value		—			—
Forfeited		(19	)	$	37.74
Outstanding at March 31, 2007		413		$	37.69

(6) Restricted Assets

     Certain of our facility leases have outstanding letters of credit issued by a commercial bank which serve as security for our performance under the leases. The collateral for these letters of credit are maintained in a restricted investment account. Included in investment securities as of March 31, 2007 was $9.8 million of restricted cash and investments to secure these letters of credit.

(7) Inventory

     Tarceva is stated at the lower of cost or market, with cost being determined using the weighted average method. Inventory is comprised of three components: raw materials, which are purchased directly by us, work in process, which is primarily active pharmaceutical ingredient, or API, where title has transferred from our contract manufacturer to us, and finished goods, which are packaged product ready for commercial sale.

     The December 31, 2006 inventory balances included both Tarceva and Macugen inventory values. As of March 31, 2007, Macugen inventories were classified as assets related to discontinued operations. As of December 31, 2006, the total value of the Macugen inventories was $18.4 million.

     Inventory at March 31, 2007 and December 31, 2006 consisted of the following (in thousands):

	March 31,		December 31,
	2007		2006
Raw materials	$	2,969	$	3,032
Work in progress		7,672		22,282
Finished goods on hand, net		5,219		6,088
Inventory subject to return		4,856		5,458
Total inventory	$	20,716	$	36,860

14

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

     Inventory subject to return represents the amount of Tarceva shipped to Genentech which has not been recognized as revenue.

(8) Comprehensive Income (Loss)

     Comprehensive income (loss) for the three months ended March 31, 2007 and 2006 was as follows (in thousands):

	Three Months Ended
	March 31,
	2007		2006
Net income (loss)	$	6,641	$	(17,855	)
Other comprehensive income (loss):
Foreign currency translation adjustments		79		66
Unrealized holding gains (losses) arising during period		302		(94	)
		381		(28	)
Total comprehensive income (loss)	$	7,022	$	(17,883	)

     The components of accumulated other comprehensive income were as follows (in thousands):

	March 31,			December 31,
	2007			2006
Cumulative foreign currency translation adjustment	$	4,055		$	3,976
Adjustment to initially apply SFAS 158 (1)		(1,316	)		(1,316	)
Unrealized loss on available-for-sale securities		(4	)		(306	)
Accumulated other comprehensive income	$	2,735		$	2,354

(1) SFAS No. 158 “Employers Accounting for Defined Benefit Pension and Post Retirement Plans.”

(9) Intangible Assets

     The components of other intangible assets-net are as follows (in thousands):

	March 31, 2007							December 31, 2006
	Carrying		Accumulated			Net Book		Carrying		Accumulated			Net Book
	Amount		Amortization			Value		Amount		Amortization			Value
Novantrone	$	46,009	$	(43,470	)	$	2,539	$	46,009	$	(43,108	)	$	2,901
Acquired patent estate		763		(150	)		613		760		(135	)		625
Acquired licenses issued to other companies		3,949		(798	)		3,151		3,932		(716	)		3,216
Total	$	50,721	$	(44,418	)	$	6,303	$	50,701	$	(43,959	)	$	6,742

15

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

     Total amortization expense for the three months ended March 31, 2007 and 2006 was $458,000 and $5.0 million, respectively. Amortization expense is estimated to be $1.4 million for the remaining nine months of 2007, $1.8 million for 2008 and $382,000 for the years 2009 through 2012.

(10) Consolidation of Facilities

(a) Restructuring Plan

     On November 6, 2006, we announced our intention to exit our eye disease business, and committed to a plan to re-scale our eye disease business and other operations consistent with the streamlining of our overall business. The plan as it relates to ongoing OSI operations includes the consolidation of facilities as well as a reduction in the workforce and is expected to cost between $2.6 million and $3.5 million. We recognized $2.5 million of this cost in the fourth quarter of 2006. Included in this charge was $653,000 for severance payments, $654,000 of impairment charges related to long term assets and $1.2 million for lease obligations. During the three months ended March 31, 2007, we recognized $837,000 of additional severance charges, of which $475,000 was included in selling, general and administrative expenses, and $362,000 was included in research and development expenses. The remaining severance charges are expected to be incurred in the second quarter of 2007.

     The activity for the three months ended March 31, 2007 was as follows (in thousands):

	Three Months
	Ended
	March 31, 2007
Opening liability January 1, 2007	$	1,897
Accrual for severance payments		837
Accrual for lease payments		386
Cash paid for severance		(1,071	)
Cash paid for rent		(122	)
Ending liability	$	1,927

(b) Corporate headquarters

     During the first quarter of 2006, we relocated our corporate headquarters to our newly acquired facility in Melville, New York. As a result, in accordance with SFAS No. 146, we recognized a liability of $2.7 million and net expense of $2.3 million for the exit cost associated with the termination of the lease for the prior facility. The recognized net expense of $2.3 million was comprised of the net lease obligations of $2.7 million, offset by previously accrued rent expense of $369,000.

16

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

     The activity for the three months ended March 31, 2007 and 2006 was as follows (in thousands):

	Three Months Ended
	March 31,
	2007			2006
Opening liability January 1	$	1,924		$	—
Accrual for lease termination costs		—			2,700
Accretion expense		21			—
Cash paid for rent		(1,434	)		—
Ending liability	$	511		$	2,700

(c) Oxford, England

     During the fourth quarter of fiscal 2004, we announced the decision to consolidate all of our U.K.-based oncology research and development activities into our New York locations by approximately November 30, 2004. The termination benefits provided to employees was $3.7 million as of September 30, 2004. During the year ended December 31, 2005, we recorded a charge of $4.4 million, in selling, general and administrative expenses, for estimated facility lease return costs and the remaining rental obligation net of estimated sublease rental income in accordance with SFAS No. 146.

     The activity for the three months ended March 31, 2007 and 2006 was as follows (in thousands):

	Three Months Ended
	March 31,
	2007			2006
Opening liability January 1	$	4,062		$	4,211
Cash paid for rent		(153	)		(403	)
Other		18			37
Ending liability	$	3,927		$	3,845

(d) Horsham, Pennsylvania

     During the second quarter of fiscal 2004, we committed to and approved an exit plan for our Horsham, Pennsylvania facility, which we acquired in connection with the acquisition of Cell Pathways, Inc. in June 2003. We have recognized the rent obligations for the remainder of the lease (through June 2008), offset by the sublease rental income. These exit costs were comprised of the net lease obligations of $2.1 million, offset by previously accrued rent expense of $338,000. In May 2004, we entered into a sublease agreement for the Horsham facility. We charge the rental payments less the sublease rental income received against the accrued liability.

17

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

     The activity for the three months ended March 31, 2007 and 2006 was as follows (in thousands):

	Three Months Ended
	March 31,
	2007			2006
Opening liability January 1	$	695		$	1,160
Cash paid for rent net of sublease income received		(164	)		(75	)
Ending liability	$	531		$	1,085

(11) Employee Post-Retirement Plan

     We have a plan which provides post-retirement medical and life insurance benefits to eligible employees, board members and qualified dependents. Eligibility is determined based on age and service requirements. These benefits are subject to deductibles, co-payments and other limitations.

     Under SFAS No. 106, “Employer’s Accounting for Post-Retirement Benefits Other Than Pensions,” the cost of post-retirement medical and life insurance benefits is accrued over the active service periods of employees to the date they attain full eligibility for such benefits.

     Net post-retirement benefit cost for the three months ended March 31, 2007 and 2006 included the following components (in thousands):

	Three Months Ended
	March 31,
	2007		2006
Service costs for benefits earned during the period	$	287	$	264
Interest costs on accumulated post-retirement benefits obligation		115		102
Amortization of initial benefits attributed to past services		2		1
Amortization of loss		5		17
Net post-retirement benefit cost	$	409	$	384

     As discussed in “Subsequent Events” below, on April 18, 2007, we curtailed our post-retirement medical and life insurance plan and grandfathered those employees, board members and qualified dependents who were eligible to participate on that date. Only those grandfathered participants will continue to receive benefits under the plan.

(12) Sabbatical Leave Accrual

     Effective January 1, 2007, we adopted EITF 06-02 “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43.” Sabbatical leave is generally defined as an employee’s entitlement to paid time off after working for an entity for a specified

18

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

period of time. The employee continues to be a compensated employee and is not required to perform any duties for the entity during the sabbatical leave. We provide a sabbatical leave of four weeks to employees who have achieved 15 years of service. We applied EITF 06-02 as a change in accounting principle through retrospective application to all prior periods in accordance with SFAS No. 154. The adoption of this change in accounting principle resulted in an increase of $352,000 in accrued expenses and a decrease in retained earnings of $352,000 in our consolidated balance sheets as of December 31, 2006. The results for the three months ended March 31, 2006 have not been restated for the retrospective impact of adopting the EITF 06-02 because the effect was insignificant.

(13) Income Taxes

     In July 2006, the Financial Accounting Standards Board, or FASB, issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the criteria that must be met prior to recognition of the financial statement benefit of a position taken in a tax return. FIN 48 provides a benefit recognition model with a two-step approach consisting of a “more-likely-than-not” recognition criteria, and a measurement attribute that measures a given tax position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. FIN 48 also requires the recognition of liabilities created by differences between tax positions taken in a tax return and amounts recognized in the financial statements. FIN 48 is effective as of the beginning of the first annual period beginning after December 15, 2006, and became effective for us on January 1, 2007. The adoption of FIN 48 on January 1, 2007 had no impact on the Company because we did not identify any uncertain tax portions in any taxing jurisdiction.

     We are subject to taxation in the US, various states and the United Kingdom. Effectively, all of our historical tax years since 1993 are subject to examination by the United States Internal Revenue Service and various states due to the generation of net operating loss and credit carryforwards. In the United Kingdom, our historical tax years since 2004 are subject to examination by Inland Revenue.

     For the three months ended March 31, 2007, we recorded a provision for income taxes related to our alternative minimum tax obligations of approximately $500,000 related to income from continuing operations and a tax benefit of $315,000 related to our loss from discontinued operations. Based on our ability to fully offset current taxable income by our net operating loss carryforwards, our estimated tax expense is principally related to alternative minimum tax. The provision for income taxes related to continuing operations has been included in other income (expense) in the accompanying statement of operations for the quarter ended March 31, 2007.

(14) Litigation

     On or about December 16, 2004, several purported shareholder class action lawsuits were filed in the United States District Court for the Eastern District of New York against us, certain of our current and former executive officers, and the members of our Board of Directors. The lawsuits were brought on behalf of those who purchased or otherwise acquired our common stock during certain periods in 2004, which periods differed in the various complaints. The Court

19

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (continued)
(Unaudited)

appointed a lead plaintiff who, on February 17, 2006, filed a consolidated amended class action complaint seeking to represent a class of all persons who purchased or otherwise acquired our common stock during the period from April 26, 2004 through November 22, 2004. The consolidated complaint alleges that the defendants made material misstatements and omissions concerning the survival benefit associated with our product, Tarceva and the size of the potential market of Tarceva upon FDA approval of the drug. It alleges violations of Sections 11 and 15 of the Securities Act of 1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The consolidated complaint seeks unspecified compensatory damages and other relief. On April 7, 2006, we filed a motion to dismiss the consolidated amended complaint. Briefing on this motion was completed on June 21, 2006. In an opinion dated March 31, 2007 (and entered on the docket on April 4, 2007), the Court granted in part and denied in part the motion to dismiss. The Court dismissed claims against some of the individual defendants and dismissed the Section 11 and 15 claims, but granted the plaintiff 30 days leave to replead the Section 11 claim in accordance with the Court’s order and to renew the Section 15 claim. The Court ‘s order states that if plaintiff does not properly amend the complaint within 30 days, the Section 11 and 15 claims will be dismissed with prejudice. As of the date of this filing, the plaintiff has not amended the complaint. Based on the early stage of this litigation, the ultimate outcome cannot be determined and accordingly, no provision has been recorded in the consolidated financial statements.

(15) Subsequent Events

     On April 18, 2007, we curtailed our post-retirement medical and life insurance plan and grandfathered those employees, board members and qualified dependants who were eligible to participate in the plan on that date. Only those grandfathered participants will continue to be entitled to receive benefits under the plan.

     On April 20, 2007, we terminated our existing collaboration agreement with Pfizer with respect to the co-promotion of Macugen in the United States and amended and restated the license agreement pursuant to which we had originally granted to Pfizer a number of exclusive licenses or sublicenses to patents and other intellectual property related to Macugen on a world-wide basis. Under the terms of the amended and restated license agreement, Pfizer has agreed to return to us all rights to develop and commercialize Macugen in the United States, and we have granted to Pfizer an exclusive right to develop and commercialize Macugen in the rest of the world. We have also agreed with Pfizer to provide each other with certain transitional services related to Macugen.

20

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

THREE MONTHS ENDED MARCH 31, 2007 AND 2006

Overview

     We are a mid-cap biotechnology company committed to building a scientifically strong and financially successful top tier biopharmaceutical organization that discovers, develops and commercializes innovative molecular targeted therapies addressing major unmet medical needs in oncology, diabetes and obesity.

     Our primary focus is oncology where our business is anchored by our flagship product, Tarceva, a small molecule inhibitor of the epidermal growth factor receptor. In November 2004, Tarceva was approved by the U.S. Food and Drug Administration, or FDA, for the treatment of advanced non-small cell lung cancer, or NSCLC, in patients who have failed at least one prior chemotherapy regimen and, subsequently, in November 2005, for the treatment of patients with locally advanced and metastatic pancreatic cancer in combination with the chemotherapy agent, gemcitabine. Tarceva was also approved for sale in the European Union for the treatment of advanced NSCLC in September 2005 and, in January 2007, as a first-line therapy for metastatic pancreatic cancer in combination with gemcitabine. Tarceva achieved global sales of approximately $650 million for 2006. We co-promote Tarceva in the United States with Genentech, Inc. and receive royalties on sales from our international partner, Roche. Behind Tarceva, we have an emerging oncology pipeline of molecular targeted therapies in clinical and late-stage pre-clinical development.

     We also have research and early development programs in diabetes and obesity which are conducted through Prosidion Limited, our U.K. subsidiary. Our near term focus in the diabetes and obesity area is to progress our research projects through clinical proof-of-concept studies followed by outlicensing or partnering these programs for upfront fees, milestones and royalties. In January 2007, we licensed our glucokinase activator program, including our clinical candidate PSN010, which is in Phase I studies, to Eli Lilly and Company for an upfront fee of $25 million and up to $360 million in potential development and sales milestones and other payments plus royalties on any compounds successfully commercialized from this program. We also generate revenues from our patent estate relating to the use of dipeptidyl peptidase IV, or DPIV, inhibitors for the treatment of type II diabetes and related indications. Nine pharmaceutical companies have taken non-exclusive licenses to these patents, which provide us with upfront payments as well as potential milestones and royalties. In the fourth quarter of 2006, one of our licensees, Merck & Co., Inc., received approval by the FDA for its DPIV inhibitor, Januvia™ (sitagliptin), and commenced marketing of the drug, which triggered the payment of a milestone and royalties to us. In March 2007, Merck received EU approval of Januvia™, and also received FDA approval of Janumet™ (sitagliptin/metformin HCI), a combination Januvia/metformin product, which triggered milestone payments to us and future royalties based on the sales of those products.

     On November 6, 2006, we announced our intention to divest our eye disease business, a process which we expect to complete in mid-2007. Our eye disease business consists principally of Macugen, our marketed product for the treatment of neovascular age-related macular

21

degeneration, or wet AMD, as well as research assets in the eye disease area. We made the decision to exit the eye disease business because we believe that a key strategic goal of the acquisition of the business in November 2005 — the generation of significant cash flow from the business in the 2006 through 2008 fiscal years — has not been and will not be realized. Total U.S. net sales of Macugen in 2006 were approximately $103 million and were significantly impacted by the launch of a competitor’s product. U.S. net sales of Macugen declined significantly in 2006, from $50.6 million in the first quarter of 2006 to $5.0 million in the first quarter of 2007. As a result of the decline in revenues for Macugen and developments in the wet AMD marketplace, we recognized impairment charges in the second and third quarters of 2006 of approximately $320.3 million in the aggregate for the goodwill relating to our eye disease business and additional charges in the fourth quarter of 2006 of $185.7 million relating to the Macugen intangible assets and $26.4 million relating to the Macugen obsolete and expiring inventory. Given the financial constraints resulting from the decline in Macugen sales on our overall research and development budget, we do not believe that we can optimally develop the research and development assets in our eye disease business and continue to support Macugen in the face of competing priorities in the oncology and diabetes and obesity areas.

     During the first quarter of 2007, we finalized our exit plan and began to actively market the Macugen assets. In April 2007, we restructured our relationship with Pfizer Inc. for Macugen, which resulted in the return to us of U.S. rights to Macugen in exchange for a royalty-free license to Pfizer to commercialize Macugen in the rest of the world. We restructured our relationship with Pfizer to help facilitate a successful divestiture of our eye disease business. We are currently in discussions with several parties regarding the divestiture of the eye disease business for an upfront fee and/or future milestones and royalties. We intend to structure the divestiture in a manner which will allow us to be compensated for any future success of Macugen and the pipeline assets in the eye disease business — primarily our PDGF aptamer program. As a result the finalization of our plan to sell the business during the first quarter of 2007, the financial information associated with these operations is presented as discontinued operations in the accompanying financial statements.

     Delivering full-year profitability in 2007 is a key goal that we believe can be attained through diligent management of our business and, in particular, our expenses. In addition to our decision to divest our eye business, we have taken several steps to carefully manage the interim costs related to the eye disease business, such as closing the headquarters for our eye disease business in Times Square, New York at the end of 2006 and significantly reducing headcount related to this business. We also have minimized clinical development for Macugen and our other eye disease programs with the exception of our post approval trial commitments and the LEVEL trial – our trial to assess Macugen’s ability to maintain the vision gains achieved by pan-VEGF-A inhibitors. We are decreasing our overall general and administrative expenses by resizing our corporate operations so that they are commensurate with our simplified business following the divestiture of our eye disease business. We are also decreasing expenses related to certain of our pre-clinical activities, such as drug formulation and toxicology studies, by outsourcing such functions in a cost-effective manner, including off-shoring.

22

Quarterly Update

     On January 10, 2007, we announced that Prosidion had entered into an exclusive license with Eli Lilly and Company for our glucokinase activator program, including clinical candidate PSN010 which is in Phase I studies, for an upfront fee of $25 million and up to $360 million in potential development and sales milestones and other payments plus royalties on any compounds successfully commercialized from the program.

     On January 29, 2007, we announced that the European Commission had granted marketing authorization for Tarceva in combination with gemcitabine as first-line therapy for metastatic pancreatic cancer.

     In March 2007, Merck received EU regulatory approval for Januvia, and also received FDA approval for Janumet, a combination Januvia/metformin product, which triggered milestone payments to us and potential future royalties based on the sales of these products.

Subsequent Events

     On April 18, 2007, we curtailed our post-retirement medical and life insurance plan and grandfathered those employees, board members and qualified dependants who were eligible to participate in the plan on that date. Only those grandfathered participants will continue to be entitled to receive benefits under the plan.

     On April 20, 2007, we terminated our existing collaboration agreement with Pfizer with respect to the co-promotion of Macugen in the United States and amended and restated the license agreement pursuant to which we had originally granted to Pfizer a number of exclusive licenses or sublicenses to patents and other intellectual property related to Macugen on a world-wide basis. Under the terms of the amended and restated license agreement, Pfizer has agreed to return to us all rights to develop and commercialize Macugen in the United States, and we have granted to Pfizer an exclusive right to develop and commercialize Macugen in the rest of the world. We have also agreed with Pfizer to provide each other with certain transitional services related to Macugen.

     Effective May 1, 2007, the price of Tarceva to wholesalers for sales of the drug in the United States is $3,125 for a 30-day supply of the 150mg tablets, $2,763 for a 30-day supply of the 100mg tablets and $1,006 for a 30-day supply of the 25mg tablets.

Critical Accounting Policies

     We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ significantly from our estimates and the estimated amounts could differ significantly under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are

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those that are most important to the portrayal of our financial condition and results of operations and which require our most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Note 1 to the accompanying consolidated financial statements includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements.

Discontinued Operations

     On November 6, 2006, we announced our intention to divest our eye disease business, a process which we expect to complete in 2007. During the first quarter of 2007, we finalized our exit plan and began to actively market our eye disease business. As a result of the finalization of our plan to sell during the first quarter of 2007 and as discussed in note 4 to the accompanying consolidated financial statements, the financial information associated with these operations is presented as discontinued operations in the accompanying financial statements.

Revenue Recognition

Net revenues from unconsolidated joint business

     Net revenues from unconsolidated joint business are related to our co-promotion and manufacturing agreements with Genentech for Tarceva. They consist of our share of the pretax co-promotion profit generated from our co-promotion arrangement with Genentech for Tarceva, the partial reimbursement from Genentech of our sales and marketing costs related to Tarceva and the reimbursement from Genentech of our manufacturing costs related to Tarceva. Under the co-promotion arrangement, all U.S. sales of Tarceva and associated costs and expenses, except for a portion of our sales related costs, are recognized by Genentech. We record our 50% share of the co-promotion pretax profit on a quarterly basis, as set forth in our agreement with Genentech. Pretax co-promotion profit under the co-promotion arrangement is derived by calculating U.S. net sales of Tarceva to third-party customers and deducting costs of sales, distribution and selling and marketing expenses incurred by Genentech and us. The costs incurred during the respective periods represent estimated costs of both parties and are subject to further adjustment based on each party’s final review. Based on past experience, we do not believe that these adjustments, if any, will be significant to our consolidated financial statements. The partial reimbursement of sales and marketing costs related to Tarceva is recognized as revenue as the related costs are incurred. We defer the recognition of the reimbursement of our manufacturing costs related to Tarceva until the time Genentech ships the product to third-party customers at which time our risk of inventory loss no longer exists.

License fees and milestones

     Our revenue recognition policies for all nonrefundable upfront license fees and milestone arrangements are in accordance with the guidance provided in the Securities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” as amended by SEC Staff Accounting Bulletin No. 104, “Revenue Recognition.” In addition, we follow the provisions of EITF, 00-21, “Revenue Arrangements with Multiple Deliverables” for multiple element revenue arrangements entered into or materially amended after June 30, 2003.

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     Milestones received from Genentech after June 2004 and the remaining unearned upfront fee are being recognized over the term of our Manufacturing and Supply Agreement with Genentech, under which the last items of performance to be delivered to Genentech are set forth, on a straight line basis, which approximates the expected level of performance under the Manufacturing and Supply Agreement. Milestone payments received from Roche are recorded as unearned revenue and recognized over the expected term of the research collaboration on a straight-line basis, which approximates the expected level of performance under the development plan.

     In January 2007, we outlicensed our glucokinase activator program, including our clinical candidate PSN010, which is in Phase I studies, to Eli Lilly and Company for an upfront fee of $25 million and up to $360 million in potential development and sales milestones and other payments plus royalties on any compounds successfully commercialized from this program. We have deferred the initial recognition of the $25 million upfront fee based upon our obligation under the agreement to provide technical support during a transitional period of nine months from the date of execution. Accordingly, we are amortizing the $25 million upfront fee over the nine month transition period and have recognized $8.3 million in the three months ended March 31, 2007.

Macugen Product Sales

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

     Under an agreement with Pfizer dated February 2003, we shared sales and marketing responsibility for sales of Macugen in the United States and reported product revenue on a gross basis for these sales. We have determined that we are qualified as a principal under the criteria set forth in EITF 99-19, based on our responsibilities under our contracts with Pfizer, which include manufacture of product for sale in the United States, distribution, ownership of product inventory and credit risk from customers. As discussed in “Subsequent Events” above, as a result of the restructuring of our agreements with Pfizer for Macugen, effective as of April 20, 2007, we are solely responsible for the sales and marketing costs for Macugen in the United States.

     If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future.

Macugen Collaborative Revenue

     Collaborative program revenues related to Macugen for the three months ended March 31, 2007 and 2006 represented funding arrangements for Macugen research and

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development with Pfizer and were recognized when earned in accordance with the terms of the agreements and related research and development activities undertaken. These revenues are included in discontinued operations.

     Based on the terms of our collaboration agreement with Pfizer, revenues derived from reimbursements of costs associated with the development of Macugen were recorded in compliance with EITF 99-19 “Reporting Revenue Gross as Principal versus Net as an Agent” and EITF Issue 01-14 “Income Statement Characterization of Reimbursements Received for ‘Out of Pocket’ Expenses Incurred.” According to the criteria established by these EITF Issues, we have met the criteria to record revenue for the gross amount of the reimbursements. As discussed in “Subsequent Events” above, we terminated our collaboration agreement with Pfizer in April 2007.

Macugen Milestone Revenue

     In the second quarter of 2006, we received a $35 million milestone payment from Pfizer upon the launch of Macugen in select European countries. In accordance with EITF 00-21, the milestone payment was recorded as unearned revenue and is being recognized as revenue on a straight-line basis over the expected term of our collaboration and license agreements with Pfizer, which approximates the expected level of performance under these agreements with Pfizer. The amortization of the unearned revenue is included in loss from discontinued operations. As discussed in “Subsequent Events” above, in April 2007, we terminated our collaboration agreement with Pfizer and amended and restated the license agreement. The amortization of the remaining balance of the unearned revenue may change based on the terms of the amended and restated license agreement. Any remaining balance of deferred revenue related to this milestone payment will be reversed upon the sale of the eye disease business.

Accruals for Clinical Research Organization and Clinical Site Costs

     We make estimates of costs incurred to date but not yet invoiced in relation to external clinical research organizations, or CROs, and clinical site costs. We analyze the progress of clinical trials, including levels of patient enrollment, invoices received and contracted costs when evaluating the adequacy of the accrued liabilities. Significant judgments and estimates must be made and used in determining the accrued balance in any accounting period.

Goodwill and Other Long-Lived Assets

     We account for goodwill and other intangible assets in accordance with Statements of Financial Accounting Standards, or SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations. It specifies the criteria which intangible assets acquired in a business combination must meet in order to be recognized and reported apart from goodwill. SFAS No. 142 requires that goodwill and intangible assets determined to have indefinite lives no longer be amortized but instead be tested for impairment at least annually and whenever events or circumstances occur that indicate impairment might have occurred. We completed our annual impairment review of goodwill at December 31, 2006, and determined that no impairment charge was required.

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     Our identifiable intangible assets are subject to amortization. SFAS No. 142 requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires, among other things, that long-lived assets be measured at the lower of carrying amount or fair value, less cost to sell, whether reported in continuing operations or in discontinued operations. We review our intangibles with determinable lives and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

     As discussed in note 4 to the accompanying consolidated financial statements, our Eyetech operations have been classified as discontinued operations and certain assets have been classified as held for sale. In accordance with SFAS No. 144 these assets have been recorded at their lower of carrying amount or fair value, less cost to sell.

Stock-Based Compensation

     As discussed further in note 5 to the accompanying consolidated financial statements, we adopted SFAS No. 123(R), “Accounting for Stock-Based Compensation,” on January 1, 2006 using the modified prospective method.

     We have used and expect to continue to use the Black-Scholes option-pricing model to compute the estimated fair value of stock-based awards. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected option term and risk-free interest rates. We estimate expected volatility based upon a combination of historical, implied and adjusted historical stock prices. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. Commencing in the second quarter of fiscal 2005, the fair value of the options was estimated at the date of grant using a Black-Scholes option pricing model with the expected option term determined using a Monte Carlo simulation model that incorporates historical employee exercise behavior and post-vesting employee termination rates.

     The assumptions used in computing the fair value of stock-based awards reflect our best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of our control. As a result, if other assumptions or estimates had been used, the stock-based compensation expense that was recorded for the quarters ended March 31, 2007 and 2006 could have been materially different. Furthermore, if different assumptions are used in future periods, stock-based compensation expense could be materially impacted in the future.

Income Taxes

     Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Significant estimates are required in determining our provision for income taxes. As of March 31, 2007, we continue to reflect a full valuation allowance against our total net deferred tax assets consisting principally of the deferred tax assets associated with our net operating loss carryforwards because it is more likely than not

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that the net deferred tax assets will not be realized. If we demonstrate sustained profitability in the future, we will need to revise our conclusions regarding the realization of our deferred tax assets. In addition, there may be other factors such as changes in tax laws and future levels of research and development spending that may impact our effective tax rate in the future.

Revenues

	Three Months Ended
	March 31,
	(in thousands)
	2007		2006		$ Change
Net revenue from unconsolidated joint business	$	39,122	$	35,655	$	3,467
Royalties on product licenses		19,293		8,014		11,279
License, milestone and other revenues		19,054		15,586		3,468
Total revenues	$	77,469	$	59,255	$	18,214

Net Revenue from Unconsolidated Joint Business

     Net revenue from unconsolidated joint business is related to our co-promotion and manufacturing agreements with Genentech for Tarceva. For the three months ended March 31, 2007 and 2006, Genentech recorded net sales of Tarceva in the United States and its territories of $102 million and $93 million, respectively. Our share of these net sales is reduced by the costs incurred for cost of goods sold and for the sales and marketing of the product. For the three months ended March 31, 2007 and 2006, we reported net revenues from our unconsolidated joint business for Tarceva of $39.1 million and $35.7 million, respectively. The increase in net revenue from unconsolidated joint business was primarily due to higher net sales, related to the increased use of Tarceva in the NSCLC and pancreatic cancer indications, and price increases. Sales of Tarceva declined $5.2 million on a sequential basis from the fourth quarter of 2006. However, sales of Tarceva on a unit basis were essentially stable after adjusting for inventory on hand at the wholesalers over the last three quarters. We believe that this is driven in part by competition in the second and third-line NSCLC market and the changing dynamics of Medicare Part B reimbursement.

Royalties on Product Licenses

     We receive royalties on the sales of Tarceva outside of the United States and its territories. In September 2005, our partner Roche received approval from the European Commission for the sale of Tarceva in the European Union for the treatment of patients with locally advanced or metastatic NSCLC, and in January 2007 as a first-line therapy for metastatic pancreatic cancer in combination with gemcitabine. Roche has also received approval for reimbursement in a number of EU countries and is pursuing approval in other major markets in the European Union. Tarceva sales are expected to increase outside the United States as additional reimbursement approvals are secured. For the three months ended March 31, 2007 and 2006, Roche recorded $96 million and $40 million, respectively, in net sales of Tarceva outside of the United States and its territories we recorded $19.3 million and $8.0 million in royalty revenues from these sales, respectively. On a sequential basis from the fourth quarter of 2006,

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sales of Tarceva outside of the United States increased approximately $12 million or 14%, due to increased use of Tarceva in the NSCLC indication.

License, Milestone and Other Revenues

     We recognized $19.1 million and $15.6 million of license, milestone and other related revenues during the three months ended March 31, 2007 and 2006, respectively.

     The three months ended March 31, 2007 and 2006 included $8.8 million and $7.3 million, respectively, of upfront payments, milestones and royalties under the worldwide non-exclusive license agreements entered into by Prosidion under our DPIV patent portfolio covering the use of DPIV inhibitors for treatment of type II diabetes and related indications. The amount of license revenues generated from our DPIV patent estate can be expected to fluctuate significantly from quarter to quarter based (i) the level of future product sales by our licensees, (ii) the ability of our licensees to achieve specified events under the license agreements which entitle us to milestone payments and (iii) our ability to enter into additional license agreements in the future. As a result, we cannot reasonably predict or estimate the level of such revenues for any future period.

     In addition, we recognized $8.3 million of the $25.0 million upfront fee we received in January 2007, from our licensing our glucokinase activator program, including our clinical candidate PSN010, which is in Phase I studies, to Eli Lilly. As of March 31, 2007, $16.7 million of the Eli Lilly upfront fee remains unamortized and is being amortized, equally, over our transitional performance obligation through the third quarter of 2007.

     Also included in license and milestone revenues is the recognition of the ratable portion of upfront fees from Genentech and milestone payments received from Genentech and Roche to date in connection with various regulatory acceptances and approvals for Tarceva in the United States, Europe and Japan. These payments were initially deferred and are being recognized as revenue in accordance with EITF 00-21. The ratable portion of the upfront fee and milestone payments recognized as revenue for the three months ended March 31, 2007 and 2006, were $944,000 and $790,000, respectively. The unrecognized deferred revenue related to these upfront fees and milestone payments received was $42.8 million and $39.8 million as of March 31, 2007 and December 31, 2006, respectively. During the quarter ended March 31, 2007, we received a $4 million payment which is being recognized over the expected term of the research and development collaboration.

     We also will be entitled to additional milestone payments from Genentech and Roche upon the occurrence of certain regulatory approvals and filings with respect to Tarceva. Additional milestone payments will be due from Genentech and Roche upon approval of adjuvant indications in the United States and Europe. Additional milestone payments will be due from Roche upon the approval of Tarceva in Japan. The ultimate receipt of these additional milestone payments is contingent upon the applicable regulatory approvals and other future events.

     Included in license, milestone and other revenues are sales commission earned on the sales of Novantrone in the United States for oncology indications. Sales commissions for the

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three months ended March 31, 2007 and 2006 were $794,000 and $7.1 million, respectively. Sales commissions declined significantly subsequent to April 2006 due to the patent expiration of Novantrone in April 2006, which resulted in our loss of market exclusivity for this product and the launch of generic competitors.

Expenses

	Three Months Ended
	March 31,
	(in thousands)
	2007		2006		$ Change
Cost of goods sold	$	1,904	$	2,222	$	(318	)
Research and development		30,626		27,078		3,548
Selling, general and administrative		25,129		27,808		(2,679	)
Amortization of intangibles		458		448		10
	$	58,117	$	57,556	$	561

Cost of Goods Sold

     Total cost of goods sold for the three months ended March 31, 2007 and 2006 was $1.9 million and $2.2 million, respectively.

     Prior to receipt of approval of Tarceva for commercial sale on November 18, 2004, we had expensed all costs associated with the production of Tarceva to research and development. Effective November 18, 2004, we began to capitalize the costs of manufacturing Tarceva as inventory, including the costs to label, package and ship previously manufactured bulk inventory whose costs had already been expensed as research and development. Although it is our policy to state inventory reflecting full absorption costs until we sold all of our existing inventory for which all or a portion of the costs were previously expensed, certain components of inventory continued to reflect costs incurred to process into finished goods previously expensed raw materials and work in process. During 2006, we had sold all of the inventory partially produced and expensed prior to November 18, 2004. Cost of goods sold for the three months ended March 31, 2006 would have been $528,000 higher, if the Tarceva inventory sold had reflected the full absorption manufacturing costs.

Research and Development

     We consider the active management and development of our clinical pipeline crucial to the long-term process of getting a clinical candidate approved by the regulatory authorities and brought to market. We manage our overall research, development and in-licensing efforts in a manner designed to generate a constant flow of clinical candidates into development to offset both the advancement of products to the market and the anticipated attrition rate of drug candidates that fail in clinical trials or are terminated for business reasons. The duration of each phase of clinical development and the probabilities of success for approval of drug candidates entering clinical development will be impacted by a variety of factors, including the quality of the molecule, the validity of the target and disease indication, early clinical data, investment in the program, competition and commercial viability. Because we manage our pipeline in a

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dynamic manner, it is difficult to give accurate guidance on the anticipated proportion of our research and development investments assigned to any one program prior to the Phase III stage of development, or to the future cash inflows from these programs. For the three months ended March 31, 2007 and 2006, we expended a total of $12.0 million and $10.9 million, respectively, in research and $18.6 million and $16.1 million, respectively, in pre-clinical and clinical development. We consider this level of investment suitable for a company with our pipeline of clinical and pre-clinical candidates.

     Research and development expenses increased $3.5 million for the three months ended March 31, 2007 compared to the same period last year. The increase was primarily due to a $2.2 million increase in research and development programs related to Tarceva, $600,000 increase in research and development programs related to diabetes and obesity, $600,000 increase related to equity compensation, and $363,000 of employee severance cost.

     We manage the ongoing development program for Tarceva with our partners, Genentech and Roche, through a global development committee under a Tripartite Agreement among the parties. Together with our partners, we have implemented a broad-based global development strategy for Tarceva that implements simultaneous clinical programs currently designed to expand the number of approved indications of Tarceva and evaluate the use of Tarceva in new and/or novel combinations. Our global development plan has included major Phase III clinical trials in lung and pancreatic cancer in the past, and currently includes additional major Phase III clinical trials in lung cancer in the maintenance, adjuvant, and second line settings. Since 2001, the alliance partners have committed an aggregate of approximately $750 million to the global development plan which is shared by the three parties. As of March 31, 2007, we had expended in excess of $186 million in the development of Tarceva, representing our share of the costs incurred to date in the tripartite global development plan and additional investments outside of the plan.

Selling, General and Administrative

     Selling, general and administrative expenses for the quarter ended March 31, 2007 were $25.1 million, a decrease of $2.7 million compared to expenses of $27.8 million in the same period last year. The decrease in expenses was primarily attributable to $3.5 million decline in maintenance fees for Novantone and $2.4 million of estimated lease return costs related to relocation of our corporate headquarters in 2006, partially offset by an increase in expenses recorded in 2007 for severance, equity based compensation, lease exit costs and an increase in corporate related expenses.

Other Income and Expense

	Three Months Ended
	March 31,
	(in thousands)
	2007			2006			$ Change
Investment income-net	$	3,095		$	1,367		$	1,728
Interest expense		(1,803	)		(1,798	)		(5	)
Other income (expenses)-net		(949	)		(892	)		(57	)
Total other income (expenses)	$	343		$	(1,323	)	$	1,666

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     Investment income for the three months ended March 31, 2007 increased $1.7 million compared to the same period last year, primarily due to an increase in the funds available for investment.

     Other income expense-net for the periods include the amortization of debt issuance costs related to the convertible senior subordinated note, and other miscellaneous income and expense items. Other income (expense) for the months ended March 31, 2007 includes a provision for income taxes related to our alternative minimum tax obligations of $500,000 related to income from continuing operations. Based on our use of net operating loss carryforwards, our estimated effective tax rate for fiscal 2007 is 2.5% based principally on the federal alternative minimum tax.

Discontinued Operations

     U.S. net sales of Macugen declined significantly in 2007, from $50.6 million in the first quarter of 2006 to $5.0 million in the first quarter of 2007. Despite the decline in sales, losses declined $5.2 million to $13.1 million for the three months ended March 31, 2007, compared to $18.2 million in the same period last year. The decline in losses was primarily attributable to lower research and development expenses and lower amortization expense related to intangibles. Partially offsetting the decline in expenses was $3.7 million of exit costs associated with leased facilities recorded in the three months ended March 31, 2007. Until an anticipated divestiture of the eye disease business, we expect the cash flow related to the eye disease operations to be less than $3 million monthly.

Liquidity and Capital Resources

     At March 31, 2007, cash and investments, including restricted securities, were $241.1 million compared to $216.4 million at December 31, 2006. The increase of $24.7 million was primarily due to the following changes: (i) net cash of $21.5 million from operating activities; and (ii) net cash of $2.9 million proceeds from stock option exercises; offset by (iii) $729,000 of cash used for capital expenditures.

     Included in the cash from operations for the three months ended March 31, 2007 was $25 million of licensing fees from Eli Lilly and Company related to our diabetes and obesity business and a $4 million milestone payment related to Tarceva.

     Delivering full-year profitability in 2007 is a key goal that we believe can be attained through careful and prudent management of our business and, in particular, our expenses. If we are able to execute on our internal plans, including exiting the eye disease business in 2007, we expect that our R&D investments and capital requirements over the next 12 to 18 months can be funded from the generation of cash flow from our commercialized product and out licensing activities. If we are successful, we anticipate funding the majority, if not all, of our liquidity and capital needs from the generation of cash flow from operations, with the potential exception of strategic acquisitions of products and/or businesses.

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Commitments and Contingencies

     Our major outstanding contractual obligations relate to our senior subordinated convertible notes and our facility leases. The following table summarizes our significant contractual obligations at March 31, 2007 and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

	Remainder						2012 and
	of 2007		2008-2010		2011-2012		beyond
Senior convertible debt(a)	$	4,738	$	21,525	$	14,350	$	348,525
Operating leases		9,926		35,631		22,980		82,891
Purchase obligations(b)		31,045		62,498		7,700		6,000
Obligations related to exit activities(c)		3,178		3,159		—		816
Total contractual obligations	$	48,887	$	122,813	$	45,030	$	438,232

(a)	Includes interest payments at a rate of 3.25% per annum relating to the $150.0 million principal amount of the 2023 Notes and at a rate of 2% per annum relating to the $115.0 million principal amount of the 2025 Notes. The holders of the 2023 Notes have the right to require us to purchase all of the 2023 Notes, or a portion thereof, in September 2008. We may choose to pay the purchase price in cash or shares of our common stock. Holders of the 2025 Notes have the right to require us to purchase, for cash, all of the 2025 Notes, or a portion thereof, in December 2010.
(b)	Purchase obligations include inventory commitments, commercial and research commitments and other significant purchase commitments. Included in these purchase obligations is our share of the remaining future commitment related to the Tarceva global development cost of approximately $95 million.
(c)	Includes payments for termination benefits and facility refurbishments.

Other significant commitments and contingencies include the following:

• We are committed to share certain commercialization costs relating to Tarceva with Genentech. Under the terms of our agreement, there are no contractually determined amounts for future commercial costs.

• Under agreements with external CROs we will continue to incur expenses relating to clinical trials of Tarceva, Macugen and other clinical candidates. The timing and amount of these disbursements can be based upon the achievement of certain milestones, patient enrollment, services rendered or as expenses are incurred by the CROs and therefore we cannot reasonably estimate the potential timing of these payments.

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• We have outstanding letters of credit of $9.0 million, which primarily serve as security for performance under various lease obligations.

• We have a retirement plan, which provides post-retirement medical and life insurance benefits to eligible employees, board members and qualified dependents. Eligibility is determined based on age and years of service. We had accrued post-retirement benefit costs of $8.5 million at March 31, 2007. On April 18, 2007, we curtailed this plan and grandfathered those employees, board members and qualified dependants who were eligible to participate in the plan on that date. Only those grandfathered participants will continue to be entitled to receive benefits under plan.

• Under certain license and collaboration agreements with pharmaceutical companies and educational institutions, we are required to pay royalties and/or milestone payments upon the successful development and commercialization of products. However, successful research and development of pharmaceutical products is high risk, and most products fail to reach the market. Therefore, at this time the amount and timing of the payments, if any, are not known.

• Under certain license and other agreements, we are required to pay license fees for the use of technologies and products in our research and development activities or milestone payments upon the achievement of certain predetermined conditions. These license fees are not deemed material to our consolidated financial statements and the amount and timing of the milestone payments, if any, are not known due to the uncertainty surrounding the successful research, development and commercialization of the products.

• In connection with the acquisition of Eyetech Pharmaceuticals, Inc. in November 2005, we assumed various contracts related to the in-licensing, development, manufacture and marketing of Macugen. As a result of the acquisition, these license agreements now represent rights and obligations of our subsidiary, (OSI) Eyetech, Inc. Under the terms of the license agreements, we will be required to make additional milestone payments, and we are also required to pay royalties on net sales.

• We have a minor investment in a privately owned company, and are obligated to make an additional $1.7 million of capital contribution upon request.

Accounting Pronouncements

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or SFAS No. 159. SFAS No. 159 permits entities to choose to measure many financial instruments and certain items at fair value that are not currently required to be measured at fair value. We will be subject to the requirements of SFAS No. 159 for our

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fiscal year ending December 31, 2008. We are currently evaluating the impact of the provisions of SFAS No. 159.

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” or SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for our fiscal year ending December, 31, 2008. We are currently evaluating the impact of the provisions of SFAS No. 157.

Forward Looking Statements

     A number of the matters and subject areas discussed in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report that are not historical or current facts deal with potential future circumstances and developments. The discussion of these matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and these discussions may materially differ from our actual future experience involving any one or more of these matters and subject areas. These forward-looking statements are also subject generally to the other risks and uncertainties that are described below. These forward looking statements are also subject generally to the other risks and uncertainties that are described in our annual report on Form 10-K for the fiscal year ended December 31, 2006.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

     Our cash flow and earnings are subject to fluctuations due to changes in interest rates in our investment portfolio of debt securities, the fair value of equity instruments held and foreign currency exchange rates. We maintain an investment portfolio of various issuers, types and maturities. These securities are generally classified as available-for-sale as defined by SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) included in stockholders’ equity.

     At March 31, 2007, we maintained a portion of our cash and cash equivalents in financial instruments with original maturities of three months or less. We also maintained an investment portfolio principally comprised of government and government agency obligations and corporate obligations that are subject to interest rate risk and will decline in value if interest rates increase. A hypothetical 10% change in interest rates during the periods would have resulted in a $310,000 change in our net loss for the quarter ended March 31, 2007.

     Our limited investments in certain biotechnology companies are carried on the equity method or cost method of accounting using the guidance of applicable accounting literature. Other-than-temporary losses are recorded against earnings in the same period the loss was deemed to have occurred.

     Our long-term debt totaled $265.0 million at March 31, 2007 and was comprised of our 2023 Notes which bear interest at a fixed rate of 3.25% and our 2025 Notes which bear interest

35

at a fixed rate of 2.00%. Underlying market risk exists related to an increase in our stock price or an increase in interest rates which may make the conversion of the 2023 Notes or 2025 Notes to common stock beneficial to the holders of such notes. Conversion of the 2023 Notes or 2025 Notes would have a dilutive effect on any future earnings and book value per common share.

Item 4. Controls and Procedures

     Attached to this Quarterly Report on Form 10-Q as Exhibit 31.1 and 31.2, there are two certifications, or the Section 302 Certifications, one by each of our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO. This Item 4 contains information concerning the evaluation of our disclosure controls and procedures and internal control over financial reporting that is referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

     Evaluation of Our Disclosure Controls and Procedures. The Securities and Exchange Commission requires that as of the end of the period covered by this Quarterly Report on Form 10-Q, the CEO and the CFO evaluate the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13(a)-15(e)) under the Securities Exchange Act of 1934, as amended, and report on the effectiveness of the design and operation of our disclosure controls and procedures. Accordingly, under the supervision and with the participation of our management, including our CEO and CFO, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.

     CEO/CFO Conclusions about the Effectiveness of the Disclosure Controls and Procedures. Based upon their evaluation of the disclosure controls and procedures, our CEO and CFO have concluded that our disclosure controls and procedures are effective at the reasonable assurance level to ensure that material information relating to OSI and our consolidated subsidiaries is made known to management, including the CEO and CFO, on a timely basis and during the period in which this Quarterly Report on Form 10-Q was being prepared.

     Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f)) under the Exchange Act identified in connection with the evaluation of such internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     On or about December 16, 2004, several purported shareholder class action lawsuits were filed in the United States District Court for the Eastern District of New York against us, certain of our current and former executive officers, and the members of our Board of Directors. The lawsuits were brought on behalf of those who purchased or otherwise acquired our common stock during certain periods in 2004, which periods differed in the various complaints. The Court appointed a lead plaintiff who, on February 17, 2006, filed a consolidated amended class action complaint seeking to represent a class of all persons who purchased or otherwise acquired our common stock during the period from April 26, 2004 through November 22, 2004. The consolidated complaint alleges that the defendants made material misstatements and omissions concerning the survival benefit associated with our product, Tarceva and the size of the potential market of Tarceva upon FDA approval of the drug. It alleges violations of Sections 11 and 15 of the Securities Act of 1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The consolidated complaint seeks unspecified compensatory damages and other relief. On April 7, 2006, we filed a motion to dismiss the consolidated amended complaint. Briefing on this motion was completed on June 21, 2006. In an opinion dated March 31, 2007 (and entered on the docket on April 4, 2007), the Court granted in part and denied in part the motion to dismiss. The Court dismissed claims against some of the individual defendants and dismissed the Section 11 and 15 claims, but granted the plaintiff 30 days leave to replead the Section 11 claim in accordance with the Court’s order and to renew the Section 15 claim. The Court ‘s order states that if plaintiff does not properly amend the complaint within 30 days, the Section 11 and 15 claims will be dismissed with prejudice. As of the date of this filing, the plaintiff has not amended the complaint. Based on the early stage of this litigation, the ultimate outcome cannot be determined and accordingly, no provision has been recorded in the consolidated financial statements.

Item 1A. Risk Factors

     There have been no material changes to the risk factors as previously disclosed in our Form 10-K for the year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     Not applicable.

Item 3. Defaults Upon Senior Securities

     Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

     Not applicable.

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Item 5. Other Information

     Not applicable.

Item 6. Exhibits

3.1	Certificate of Incorporation, as amended, filed by OSI Pharmaceuticals, Inc. as an exhibit to the Form 10-K for the fiscal year ended September 30, 2001 (file no. 000-15190), and incorporated herein by reference.
3.2	Amended and Restated Bylaws, filed by OSI Pharmaceuticals, Inc. as an exhibit to the Form 8-K filed on June 16, 2006 (file no. 000-15190), and incorporated herein by reference.
10.1*	Letter Agreement, dated January 25, 2007, by and between Dr. Daryl Granner and OSI Pharmaceuticals, Inc., filed by OSI Pharmaceuticals, Inc. as an exhibit to the Form 8-K filed on January 29, 2007 (file no. 000-15190), and incorporated herein by reference.
10.2†	Exclusive License Agreement, effective as of January 4, 2007, between Eli Lilly and OSI Pharmaceuticals, Inc. and Prosidion Limited, filed by OSI Pharmaceuticals, Inc. with the Form 10-K for the fiscal year ended December 31, 2006, and incorporated herein by reference.
10.3†	Amended and Restated License Agreement, dated April 20, 2007, by and between OSI Pharmaceuticals, Inc. and Pfizer Inc. (Filed herewith)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a). (Filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a). (Filed herewith)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350. (Filed herewith)

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32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350. (Filed herewith)

*	Indicates a management contract or compensatory plan, contract or arrangement in which directors or executive officers participates
†	Portions of this exhibit have been redacted and are subject to a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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SIGNATURES

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

	OSI PHARMACEUTICALS, INC.
	(Registrant)
Date: May 8, 2007	/s/ Colin Goddard, Ph.D. Colin Goddard, Ph.D.
	Chief Executive Officer
Date: May 8, 2007	/s/ Michael G. Atieh Michael G. Atieh
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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INDEX TO EXHIBITS

Exhibit
3.1	Certificate of Incorporation, as amended, filed by OSI Pharmaceuticals, Inc. as an exhibit to the Form 10-K for the fiscal year ended September 30, 2001 (file no. 000-15190), and incorporated herein by reference.
3.2	Amended and Restated Bylaws, filed by OSI Pharmaceuticals, Inc. as an exhibit to the Form 8-K filed on June 16, 2006 (file no. 000-15190), and incorporated herein by reference.
10.1*	Letter Agreement, dated January 25, 2007, by and between Dr. Daryl Granner and OSI Pharmaceuticals, Inc., filed by OSI Pharmaceuticals, Inc. as an exhibit to the Form 8-K filed on January 29, 2007 (file no. 000-15190), and incorporated herein by reference.
10.2†	Exclusive License Agreement, effective as of January 4, 2007, between Eli Lilly and OSI Pharmaceuticals, Inc. and Prosidion Limited, filed by OSI Pharmaceuticals, Inc. with the Form 10-K for the fiscal year ended December 31, 2006, and incorporated herein by reference.
10.3†	Amended and Restated License Agreement, dated April 20, 2007, by and between OSI Pharmaceuticals, Inc. and Pfizer Inc. (Filed herewith)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a). (Filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a). (Filed herewith)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350. (Filed herewith)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350. (Filed herewith)

*	Indicates a management contract or compensatory plan, contract or arrangement in which directors or executive officers participates
†	Portions of this exhibit have been redacted and are subject to a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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EX-10.3

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE OMISSIONS

EXHIBIT 10.3

AMENDED AND RESTATED LICENSE AGREEMENT

          THIS AMENDED AND RESTATED LICENSE AGREEMENT (this “Agreement”) dated as of April 20, 2007 (the “Restatement Date”) between Pfizer Inc., a corporation organized under the laws of the state of Delaware, with its principal place of business at 235 East 42nd Street, New York, New York 10017 (“Pfizer”), and (OSI) Eyetech, Inc. (formerly known as Eyetech Pharmaceuticals, Inc.), a corporation organized under the laws of the state of Delaware, with its principal place of business at 140 E. Hanover Avenue, Cedar Knolls, New Jersey 07927 (“Eyetech”).

          WHEREAS, on December 17, 2002, Pfizer and Eyetech entered into a License Agreement (as amended prior to the Restatement Date, the “Original License Agreement”), whereby, inter alia, Eyetech granted to Pfizer an exclusive license or sublicense to certain patents and patent applications, know-how, trade secrets and scientific and technical information relating to Macugen® throughout the world, and a Collaboration Agreement (the “Collaboration Agreement”), in which Eyetech and Pfizer agreed, inter alia, to co-promote Macugen® in the US Territory (as defined below);

          WHEREAS, the Parties no longer desire to co-promote Macugen® in the US Territory; and

          WHEREAS, Pfizer desires to continue to develop and commercialize the Product (as defined below) in the ROW Territory (as defined below).

          NOW, THEREFORE, the Parties agree to terminate the Collaboration Agreement and amend and restate the Original License Agreement in its entirety as follows:

ARTICLE 1
DEFINITIONS

          1.1 “AAA” has the meaning set forth in Section 14.1(a).

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          1.2 “Affiliate” means any Person directly or indirectly controlled by, controlling or under common control with, a Party, but only for so long as such control shall continue. For purposes of this definition, “control” (including, with correlative meanings, “controlled by”, “controlling” and “under common control with”) means, with respect to a Person, possession, direct or indirect, of (a) the power to direct or cause direction of the management and policies of such Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), or (b) at least 50% of the voting securities (whether directly or pursuant to any option, warrant or other similar arrangement) or other comparable equity interests. For the avoidance of doubt, neither of the Parties shall be deemed to be an “Affiliate” of the other.

          1.3 “Bankruptcy Code” means 11 U.S.C §§ 101-1330, as amended.

          1.4 “Amended and Restated Distribution Agreement” means the Amended and Restated Distribution Agreement between Eyetech and Pfizer dated as of the date hereof.

          1.5 “Amended and Restated Regulatory Services Agreement” means the Amended and Restated Regulatory Services Agreement between Eyetech and Pfizer dated as of the date hereof.

          1.6 “Assignment and Assumption Agreement for Manufacturing Agreements” means the Assignment and Assumption Agreement between Eyetech and Pfizer, dated as of the date hereof, pursuant to which the agreements set forth on Schedule 4.9(b) are assigned from Eyetech to Pfizer.

          1.7 “Assignment and Assumption Agreement for US Territory Agreements” means the Assignment and Assumption Agreement among Eyetech, Pfizer and OSI Pharmaceuticals, Inc. (“OSIP”), dated as of the date hereof, pursuant to which the US Territory Agreements are assigned from Pfizer and/or OSIP to Eyetech.

          1.8 “Bill of Sale” means the bill of sale in the form attached hereto as Exhibit 1.8.

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          1.9 “Bulk Drug Substance Supplier” means a third-party supplier of bulk drug substance for the Product with which Pfizer has entered into a supply agreement.

          1.10 “Business Day” means a day other than a Saturday, Sunday, or bank or other public holiday in New York, New York.

          1.11 “Collaboration Agreement” has the meaning set forth in the Recitals to this Agreement.

          1.12 “Compound” means the anti-VEGF aptamer that is the active pharmaceutical ingredient in Macugen® as of the Restatement Date, and is more specifically described in Schedule 1.12.

          1.13 “Confidential Information” means all trade secrets or other proprietary information, including without limitation any proprietary data and materials (whether or not patentable or protectable as a trade secret), regarding a Party’s technology, products, business or objectives or regarding the Product, which is disclosed by a Party to the other Party. Notwithstanding the foregoing, there shall be excluded from the foregoing definition of Confidential Information any of the foregoing that:

                    (a) was known by the receiving Party or an Affiliate prior to its date of disclosure to the receiving Party as shown by the receiving Party’s or its Affiliate’s written records; or

                    (b) either before or after the date of the disclosure to the receiving Party is lawfully disclosed to the receiving Party or its Affiliate by third parties not in violation of any obligation to the other Party; or

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                    (c) either before or after the date of the disclosure to the receiving Party becomes published or generally known to the public through no fault or omission on the part of the receiving Party or its Affiliates; or

                    (d) is independently developed by or for the receiving Party or its Affiliate without reference to or reliance upon the Confidential Information as demonstrated by contemporaneous written records of the receiving Party or its Affiliate; or

                    (e) is required to be disclosed by the receiving Party or its Affiliate to comply with applicable Laws, to defend or prosecute litigation or to comply with governmental regulations or the regulations or requirements of any stock exchange, including Nasdaq, provided that the receiving Party provides prior notice of such disclosure to the other Party and takes reasonable and lawful actions to avoid and/or minimize the degree of such disclosure.

          1.14 “Control” or “Controlled” means, with respect to any intellectual property right, the possession (whether by ownership or license) by a Party (or by any Affiliate of a Party) of the ability to grant to the other Party a license under such right without violating the terms of any agreement with a third party.

          1.15 “Courts” has the meaning set forth in Section 15.4.

          1.16 “Current Inventories” has the meaning set forth in Section 4.9(c).

          1.17 “DDMAC” means the FDA’s Division of Drug Marketing Advertising and Communications, or its equivalent in the ROW Territory.

          1.18 “Degussa Agreement” means the Manufacturing and Supply Agreement dated as of November 11, 2003, by and between Degussa Canada Inc. (as successor in interest to Raylo Chemicals Inc.) and Eyetech, assigned to Pfizer pursuant to the Assignment and Assumption Agreement for Manufacturing Agreements.

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          1.19 “Eyetech Capital Equipment” has the meaning set forth in Section 4.9(f).

          1.20 “Eyetech Parties” has the meaning set forth in Section 11.2.

          1.21 “Eyetech Patent Rights” means all Patent Rights Controlled by Eyetech or its Affiliates as of the Restatement Date relating to, or useful in connection with, the manufacture, use or sale of the Compound or the Product in the ROW Territory, including the patents and patent applications set forth on Schedule 1.21. Any patentable inventions that have been reduced to practice prior to the Restatement Date for which a patent application is not filed until after the Restatement Date shall be included within the definition of Eyetech Patent Rights.^**

          1.22 “Eyetech Technical Information” means all scientific or technical information and related know-how and trade secrets, Controlled by Eyetech or its Affiliates as of the Restatement Date relating to the Compound or the Product, including but not limited to: (a) medical, clinical, toxicological or other scientific data and (b) processes and analytical methodology useful in the development, testing, analysis, manufacture or packaging of the Compound or the Product.

          1.23 “Eyetech Third Party Licensors” shall mean (a) Gilead, Nektar and Isis, and (b) any additional third party licensors that are identified by Eyetech to Pfizer with respect to a New Product in the course of negotiating an agreement pursuant to Section 3.5 concerning such New Product.

          1.24 “FDA” means the United States Food and Drug Administration and any successor agency thereto.

          1.25 “Field” means the prevention, treatment or control of all ophthalmic diseases or conditions.

^** This portion has been redacted pursuant to a confidential treatment request.

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          1.26 “Fill and Finish Services Supplier” means a third party supplier of fill and finish services necessary to produce the Product in finished (i.e., ready for administration to patients) form for sale in the ROW Territory with which Pfizer has entered into an agreement.

          1.27 “Gilead License” means the Licensing Agreement dated as of March 30, 2000, by and among Eyetech, Gilead Sciences, Inc. (“Gilead”) and NeXstar Pharmaceuticals, Inc., as amended from time to time.

          1.28 “Global Congresses” has the meaning set forth in Section 4.4(g)(ii).

          1.29 “Governmental Authority” means any court, agency, department or other instrumentality of any foreign, federal, state, county, city or other political subdivision.

          1.30 “Isis License” means the License Agreement dated as of December 31, 2001, by and between Eyetech and Isis Pharmaceuticals, Inc. (“Isis”), as amended from time to time.

          1.31 “Joint Inventions” shall have the meaning set forth in Section 9.12.

          1.32 “Joint Patent Rights” means Patent Rights that claim Joint Inventions.

          1.33 “Law” or “Laws” means all laws, statutes, rules, codes, regulations, orders, judgments and/or ordinances of any Governmental Authority.

          1.34 “Losses” means, subject to Section 10.4, any and all (a) claims, losses, liabilities, damages, fines, royalties, governmental penalties or punitive damages, deficiencies, interest, awards, and judgments, (b) with respect to third parties, settlement amounts and all of the items referred to in clause (a) above which, in accordance with Section 10.4, include third party special, indirect, incidental, consequential damages (including without limitation lost profits) and third party punitive and multiple damages, and (c) in connection with all of the items referred in clauses (a) and (b) above, any and all costs and expenses (including reasonable attorneys’ fees and all other

6

expenses reasonably incurred in investigating, preparing or defending any litigation or proceeding, commenced or threatened).

          1.35 “Nektar License” means the License, Manufacturing and Supply Agreement dated as of February 5, 2002, by and between Eyetech and Nektar Therapeutics (formerly Shearwater Corporation) (“Nektar”), as amended as of January 23, 2006.

          1.36 “Net Sales” means the gross amounts billed or invoiced by Pfizer, its Affiliates and sublicensees for the Product in the ROW Territory, less the following deductions:

                    (a) trade, quantity and cash discounts allowed, but expressly excluding discounts or allowances offered as part of a package of products that includes a Product sold by Pfizer, its Affiliates or sublicensees;

                    (b) refunds, chargebacks and any other allowances which effectively reduce the net selling price;

                    (c) actual product returns, credits and allowances allowed to customers, and actual bad debts;

                    (d) rebates actually paid or credited to any governmental agency (or branch thereof) or to any third party payor, administrator or contractee;

                    (e) discounts mandated by, or granted to meet the requirements of, applicable state, provincial or federal law, wholesaler, including required chargebacks and retroactive price reductions;

                    (f) transportation, freight, postage charges and other charges, such as insurance, relating thereto, in each case included as a specific line item on an invoice to such third parties; and

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                    (g) taxes, excises or other governmental charges upon or measured by the production, sale, transportation, delivery or use of goods, in each case included as a specific line item on an invoice to such third parties.

          If any such sales to third parties are made in transactions that are not at arm’s length between the buyer and the seller, then the gross amount to be included in the calculation of Net Sales shall be the amount that would have been invoiced had the transaction been conducted at arm’s length. Such amount that would have been invoiced shall be determined, wherever possible, by reference to the average selling price of the Product in arm’s-length transactions in the relevant country.

          If Pfizer, its Affiliate or sublicensee sells a Product in unfinished form to a third party for resale, then the gross amount to be included in the calculation of Net Sales arising from such sale shall be the amount invoiced by the third party upon resale, in lieu of the amounts invoiced by Pfizer, its Affiliates or sublicensee when selling the Product in unfinished form. Otherwise, where Pfizer, its Affiliate or sublicensee sells a Product in finished form to a third party that does not require a sublicense under the Eyetech Patent Rights for further resale (each such third party hereinafter a “Distributor”), the amount to be included in the calculation of Net Sales shall be the price invoiced from Pfizer or its Affiliate or sublicensee to the third party, not the amount invoiced by the third party upon resale.

          If, in addition to or in lieu of a transfer price paid for quantities of Product supplied, any Distributor provides consideration to Pfizer, its Affiliate or sublicensee in connection with any Product or the Distributor’s rights or relationship with Pfizer, its Affiliate or sublicensee in relation thereto, then such consideration shall be included in the calculation of Net Sales in the Pfizer Quarter in which it becomes due to Pfizer or its Affiliate or sublicensee (as applicable).

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Notwithstanding the foregoing, amounts received by Pfizer, or its Affiliates or sublicensees, for the sale of the Product among Pfizer and its Affiliates or sublicensees for resale shall not be included in the computation of Net Sales hereunder.

          Net Sales shall be determined from books and records maintained in accordance with GAAP, consistently applied throughout the organization and across all products of the entity whose sales of Product are giving rise to Net Sales.

          1.37 “New Product” means, other than the prescription pharmaceutical product containing the Compound and known as Macugen® as of the Restatement Date and any new doses and dosing regimens thereof approved after the Restatement Date, provided that such new doses or dosing regimens do not alter the Product itself or any ingredient contained in such Product as of the Restatement Date, any product that (a) contains or is based on the Compound, or any metabolites or prodrugs of such aptamer or any hydrates, conjugates, salts, esters, isomers, polymorphs or analogues of any of the foregoing, either alone or in combination with one or more other therapeutically active substances, and (b) is for use in the Field; including for the avoidance of doubt any un-pegylated formulation of the prescription pharmaceutical product containing the Compound and known as Macugen® as of the Restatement Date.

          1.38 “Ongoing Trials” has the meaning set forth in Section 4.2.

          1.39 “Ongoing Trial Data” means all results and data arising from the Ongoing Trials, including without limitation all raw data and final results.

          1.40 “Original License Agreement” shall have the meaning set forth in the Recitals to this Agreement.

          1.41 “Other Components” shall have the meaning set forth in Section 4.9(c).

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          1.42 “Out-of-Pocket Costs” means costs and expenses paid to third parties (or payable to third parties and accrued in accordance with GAAP), other than Affiliates or employees, by either Party after the Restatement Date.

          1.43 “Packaging Materials” has the meaning set forth in Section 9.7.

          1.44 “Party” means either Eyetech or Pfizer; “Parties” means both Eyetech and Pfizer.

          1.45 “Patent Rights” means the rights and interest in and to all issued patents and pending patent applications in any country in the Territory, including all divisionals, continuations, renewals, continuations-in-part, patents of addition, supplementary protection certificates, extensions, registrations or confirmation patents and reissues thereof.

          1.46 “Person” means any natural person or any corporation, company, partnership, joint venture, firm or other entity, including without limitation a Party.

          1.47 “Pfizer Capital Equipment” has the meaning set forth in Section 4.9(g).

          1.48 “Pfizer Parties” has the meaning set forth in Section 11.1.

          1.49 “Pfizer Patent Rights” means all Patent Rights Controlled by Pfizer or its Affiliates as of the Restatement Date, relating to, or useful in connection with, the manufacture, use or sale of the Compound or the Product in the US Territory. Any patentable inventions that have been reduced to practice prior to the Restatement Date for which a patent application is not filed until after the Restatement Date shall be included in Pfizer Patent Rights.

          1.50 “Pfizer Quarter” means each of the four (4) thirteen (13) week periods, the first commencing on December 1 of any Year.

          1.51 “Pfizer Technical Information” means all scientific or technical information and related know-how and trade secrets, Controlled by Pfizer or its Affiliates as of the Restatement Date, including but not limited to: (a) medical, clinical, toxicological or other scientific data and (b)

10

processes and analytical methodology useful in the development, testing, analysis, manufacture or packaging of the Compound or the Product.

          1.52 “Pharmacovigilance Agreement” has the meaning set forth in Section 4.5.

          1.53 “Prior Agreements” means the following agreements entered into between Pfizer and Eyetech: the Collaboration Agreement, the Detailing Services Agreement dated December 17, 2002, and the Mutual Consent Establishing the Technology Subcommittee dated February 4, 2004.

          1.54 “Product” means (a) the prescription pharmaceutical product containing the Compound and known as Macugen® as of the Restatement Date, for any use in the Field, and (b) any New Product with respect to which the license granted to Pfizer in Section 3.1 is expanded pursuant to Section 3.5. For the avoidance of doubt, Product shall include new doses and dosing regimens thereof approved after the Restatement Date, provided that such new doses or dosing regimens do not alter the Product itself or any ingredient contained in such Product as of the Restatement Date.

          1.55 “Product Components” has the meaning set forth in Section 4.9(a).

          1.56 “Quarterly Expense Reports” has the meaning set forth in Section 5.2(a).

          1.57 “Regulatory Authority” means any federal, national, multinational, state, provision, or local regulatory agency, department, bureau or other governmental entity with authority over the testing, manufacture, use, storage, import, promotion, marketing and sale of a pharmaceutical product in a country, including the FDA.

          1.58 “Required Consents” has the meaning set forth in Section 4.9(b).

          1.59 “Responsible Party” has the meaning set forth in Section 4.2.

          1.60 “Restatement Date” has the meaning set forth in the opening paragraph of this Agreement.

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          1.61 “ROW Territory” means all countries in the world outside the US Territory.

          1.62 “Technical Information” means Eyetech Technical Information or Pfizer Technical Information.

          1.63 “Territory” means the US Territory and/or the ROW Territory, as the case may be.

          1.64 “Third Party Claims” has the meaning set forth in Section 11.1(a)(ii).

          1.65 “Trademarks” means (a) the registered and unregistered trademarks and trade names in use as of the Restatement Date related to the Product including those marks reflected on Exhibit 1.65; and (b) any aspect of Product packaging in use as of the Restatement Date that constitutes protectable trade dress; but in each case excluding the Eyetech name and logo.

          1.66 “Transaction Agreements” mean this Agreement, the Amended and Restated Regulatory Services Agreement, the Amended and Restated Distribution Agreement, the Assignment and Assumption Agreement for Manufacturing Agreements, the Assignment and Assumption Agreement for US Territory Agreements, the Bill of Sale, the Pharmacovigilance Agreement and the Transitional Services Agreement.

          1.67 “Transitional Services Agreement” means the transitional services agreement between the Parties entered into on the Restatement Date pursuant to which Eyetech has agreed to provide to Pfizer certain services, including supply, analytical, stability and clinical trial support services, with respect to the Product and Product Components.

          1.68 “US Territory” means United States of America, its territories, possessions and Puerto Rico.

          1.69 “US Territory Agreements” has the meaning set forth in Section 4.4(e).

          1.70 “Year” means a calendar year.

          1.71 Other Definitional Provisions.

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                    (a) The words “hereof”, “herein”, “hereto” and “hereunder” and words of similar import, when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

                    (b) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

                    (c) The term “including” shall mean “including, without limitation”.

ARTICLE 2

AMENDMENT AND RESTATEMENT OF ORIGINAL LICENSE AGREEMENT;
TERMINATION OF PRIOR AGREEMENTS;
OTHER TRANSACTION AGREEMENTS

          2.1 Original License Agreement. This Agreement amends and restates the Original License Agreement in its entirety. Notwithstanding anything to the contrary herein, this Agreement shall not relieve either Party of any obligations the performance of which were owed under the Original License Agreement prior to the Restatement Date.

          2.2 Prior Agreements. Effective as of the Restatement Date, the Prior Agreements, and all rights and obligations of the Parties thereunder, are terminated in their entirety (including, without limitation, provisions under the Prior Agreements that would otherwise survive such termination) by mutual consent of the Parties and shall no longer be in effect, except for the following provisions of the Collaboration Agreement, which shall survive termination of the Collaboration Agreement as set forth below: (a) each Party’s obligations with respect to expenses and Net Sales which have accrued under the Collaboration Agreement prior to the Restatement Date and which shall be reconciled pursuant to Section 5.1 of this Agreement, and (b) the obligations of the Parties with respect to accounts and reports (Article 9 of the Collaboration Agreement), ownership of intellectual property (Article 10 of the Collaboration Agreement), the protection and nondisclosure of Confidential Information (Article 11 of the Collaboration

13

Agreement), dispute resolution (Article 15 of the Collaboration Agreement) and indemnification (Sections 12.4, 12.5, 12.6, 12.7, 12.8 and 12.9 of the Collaboration Agreement). For the avoidance of doubt, Section 14.1 of the Collaboration Agreement (Non-Competition) shall terminate and have no further force or effect from and after the termination of the Collaboration Agreement.

          2.3 Other Transaction Agreements. Concurrently with the execution of this Agreement, the Parties are executing the Amended and Restated Distribution Agreement, the Amended and Restated Regulatory Services Agreement, the Assignment and Assumption Agreement for Manufacturing Agreements, the Assignment and Assumption Agreement for US Territory Agreements, the Bill of Sale, and the Transitional Services Agreement. The Pharmacovigilance Agreement shall survive the execution of this Agreement and the termination of the Prior Agreements in accordance with its terms.

ARTICLE 3

LICENSES

          3.1 Eyetech Grants.

               (a) Subject to the terms of this Agreement, Eyetech hereby grants to Pfizer, and Pfizer hereby accepts, (i) an exclusive (even as to Eyetech, subject to a retained right by Eyetech to develop, use, make, have made and import the Product in the ROW Territory solely for the purpose of obtaining regulatory approval(s) for the Product in the US Territory and developing and supplying the Product for sale and importation in the US Territory), royalty-free (except as otherwise set forth in Article 6) license under the Eyetech Patent Rights, Eyetech Technical Information, and Eyetech’s rights under any Joint Patent Rights and Ongoing Trial Data, to develop, use, make, have made, sell, offer for sale, import, and have imported the Product in the ROW Territory, and (ii) a nonexclusive, royalty-free (except as otherwise set forth in Article 6) license under the Eyetech Patent Rights and corresponding US Territory Patent Rights owned or

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Controlled by Eyetech or its Affiliates, Eyetech Technical Information, and Eyetech’s rights under any Joint Patent Rights and Ongoing Trial Data, to develop, use, make, have made and import the Product in the US Territory solely for the purpose of developing and supplying the Product for sale and importation in the ROW Territory.

               (b) The licenses granted in Section 3.1(a) include sublicenses, as applicable. The sublicenses granted by Eyetech to Pfizer in Section 3.1(a) are subject to the following terms of the Gilead License, the Isis License and the Nektar License, respectively:

                    (i) Sections 2.4, 2.5, 3.6, 3.8, 6.3 and 6.7 of the Gilead License;

                    (ii) Sections 4.3 and 4.4 of the Isis License; and

                    (iii) Sections 2.3, 3.2, 3.5, 4.1, 4.9, 8.1, 8.2.3, 9.1 and 9.6 of the Nektar License.

               (c) Any sublicensee obligations required by the Gilead License, the Isis License and the Nektar License to be included in a sublicense thereunder, including without limitation any required provision making the applicable Eyetech Third Party Licensor a third party beneficiary of any sublicense thereunder, shall be deemed to be included in this Agreement.

               (d) The licenses granted by Eyetech in Section 3.1(a) with respect to the following patents: US Patent No. 5,475,096, US Patent No. 5,670,637, and US Patent No. 5,696,249, are subject to 35 USC §§200-212, 37 CFR §401 et seq. and applicable governmental implementing regulations. Any right granted in this Agreement greater than that permitted under 35 USC §§200-212 or 37 CFR §401 et seq. shall be subject to modification as may be required to conform to the provisions of those statutes. All rights reserved to the United States government and others under 35 USC §§200-212 and 37 CFR §401 shall remain and shall in no way be affected by this Agreement.

15

          3.2 License Grant to Eyetech. Subject to the terms of this Agreement, Pfizer hereby grants to Eyetech, and Eyetech hereby accepts, (i) an exclusive (even as to Pfizer, subject to a retained right by Pfizer to develop, use, make, have made and import the Product in the US Territory solely for the purpose of obtaining regulatory approval(s) for the Product in the ROW Territory and developing and supplying the Product for sale and importation in the ROW Territory), royalty-free license under the Pfizer Patent Rights, Pfizer Technical Information, and Pfizer’s rights under any Joint Patent Rights and Ongoing Trial Data, to develop, use, make, have made, sell, offer for sale, import, and have imported the Product in the US Territory, and (ii) a nonexclusive, royalty-free license under the Pfizer Patent Rights and corresponding ROW Territory Patent Rights owned or Controlled by Pfizer or its Affiliates, Pfizer Technical Information, and Pfizer’s rights under any Joint Patent Rights and Ongoing Trial Data, to develop, use, make, have made and import the Product in the ROW Territory solely for the purpose of developing and supplying the Product for sale and importation in the US Territory.

          3.3 Sublicensing.

               (a) The licenses granted in Sections 3.1(a) and 3.2 above include the right by either Party to grant sublicenses. Any sublicense granted by a Party must be granted pursuant to a written agreement that subjects the sublicensee to all relevant restrictions, limitations and obligations in this Agreement.

               (b) If a Party grants a sublicense under Section 3.3(a), such Party shall be responsible for failure by its sublicensees to comply with all relevant restrictions, limitations and obligations in this Agreement.

               (c) In the event of a material default by any sublicensee under a sublicense agreement, the sublicensing Party will inform the other Party and take such action, after

16

consultation with the other Party, that in the sublicensing Party’s reasonable business judgment is required to address such default.

               (d) Pfizer shall provide Eyetech with a copy of each sublicense agreement, in final executed form, that Pfizer enters into in accordance with this Section 3.3 not later than five (5) days after the execution of such sublicense agreement; provided that Pfizer may redact the financial terms from such copies only if permitted under the applicable requirements of the Gilead License, the Nektar License and the Isis License requiring delivery to Gilead, Nektar or Isis of copies of sublicense agreements.

          3.4 Product Orders or Sales Outside of a Party’s Territory. If Eyetech receives an order for the Product from a third party that is either located in the ROW Territory or that intends to resell the Product into the ROW Territory, Eyetech will not accept such order and shall refer such order to Pfizer. If Pfizer receives an order for the Product from a third party that is either located in the US Territory or that intends to resell the Product into the US Territory, Pfizer will not accept such order and shall refer such order to Eyetech. Each Party agrees that it shall not, and shall cause its Affiliates and licensees or sublicensees not to, (a) solicit active or passive sales of the Product outside of, in the case of Eyetech, the US Territory, and in the case of Pfizer, the ROW Territory, or (b) sell the Product to a third party where the selling Party knows or should reasonably know that such third party intends to resell such Product outside of, in the case of Eyetech, the US Territory, and in the case of Pfizer, the ROW Territory.

          3.5 Right of First Negotiation For New Products. During the period commencing upon the Restatement Date and ending upon the^** anniversary of the Restatement Date (the “ROFN Period”), in the event that Eyetech proposes to (a) commence a phase III clinical trial with respect to any New Product that Eyetech intends will serve as a pivotal trial for the purpose of obtaining

^** This portion has been redacted pursuant to a confidential treatment request.

17

regulatory approval(s) for such New Product in the ROW Territory, or (b) grant to any third party any right or license under any Patent Rights Controlled by Eyetech or its Affiliates to offer for sale, sell or have sold any New Product(s) in the ROW Territory, then Eyetech shall provide Pfizer with (x) written notice thereof (“Notice of Opportunity”), and (y) any material information regarding the toxicology, safety and efficacy of the New Product(s) identified in the Notice of Opportunity (the ROW Territory commercialization rights with respect to each such identified New Product(s), a “New Product Opportunity”), the status of any material discussions with the FDA relating to such New Product, and any relevant patent information, each to the extent that such information is available and permitted to be disclosed by Eyetech as of the date of the Notice of Opportunity. In the case of the foregoing clause (a), Eyetech shall provide Pfizer with the Notice of Opportunity during the time period commencing upon^** and ending with ^**. In the case of the foregoing clause (b), Eyetech shall provide Pfizer with the Notice of Opportunity on or about the time at which ^**. Pfizer, at its option, will have the right to negotiate with Eyetech for rights to the New Product Opportunity and to expand Pfizer’s license hereunder to include rights to such New Product Opportunity; provided that Pfizer exercises such right by written notice to Eyetech within ^** days after receipt of the Notice of Opportunity. In the event that Pfizer does not provide the written notice exercising Pfizer’s right to negotiate as described in the immediately preceding sentence, Eyetech shall have no further obligation to Pfizer, and Pfizer shall have no further rights, with respect to such New Product Opportunity. In the event that Pfizer provides the written notice exercising Pfizer’s right to negotiate as described above, Eyetech shall not commence such phase III clinical trial of the applicable New Product(s) or grant rights to such New Product Opportunity to a third party for a period of up to ^**, in order to provide Pfizer with an opportunity to discuss with Eyetech the terms pursuant to which Pfizer would license rights to such New Product

^** This portion has been redacted pursuant to a confidential treatment request.

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Opportunity. Pfizer’s rights under this Section 3.5 shall apply on a New Product Opportunity-by-New Product Opportunity basis, and Pfizer’s waiver of its rights hereunder with respect to any particular New Product Opportunity shall not constitute a waiver of such rights with respect to any other New Product Opportunity. If the Parties do not reach agreement regarding the terms on which Pfizer would license rights to any New Product Opportunity during any such ^** negotiation period, Eyetech shall have no further obligation to Pfizer, and Pfizer shall have no further rights, with respect to such New Product Opportunity; provided that, (A) during the ROFN Period, Eyetech shall not grant any third party a license of any Patent Rights Controlled by Eyetech or its Affiliates for such New Product Opportunity on terms which, ^**, and (B) in the case of a New Product Opportunity for which Eyetech provided Pfizer with a Notice of Opportunity pursuant to the foregoing clause (b), if Eyetech has not granted rights to such New Product Opportunity to a third party within ^** after the end of such ^** negotiation period between Eyetech and Pfizer, the provisions of this Section 3.5 shall once again apply to such New Product Opportunity.

ARTICLE 4

MANUFACTURING, MARKETING, MEDICAL AND REGULATORY MATTERS

          4.1 Meetings and Information Exchange. The Parties recognize that, after the Restatement Date, it is critical to maintain and facilitate ongoing cooperation and information exchange between them concerning the Product. Accordingly, representatives of the Parties shall meet periodically as set forth in this Article 4 in order to exchange, assess and discuss information and strategies related to, inter alia, the: (1) continued clinical development of, and regulatory strategy for, the Product, (2) marketing and promotion for the Product, and (3) manufacture, supply and distribution of the Product. These meetings may be held in person, by videoconference or by

^** This portion has been redacted pursuant to a confidential treatment request.

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teleconference, as the Parties mutually agree, and all in-person meetings shall be at locations mutually agreed-upon by the Parties.

          4.2 Ongoing Clinical Trials. Schedule 4.2 sets forth a list of the ongoing clinical trials for the Product (the “Ongoing Trials”), the identity of the Party responsible for completing the trial and performing remaining activities for each such trial (the “Responsible Party”), the allocation between the Parties of the future costs for performing the activities for each such trial, which costs shall be reconciled between the Parties pursuant to Section 5.2 hereof, and the services, if any, to be provided to the Responsible Party by the other Party in connection with each Ongoing Trial. Each Party will cooperate with the other Party, at the other Party’s reasonable request, in order to complete the Ongoing Trials. Except with respect to the CRVO study (study number 1011), for which Eyetech will complete the final clinical study report within one (1) year from completion of such study, the Responsible Party for a particular Ongoing Trial shall have the right to change or terminate such Ongoing Trial as such Party may deem necessary or desirable, provided, that the other Party shall not be liable for any such change or termination and shall be compensated for such Party’s performance of any additional activities or services requested by the Responsible Party in connection with such change or termination. Services to be provided by Eyetech to Pfizer in connection with certain Ongoing Trials will be provided pursuant to the Transitional Services Agreement. Any services to be provided by Pfizer to Eyetech in connection with certain Ongoing Trials will be provided pursuant to the Amended and Restated Regulatory Services Agreement. In addition,^**. In addition, Pfizer shall provide Eyetech access to, and shall reasonably cooperate with Eyetech in compiling, data that may reasonably be deemed necessary by Eyetech to fulfill its post-marketing commitments to the FDA for the Product with respect to ERG and corneal biomicroscopy, and to respond to related queries or requests by the FDA with respect to such post-

^** This portion has been redacted pursuant to a confidential treatment request.

20

marketing commitments to the FDA. Without limiting the Parties’ rights and obligations under the Pharmacovigilance Agreement with respect to the sharing of any clinical data thereunder, with respect to each clinical trial for the Product completed prior to the Restatement Date as well as each Ongoing Trial, Pfizer and Eyetech shall each provide, or cause any third party at which such information is stored to provide, the other Party with all raw data and final results arising from such trials promptly after such data and results become available, but no less frequently than on a quarterly basis for the duration of any Ongoing Trials, provided that, if a Party requests interim disclosure of Ongoing Trial Data in the possession of the other Party, the other Party shall not unreasonably refuse to provide such interim disclosure. Each Party will provide the other with a draft of all public releases of Ongoing Trial Data reasonably in advance of public dissemination of any such release in order to afford the other Party with an opportunity to review and comment upon such draft. The Party identified on Schedule 4.2 as the responsible party for performing activities with respect to an Ongoing Trial may post the final results from such Ongoing Trial on the PhRMA clinical studies database located at www.clinicalstudyresults.org.

          4.3 Future Clinical Trials. Subject to the remainder of this Section 4.3, and in addition to the rights and obligations of the Parties as set forth in Section 4.7(d) below, Pfizer has the right to conduct further clinical studies with respect to the Product in the ROW Territory, and Eyetech has the right to conduct further clinical studies with respect to the Product in the US Territory. At the request of either Party, the Parties shall in good faith meet and discuss jointly conducting additional clinical studies with respect to the Product where preclinical and/or clinical results ^**. If the Parties agree to pursue such additional development jointly, the Parties shall agree on both the manner in which the costs for such development will be shared, and each Party’s respective rights to use the data and other information resulting from such development. If the Parties do not agree

^** This portion has been redacted pursuant to a confidential treatment request.

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to jointly pursue such additional development, either Party shall have the right to pursue such development at its sole expense; provided, however, that ^**.

          4.4 Marketing.

               (a) In order to ensure that a consistent message is communicated by the Parties with respect to the Product, representatives of the Parties shall meet at least once each calendar quarter to review and discuss their respective strategies for the advertising and promotion of the Product.

               (b) ^**

               (c) ^**

               (d) ^**

               (e) In connection with the marketing, promotion and medical support of the Product in the US Territory, Pfizer and/or Eyetech (or its Affiliate) have entered into the third party agreements as set forth in Schedule 4.4(e) (the “US Territory Agreements”). Subject to the terms and conditions of such agreements and any required third party consents, Pfizer shall assign to Eyetech, and Eyetech will assume, all of Pfizer’s rights and obligations under such US Territory Agreements pursuant to the Assignment and Assumption Agreement for US Territory Agreements. For the avoidance of doubt, if Pfizer is not permitted to assign all of its rights and obligations under a US Territory Agreement to Eyetech, then such US Territory Agreement will be terminated by Pfizer and/or Eyetech (or its Affiliate), as applicable.

               (f) With respect to ^** in payments made by Pfizer as of the Restatement on behalf of the Parties to ^** to organize two (2) consultant meetings for Product in the US Territory to be held after the Restatement Date and solely under the control of and for the benefit of Eyetech,

^** This portion has been redacted pursuant to a confidential treatment request.

22

Eyetech shall reimburse Pfizer for the Out-of-Pocket Costs thereof. Such costs shall be included in Pfizer’s Quarterly Expense Report.

               (g) In addition, the Parties further agree to:

                    (i) provide each other, for information, with a copy of all new advertising and promotional materials for the Product produced by Eyetech for the US Territory and by Pfizer for all English-speaking countries in the ROW Territory;

                    (ii) discuss, share information concerning, and, to the extent reasonably practicable, coordinate, advisory board meetings, contacts with key opinion leaders, and activities at the ARVO and AAO global congresses and the world ophthalmology conference (WOC) (collectively, “Global Congresses”). The Parties will share their planning for all Global Congresses with respect to the Product in advance of the applicable event. In addition, with respect to the two (2) 10x10 Product-specific convention booths in existence as of the Restatement Date, from and after the Restatement Date each Party shall own one (1) such booth as discussed by the Parties prior to the Restatement Date and each Party agrees to execute any assignments and other documents and take any further actions as may be necessary to more fully vest on the other Party such agreed ownership.**

** This portion has been redacted pursuant to a confidential treatment request.

23

                    (iii) coordinate press releases and other communications on new data or other material information concerning the Product by providing drafts of all such press releases or communications reasonably in advance of public dissemination of any of the foregoing in order to afford the other Party with an opportunity to review and comment upon such draft in advance of dissemination;

                    (iv) exchange, at least once each calendar year, a list of magazines, journals and other publications in which it plans to place advertising for the Product and attempt, to the extent reasonably practicable, to allocate advertising responsibility based on the country in which the applicable magazine, journal or other publication maintains its primary circulation; and

                    (v) cooperate in the development of separate US Territory and ROW Territory Internet websites for the Product. After the Restatement Date, Eyetech shall retain ownership of the websites (including URL) currently located at “www.macugen.com” and “www.macugen.net”, shall continue to operate, maintain and develop the “www.macugen.com” website for Product in the US Territory, and shall be responsible for all costs associated

24

therewith. After the Restatement Date, Pfizer shall operate, maintain and develop the website “www.macugen.net” for Product in the ROW Territory, and shall be responsible for all costs associated therewith. Subject to the terms and conditions hereof, Eyetech shall maintain a link on the “www.macugen.com” website to the “www.macugen.net” website, and Pfizer shall maintain a link on the “www.macugen.net” website to the “www.macugen.com” website, such links to be in a form to be mutually agreed by the Parties.

          4.5 Pharmacovigilance and Product Safety Matters. Eyetech and Pfizer shall be responsible for the surveillance, receipt, evaluation, and reporting of adverse drug experiences for the Product in the US Territory and the ROW Territory, respectively, and, with respect to the exchange of adverse event and other safety information relating to the Product, each shall at all times comply with the terms of the Pharmacovigilance Agreement between the Parties dated May 11, 2006 (as it may be amended from time to time, the “Pharmacovigilance Agreement”). Pursuant to the Pharmacovigilance Agreement, Pfizer is currently responsible for receipt, processing, evaluation and follow-up of all post-marketing reports for the US Territory. Eyetech has requested that Pfizer, and Pfizer has agreed to, continue to be responsible for receipt, processing, evaluation and follow-up of all post-marketing reports for the US Territory for a period of ^** after the Restatement Date. The Pharmacovigilance Agreement will be amended to reflect such transfer of any responsibilities from Pfizer to Eyetech or its successor.

          4.6 Medical Information and Product Complaints. Eyetech shall be responsible for responding to medical, consumer and other inquiries received from the US Territory concerning the Product, including any Product complaints, and, subject to the services to be provided by Pfizer to Eyetech pursuant to the Amended and Restated Regulatory Services Agreement, Pfizer shall direct all such matters to Eyetech’s attention. Pfizer shall be responsible for responding to medical,

^** This portion has been redacted pursuant to a confidential treatment request.

25

consumer and other inquiries received from the ROW Territory concerning the Product, including any Product complaints, and Eyetech shall direct all such matters to Pfizer’s attention. The Parties acknowledge that, as of the Restatement Date, Pfizer is handling certain Product complaints and medical, consumer and other inquiries concerning the Product on behalf of Eyetech for the US Territory. Eyetech shall have the right to request that Pfizer continue to handle these matters for the US Territory pursuant to, and subject to the terms of, the Amended and Restated Regulatory Services Agreement.

          4.7 Regulatory Matters. All regulatory approvals in the ROW Territory relating to the Product shall continue to be the property of Pfizer and held in Pfizer’s or its Affiliate’s name, and all regulatory approvals in the US Territory shall continue to be the property of Eyetech and held in Eyetech’s or its Affiliate’s name. Each Party will cooperate with the other, and provide the other with reasonable assistance, in connection with future filings with Governmental Authorities concerning the Product (including filings related to regulatory approval or safety of, or approval of a new indication for, the Product, but excluding DDMAC filings), in each case at the owning Party’s request and expense, including without limitation by (i) providing reasonable assistance to such owning Party to provide information to, and answer queries posed by, Regulatory Authorities in connection with obtaining or maintaining regulatory approvals for Product, (ii) providing, or causing its third party contractors to provide, the owning Party with non-clinical data concerning the Product including CMC, pharmacology, toxicology, and pharmacodynamics data; and (iii) permitting the applicable Governmental Authorities to inspect manufacturing or testing facilities of the non-owning party as required by such Governmental Authorities. In addition, the Parties agree as follows with respect to future regulatory activities concerning the Product:

26

               (a) Each Party will provide the other Party with copies of all material Product-related correspondence that it receives from the FDA or analogous Governmental Authorities or Regulatory Authorities in the European Union, Canada and Japan, except correspondence from DDMAC. In addition to the immediately preceding sentence and to Section 4.1, each Party will provide the other Party with copies, which copies may be in draft form, of (i) the safety sections of material Product-related submissions to the FDA or analogous Governmental Authorities or Regulatory Authorities in the ROW Territory, and (ii) any sections disclosing or concerning any Ongoing Trial Data included in any such submissions, reasonably in advance of submission, and such Party shall, prior to making such submission, reasonably consider the comments, if any, given by the other Party; and

               (b) Any decision to initiate a recall or withdrawal of, or a broad-based non-promotional information update to physicians about (e.g., a “Dear Dr. Letter”), the Product in the US Territory shall be made by Eyetech and any decision to initiate a recall or withdrawal of, or a broad-based non-promotional information update to physicians about, the Product in the ROW Territory shall be made by Pfizer. Before either Party initiates a recall, withdrawal or broad-based non-promotional information update to physicians about the Product, such Party shall, if reasonably practicable under the circumstances, promptly and in good faith discuss the reasons therefor with the other. In the event of any recall or withdrawal of, or broad-based non-promotional information update to physicians about, the Product in the US Territory, Eyetech shall be responsible for implementing any necessary action and the associated costs thereof, and in the event of any recall or withdrawal of, or broad-based non-promotional information update to physicians about, the Product in the ROW Territory, Pfizer shall be responsible for implementing any necessary action and the associated costs thereof.

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               (c) Pfizer will provide certain services relating to the US Territory during a transitional period pursuant to the Amended and Restated Regulatory Services Agreement. The fees payable to Pfizer by Eyetech for the services provided by Pfizer under the Amended and Restated Regulatory Services Agreement shall be included in Pfizer’s Quarterly Expense Report.

               (d) Notwithstanding Section 4.2, Section 4.3 or the exclusive grant of rights to Pfizer in Section 3.1(a) and to Eyetech in Section 3.2, Eyetech may open one or more clinical trial sites in the ROW Territory and Pfizer may open one or more clinical trial sites in the US Territory, solely in connection with clinical studies for the Product, the results of which are intended for Eyetech’s use solely in the US Territory or Pfizer’s use solely in the ROW Territory, as applicable. In the event that a Party intends to open any clinical trial sites in the other Party’s Territory, such Party will provide the other Party with written notice thereof, a copy of the protocol for the clinical study, a list of the investigators, and any other documents or information required by local Regulatory Authorities in such Territory. Pfizer will be solely responsible for submitting the foregoing to the applicable Regulatory Authorities in the ROW Territory and for any other communications with the applicable Regulatory Authorities in the ROW Territory concerning any such Eyetech clinical study, and Eyetech will be solely responsible for submitting the foregoing to the applicable Regulatory Authorities in the US Territory and for any other communications with the applicable Regulatory Authorities in the US Territory concerning any such Pfizer clinical study. Without limiting the generality of the foregoing, Eyetech shall have the right to reference Pfizer’s clinical trial authorizations concerning the Product for purposes of establishing and conducting such clinical trial sites in the ROW Territory, and Pfizer shall have the right to reference Eyetech’s Investigational New Drug applications for Product for purposes of establishing and conducting such clinical trial sites in the US Territory.

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          4.8 Scientific Activities; Investigator Initiated Research; Medical Education Grants. The Parties recognize that close coordination and sharing of information with respect to proposed scientific and medical publications is critical for the future success of the Product. Accordingly, to the extent reasonably practicable, each Party agrees to: (a) provide the other Party with a draft of all Product-related scientific publications proposed for submission by such Party (“Proposed Submissions”), including manuscripts and meeting abstracts, prior to such submission; and (b) meet on a regular basis, but no less than^**, to discuss, with respect to the Product, proposed, completed or otherwise finalized investigator-initiated research, medical education grants, and each Party’s planned or finalized publications, abstracts and oral presentations; provided that, in the absence of an agreement between the Parties to the contrary, no such sharing of information shall entitle the receiving Party to use any data conferred therein or to exercise any approval right over the other Party’s Proposed Submissions. For the avoidance of doubt, (x) Eyetech shall have the sole right, but not the obligation, to fund investigator-initiated research and medical education grants concerning the Product or related disease state education in both the US Territory and the ROW Territory, provided that any such funding directly concerning the Product in the ROW Territory is solely to support Eyetech’s activities in the US Territory, and (y) Pfizer shall have the sole right, but not the obligation, to fund investigator-initiated research and medical education grants concerning the Product or related disease state education in both the ROW Territory and the US Territory, provided that any such funding directly concerning the Product in the US Territory is solely to support Pfizer’s activities in the ROW Territory. Each Party shall notify the other Party prior to commencement of any investigator-initiated research funded by the notifying Party in such other Party’s Territory, in order to provide such other Party with an opportunity to provide, at such other Party’s discretion, feedback to the notifying Party concerning such proposed research.

^** This portion has been redacted pursuant to a confidential treatment request.

29

          4.9 Manufacturing and Supply.

               (a) Representatives of the Parties will meet at least ^** (until such time as otherwise mutually agreed by the Parties) in order to discuss (i) worldwide quality assurance to ensure that all bulk drug substance and starting materials (together, “Product Components”) and Product are manufactured in accordance with the Parties’ quality standards; (ii) supply relationships with third party manufacturers; (iii) any changes required by Law to the approved specifications for the Product or any Product Component; and (iv) forecasts for the Product and Product Components and inventory levels for the Product and Product Components, and future logistic strategies and capacity planning.

               (b) As of the Restatement Date, Eyetech shall assign to Pfizer, subject to receipt of any required third party consents or approvals required as a condition to such assignment (the “Required Consents”), each of the agreements set forth in Schedule 4.9(b) pursuant to the Assignment and Assumption Agreement for Manufacturing Agreements. If the Parties are not able to procure a Required Consent, then Eyetech shall continue to provide Pfizer with the benefit of the contract with the third party that refused to provide the Required Consent pursuant to the Transitional Services Agreement between Eyetech and Pfizer. The Parties acknowledge and agree that, subject to obtaining Required Consent with respect to the assignment of the Degussa Agreement to Pfizer, and after the date on which such Required Consent is obtained (“Assignment Date”):

                    (i) ^**

                    (ii) Pfizer shall, and hereby does, grant to Eyetech a sublicense of Pfizer’s rights under Section 2.3(c) of the Degussa Agreement, effective upon the Assignment Date;

^** This portion has been redacted pursuant to a confidential treatment request.

30

                    (iii) Pfizer shall not amend the Degussa Agreement or grant to any third party any rights thereunder in any manner that would prevent, be inconsistent with, or otherwise undermine the benefit to Eyetech of, the license grants to Eyetech set forth in the immediately preceding clauses (i) and (ii) above;

                    (iv) ^**

                    (v) In the event that Eyetech’s authorization is required in order for Degussa or its third party subcontractor to use certain protocols (“Eyetech Protocols”) to test API and/or Eyetech Product, or any component thereof, on behalf of Pfizer under the Degussa Agreement, Eyetech shall provide such authorization, provided, however, that in no event shall Eyetech be liable for any use or non-use of such Eyetech Protocols.

               The Parties further acknowledge and agree that there may be other agreements related to manufacturing and/or quality assurance of Product to which Eyetech and/or Pfizer may be party(ies) and which may need to be amended or otherwise addressed following the Restatement Date in connection with the transactions contemplated under this Agreement, and each Party shall cooperate with the other Party in undertaking such amendments or other actions.

               (c) Each Party will be responsible for ^** (^**%) of (x)^**; (y) Out-of-Pocket Costs of retesting Current Inventories and Other Components; and (z) obsolescence, destruction and disposal costs, if any, for portions of the Current Inventories and Other Components that become unusable. “Current Inventories” means the inventories owned by the Parties on the Restatement Date of (1) bulk drug substance; and (2) finished goods. ** The lot number, unit cost, number of units, and Territorial designation of the Current Inventories as of April 9, 2007, with respect to finished goods, and the Restatement Date with respect to bulk drug substance are reflected on Schedule 4.9(c). Promptly after the Restatement Date, the Parties shall update Schedule 4.9(c) to

^** This portion has been redacted pursuant to a confidential treatment request.

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account for Current Inventories of finished goods as of the Restatement Date. After the Restatement Date, each Party will own all Current Inventories manufactured for such Party’s Territory. Eyetech will, and hereby does, transfer to Pfizer title to all the starting materials for manufacture of the bulk drug substance for Product in inventory as of the Restatement Date (the “Other Components”) pursuant to the Bill of Sale. The inventory of, and Eyetech’s direct, out-of-pocket costs for, Other Components as of the Restatement Date are set forth on Schedule 4.9(c). Within ^** days after the Restatement Date, Pfizer shall pay Eyetech for Eyetech’s direct, out-of-pocket costs for Other Components as of the Restatement Date. If and when any materials contained in either Party’s Current Inventories or Other Components (which, for purposes of clarity, shall include, with respect to Pfizer, the Other Components transferred to Pfizer pursuant to this Section 4.9(c)) are deemed by such Party, based on relevant factors including expiration date, results of retesting, non-conformance with Product specifications in such Party’s Territory, or such Party’s internal quality standards, to be unusable, such Party will provide notice to the other Party describing the materials within the Current Inventories and Other Components that such Party has deemed to be unusable. Any amounts for which either Party is entitled to contribution from the other Party pursuant to Section 4.9(c) will be included in such Party’s Quarterly Expense Report.

               (d) The Parties acknowledge and agree that Pfizer currently holds an inventory of certain pre-printed syringes and related components (“BD Luer Lok Preprinted Syringes”) which were purchased by Pfizer to support certain line trials and qualification runs, and that, to the extent that any such BD Luer Lok Preprinted Syringes remain unused after the completion of such line trials and qualification runs, Pfizer shall notify Eyetech of such remaining BD Luer Lok Preprinted Syringes and Pfizer’s Out-of-Pocket Costs for procuring such BD Luer Lok Preprinted Syringes from the relevant third party vendor. To the extent requested by Eyetech, Pfizer will transfer title

^** This portion has been redacted pursuant to a confidential treatment request.

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to, and Eyetech shall purchase, all such remaining BD Luer Lok Preprinted Syringes, at Pfizer’s Out-of-Pocket Costs for procuring such BD Luer Lok Preprinted Syringes.

               (e) Eyetech shall provide Pfizer, upon Pfizer’s reasonable request, with copies of data and documentation in Eyetech’s possession or under Eyetech’s control, which data and documentation relate to the manufacture, process development and validation of Product Components or the Product.

               (f) Pursuant to the Bill of Sale, Eyetech shall transfer to Pfizer title to capital equipment purchased by Eyetech for the manufacture of bulk drug substance for Product at Degussa, which equipment is owned by Eyetech and held in Eyetech’s name (“Eyetech Capital Equipment”); provided, that in the event that such transfer does not occur prior to or as of the Restatement Date, Pfizer will be entitled to use, and to enjoy all of the benefits of, such Eyetech Capital Equipment in connection with the manufacture of bulk drug substance for Product until such transfer has occurred.

               (g) With respect to capital equipment required for the manufacture of finished Product at Gilead and purchased, or to be purchased, by Pfizer, which equipment is or shall be owned by Pfizer and held in Pfizer’s name and set forth on Schedule 4.9(g) (“Pfizer Capital Equipment”), Eyetech shall be financially responsible for ^**% and Pfizer for ^**% of the capital expenditures for such Pfizer Capital Equipment, together with the costs of the services related thereto. For the avoidance of doubt, the above allocation of financial responsibility shall apply to ^** . The budget for the capital expenditure amounts for Pfizer Capital Equipment and ^** are set forth on Schedule 4.9(g), which shall be updated by the Parties promptly after the Restatement Date to reflect an updated budget and statement of costs of services related to the Pfizer Capital Equipment as of the Restatement Date. Pfizer will charge Eyetech for Eyetech’s share of the cost

^** This portion has been redacted pursuant to a confidential treatment request.

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of such Pfizer Capital Equipment and related services in Pfizer’s Quarterly Expense Report. Title to the Pfizer Capital Equipment installed, or to be installed, at Gilead shall remain with Pfizer; provided, however, that Eyetech will be entitled to use, and to enjoy all of the benefits of, such Pfizer Capital Equipment in connection with the manufacture of finished Product.

          4.10 Analytical and Other Support Services. Pursuant to the Transitional Services Agreement, Eyetech shall provide to Pfizer certain services, including stability and analytical services related to the Product and Product Components, which services are currently, or have been, provided to Pfizer by Eyetech using Eyetech’s Cedar Knolls, New Jersey facility. The costs of the transitional services provided by Eyetech under the Transitional Services Agreement shall be included in Eyetech’s Quarterly Expense Report.

          4.11 Distribution. Pfizer will continue to provide certain logistics services to Eyetech with respect to the distribution of the Product in the US Territory pursuant to the Amended and Restated Distribution Agreement. The cost of the services provided by Pfizer under the Amended and Restated Distribution Agreement shall be included in Pfizer’s Quarterly Expense Report.

ARTICLE 5

COST SHARING

          5.1 Responsibility for Expenses. Other than as mutually agreed-upon by the Parties, or as otherwise set forth in this Agreement or any Exhibit or Schedule to this Agreement, after the Restatement Date, Pfizer will be responsible for 100% of the internal and external development, marketing, regulatory expenses, and cost of goods sold, relating to the sale of Product in the ROW Territory, and Eyetech will be responsible for 100% of the internal and external development, marketing, regulatory costs, and cost of goods sold, relating to the sale of Product in the US

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Territory. Promptly, but no later than ^** after the Restatement Date, the Parties will perform a preliminary reconciliation pursuant to the Collaboration Agreement in order to settle all expense and Net Sales sharing with respect to the Product under the Prior Agreements and the Original License Agreement for all periods prior to the Restatement Date, and a final reconciliation to settle all such expense and Net Sales sharing no later than ^** after the Restatement Date.

          5.2 Reconciliation of Expenses.

               (a) Within ^** days after the end of each calendar quarter during the term of this Agreement, each Party shall provide the other Party with a statement of the expenses relating to the Product, if any, incurred by such Party during such calendar quarter (or, with respect to the first such reconciliation, all prior periods following the Restatement Date through the end of such calendar quarter) for which such Party is entitled to reimbursement from the other Party pursuant to this Agreement or any other Transaction Agreement, as well as the details of adjustments, if any, to be made to the amounts submitted by such Party for previous calendar quarters (such reports, “Quarterly Expense Reports”). The Quarterly Expense Reports shall be substantially in the form of Exhibit 5.2(a) to this Agreement.

               (b) The Party entitled to receive payment from the other Party, as set forth in the report prepared and delivered in accordance with Section 5.2(a) shall issue an invoice to the other Party reflecting the net amount payable, and such amount shall be paid by the Party owing such net amount to the other Party within ^** after such invoice is delivered.

          5.3 Offset. Any amount payable by either Party pursuant to Section 5.1 or 5.2 may be offset against any other amounts then payable to such Party under this Agreement or any other Transaction Agreement.

^** This portion has been redacted pursuant to a confidential treatment request.

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ARTICLE 6

THIRD PARTY ROYALTIES

          6.1 Payment of Third Party Royalties.

               (a) Pfizer shall be responsible for all royalties payable to third parties based on sales of the Product in the ROW Territory. For the avoidance of doubt, in the event that any withholding or other taxes are payable by Pfizer on any such payments due to the Eyetech Third Party Licensors with respect to sales in the ROW Territory, then Pfizer shall make such tax payments in addition to making the payments to Eyetech set forth in the immediately preceding sentence. If any withholding or other taxes are payable by Eyetech on any such payments due to the Eyetech Third Party Licensors with respect to sales in the ROW Territory, and such taxes are not deductible from the royalty payments due to the Eyetech Third Party Licensors, then Pfizer shall pay to Eyetech an additional amount equal to such taxes. Pfizer shall indemnify Eyetech and its Affiliates and their respective directors, officers, employees and agents from and against any liability with respect to withholding or other taxes that are payable by Pfizer or Eyetech on any royalty payments due to Eyetech Third Party Licensors with respect to sales in the ROW Territory. The Parties shall establish such procedures as are reasonably necessary to permit them to reconcile Eyetech’s actual payments to the Eyetech Third Party Licensors with Pfizer’s payments to Eyetech under this Section 6.1. Notwithstanding the foregoing provisions of this Section 6.1, Pfizer shall not have any responsibility for withholding taxes that become payable solely as a result of an assignment by Eyetech of Eyetech’s rights to receive payments from Pfizer to an Affiliate of Eyetech or other third party.

               (b) With respect to Pfizer’s responsibility for the payments of royalties payable by Eyetech to Eyetech Third Party Licensors payable based on Net Sales of the Product in the ROW Territory, Eyetech shall send Pfizer an invoice that shall be based on Pfizer’s report of Net

36

Sales pursuant to Section 6.2, and Pfizer will pay the amount reflected on such invoice within ^** after such invoice is delivered by Eyetech. For the purposes of determining the amount of third party royalties due for the relevant Pfizer Quarter, the amount of Net Sales in any foreign currency shall be converted by Pfizer into United States dollars in a manner consistent with Pfizer’s normal practices used to prepare its audited financial reports; provided that such practices use a widely accepted source of published exchange rates.

          6.2 Net Sales Reports. Pfizer shall provide Eyetech with a report of Net Sales with respect to each Pfizer Quarter within ** after the end of each calendar quarter, which report shall identify, on a country-by-country basis, the Product and the Net Sales of each such Product; ^** . Net Sales reports shall be kept confidential by Eyetech and not disclosed to any other party other than Eyetech Third Party Licensors and their respective accountants and Boards of Directors.

ARTICLE 7

PAYMENT TERMS; RECORD-KEEPING; AUDIT RIGHTS

          7.1 Payment Currency. All amounts due under this Agreement shall be paid to the designated Party in United States dollars.

          7.2 Payments. All payments under this Agreement shall be made on or before the due date by electronic transfer in immediately available funds to the respective account designated in writing by each Party at least five (5) Business Days before the payment is due. All payments under this Agreement shall bear interest from the date due until paid at a rate equal to the prime rate of Citibank, NA as announced on the date such payment was due plus three percent (3%), compounded on a calendar quarterly basis. In addition, the Party liable for late payment shall reimburse the other Party for all reasonable costs and expenses, including without limitation reasonable attorneys’ fees and legal expenses, incurred in the collection of late payments.

^** This portion has been redacted pursuant to a confidential treatment request.

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          7.3 Books and Records. Each Party shall keep comprehensive books and records relating to this Agreement in accordance with GAAP. Such books and records shall include all information subject to audit pursuant to Section 7.4 including all expenses incurred or paid and any other costs incurred for which the other Party is responsible pursuant to this Agreement, and in the case of Pfizer, all books and records setting forth gross sales and Net Sales in the ROW Territory. All such books and records shall be maintained for three (3) Years following the relevant Year or such longer period as is required by Law.

          7.4 Audits. These audit and adjustment provisions apply with respect to all payments due from one Party to another pursuant to this Agreement. Each Party shall have the right to have the applicable books and records of the other Party audited by a nationally recognized independent certified public accountant, selected by a Party (as to which firm the other Party has no reasonable objection), under appropriate confidentiality provisions reasonably acceptable to the accounting firm conducting the audit, for the sole purpose of verifying the accuracy of all financial, accounting and numerical information and calculations under this Agreement. Any such audit shall be conducted no more than once each Year during the term of this Agreement, shall be limited to payments due within the prior three (3) Years, and shall be conducted upon at least thirty (30) days’ advance notice during normal business hours and in a manner that does not interfere unreasonably with the business of the audited entity. The results of any such audit shall be delivered in writing to each Party and shall be binding absent manifest error. Any underpayment or overbilling determined by such audit shall promptly be paid or refunded by the audited Party. If the audited Party has underpaid or overbilled amounts due under this Agreement by more than five percent (5%) over any reporting period, the audited Party shall also reimburse the other Party for the cost of such audit (with the cost of the audit to be paid by the auditing Party in all other cases),

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plus interest at the interest rate set forth in Section 7.2, from the date of any such underpayment or overpayment.

ARTICLE 8

CONFIDENTIALITY AND PUBLICITY

          8.1 Confidentiality. During the term of this Agreement and for ^** after the termination of this Agreement, each Party shall maintain Confidential Information provided by the other Party in confidence, and shall not disclose, divulge or otherwise communicate such Confidential Information to others, or use it for any purpose other than as permitted under this Agreement. The receiving Party shall have the right to disclose Confidential Information received from the other Party to Governmental Authorities to the extent reasonably required or desirable to secure approval for marketing of the Product (provided that the receiving Party shall use reasonable efforts to secure confidential treatment thereof), and to preclinical and clinical investigators where reasonably necessary or desirable for their information to the extent normal and usual in the custom of the trade and under a confidentiality agreement with provisions governing confidentiality and non-use substantially the same as those contained herein.

          8.2 Publicity Related to this Agreement. The Parties recognize that each Party may from time to time desire to issue press releases and make other public statements or disclosures regarding the existence or terms of this Agreement. In such event, the Party desiring to issue a press release or make a public statement or disclosure shall provide the other Party with a copy of the proposed press release, statement or disclosure for review and approval in advance, which advance approval shall not be unreasonably withheld, conditioned or delayed. No other public statement or disclosure concerning the existence or terms of this Agreement shall be made, either directly or indirectly, by either Party hereto, without first obtaining the written approval of the

^** This portion has been redacted pursuant to a confidential treatment request.

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other Party. Once any public statement or disclosure has been approved in accordance with this Section, then either Party may appropriately communicate information contained in such permitted statement or disclosure. Notwithstanding the foregoing provisions of Section 8.1 or this Section 8.2, a Party may (a) disclose the existence and terms of the this Agreement where required, as reasonably determined by the disclosing Party, by applicable Law, by applicable stock exchange, including Nasdaq, regulation or by order or other ruling of a competent court, and (b) disclose the existence and terms of the this Agreement under obligations of confidentiality to agents, advisors, contractors, investors and sublicensees, and to potential agents, advisors, contractors, investors and sublicensees, in connection with such Party’s activities hereunder and in connection with such Party’s financing activities, provided that, in the case of any such public disclosure, the disclosing Party provides the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release or publication thereof to afford such other Party a reasonable opportunity to review and comment upon the proposed text. Furthermore, notwithstanding anything in this Agreement to the contrary, each Party shall have the right to publicly announce or disclose, without having to first submit such announcement for review and/or approval by the other Party, any information concerning such Party’s development and commercialization of the Product in accordance with this Agreement, excluding any information relating to the other Party or any arrangement with the other Party contemplated under this Agreement (unless such information has already been approved by the other Party for public disclosure).

          8.3 Applicability of Obligations to Affiliates, Employees, Directors, Agents, Independent Contractors and Consultants. The confidentiality obligations of the Parties under this Article 8 shall be applicable to Parties, as well as their respective Affiliates, employees, directors, agents, independent contractors and consultants.

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ARTICLE 9

PATENTS AND TRADEMARKS

          9.1 Third Party License Agreements. The Parties acknowledge that the provisions of this Article 9 are subject in all respects to the provisions of any license agreements between Eyetech and Eyetech Third Party Licensors and the obligations of Eyetech and the rights of Pfizer under this Article 9 are limited accordingly. Eyetech and Pfizer shall, within the foregoing constraints, cooperate in the continued prosecution and maintenance by Eyetech or Gilead of the Eyetech Patent Rights listed on Schedule 1.21 and licensed to Eyetech by Gilead.

          9.2 Disclosure of Patent Applications and Proceedings. Eyetech shall disclose to Pfizer, within a reasonable time period prior to filing thereof, (i) the complete texts of all national stage entry, continuation or divisional patent applications within the Eyetech Patent Rights contemplated to be filed in the ROW Territory by Eyetech, or by Eyetech’s licensors to the extent Eyetech is permitted to provide such texts to Pfizer under the terms of Eyetech’s agreements with such licensors, and (ii) the complete texts of all US patent applications corresponding to the Eyetech Patent Rights in the ROW Territory set forth in clause (i) above contemplated to be filed in the US Territory by Eyetech, or by Eyetech’s licensors to the extent Eyetech is permitted to provide such texts to Pfizer under the terms of Eyetech’s agreements with such licensors. Pfizer shall have the right to review all such applications and make recommendations to Eyetech concerning such applications, as well as the texts of any filed patent applications, information received concerning the institution or possible institution of any opposition, revocation or any official proceeding involving patents and patent applications within the Eyetech Patent Rights prosecuted and/or maintained by Eyetech, or by Eyetech’s licensors to the extent Eyetech receives such information, anywhere in the ROW Territory. Pfizer shall have the right to review all such applications and other proceedings and make recommendations to Eyetech, and to Eyetech’s licensors if permitted

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under the terms of Eyetech’s agreements with such licensors, concerning such applications and proceedings and their conduct. Eyetech agrees, subject to any limitations set forth in Eyetech’s agreements with Eyetech’s licensors, to keep Pfizer promptly and fully informed of the course of such patent prosecution and other proceedings including by providing Pfizer with copies of all substantive communications submitted to or received from patent offices throughout the ROW Territory and the US Territory. Pfizer shall provide such patent consultation at no cost to Eyetech or its licensors, and shall hold all information disclosed to it under this Section 9.2 as confidential subject to the provisions of Article 9 of this Agreement.

          9.3 Prosecution and Maintenance; Costs.

               (a) Eyetech shall not abandon any Eyetech Patent Rights in the ROW Territory with respect to which Eyetech controls prosecution and maintenance activities, either directly or through step-in rights granted to Eyetech in any third party license agreement, without at least 60 days’ prior notice of such abandonment to Pfizer. If Eyetech decides to abandon any such Eyetech Patent Rights in the ROW Territory, Pfizer shall have the option to continue the prosecution and maintenance of such Eyetech Patent Rights in Eyetech’s name at Pfizer’s expense, subject to any limitations set forth in Eyetech’s agreements with Eyetech’s licensors. If Pfizer desires that Eyetech file any application within the Eyetech Patent Rights for a patent in specific countries in the ROW Territory, or file any patent applications in the ROW Territory on improvements and variations upon inventions disclosed in the Eyetech Patent Rights and relating to the Product, Pfizer shall advise Eyetech of such countries or improvements, variations or inventions, as the case may be. Eyetech shall consider Pfizer’s request in good faith and, unless Eyetech does not possess all legal rights necessary to make such filing, Eyetech shall file the requested patent application, and Pfizer shall pay all reasonable expenses, including reasonable fees for patent counsel, for filing

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and for prosecuting such requested patent applications. Pfizer shall have reasonable access to all documentation, filings and communications to or from the respective patent offices in the ROW Territory with respect to such Eyetech Patent Rights, and shall be kept advised as to the status of all pending applications to the extent pertaining to the Product in the ROW Territory and to the extent Eyetech is able to provide such access, it being understood that all such documentation, filings and communications shall constitute Confidential Information of Eyetech. Pfizer shall be responsible for all of the Parties’ patent prosecution and maintenance costs relating to the Eyetech Patent Rights in the ROW Territory. Pfizer shall reimburse Eyetech for all such ROW Territory costs within thirty (30) days after receiving any invoice from Eyetech for such costs.

               (b) With respect to Joint Patent Rights, the Parties agree to select outside counsel acceptable to both Parties to file, prosecute and maintain such Joint Patent Rights in both Parties’ names. Such outside counsel shall provide both Parties with copies of all substantive correspondence and other communications from and with opportunities to review and comment in advance on all substantive correspondence to and filings with any patent office relating to the filing, prosecution and maintenance of such Joint Patent Rights. The costs, fees and expenses related to the filing, prosecution and maintenance of Joint Patent Rights in the US Territory shall be paid by Eyetech and in the ROW Territory shall be paid by Pfizer.

          9.4 Third Party Infringement Actions.

               (a) If any third party shall in the reasonable opinion of either Party, within any country in the ROW Territory, infringe any Eyetech Patent Rights through infringing activities in the Field, the Party learning of such infringement shall promptly notify the other Party and provide it with any available evidence of such possible infringement. As between Pfizer and Eyetech, and subject to any rights retained by Eyetech’s licensors, Pfizer shall have the first right to bring suit

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and to take action against such infringer in its own name, or in the name of Eyetech (or Eyetech’s licensor, to the extent Eyetech possesses the rights necessary to enable Pfizer to join such licensor under the terms of Eyetech’s license agreement with such licensor; provided that Eyetech shall have no liability for any failure of such licensor to appear or cooperate in such action) where necessary, in which case Pfizer shall control the prosecution of any such suit or claim, including without limitation the choice of counsel, and shall have the exclusive right to settle or dispose of any such suit or claim. Notwithstanding anything to the contrary in this Section 9.4, but subject to any legal obligations of Eyetech to its licensors with respect to Eyetech Patent Rights, if Pfizer fails to initiate a suit or take other appropriate action that it has the initial right to initiate or take pursuant to this Section 9.4 within ninety (90) days after becoming aware of the basis for such suit or action, then Eyetech may, in its discretion, provide Pfizer with written notice of Eyetech’s intent to initiate a suit or take other appropriate action. If Eyetech provides such notice and Pfizer fails to initiate a suit or take such other appropriate action within thirty (30) days after receipt of such notice from Eyetech, then Eyetech shall have the right to initiate a suit or take other appropriate action that it believes is reasonably required to protect the intellectual property rights at issue. The proceeds of any recovery, court award or settlement of such action shall, after any required payments to Eyetech’s licensors, first be applied to reimburse the Parties for the costs and expenses of such prosecution and the balance shall be paid to the Party that initiated the suit or action.

               (b) If any third party shall in the reasonable opinion of either Party, within any country in the other Party’s Territory, infringe any Joint Patent Rights through the manufacture, use, offer for sale, sale or importation of a product that is, or is reasonably likely to be, competitive with any Product that such other Party has rights to commercialize in such other Party’s Territory, such Party shall promptly notify the other Party and provide it with any available evidence of such

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possible infringement. The Party having rights to commercialize the applicable Product in such Territory shall have the right to bring a suit or take other appropriate action with respect to such infringement of Joint Patent Rights in such Territory. The proceeds of any recovery, court award or settlement of such action shall be paid to the Party that initiated such suit or action.

          9.5 Patent Term Extensions. The Parties shall cooperate, if necessary and appropriate, with each other in gaining patent term extension wherever applicable to Eyetech Patent Rights in the ROW Territory. The Parties shall, if necessary and appropriate, use reasonable efforts to agree upon a joint strategy relating to patent term extensions, but, in the absence of mutual agreement, Pfizer will have final decision-making authority over extension of any Eyetech Patent Right in the ROW Territory. Pfizer shall be responsible for the costs of seeking and/or obtaining patent term extensions relating to such Eyetech Patent Rights in the ROW Territory.

          9.6 Product Labeling. In the ROW Territory, subject to Section 9.8, Pfizer shall be the only Party identified on all Product package inserts, trade packages, packaging, samples, and marketing and promotional materials.

          9.7 Pfizer Trademark. For a period not to exceed ^** after the Restatement Date, except with respect to Product inventory and packaging for, or any materials or articles accompanying or affixed to, the Product existing or in-process as of the Restatement Date (collectively, “Packaging Materials”), for which such period shall not exceed ^** after the Restatement Date, Pfizer grants to Eyetech the non-exclusive right, free of charge, to use the Pfizer name and logo in the US Territory solely in connection with the packaging, sale, marketing, advertising, disposition and distribution of Product, Packaging Materials or advertising and promotional materials, in each case that were in existence as of the Restatement Date, but only to the extent the Pfizer name and logo were used by Eyetech for such purposes prior to the Restatement Date in connection with the Product. The

^** This portion has been redacted pursuant to a confidential treatment request.

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purpose of the license granted in this Section 9.7 is to provide Eyetech with a reasonable transitional period in which to prepare materials for the packaging, sale, marketing, advertising, disposition and distribution of the Product in the US Territory that do not contain the Pfizer name or logo. Eyetech agrees to use its commercially reasonable efforts to discontinue its use of Pfizer’s name and logo as soon as commercially practicable after the Restatement Date.

          9.8 Trademarks. For the term of this Agreement, Eyetech grants to Pfizer the non-exclusive right, free of charge, to use the Trademarks in the ROW Territory solely for purposes of marketing and promoting Product in the ROW Territory in accordance with this Agreement. For a period of ^** after the Reinstatement Date, Eyetech also grants to Pfizer the non-exclusive right, free of charge, to use the Eyetech name and logo in the ROW Territory solely for purposes of packaging, distributing, marketing and promoting Product in the ROW Territory in accordance with this Agreement, but only to the extent that (a) the Eyetech name and logo were used by Pfizer for such purposes prior to the Restatement Date in connection with the Product, and (b) Pfizer uses its commercially reasonable efforts to discontinue its use of the Eyetech name and logo as soon as commercially practicable after the Restatement Date. If Pfizer reasonably determines that, despite such commercially reasonable efforts, applicable Law in the ROW Territory requires Pfizer to continue to use the Eyetech name and logo beyond the ^** period, then such ^** period shall be extended until such time as Pfizer is able to discontinue Pfizer’s use of the Eyetech name and logo in the ROW Territory without violating applicable Law, provided, that Pfizer shall continue to use commercially reasonable efforts to effect such discontinuance, including without limitation obtaining all required approvals from Regulatory Authorities or Governmental Authorities in the ROW Territory, as soon as commercially practicable within such extended period of time.

^** This portion has been redacted pursuant to a confidential treatment request.

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          9.9 Trademark Ownership. Eyetech shall remain the owner of the Eyetech name and logo and the Trademarks and the goodwill pertaining thereto, and Pfizer shall remain the owner of the Pfizer name and logo and the MACUVERSE trademark and the goodwill pertaining thereto. Eyetech shall be solely responsible for registering and maintaining the Eyetech name and logo and the Trademarks in the ROW Territory. Except as contemplated herein, Eyetech shall have no rights in or to the Pfizer name or logo or MACUVERSE trademark or the goodwill pertaining thereto. Except as contemplated herein, Pfizer shall have no rights in the Eyetech name or logo or Trademarks or the goodwill pertaining thereto. It is the Parties’ intention to utilize a single trademark for the Product throughout the Territory. Accordingly, Pfizer agrees to use the Trademarks for the Product in the ROW Territory, provided, however, if any Governmental Authority fails to approve MACUGEN as the trademark for the Product, or if Pfizer reasonably determines that use of any of the Trademarks may violate the rights of any third party in the ROW Territory, then the Parties shall jointly select an alternative trademark for the Product in the applicable country in the ROW Territory. In either event, Eyetech shall be solely responsible for registering and maintaining such alternative trademark in the ROW Territory and shall be the owner thereof. Pfizer shall not register or seek to register any of the Trademarks or any alternative trademark selected by the Parties in any country of the ROW Territory. Pfizer shall be responsible for the cost in the ROW Territory of registering and maintaining the Trademarks and any alternative trademark for the Product.

          9.10 Trademark Infringement. Each Party shall promptly notify the other Party of any infringement of or challenge to any Trademarks in the ROW Territory, or of any infringement or alleged infringement of or challenge to any third party trademark in connection with the use of any Trademarks in the ROW Territory, whether actual or threatened, which comes to the notice of such

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Party. In respect of the defense and infringement of such Trademarks or third party trademark, as the case may be, in the ROW Territory, as between Pfizer and Eyetech, Pfizer shall have the first right, at its sole cost and expense, to bring suit and to take action against such infringer or challenger or to defend any suits or challenges from a third party, in which case Pfizer shall control the prosecution and/or defense of any such suit or claim, including without limitation, the choice of counsel, and shall have the exclusive right to settle or dispose of any such suit or claim. Eyetech shall provide reasonable assistance and co-operation as Pfizer may reasonably request, at Pfizer’s sole cost and expense. If Pfizer fails to initiate a suit or take other appropriate action that it has the initial right to initiate or take pursuant to this Section 9.10, within ninety (90) days after becoming aware of the basis for such suit or action, then Eyetech may, in its discretion, provide Pfizer with written notice of Eyetech’s intent to initiate a suit or take other appropriate action. If Eyetech provides such notice and Pfizer fails to initiate a suit or take such appropriate action within thirty (30) days after receipt of such notice from Eyetech, then Eyetech shall have the right to initiate a suit or take other appropriate action that it believes is reasonably required to protect the intellectual property rights at issue. The proceeds of any recovery, court award or settlement of such action shall first be applied to reimburse the Parties for the costs and expenses of such prosecution and/or defense and the balance shall be to the Party that initiates such suit or action.

          9.11 Quality Control. Pfizer shall have the right to exercise quality control over Eyetech’s use of the Pfizer name and logo, and Eyetech shall have the right to exercise quality control over Pfizer’s use of the Eyetech name and logo and the Trademarks, in each instance to a degree necessary to maintain the validity of the licensed trademarks and to protect the goodwill associated therewith. Each Party acknowledges that the quality of the Product sold by the other Party immediately prior to the Restatement Date (and associated packaging, marketing, and

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advertising materials) is adequate for this purpose. Accordingly, each Party shall, in its packaging, sale, marketing, advertising, disposition and distribution of the Product adhere to a level of quality consistent with the level in effect for the packaging, sale, marketing, advertising, disposition and distribution of the Product by such Party immediately prior to the Restatement Date.

          9.12 Joint Inventions. The Parties shall jointly own all inventions (a) conceived jointly by employees, agents and consultants of Eyetech, on the one hand, and employees, agents and consultants of Pfizer, on the other hand, during the term of this Agreement, or (b) conceived by consultants engaged jointly by Eyetech and Pfizer during the term of this Agreement in the course of such consultants’ joint engagement (“Joint Inventions”). Subject to the licenses and other provisions of this Agreement, each Party shall have the unrestricted right to use and license Joint Inventions without obtaining consent from, or accounting to, the other Party. For purposes of determining whether an invention is a Joint Invention, questions of inventorship shall be resolved in accordance with United States patent laws.

ARTICLE 10

REPRESENTATIONS, WARRANTIES AND COVENANTS

          10.1 Eyetech Representations and Warranties. Eyetech hereby represents and warrants, as of the date hereof, to Pfizer as follows:

               (a) Eyetech has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement by Eyetech have been duly and validly authorized and approved by proper corporate action on the part of Eyetech, and Eyetech has taken all other action required by Law, its certificate of incorporation or by-laws or any agreement to which it is a party or by which it or its assets are bound required to authorize such execution, delivery and performance. Assuming due authorization, execution and delivery on the part of Pfizer, this Agreement constitutes a legal, valid

49

and binding obligation of Eyetech, enforceable against Eyetech in accordance with its respective terms.

               (b) The execution and delivery of this Agreement by Eyetech and the performance by Eyetech contemplated hereunder will not violate any ordinance, Law, decree or government regulation or any order of any court or other governmental department, authority, agency or instrumentality therein.

               (c) Neither the execution and delivery of this Agreement nor the performance hereof by Eyetech requires Eyetech to obtain any permits, authorizations or consents from any governmental body or from any other person, firm or corporation, and such execution, delivery and performance will not result in the breach of or give rise to any termination of any agreement or contract to which Eyetech may be a party which relates to the Eyetech Patent Rights, Eyetech Technical Information, the Compound or the Product.

               (d) There is no action, claim, demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending or, to the best knowledge of Eyetech, threatened against Eyetech or its Affiliates in connection with the Compound, the Product or any Eyetech Patent Rights or against or relating to the transactions contemplated by this Agreement

          10.2 Pfizer Representations and Warranties. Pfizer hereby represents and warrants, as of the date hereof, to Eyetech as follows:

               (a) Pfizer has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement by Pfizer have been duly and validly authorized and approved by proper corporate action on the part of Pfizer, and Pfizer has taken all other action required by Law, its

50

certificate of incorporation or by-laws or any agreement to which it is a party or by which it or its assets are bound required to authorize such execution, delivery and performance. Assuming due authorization, execution and delivery on the part of Eyetech, this Agreement constitutes a legal, valid and binding obligation of Pfizer, enforceable against Pfizer in accordance with its respective terms.

               (b) The execution and delivery of this Agreement and the performance by Pfizer contemplated hereunder will not violate any state, federal or other statute or regulation or any order of any court or other governmental department, authority, agency or instrumentality therein.

               (c) There is no action, claim, demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending or relating to or, to the knowledge of Pfizer, threatened against Pfizer in connection with or relating to the transactions contemplated by this Agreement, and assuming the accuracy of the representations and warranties of Eyetech contained herein, Pfizer is unaware and has no reason to be aware of any basis for the foregoing.

               (d) Neither the execution and delivery of this Agreement nor the performance hereof by Pfizer requires Pfizer to obtain any permits, authorizations or consents from any governmental body or from any other person, firm or corporation and such execution, delivery and performance will not result in the breach of or give rise to any termination of any agreement or contract to which Pfizer may be a party, except that which would not reasonably be expected to adversely affect the ability of Pfizer to perform its obligations under this Agreement.

          10.3 Eyetech Covenants. Eyetech covenants and agrees that, subject to Pfizer’s and its sublicensees’ performance of their obligations under this Agreement (including such obligations relating to third party royalties), Eyetech shall use commercially reasonable efforts to maintain the

51

Isis License, Gilead License and Nektar License in good standing and not to take any actions (or omit or fail to take any actions) which would result in a breach of any of such license agreements. Eyetech agrees that it shall not amend, modify or supplement any of the Isis License, Gilead License or Nektar License in any manner that would adversely affect Pfizer’s rights under this Agreement without the consent of Pfizer. In addition, Eyetech shall not sell, assign, convey, pledge, hypothecate or otherwise transfer any of the Isis License, Gilead License or Nektar License or Eyetech’s rights or obligations thereunder, or otherwise make any commitments or offers in a manner that conflicts with Pfizer’s rights hereunder without the consent of Pfizer. Eyetech shall immediately notify Pfizer upon receipt by Eyetech or its Affiliates of any notice from Gilead, Isis or Nektar of such party’s intent to terminate Eyetech’s rights, exercise its respective rights or remedies thereunder, or otherwise take any action that may adversely affect Pfizer’s rights under this Agreement.

          10.4 No Consequential or Punitive Damages. NEITHER PARTY HERETO WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, OR FOR LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 10.4 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY UNDER THIS AGREEMENT WITH RESPECT TO THIRD PARTY CLAIMS.

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ARTICLE 11

INDEMNIFICATION

          11.1 General Indemnification in Favor of Pfizer.

               (a) Eyetech shall indemnify, defend and hold Pfizer Parties harmless from and against any and all Losses incurred, suffered or sustained by Pfizer Parties or to which Pfizer Parties become subject, arising out of or resulting from:

                    (i) any misrepresentation or breach of any representation, warranty, covenant or agreement made by Eyetech in this Agreement; or

                    (ii) any third party claims, actions, suits, proceedings, liabilities or obligations (“Third Party Claims”) arising out of or resulting from:

                         (aa) any misrepresentation or breach of any representation, warranty, covenant or agreement made by Eyetech in this Agreement; or

                         (bb) the advertising, promotion, distribution, manufacture, use, sale or importation of the Product by or on behalf of Eyetech or any of its Affiliates or licensees (except Pfizer), including without limitation all Third Party Claims involving death or bodily injury caused or allegedly caused by such use or sale of the Product; or

                         (cc) the gross negligence, recklessness or willful misconduct of Eyetech Parties in connection with Eyetech’s performance of this Agreement.

For purposes of this Article 11, “Pfizer Parties” means Pfizer and its Affiliates and their respective agents, directors, officers and employees.

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               (b) None of the indemnities in Section 11.1(a) shall apply to the extent that any Loss is the result of any breach of this Agreement by Pfizer or of any gross negligence, recklessness or willful misconduct of Pfizer Parties.

          11.2 General Indemnification in Favor of Eyetech.

               (a) Pfizer shall indemnify, defend and hold Eyetech Parties harmless from and against any and all Losses incurred, suffered or sustained by Eyetech Parties or to which Eyetech Parties become subject, arising out of or resulting from:

                    (i) any misrepresentation or breach of any representation, warranty, covenant or agreement made by Pfizer in this Agreement; or

                    (ii) any Third Party Claims arising out of or resulting from:

                         (aa) any misrepresentation or breach of any representation, warranty, covenant or agreement made by Pfizer in this Agreement; or

                         (bb) the advertising, promotion, distribution, manufacture, use, sale or importation of the Product by or on behalf of Pfizer or any of its Affiliates or licensees (except Eyetech), including without limitation all Third Party Claims involving death or bodily injury caused or allegedly caused by such use or sale of the Product; or

                         (cc) the gross negligence, recklessness or willful misconduct of Pfizer Parties in connection with Pfizer’s performance of this Agreement.

For purposes of this Article 11, “Eyetech Parties” means Eyetech and its Affiliates and their respective agents, directors, officers and employees.

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               (b) None of the indemnities in Section 11.2(a) shall apply to the extent that any Loss is the result of any breach of this Agreement by Eyetech or of any gross negligence, recklessness or willful misconduct of Eyetech Parties.

ARTICLE 12

TERM

          12.1 This Agreement shall be effective as of the date first set forth above and shall remain in effect until terminated pursuant to Article 13.

ARTICLE 13

TERMINATION

          13.1 Termination for Convenience. Pfizer shall have the right to terminate this Agreement at any time for any reason in its sole discretion upon written notice to Eyetech, such termination to be effective sixty (60) days after the date of such notice.

          13.2 Termination for Breach. If either Pfizer or Eyetech materially breaches or materially defaults in the performance or observance of any of the provisions of this Agreement, such breach or default has a material adverse effect on the benefits reasonably anticipated by the non-breaching Party, and such breach or default is not cured within ninety (90) days after the giving of notice by the other Party specifying such breach or default, then the other Party shall have the right to terminate this Agreement forthwith, such termination to be effective upon the expiration of such ninety (90)-day notice period. For the purpose of this Section 13.2, a material breach or material default in the performance of any of the provisions of this Agreement shall include a material inaccuracy in any warranty or representation contained herein.

          13.3 Effects of Termination. Upon any termination of this Agreement:

               (a) the licenses set forth in Sections 3.1 and 9.8 shall terminate;

               (b) the rights and licenses set forth in Sections 3.2 and 9.7 shall survive;

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               (c) Eyetech’s right to receive all third party royalty payments due and owing under Article 5 hereof as of the effective date of such termination shall survive;

               (d) each Party’s right to recover against the other Party for any breaches of any representations, warranties, covenants and agreements of such other Party under this Agreement as of the effective date of such termination shall survive;

               (e) the provisions of Sections 7.3, 7.4, and this Section 13.3, and Articles 8, 11 and 14, shall survive;

               (f) Pfizer shall promptly and in no event later than sixty (60) days after termination (i) transfer to Eyetech ownership of all governmental or regulatory filings and approvals relating to Product (including, without limitation, any marketing approvals), (ii) deliver to Eyetech all pre-clinical and clinical data and information in Pfizer’s possession or control relating to the Product, (iii) deliver to Eyetech copies of all reports, records, regulatory correspondence and other materials in Pfizer’s possession or control relating to the pre-clinical and clinical development, regulatory approval, manufacture, distribution and sales of Product, including without limitation all information contained in the centralized global safety database established and maintained by Pfizer, and (iv) deliver to Eyetech all data and information relating to process conditions, in-process controls, analytical methodology and formulation, in each case as developed by Pfizer and relating to the manufacturing of Product, solely for use in connection with the Product;

               (g) if requested by Eyetech, assign to Eyetech, subject to any required third party consents, any agreement that Pfizer has with a Bulk Drug Substance Supplier(s), Fill and Finish Services Supplier(s), or supplier of any Product Components, with respect to the manufacture of the Product. Pfizer and Eyetech will each use commercially reasonable efforts (but

56

will not be required to make any payments or commence litigation) to obtain any such third party consent(s) necessary for such requested assignment(s). If Eyetech requests that Pfizer obtain any required third party consent and the third party from whom such consent is required refuses to grant the consent or makes any such consent conditional upon payment of additional fees or upon the assumption of additional obligations or liabilities by Pfizer, then Pfizer shall not be required to continue to seek such consent but will use commercially reasonable efforts, at no incremental cost to Pfizer, to provide to Eyetech the benefit of such agreement.

               (h) Pfizer shall permit Eyetech, at Eyetech’s option, to purchase, at Pfizer’s Costs, all or any part of Pfizer’s unsold inventory of Product Components, work-in-progress Product and finished Product as of the effective date of termination, provided that, Pfizer shall not be required to sell to Eyetech inventories of Product Components and work-in-progress Product that Pfizer needs to satisfy its obligations under Section 13.3(g); and

               (i) unless this Agreement expressly provides that termination shall be the sole and exclusive remedy for a particular breach hereof, either Party’s right to commence an action, suit or other proceeding claiming breach of this Agreement by the other Party shall survive termination.

          Upon any termination of this Agreement, each Party shall promptly return to the other Party or destroy all written Confidential Information, and all copies thereof, of such other Party.

ARTICLE 14

DISPUTE RESOLUTION

          14.1 Arbitration. Any dispute relating to any amounts payable by one Party to the other pursuant to Section 5, third party royalties payable by Pfizer on sales of Product in the ROW Territory, or any audit conducted pursuant to Section 7.4 shall be resolved through binding arbitration as follows:

57

               (a) A Party may submit such dispute to arbitration by notifying the other Party, in writing, of such dispute. Within thirty (30) days after receipt of such notice, the Parties shall designate in writing a single arbitrator to resolve the dispute; provided, however, that if the Parties cannot agree on an arbitrator within such 30-day period, the arbitrator shall be selected by the New York, New York office of the American Arbitration Association (the “AAA”). The arbitrator shall be a lawyer knowledgeable and experienced in the law concerning the subject matter of the dispute, and shall not be an Affiliate, employee, consultant, officer, director or stockholder of any Party.

               (b) Within thirty (30) days after the designation of the arbitrator, the arbitrator and the Parties shall meet, at which time the Parties shall be required to set forth in writing all disputed issues and a proposed ruling on the merits of each such issue.

               (c) The arbitrator shall set a date for a hearing, which shall be no later than thirty (30) days after the submission of written proposals pursuant to Section 14.1(b), to discuss each of the issues identified by the Parties. The Parties shall have the right to be represented by counsel. Except as provided herein, the arbitration shall be governed by the Commercial Arbitration Rules of the AAA; provided, however, that the Federal Rules of Evidence shall apply with regard to the admissibility of evidence.

               (d) The arbitrator shall use his or her best efforts to rule on each disputed issue within thirty (30) days after the completion of the hearings described in Section 14.1(c). The determination of the arbitrator as to the resolution of any dispute shall be binding and conclusive upon all Parties. All rulings of the arbitrator shall be in writing and shall be delivered to the Parties.

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               (e) The (i) attorneys’ fees of the Parties in any arbitration, (ii) fees of the arbitrator and (iii) costs and expenses of the arbitration shall be borne by the Parties as determined by the arbitrator.

               (f) Any arbitration pursuant to this Section 14.1 shall be conducted in New York, New York. Any arbitration award may be entered in and enforced by a court in accordance with Section 15.4.

          14.2 No Limitation. Nothing in Section 14.1 shall be construed as limiting in any way the right of a Party to seek a temporary restraining order or preliminary injunction with respect to any actual or threatened breach of this Agreement from, or to bring an action in aid of arbitration in, a court in accordance with Section 15.4. Should any Party seek a temporary restraining order or preliminary injunction, then for purposes of determining whether to grant such temporary restraining order or preliminary injunction, the dispute underlying the request for such temporary restraining order or preliminary injunction may be heard by a court in accordance with Section 15.4.

ARTICLE 15

MISCELLANEOUS

          15.1 Force Majeure. No Party shall be liable for failure of or delay in performing obligations set forth in this Agreement, and no Party shall be deemed in breach of its obligations, if such failure or delay is due to natural disasters or any causes reasonably beyond the control of such Party.

          15.2 Assignment. Neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either Party without the written consent of the other Party; provided, however, either Party may, without such consent, assign this Agreement, in whole or in part: (i) to any of its respective Affiliates; provided that such Party shall remain jointly and

59

severally liable with such Affiliate in respect of all obligations so assigned and such Affiliate has acknowledged and confirmed in writing that effective as of such assignment or other transfer, such Affiliate shall be bound by this Agreement as if it were a Party to it as and to the identical extent applicable to the transferor; (ii) any successor in interest by way of merger, acquisition or sale of all or substantially all of its assets relating to the business to which the Product relates, provided that such successor agrees in writing to be bound by the terms of this Agreement as if it were the assigning Party.

          15.3 Governing Law. This Agreement shall be governed by the laws of the State of New York without regard to its conflict of laws provisions.

          15.4 Jurisdiction. Except with respect to disputes arising out of audits conducted pursuant to Section 7.4 or with respect to payment disputes, which shall be resolved through binding arbitration in accordance with Article 14, each Party (a) irrevocably submits to the exclusive jurisdiction in the United States District Court for the Southern District of New York and any State courts sitting in New York, New York (collectively, the “Courts”), for purposes of any action, suit or other proceeding arising out of this Agreement, and (b) agrees not to raise any objection at any time to the laying or maintaining of the venue of any such action, suit or proceeding in any of the Courts, irrevocably waives any claim that such action, suit or other proceeding has been brought in an inconvenient forum and further irrevocably waives the right to object, with respect to such action, suit or other proceeding, that such Court does not have any jurisdiction over such Party.

          15.5 Notices. All notices, instructions and other communications hereunder or in connection herewith shall be in writing, shall be sent to the address below and shall be: (a) delivered personally; (b) sent by registered or certified mail, return receipt requested, postage

60

prepaid; (c) sent via a reputable nationwide overnight courier service; or (d) sent by facsimile transmission. Any such notice, instruction or communication shall be deemed to have been delivered upon receipt if delivered by hand, three (3) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, one (1) Business Day after it is sent via a reputable nationwide overnight courier service, or when transmitted with electronic confirmation of receipt, if transmitted by facsimile (if such transmission is on a Business Day; otherwise, on the next Business Day following such transmission). Notices shall be addressed as follows:

If to Pfizer:	If to Eyetech:
PFIZER INC.	(OSI) EYETECH, INC.
235 East 42nd Street	140 E. Hanover Avenue
New York, New York 10017-5755	Cedar Knolls, New Jersey 07927
Fax: **	Fax: **
Attention: President, Worldwide	Attention: President
Pharmaceutical Operations
with a copy to:	with a copy to:
PFIZER INC.	WILMER CUTLER PICKERING
235 East 42nd Street	HALE AND DORR LLP
New York, New York 10017-5703	60 State Street
Attn.: Senior Vice President and Associate	Boston, Massachusetts 02109
General Counsel	Attn.: Steven D. Barrett, Esq.
Fax: **	Fax: **

Either Party may change its address by giving notice to the other Party in the manner provided above.

          15.6 Entire Agreements; Amendments. This Agreement and the other Transaction Agreements collectively set forth the complete understanding of the Parties with respect to the subject matter hereof and supersede all prior understandings and writings relating to such subject

^** This portion has been redacted pursuant to a confidential treatment request.

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matter, including, without limitation, the Prior Agreements. None of the terms of this Agreement shall be amended, supplemented or modified except in writing signed by the Parties hereto. If any applicable court of competent jurisdiction determines this Agreement to be executory in nature, such agreement shall otherwise be deemed to be, for purposes of Section 365 (n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101 of the Bankruptcy Code.

          15.7 Severability. If and solely to the extent that any provision of this Agreement shall be invalid or unenforceable, or shall render this entire Agreement to be unenforceable or invalid, such offending provision shall be of no effect and shall not effect the validity of the remainder of this Agreement or any of its provisions; provided, however, the Parties shall use their respective reasonable efforts to renegotiate the offending provisions to best accomplish the original intentions of the Parties.

          15.8 Waivers. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party or Parties waiving such term or condition. Neither the waiver by any Party of any term or condition of this Agreement nor the failure on the part of any Party, on one or more instances, to enforce any of the provisions of this Agreement or to exercise any right or privilege, shall be deemed or construed to be a waiver of such term or condition for any similar instance in the future or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be a limitation of any other remedy, right, undertaking, obligation or agreement.

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          15.9 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective permitted successors and assigns.

          15.10 Further Assurances. Following the date hereof, Eyetech and Pfizer shall and, to the extent this Agreement expressly imposes obligations on its Affiliates, each Party shall cause each of its respective Affiliates to, from time to time, execute and deliver such additional instruments, documents, conveyances or assurances and take such other actions as shall be necessary or otherwise reasonably requested by Pfizer or Eyetech, to confirm and assure the rights and obligations provided for in this Agreement, and render effective the consummation of the transactions contemplated thereby.

          15.11 Third Party Beneficiaries. None of the provisions of this Agreement shall be for the benefit of or enforceable by any third party including any creditor of either Party. No third party shall obtain any right under any provision of this Agreement or shall by reasons of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against either Party hereto.

          15.12 Performance by Affiliates. To the extent that this Agreement imposes obligations on Affiliates of a Party, such Party agrees to cause its Affiliates to perform such obligations.

          15.13 Counterparts. This Agreement may be executed in any two or more counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document.

          15.14 Headings. Headings in this Agreement are included herein to ease of reference only and shall have no legal effect. References to Sections, Schedules and Exhibits are to Sections, Schedules and Exhibits of this Agreement unless otherwise specified.

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          15.15 Offset. All amounts due and payable from Pfizer to Eyetech pursuant to this Agreement are subject to offset in respect of the amount of any liabilities of Eyetech paid by Pfizer to Gilead pursuant to Section 3 of the Stand-By License Agreement between Pfizer and Gilead dated December 13, 2002.

[Remainder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the Parties hereto have caused this Amended and Restated License Agreement to be executed as of the Restatement Date by their duly authorized officers.

PFIZER INC.		(OSI) EYETECH, INC.
By:	/s/  Susan Silbermann	By:	/s/  Paul G. Chaney
Name:	Susan Silbermann	Name:	Paul G. Chaney
Title:	S.V.P. WW Commercial Development	Title:	President

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SCHEDULES TO AMENDED AND RESTATED LICENSE AGREEMENT

BETWEEN (OSI) EYETECH, INC. AND PFIZER INC.

SCHEDULE 1.12

COMPOUND

^**

^** This portion has been redacted pursuant to a confidential treatment request.

S-1

SCHEDULE 1.21

EYETECH PATENT RIGHTS

	Application			Publication	Patent
Country	Number	Filing Date	Status	Number	Number	Issue Date
**	**	**	**	**	**	**

^** This portion has been redacted pursuant to a confidential treatment request.

S-2

SCHEDULE 4.2

ONGOING CLINICAL TRIALS

^**

^** This portion has been redacted pursuant to a confidential treatment request.

S-3

SCHEDULE 4.4(c)

ONGOING MARKET RESEARCH ACTIVITIES

^**

^** This portion has been redacted pursuant to a confidential treatment request.

S-4

SCHEDULE 4.4(e)

US TERRITORY AGREEMENTS

Joint Agreements

• Amended and Restated Administrative and Technical Services Agreement by and among The Lash Group, Inc., Pfizer Inc. and (OSI) Eyetech, Inc. dated March 1, 2006, as amended by Amendment No. 1 to Amended and Restated Administrative and Technical Services Agreement, dated as of March 1, 2007.

• Professional Advertising Agency Services Agreement, dated as of January 1, 2004, by and among Pfizer Inc., Eyetech Pharmaceuticals, Inc., and Medicus New York.

• Public Relations and Communications Services Agreement for MACUGEN®, dated as of January 1, 2006, by and among Pfizer Inc., OSI Pharmaceuticals, Inc. and Daniel J. Edelman, Inc.

Pfizer Agreements

• Professional Services Agreement, dated as of March 15, 2005, by and between CommGenix, LLC and Pfizer Inc.

S-5

SCHEDULE 4.9(b)

MANUFACTURING AND SUPPLY AGREEMENTS

• Manufacturing and Supply Agreement dated as of November 11, 2003, by and between Degussa Canada Inc. (as successor in interest to Raylo Chemicals Inc.) and Eyetech Pharmaceuticals, Inc.

• Supply Agreement dated as of October 22, 2004, by and between Eyetech Pharmaceuticals, Inc. and Sigma-Aldrich, Inc. (formerly Proligo, LLC)

S-6

SCHEDULE 4.9(c)

CURRENT INVENTORIES AND OTHER COMPONENTS

^**

^** This portion has been redacted pursuant to a confidential treatment request.

S-7

SCHEDULE 4.9(g)

BUDGET FOR PFIZER CAPITAL EQUIPMENT
AND EXPENDITURES FOR RELATED SERVICES

^**

^** This portion has been redacted pursuant to a confidential treatment request.

S-8

EXHIBITS TO AMENDED AND RESTATED LICENSE AGREEMENT

BETWEEN (OSI) EYETECH, INC. AND PFIZER INC.

EXHIBIT 1.8

BILL OF SALE

^**

^** This portion has been redacted pursuant to a confidential treatment request.

E-1

EXHIBIT 1.65

TRADEMARKS

[Macugen Logo]

E-2

EXHIBIT 5.2(a)

FORM OF QUARTERLY EXPENSE REPORT

^**

^** This portion has been redacted pursuant to a confidential treatment request.

E-3

EX-31.1

EXHIBIT 31.1

CERTIFICATION

     I, Colin Goddard, certify that:

     1. I have reviewed this Quarterly Report on Form 10-Q of OSI Pharmaceuticals, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

          a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the

audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2007

/s/ Colin Goddard, Ph.D. Colin Goddard, Ph.D.

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

     I, Michael G. Atieh, certify that:

     1. I have reviewed this Quarterly Report on Form 10-Q of OSI Pharmaceuticals, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

          a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2007

/s/ Michael G. Atieh Michael G. Atieh

Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

OSI PHARMACEUTICALS, INC.

CERTIFICATION PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OSI Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Colin Goddard, Ph.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 8, 2007

/s/ Colin Goddard, Ph.D. Colin Goddard, Ph.D.

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

OSI PHARMACEUTICALS, INC.

CERTIFICATION PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OSI Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael G. Atieh, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 8, 2007

/s/ Michael G. Atieh Michael G. Atieh

Executive Vice President and Chief Financial Officer