OSI Pharma: $175MM in New Debt & More…

Perhaps not squarely on certain peoples radars in these parts OSI Pharmaceuticals (NASDAQ: OSIP) is sometimes not uttered in the same breath by some when referring to public CO companies, easy to do I suppose since corporate headquarters are actually located in Melville, NY however, a very significant campus is here in Boulder, housing both clinical and R&D functions. Why for the third year in a row, OSI Pharma’s Boulder office won an Award for Colorado's Best companies for working families. OSI Pharma placed 1st in 2006 and 2nd in 2005 in the medium-sized business category, and was named a 2007 Honorary Member of the Circle of Distinction for 2007.

Tomorrow OSI Pharma has a live webcast scheduled for 10:00am EST from the Stanford Group Healthcare Conference in Washington DC, listen (here). I’ll be interested to hear about their flagship product, Tarceva®, a small molecule tyrosine kinase inhibitor of the epidermal growth factor receptor used for second-line treatment of Non Small Cell Lung Cancer.

OSI Pharma has recently priced a private placement of $175MM of 3% convertible senior debt due 2038, and has also granted the initial purchasers of the notes a 13-day option to purchase up to an additional $25MM. With these proceeds OSI Pharma intends to:

• To fund repurchases of ~1.5 million shares of its common stock
  
• To retire its 3.25% convertible senior notes due 2023
• And for general corporate purposes
  

The new notes will be convertible, in certain circumstances, into common stock of OSI Pharma based upon a base conversion rate of 13.5 shares per $1,000 principal amount of notes which represents today approximately a near whopping premium of 60% to yesterdays $41.59 close.

I will be curious to hear the amount of the retiring debt and what portion of the private placement will then ultimately be added to their cash position as-of September ’07 of approximately $298MM (including short-term) investments.

Other products OSI have in the clinic include OSI-930 an inhibitor of c-Kit and the VEGFR-2, OSI-930 is designed to target both cancer cell proliferation and blood vessel growth (angiogenesis) in selected tumors and, in preclinical studies, OSI-930 has demonstrated efficacy in small cell lung cancer, glioblastoma, colorectal, renal, head and neck, non-small cell lung cancer and gastric cancer tumor models. Also in Phase I studies is OSI-906 an inhibitor of the insulin-like growth factor-1 receptor.

***Update*** Be sure to get your vote in for the CLSDF Readers Company of the Year Award. BaroFold has some catching up to do if they are to sweep the CU TTO and CLSDF Company of the Year awards. Voting ends on 31 January.

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3 Commercialized Products & Counting!

QUESTION: What do ZostaVax®, Kineret® and Macugen® have in common…

ANSWER: They are all FDA approved first-in-class commercialized products originating from University of Colorado intellectual property.

Want to learn more about these products and the rich product pipeline portfolio at the University of Colorado? Then take a listen to this podcast featuring David Allen, Ph.D., Associate Vice President, CU Technology Transfer Office speaking at the Holland & Hart Bioentrepreneur Club and observe the year-end performance metrics through July 2007 (here).

ZostaVax® is a vaccine developed by Merck & Co. (NYSE: MRK) which has been shown to reduce the incidence of Shingles (herpes zoster) by over 51% in a pivotal phase III study of 38,000 adults aged 60 and older who received the vaccine.

Macugen® is for the treatment of neovascular (wet) age-related macular degeneration. It was developed by EyeTech Pharmaceuticals who was recently acquired by OSI Pharmaceuticals (NASDAQ: OSIP) and licensed to Pfizer (NYSE: PFE) for late stage development and marketing.

Kineret® developed by Amgen (NASDAQ: AMGN) for the reduction in signs and symptoms and slowing the progression of structural damage in moderately to severely active rheumatoid arthritis, in patients 18 years of age or older who have failed 1 or more disease-modifying antirheumatic drugs.

Black Eye For Macugen

At their quarterly conference call OSI Pharmaceuticals, Inc. (NASDAQ: OSIP) announced a planned exit of their recent $650M Eyetech acquisition. OSI bought Eyetech primarily for the age related macular degeneration (AMD) drug Macugen. Macugen sales for the quarter rapidly and dramatically declined, reaching only $9M in sales relative to $87M for the previous two quarters. OSI seeks to maximize the value for Macugen and its research assets in the area via out-licensing, partnering or a sale of the business.

"We continue to believe that Macugen's product profile, our induction / maintenance strategy and promising data in the diabetic retinopathy area will ultimately result in a meaningful place for Macugen in treating retinal eye disease. However, it is evident that a key strategic goal behind our acquisition of Eyetech - that of generating positive cash-flow from the eye business in the 2006-2008 period - will not be realized."

Colin Goddard, Ph.D., Chief Executive Officer

The AMD market is crowded and is becoming ever more competitive. Visudyne, an AMD treatment from QLT, Inc. (NASDAQ: QLTI) and Novartis AG (NYSE: NVS), like OSI, has reported rapid sales erosion in 2006 of ~ $350M down from ~$380M. Genentech (NYSE: DNA) is on the AMD offensive with their off label sales of Avastin however, with planned royalties to Xoma (NASDAQ: XOMA), Lucentis appears to be accelerating as the choice for treatment. Lucentis is priced at $1,950 per dose and it is estimated that the average dosage will be five to seven treatments per year, yielding an annual cost of the treatment from $9,750 to $13,650. With as many as 15 million Americans affected by wet and dry forms of AMD Lucentis may easily achieve billion dollar sales and blockbuster status.

Positive Phase II Data for Macugen®

There are many reasons why here in Colorado we keep a careful eye on Macugen, no pun intended…

OSI Pharmaceuticals, Inc. (NASDAQ: OSIP) announced interim Phase II study results showing that injections of Macugen® resulted in better visual acuity outcomes in patients with macular edema due to central retinal vein occlusion compared with those receiving a sham injection. Over 90 percent of patients maintained or improved vision at 30 weeks when treated with Macugen® injections compared to approximately 69 percent of those treated in the control arm. Patients treated with Macugen for 30 weeks had, on average, an improvement in visual acuity while the control group demonstrated a mean decrease in visual acuity from baseline to week 30. Vision gain was seen with a single injection of Macugen® within 6 weeks of treatment, versus a loss in the control group.