8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

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

July 27, 2007

Date of Report (Date of earliest event reported)

OSI PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

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

41 Pinelawn Road
Melville, NY 11747

(Address of principal executive offices)

(631) 962-2000

(Registrant’s telephone number, including area code)

N/A

(Former name or former address,

if changed since last report.)

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

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

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

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

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

Item 2.02. Results of Operations and Financial Condition.

     On July 30, 2007, OSI Pharmaceuticals, Inc. (“OSI”) issued a press release regarding its financial results for the quarter ended June 30, 2007. A copy of this release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

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

Item 8.01. Other Events.

     On July 27, 2007 OSI announced that its subsidiary, (OSI) Eyetech, Inc., had entered into an agreement with Ophthotech Corporation to divest its anti-platelet derived growth factor aptamer program. A copy of OSI’s press release, dated July 27, 2007, is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

     On July 30, 2007, OSI held a webcast conference call regarding its financial results for the quarter June 30, 2007. A textual representation of certain portions of the conference call is attached as Exhibit 99.3 to this Form 8-K and is incorporated herein by reference.

     This Current Report on Form 8-K contains “forward-looking statements” that do not convey historical information, but relate to predicted or potential future events, such as statements of our plans, strategies and intentions. These statements can often be identified by the use of forward-looking terminology such as “believe,” “expect,” “intend,” “may,” “will,” “should,” or “anticipate” or similar terminology. All statements other than statements of historical facts included in this Current Report on Form 8-K, including statements regarding OSI’s plans to exit its eye disease business, are forward-looking statements. All forward-looking statements speak only as of the date of this Current Report on Form 8-K. Except for OSI’s ongoing obligations to disclose material information under the federal securities laws, OSI undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition to the risks and uncertainties of ordinary business operations and conditions in the general economy and the markets in which OSI competes, the forward-looking statements of the Company contained in this Current Report on Form 8-K are also subject various risks and uncertainties, including those set forth in Item 1A, “Risk Factors”, in OSI’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2006, and in its subsequent filings made with the Securities and Exchange Commission.

Item 9.01. Financial Statements and Exhibits.

Exhibit No.	Description
99.1	Press release, dated July 30, 2007.
99.2	Press release, dated July 27, 2007.
99.3	Textual representation of certain portions of the webcast conference call held on July 30, 2007.

-2-

SIGNATURE

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

Date: July 31, 2007	OSI PHARMACEUTICALS, INC.
	By:	/s/ Barbara A. Wood
		Barbara A. Wood
		Vice President, General Counsel and Secretary

-3-

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release, dated July 30, 2007.
99.2	Press release, dated July 27, 2007.
99.3	Textual representation of certain portions of the webcast conference call held on July 30, 2007.

-4-

EX-99.1

Exhibit 99.1

NEWS RELEASE

Contacts:
OSI Pharmaceuticals, Inc.	Burns McClellan, Inc. (representing OSI)
Kathy Galante (investors/media)	Justin Jackson (media)
631-962-2043	Nicki Kahner (investors)
Kim Wittig (media)	(212) 213-0006
631-962-2135

OSI Pharmaceuticals Announces Second Quarter 2007 Financial Results

- Reports Earnings of $0.48 Per Share From Continuing Operations —
- -
- - Tarceva Global Net Sales $212 Million Up 35% Over The Second Quarter of 2006 -
- -
- - Total Revenue Up 42% Over Second Quarter of 2006 -

MELVILLE, NEW YORK — July 30, 2007 — OSI Pharmaceuticals, Inc. (NASDAQ: OSIP) announced today its financial results for the Company’s second quarter ended June 30, 2007. The Company reported net income from continuing operations of $29.3 million (or $0.48 per share) for the three months ended June 30, 2007, compared with net loss from continuing operations of $2.4 million (or $0.04 loss per share) for the second quarter of 2006.

The Company reported total revenues from continuing operations of $79 million for the second quarter of 2007 compared to revenues of $56 million for the second quarter of 2006, an increase of 42%. The increase is primarily due to the growth in revenues arising from worldwide Tarceva^® (erlotinib) sales. Total worldwide net sales of Tarceva for the second quarter of 2007, as reported by the Company’s collaborators for Tarceva, Genentech, Inc. and Roche, were approximately $212 million representing a 35% growth in global sales compared to the same period last year. For the six months ended June 30, 2007 worldwide Tarceva net sales were approximately $409 million, a 41% increase over the same period last year.

Total revenues from continuing operations for the second quarter of 2007 were comprised of the following key items:

• Net revenues from the unconsolidated joint business for Tarceva of $43 million, compared to $39 million in the second quarter of 2006, arising from the Company’s co-promotion arrangement with Genentech. The net revenues are based on total U.S. Tarceva sales of $102 million, compared to $103 million in the second quarter of 2006. Sales for the second quarter of 2007 were negatively impacted by approximately $9 million of reserve adjustments due to unusually high product returns related to

-more-

	expiring inventory returned to Genentech. Excluding this adjustment, U.S. net sales for Tarceva in the second quarter of 2007 were up 7% versus the prior year quarter;
•	Royalties of $23 million compared to $11 million in the second quarter of 2006 from Roche, the Company’s international partner for Tarceva. The royalty revenues are based on total rest of world sales of approximately $110 million which increased 103%, compared to the $54 million reported in the second quarter of 2006;
•	License, milestone and other revenues of $13 million compared with $6 million in the second quarter of 2006. The increase is comprised primarily of royalty income related to worldwide non-exclusive licensing agreements under the Company’s DP-IV patent portfolio covering the use of DP-IV inhibitors for treatment of type 2 diabetes, and the amortization of an upfront license fee related to a licensing agreement granted to Eli Lilly and Company, in January 2007, for our Glucokinase Activator program. Offsetting these increases was a decline in DP-IV related milestone income, and commissions related to sales of Novantrone® (mitoxantrone for injection concentrate) which lost patent exclusivity in April 2006.

Operating expenses from continuing operations for the second quarter of 2007 were $53.8 million, compared to $57.6 million for last year’s second quarter. Cost of goods sold of $2.0 million was relatively unchanged from the prior year period, and represents costs associated with the U.S. manufacturing and supply of Tarceva. Research and development expense for the second quarter of 2007 decreased $2.1 million to $27.3 million compared to $29.4 million for last year’s second quarter. Selling, general and administrative expenses for the second quarter of 2007 decreased $1.7 million to $24.0 million compared to $25.7 million for the second quarter of 2006. Operating expenses include $3.9 million (or $0.06 per share) of equity based compensation expense for the second quarter of 2007, compared to $2.9 million (or $0.05 per share) for the second quarter of 2006.

Included in other income (expense) — net for the second quarter of 2007 was a $4.1 million gain recognized as a result of the Company’s decision to curtail its post retirement medical plan.

On November 6, 2006, we announced our intention to divest our eye disease business, a process which we expect to complete in 2007. Our eye disease business consists principally of Macugen^® (pegaptanib sodium injection), our marketed product for the treatment of wet AMD, as well as research assets in the eye disease area. As a result of our decision to divest the eye disease business, or Eyetech, the operating results for Eyetech, for all periods presented, is shown as discontinued operations in the accompanying consolidated statement of operations.

The Company’s net income, including results from discontinued operations, was $19.6 million (or $0.33 per share) for the three months ended June 30, 2007, compared with a net loss of $319.9 million (or $5.62 per share) reported for the second quarter of 2006.

Conference Call
OSI will host a conference call reviewing the Company’s financial results, product portfolio and business developments on July 30, 2007 at 5:00PM (Eastern Time). To access the live webcast or the fourteen-day archive via the Internet, log on to www.osip.com. Please connect to the Company’s website at least 15 minutes prior to the conference call to ensure adequate

time for any software download that may be needed to access the webcast. Alternatively, please call 1-888-802-2268 (U.S.) or 1-913-312-1271 (international) to listen to the call. The conference ID number for the live call is 4897707. Telephone replay is available approximately two hours after the call through August 13, 2007. To access the replay, please call 1-888-203-1112 (U.S.) or 1-719-457-0820 (international). The conference ID number is 4897707.

About OSI Pharmaceuticals
OSI Pharmaceuticals is committed to “shaping medicine and changing lives” by discovering, developing and commercializing high-quality and novel pharmaceutical products designed to extend life and/or improve the quality of life for patients with cancer and diabetes/obesity. The Company’s oncology programs are focused on developing molecular targeted therapies designed to change the paradigm of cancer care. OSI’s diabetes/obesity efforts are committed to the generation of novel, targeted therapies for the treatment of type 2 diabetes and obesity. OSI’s flagship product, Tarceva^® (erlotinib), is the first drug discovered and developed by OSI to obtain FDA approval and the only EGFR inhibitor to have demonstrated the ability to improve survival in both non-small cell lung cancer and pancreatic cancer patients in certain settings. OSI markets Tarceva through partnerships with Genentech, Inc. in the United States and with Roche throughout the rest of the world. For additional information about OSI, please visit http://www.osip.com.

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

OSI Pharmaceuticals, Inc. and Subsidiaries
Selected Financial Information

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	Unaudited			Unaudited			Unaudited			Unaudited
Revenues:
Net revenue from unconsolidated joint business	$	42,999		$	39,211		$	82,121		$	74,866
Royalties on product licenses		22,546			10,912			41,839			18,926
License, milestone, and other revenues		13,338			5,529			32,392			21,115
Total revenues		78,883			55,652			156,352			114,907
Expenses:
Cost of goods sold		2,047			1,999			3,951			4,221
Research and development		27,269			29,421			57,895			56,499
Selling, general and administrative		24,038			25,702			49,167			53,510
Amortization of intangibles		459			451			917			899
Total expenses		53,813			57,573			111,930			115,129
Income (loss) from continuing operations		25,070			(1,921	)		44,422			(222	)
Other income (expense):
Investment income — net		2,995			1,873			6,090			3,240
Interest expense		(1,809	)		(1,857	)		(3,612	)		(3,655	)
Other income (expense) — net		3,020			(535	)		2,071			(1,427	)
Net income (loss) from continuing operations		29,276			(2,440	)		48,971			(2,064	)
Loss from discontinued operations		(9,654	)		(339,535	)		(22,708	)		(357,766	)
Net income (loss) before extraordinary gain		19,622			(341,975	)		26,263			(359,830	)
Extraordinary Gain		—			22,046			—			22,046
Net income (loss)	$	19,622		$	(319,929	)	$	26,263		$	(337,784	)
Basic and diluted income (loss) per common share:
Basic earnings (loss)
Continuing operations	$	0.51			($0.04	)	$	0.85			($0.04	)
Discontinued operations		($0.17	)		($5.96	)		($0.40	)		($6.29	)
Net income (loss) before extraordinary gain	$	0.34			($6.00	)	$	0.46			($6.33	)
Extraordinary gain	$	0.00		$	0.39		$	0.00		$	0.39
Net income (loss)	$	0.34			($5.62	)	$	0.46			($5.94	)
Diluted earnings (loss)
Continuing operations	$	0.48			($0.04	)	$	0.82			($0.04	)
Discontinued operations		($0.16	)		($5.96	)		($0.37	)		($6.29	)
Net income (loss) before extraordinary gain	$	0.33			($6.00	)	$	0.45			($6.33	)
Extraordinary gain	$	0.00		$	0.39		$	0.00		$	0.39
Net income (loss)	$	0.33			($5.62	)	$	0.45			($5.94	)
Weighted average shares of common stock outstanding:
Basic shares		57,545			56,962			57,424			56,889
Diluted shares		62,182			56,962			61,958			56,889

	June 30,		December 31,
	2007		2006
	Unaudited
Cash and investments securities (including restricted investments)	$	253,916	$	216,368

OSI Pharmaceuticals, Inc. and Subsidiaries
Reconciliation from Reported Income from Continuing Operations and Reported Diluted Income Per Share to Adjusted Income
from Continuing Operations and Income Per Share
(In thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	Unaudited			Unaudited			Unaudited			Unaudited
Reported net income (loss) from continuing operations	$	29,276		$	(2,440	)	$	48,971		$	(2,064	)
Non GAAP adjustments		(3,858	)		240			(2,634	)		2,605
Adjusted net income from continuing operations	$	25,418		$	(2,200	)	$	46,337		$	541
Reported diluted income (loss) per common share from continuing operations	$	0.48		$	(0.04	)	$	0.82		$	(0.04	)
Non GAAP adjustments per share		(0.06	)		—			(0.04	)		0.05
Adjusted diluted income (loss) per common share from continuing operations	$	0.42		$	(0.04	)	$	0.77		$	0.01

	Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007			2006
Adjusted amounts shown above include the following:
Facility related restructuring charges (a)	$	—		$	240	$	387		$	2,605
Severance related restructuring charges (b)		244			—		1,081			—
Curtailment gain (c)		(4,102	)		—		(4,102	)		—
Total Non GAAP adjustments	$	(3,858	)	$	240	$	(2,634	)	$	2,605

(a)	Represents facility restructuring charges included in SG&A.
(b)	Represents a charge for severance related to planned workforce reductions of $244 included in SG&A for the three months ended June 30, 2007. Represents a charge for severance related to planned workforce reductions of $363 included in R&D and $718 included in SG&A for the six months ended June 30, 2007.
(c)	Represents a gain recorded in other income (expenses) — net as result of the curtailment of the Company’s post retirement medical plan.

The table above details the charges excluded in the calculation of the Company’s adjusted income from continuing operations. Management believes that these charges are not reflective of the Company’s normal on-going operations. The adjusted financial results can assist in making meaningful period-over-period comparisons and in identifying operating trends that could otherwise be masked or distorted by the items subject to the adjustments. Management uses the adjusted results internally to evaluate the performance of the business, including the allocation of resources as well as the planning and forecasting of future periods and believes these results are useful to others in analyzing operating performance and trends of the Company. The adjusted amounts are not, and should not be viewed as, substitutes for U.S. GAAP amounts.

EX-99.2

Exhibit 99.2

NEWS RELEASE

Contacts:
OSI Pharmaceuticals, Inc.	Burns McClellan, Inc. (Representing OSI)
Kathy Galante (Investors/Media)	Justin Jackson
Senior Director	212-213-0006
Kim Wittig (Media)
Director
631-962-2000

OSI Pharmaceuticals Announces Agreement to Divest Anti-Platelet Derived Growth Factor (PDGF) Program

- First Transaction in On-going Eye Business Divesture Process -

MELVILLE, NY — July 27, 2007 — OSI Pharmaceuticals, Inc. (Nasdaq: OSIP) announced today that its subsidiary, (OSI) Eyetech, Inc., has entered into an agreement with Ophthotech Corporation to divest its anti-platelet derived growth factor (PDGF) aptamer program. Under the terms of the agreement, OSI will transfer to Ophthotech all rights in the PDGF aptamer program, including rights to its pre-clinical compound E10030, in exchange for an upfront cash payment, an equity interest in Ophthotech and potential future milestones and royalties. Financial terms of the agreement have not been disclosed.

In pre-clinical studies, E10030 demonstrated the potential to regress neovascularization when used in combination with a vascular endothelial growth factor (VEGF) inhibitor. Anti-VEGF agents alone have shown the ability to slow or halt, but do not regress choroidal neovascularization. OSI elected to suspend further research on this compound in connection with its decision to divest its eye disease business. The closing of the transaction is expected to occur in August.

“We are pleased to transfer the development of this highly promising agent to an Ophthotech team that has the commitment to move this program forward aggressively,” stated Colin Goddard, Ph.D., Chief Executive Officer of OSI Pharmaceuticals, Inc. “Having diligently explored our preferred option of divesting the entire eye business in one transaction we have switched to a strategy of divesting assets which, amongst other things, will have the advantage of allowing us to retain the Eyetech related Net Operating Losses. We now expect to conclude the divestiture of the Macugen related assets by the end of the year and anticipate only a modest impact on our prior cash flow guidance for these discontinued operations.”

-more-

About OSI Pharmaceuticals
OSI Pharmaceuticals is committed to “shaping medicine and changing lives” by discovering, developing and commercializing high-quality and novel pharmaceutical products designed to extend life and/or improve the quality of life for patients with cancer and diabetes/obesity. The Company’s oncology programs are focused on developing molecular targeted therapies designed to change the paradigm of cancer care. OSI’s diabetes/obesity efforts are committed to the generation of novel, targeted therapies for the treatment of type 2 diabetes and obesity. OSI’s flagship product, Tarceva^® (erlotinib), is the first drug discovered and developed by OSI to obtain FDA approval and the only EGFR inhibitor to have demonstrated the ability to improve survival in both non-small cell lung cancer and pancreatic cancer patients in certain settings. OSI markets Tarceva through partnerships with Genentech, Inc. in the United States and with Roche throughout the rest of the world. For additional information about OSI, please visit <http://www.osip.com>.

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

#     #     #

EX-99.3

Exhibit 99.3

On July 30, 2007, OSI Pharmaceuticals, Inc. (the “Company”) held a webcast conference call regarding its financial results for the quarter ended June 30, 2007 as well as an update on the Company’s business. The following represents a textual representation of certain portions of the transcript of the webcast conference call consisting of remarks by Colin Goddard, Ph.D., Chief Executive Officer of the Company and Michael G. Atieh, Executive Vice President and Chief Financial Officer of the Company

Operator

[Operator’s Introduction]

Dr. Colin Goddard

[Dr. Colin Goddard’s Introduction]

Michael Atieh

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

Dr. Colin Goddard

Thanks, Mike. Entering 2007, we set some key goals for the year, including continued execution on Tarceva, focusing our R&D investments into oncology and diabetes, controlling R&D and SG&A costs, while nurturing a promising early-stage pipeline, and divesting the eye business, which we consequently categorized as discontinued operations. All of this was part of a commitment to delivering profitability and strong financial performance. We set early-year guidance of $1 per share GAAP EPS from continuing operations as a yardstick of this effort.

We have now diligently explored our preferred option to divest the entire eye business, but have been unable to consummate a deal of this type under satisfactory terms. Therefore, we switched to a strategy of divesting assets. And as we announced last week, we have completed the divestiture of the PDGF aptamer R&D program to Ophthotech for cash, equity, milestones and royalties.

We continue to pursue divestiture of the Macugen-related assets, and we now anticipate that this will occur toward the end of the year. We would note that one of the more attractive aspects of an asset deal approach to us is the retention of the Eyetech-related net operating losses, which total well over 140 million and will become available for us to utilize within the parent business on the second anniversary of the closing of the original transaction in November. In addition, LEVEL trial updates and other developments over this period of time may contribute towards a more satisfactory deal outcome.

Investors have been rightly concerned about incremental cash burn from the discontinued eye business operations during the year. We have and are managing costs very tightly in this area, and expect that this change in timelines will result in only a modest increase of approximately 5 million in the 20 million cash burn guidance we have previously given for discontinued ops, even if the transaction is concluded at year end.

At this juncture, while we recognize that the history of this transaction is a lingering concern to some investors, and while we continue to manage events in this area diligently, we consider the 5 million increase in forecasted 2007 cash burn arising from the extended divestiture period to be somewhat immaterial financially, and we have taken steps to ensure that these events are not distracting us from our focus upon the primary value drivers in the overall business.

As Mike has already indicated with his summary of the second-quarter results, we are well en route to delivering stronger-than-guided financial performance this year, and he will be updating guidance in a positive manner shortly.

Tarceva remains the mainstay of the business, and as we’ve indicated previously, our commercial expectations this year have centered on stable to modest volume growth in the U.S., with the recent price increase and increased reimbursement to us supporting growth in our U.S. Tarceva-related revenue.

Also as previously stated, the predominant global volume and sales growth driver for the brand in 2007 will give us strong growth in ex-U.S. sales. We then anticipate second half 2008 data from the SATURN front-line non-small cell lung cancer [maintenance] Phase III study, driving a re-acceleration of U.S. Tarceva sales thereafter.

Although the 102 million in U.S. sales reported by Tarceva is clearly a disappointing number, the 9 million in reserve adjustment mentioned by Mike reaches back many quarters, and we believe the underlying sales for the quarter are more accurately reflected in the 110 to 112 million base assumption for 2Q, and we are modeling off this for our second-half expectation. That being said, there is still appreciable competition in the U.S. market, and factors such as the increasing use of chemotherapy doublets in the second-line setting and robust competition from other approved second-line chemotherapy agents, perhaps reflecting the reimbursement environment, have impacted U.S. sales. Nonetheless, as we discussed in our last call, we and Genentech have reorganized the selling effort for Tarceva around a dedicated sales force, and reemphasized the particular value of Tarceva in treating certain subsets of patients such as nonsmokers, where subset data in the Tarceva label indicates a dramatic benefit in our promotional efforts.

The new sales force was fully hired, trained and deployed beginning of June following a joint meeting of the two dedicated sales teams. Initial data from the Genentech tracking studies has been encouraging, but we will need the data to play out over the course of the next two quarters in order to more fully assess the impact of this initiative.

Accrual to the key SATURN study continues on track for anticipated data from this study in two half 2008. Accrual to the other alliance sponsored important Phase III studies, BETA and

-2-

ATLAS for Avastin and Tarceva, and our RADIANT adjuvant non-small cell lung cancer study, also continues on track. We also continue to anticipate approval of Tarceva in Japan this year.

We enjoyed a successful ASCO for Tarceva with some 70-plus accepted abstracts building upon a comprehensive data set for Tarceva, supporting, amongst other things, expansion to other disease settings — for example, the Tarceva-Avastin data in hepatocellular carcinoma — the importance of optimizing dose, a case reinforced by the subsequent publication in the July edition of Clinical Cancer Research, correlating the occurrence of skin rash an hypothesized surrogate for exposure and rash intensity with enhanced survival, and also reinforcing Tarceva’s competitive position, again further emphasized post-ASCO with the failure of another competitor in a front-line non-small cell lung cancer study. As we have frequently commented, while we share in the disappointment for cancer patients at any Phase III trial failure, we do believe that the multiple recent Phase III trial disappointments in lung and pancreatic cancer does serve to remind investors of the unique strength, positioning, and future prospects for Tarceva in the treatment of cancer.

Moving beyond Tarceva, we continue to invest in what we believe is a high-quality follow-on pipeline focused in oncology and diabetes. The Phase I program for OSI-930, our VEGF receptor c-Kit co-inhibitor, continues on track with some early indications of activity, which are always encouraging to see in a Phase I trial. We are continuing accrual on the monotherapy Phase I trial, and anticipate starting the combination Phase I of Tarceva by the early part of 2008.

We are also evaluating OSI-632, the second VEGF receptor small molecule inhibitor available to us, following its return from Pfizer, with whom we co-discovered the agent during our earlier long-term discovery alliance. OSI-632, a somewhat more selective VEGF receptor inhibitor, which has completed an initial Phase II trial run by Pfizer, represents an opportunity to either expand our clinical program or select a single preferred VEGF receptor targeted agent for internal development while exploring partnering or exchange opportunities with the other.

Behind OSI-930, we were pleased to initiate the Phase I clinical program for OSI-906, our selective oral IGF-1 receptor inhibitor, and continue to see this project as one with great future potential if we are able to demonstrate manageable selectivity against the insulin receptor in the clinic. IGF-1 receptor is implicated in many major tumor sites, including colorectal, prostate, non-small cell lung, breast and ovarian cancer, and OSI-906 has demonstrated synergistic activity in combination with Tarceva in pre-clinical models.

On the diabetes front, we continue to make progress with our DP-IV inhibitor, PSN9301, as we conduct the pre-clinical toxicology and formulation studies that are prerequisites to the initiation of a Phase IIb trial in early 2008.

The rapid growth of Januvia and Janumet, the twice-daily co-formulation of Januvia and Metformin, which collectively posted 168 million for Merck in the second quarter, will serve to emphasize the potential importance of this class of drugs. We continue to believe that PSN9301 could occupy a unique niche in this area. By dosing twice a day prandially with breakfast and dinner, we expect to get sufficient prolongation of the elevation of GLP-1 levels to cover the lunchtime period, while preserving inter-prandial between dosing and overnight with less

-3-

interference with the breakdown of other potentially important DP-IV substrates, such as Substance P and PYY. This will of course all also facilitate subsequent combination use with Metformin. Therefore, if we are successful in demonstrating comparable efficacy to the once-daily agents, we believe we may have a preferred agent for long-term use, given the currently unknown impact of this new class of drugs on long-term homeostasis and safety in large patient populations.

We were also pleased to advance PSN821, our GPR119 small molecule agonist for the treatment of diabetes and obesity into IND track studies. Preclinical data for this compound indicates the ability to both regulate glucose and provide meaningful weight loss over time. We believe we have a high-quality candidate and are amongst the leaders in this topical and competitive area, and hope to advance to the clinic in mid-2008.

We are confident in the high-quality of our emerging in-house pipeline and have focused our business development efforts on seeking to add supplemental and complimentary research assets and technologies, rather than licensing more expensive clinical agents. Currently we do not foresee any significant financial impact from this effort in 2007.

We’ve also seen some positive business development news subsequent to the conclusion of the quarter that will likely provide a positive impact on our third-quarter results. Two additional licensees to our DP-IV patent estate have been signed, and the anticipated pending EU approval of Galvus will provide a success milestone. We expect that all this will contribute approximately 7 million in total of additional revenue, which you will see in our 3Q results. We have now signed a total of 12 DP-IV licensing deals with collective terms amounting to up to 140 to 145 million in signing fees and milestones at an average royalty rate in the 2% range.

We also benefit meaningfully from the recent signing of the license deal between Renovo and Shire for the development and commercialization of TGF-beta for anti-scarring. The TGF-beta 3 is one of the Company’s legacy assets to which we hold both sequence and protein intellectual property. We originally developed this in collaboration with the then Ciba-Geigy for impaired wound healing and oral mucositis. Both indications failed in the Phase I/II trials. We subsequently licensed the rights for the anti-scarring indication to Renovo. They successfully developed the agent through Phase II trials before announcing a deal with Shire. The deal included an upfront fee of 75 million, development milestones of up to 175 million depending on the label, sales milestones of up to 525 million, and royalties. The nature of our original license arrangement is such that we will receive a proportion of all development sales milestones and royalties received by Renovo. We in turn have to pay Novartis, a successor of Ciba, a small proportion of anything we derive from Renovo. Assuming the deal successfully closes, we will record our proportion of the signing fee in our third-quarter financials.

Now let me turn you back over to Mike, who will comment on guidance.

Michael Atieh

Thank you, Colin. Please note that all of our guidance is for results from continuing operations on a GAAP basis.

-4-

Let’s start with Tarceva-related revenues. Despite the $9 million reserve adjustment recorded this quarter, Tarceva sales should come in at 855 to 860 million on a worldwide basis, slightly ahead of our earlier guidance and a 32% increase over 2006 sales levels. In the U.S., we expect the conversion factor for 2007 to average 40%, similar to the first-half average. Please note that our guidance on worldwide sales of Tarceva represents our view only and not necessarily the views of our collaborators, Genentech and Roche.

We expect that total Tarceva-related revenue will reach 260 million, an increase of 10 million from our previous guidance. This includes revenue from our unconsolidated joint business with Genentech on U.S. sales, royalties from Roche on rest-of-world sales, and the amortization of Tarceva-related milestones.

We now estimate that total revenues from our DP-IV patent estate will be between 30 million and 35 million for the year. I want to point out that this guidance includes the upfront payments received in Q3 from the two new license agreements we have signed, an assumption that Galvus is approved in the EU, and that Merck’s sales of Janumet and Januvia reach $700 million. This latter assumption creates the lower end of our guidance range.

With respect to total revenues, our point estimate is now 325 million, an increase of 25 million compared to our previous guidance. Our guidance does not include potential revenue that will arise if Renovo’s licensing deal with Shire for Juvista is consummated.

Turning to expenses, on a GAAP basis we are expecting R&D expenses to be approximately 130 million, and SG&A expenses to be approximately 100 million, with the G&A portion totaling approximately 60 million. Based on these estimates, we now expect to deliver $1.40 per share or better of earnings from continuing operations on a GAAP basis. This guidance includes the impact of the curtailment gain of $0.07 per share, and the negative impact of equity-based compensation of approximately $0.25 per share. This EPS guidance does not include the impact of potential revenue from Renovo. In addition, as Colin referenced, we are exploring the acquisition of research assets or technology that may result in some additional R&D expense in the second half of 2007, which is also not included in our guidance. However, it would be reasonable to assume that the Renovo-related revenue and this additional expense will essentially offset.

Finally, cash flow from continuing operations for 2007 is now estimated to be at the upper-end of our previous guidance range of 80 to 90 million. Negative cash flow from the discontinued Eyetech operations for all of 2007, assuming the divestiture of our eye disease business is completed by the end of the year, will be approximately 25 million.

Thank you, and let me turn it back to Colin.

Dr. Colin Goddard

Thanks, Mike. That concludes our prepared comments. And with that, we’ll be happy, Jamie, if you could open up the floor for Q&A.

[A question and answer session followed]

-5-