##### Table of Contents



FORM 10-Q
 UNITED STATES
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, 2009
 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.
  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)
 
  
 þ o
 o o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
 TABLE OF CONTENTS
 Page No.PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Consolidated
Balance Sheets
-March 31, 2009 and December 31, 2008 (Unaudited)
    
    
    1Consolidated Statements of Operations
-Three Months Ended March 31, 2009 and 2008 (Unaudited)
    
    
    2Consolidated Statements of Cash Flows
-Three Months Ended March 31, 2009 and 2008 (Unaudited)
    
    
    3Notes to Consolidated Financial Statements (Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    42PART II. OTHER INFORMATION
    
    
    43Item 1. Legal Proceedings
    
    
    43Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 3. Defaults Upon Senior Securities
    
    
    44Item 4. Submission of Matters to a Vote of Security Holders
    
    
    44Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    44SIGNATURES
    
    
    46INDEX TO EXHIBITS
    
    
    47EX-10.1EX-31.1EX-31.2EX-32.1EX-32.2
  i




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands except per share data)
 March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    205,430
    
    
    $
    272,936Investment securities
    
    
    333,539
    
    
    
    240,328Restricted investment securities
    
    
    2,269
    
    
    
    2,247Accounts receivable
    
    
    96,874
    
    
    
    100,242Inventory
    
    
    18,484
    
    
    
    20,139Interest receivable
    
    
    1,258
    
    
    
    1,428Prepaid expenses and other current assets
    
    
    8,079
    
    
    
    6,719Assets related to discontinued operations
    
    
    
    
    
    
    917Deferred tax assets  net
    
    
    34,993
    
    
    
    45,425Total current assets
    
    
    700,926
    
    
    
    690,381Property, equipment and leasehold improvements  net
    
    
    44,452
    
    
    
    43,443Debt issuance costs  net
    
    
    5,210
    
    
    
    5,632Goodwill
    
    
    38,608
    
    
    
    38,648Other intangible assets  net
    
    
    7,370
    
    
    
    7,711Other assets
    
    
    14,743
    
    
    
    14,591Deferred tax assets  net
    
    
    273,836
    
    
    
    273,797$
    1,085,145
    
    
    $
    1,074,203LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    32,819
    
    
    $
    49,052Unearned revenue  current
    
    
    10,367
    
    
    
    10,547Liabilities related to discontinued operations
    
    
    2,007
    
    
    
    1,522Total current liabilities
    
    
    45,193
    
    
    
    61,121Other liabilities:Rent obligations and deferred rent expenses
    
    
    6,395
    
    
    
    8,154Unearned revenue  long-term
    
    
    32,419
    
    
    
    33,398Convertible senior subordinated notes  net
    
    
    372,543
    
    
    
    369,095Accrued post-retirement benefit cost and other
    
    
    4,130
    
    
    
    3,890Total liabilities
    
    
    460,680
    
    
    
    475,658Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value; 5,000 shares authorized; no shares issued at
March 31, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $.01 par value; 200,000 shares authorized, 61,275 and 61,124
shares issued at March 31, 2009 and December 31, 2008, respectively
    
    
    613
    
    
    
    611Additional paid-in capital
    
    
    1,770,747
    
    
    
    1,761,179Accumulated deficit
    
    
    (1,040,718
    )
    
    
    (1,057,118
    )Accumulated other comprehensive loss
    
    
    (3,958
    )
    
    
    (3,908
    )726,684
    
    
    
    700,764Less: treasury stock, at cost; 3,396 shares at March 31, 2009 and December
31, 2008, respectively
    
    
    (102,219
    )
    
    
    (102,219
    )Total stockholders equity
    
    
    624,465
    
    
    
    598,545$
    1,085,145
    
    
    $
    1,074,203
  1




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except per share data)
 Three Months EndedMarch 31,2009
    
    2008Revenues:Tarceva related revenues
    
    $
    83,856
    
    
    $
    82,358Other revenues
    
    
    9,821
    
    
    
    8,377Total revenues
    
    
    93,677
    
    
    
    90,735Operating expenses:Cost of goods sold
    
    
    2,194
    
    
    
    2,170Research and development
    
    
    35,436
    
    
    
    30,549Selling, general and administrative
    
    
    24,201
    
    
    
    24,531Amortization of intangibles
    
    
    228
    
    
    
    602Total operating expenses
    
    
    62,059
    
    
    
    57,852Operating income from continuing operations
    
    
    31,618
    
    
    
    32,883Other income (expense):Investment income  net
    
    
    2,214
    
    
    
    3,734Interest expense
    
    
    (6,393
    )
    
    
    (6,305
    )Other (expense) income  net
    
    
    (384
    )
    
    
    (900
    )Income from continuing operations before income taxes
    
    
    27,055
    
    
    
    29,412Income tax provision
    
    
    10,551
    
    
    
    816Net income from continuing operations
    
    
    16,504
    
    
    
    28,596Loss from discontinued operations  net of tax
    
    
    (104
    )
    
    
    (2,426
    )Net income
    
    $
    16,400
    
    
    $
    26,170Basic and diluted income (loss) per common share:Basic income (loss):Continuing operations
    
    $
    0.29
    
    
    $
    0.50Discontinued operations
    
    $
    (0.00
    )
    
    $
    (0.04
    )Net income
    
    $
    0.28
    
    
    $
    0.46Diluted income (loss):Continuing operations
    
    $
    0.28
    
    
    $
    0.49Discontinued operations
    
    $
    (0.00
    )
    
    $
    (0.04
    )Net income
    
    $
    0.28
    
    
    $
    0.45Weighted average shares of common stock outstanding:Basic shares
    
    
    57,818
    
    
    
    57,130Diluted shares
    
    
    60,630
    
    
    
    57,813
  2




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
 Three Months EndedMarch 31,2009
    
    
    2008Cash flow from operating activities:Net income
    
    $
    16,400
    
    
    $
    26,170Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,908
    
    
    
    2,544Impairment of assets
    
    
    298
    
    
    
    Impact of inventory step-up related to inventory sold
    
    
    
    
    
    
    36Amortization of FSP APB 14-1 discount and debt issuance costs
    
    
    3,870
    
    
    
    3,806Amortization of premiums and discounts on investments
    
    
    (371
    )
    
    
    (202
    )Non-cash compensation charge
    
    
    6,186
    
    
    
    5,324Deferred tax provision
    
    
    10,393
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    4,195
    
    
    
    276Inventory
    
    
    1,654
    
    
    
    269Prepaid expenses and other current assets
    
    
    (1,389
    )
    
    
    528Other assets
    
    
    (306
    )
    
    
    (750
    )Accounts payable and accrued expenses
    
    
    (15,435
    )
    
    
    (7,623
    )Unearned revenue
    
    
    (1,159
    )
    
    
    (2,772
    )Accrued post-retirement benefit cost and other
    
    
    (3
    )
    
    
    10Net cash provided by operating activities
    
    
    26,241
    
    
    
    27,616Cash flows from investing activities:Purchases of investments (restricted and unrestricted)
    
    
    (171,149
    )
    
    
    (38,239
    )Maturities and sales of investments (restricted and unrestricted)
    
    
    78,734
    
    
    
    52,948Additions to property, equipment and leasehold improvements
    
    
    (4,418
    )
    
    
    (803
    )Purchase of intangible assets
    
    
    
    
    
    
    (8,000
    )Other
    
    
    (180
    )
    
    
    Net cash (used in) provided by investing activities
    
    
    (97,013
    )
    
    
    5,906Cash flows from financing activities:Proceeds from the exercise of stock options,
employee purchase plan, and other
    
    
    3,386
    
    
    
    1,800Proceeds from the issuance of convertible senior subordinated notes
    
    
    
    
    
    
    200,000Debt issuance costs
    
    
    
    
    
    
    (6,711
    )Purchase of treasury stock
    
    
    
    
    
    
    (64,998
    )Repurchase of a portion of the 2023 Notes
    
    
    
    
    
    
    (13,000
    )Net cash provided by financing activities
    
    
    3,386
    
    
    
    117,091Net (decrease) increase in cash and cash equivalents
    
    
    (67,386
    )
    
    
    150,613Effect of exchange rate changes on cash and cash equivalents
    
    
    (120
    )
    
    
    23Cash and cash equivalents at beginning of period
    
    
    272,936
    
    
    
    162,737Cash and cash equivalents at end of period
    
    $
    205,430
    
    
    $
    313,373Cash paid for taxes
    
    $
    220
    
    
    $
    108Cash paid for interest
    
    $
    4,624
    
    
    $
    2,444
  3




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 ® ®
 Basis of Presentation
    Revenue Recognition
  4




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
  Net Revenue from Unconsolidated Joint Business
     Royalties
  5




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
   License and Milestones
   6




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
  Product Development and Commercialization Agreements
   Genentech and Roche
  7




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
     8




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
     9




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
  AVEO
   Net Earnings Per Share
   10




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
    Three Months EndedMarch 31,2009
    
    2008Net income
from continuing operations  basic
    
    $
    16,504
    
    
    $
    28,596Add: Interest and issuance costs related to convertible notes  net of tax
    
    
    495
    
    
    
    Net income from continuing operations  diluted
    
    $
    16,999
    
    
    $
    28,596Weighted average common shares outstanding  basic
    
    
    57,818
    
    
    
    57,130Dilutive effect of options and restricted stock
    
    
    814
    
    
    
    683Dilutive effect of 2023 Notes
    
    
    1,998
    
    
    
    Dilutive effect of 2025 Notes
    
    
    
    
    
    
    Dilutive effect of 2038 Notes
    
    
    
    
    
    
    Weighted average common shares and dilutive potential
common shares  diluted
    
    
    60,630
    
    
    
    57,813Net income per share from continuing operations:Basic
    
    $
    0.29
    
    
    $
    0.50Diluted
    
    $
    0.28
    
    
    $
    0.49
  11




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 Three Months EndedMarch 31,2009
    
    2008Common share equivalents  convertible notes
    
    
    6,617
    
    
    
    9,310Common share equivalents  equity plans
    
    
    2,231
    
    
    
    3,134Convertible note interest and issuance expense
not added back under the if-converted method
    
    $
    3,626
    
    
    $
    6,792
 Comprehensive Income
  Three Months EndedMarch 31,2009
    
    2008Net income
    
    $
    16,400
    
    
    $
    26,170Other comprehensive income:Foreign currency translation adjustments
    
    
    (528
    )
    
    
    33Post-retirement plan
    
    
    (8
    )
    
    
    Unrealized holding gains arising
during period
    
    
    486
    
    
    
    401(50
    )
    
    
    434Total comprehensive income
    
    $
    16,350
    
    
    $
    26,604
  March 31,
    
    December 31,2009
    
    2008Cumulative foreign currency translation adjustment
    
    $
    (4,267
    )
    
    $
    (3,739
    )Post-retirement plan
    
    
    370
    
    
    
    378Unrealized losses on available-for-sale securities
    
    
    (61
    )
    
    
    (547
    )Accumulated other comprehensive loss
    
    $
    (3,958
    )
    
    $
    (3,908
    )
 Fair Value Measurements
  12




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
   (i)
    
    Level 1 quoted prices in active markets for identical assets and liabilities;(ii)
    
    Level 2 observable inputs other than quoted prices in non-active markets for identical
 assets and liabilities or quoted prices for similar assets or liabilities in active markets; and(iii)
    
    Level 3 unobservable inputs for which little or no market data exists, requiring
management to develop its own assumptions.
  QuotedPrices inAs
    
    Active
    
    SignificantReflected
    
    Market for
    
    Other
    
    Significanton the
    
    Identical
    
    Observable
    
    UnobservableBalance
    
    Assets
    
    Inputs
    
    InputsSheet
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    TotalAssets:Cash equivalents
    
    $
    186,659
    
    
    $
    186,659
    
    
    $
    
    
    
    
    
    
    
    $
    186,659Investment securities
    
    
    333,539
    
    
    
    
    
    
    
    333,539
    
    
    
    
    
    
    
    333,539Restricted investments
    
    
    2,269
    
    
    
    
    
    
    
    2,269
    
    
    
    
    
    
    
    2,269Other assets
    
    
    1,227
    
    
    
    
    
    
    
    1,227
    
    
    
    
    
    
    
    1,227Liabilities:2038 Notes (Face value $200,000)
    
    
    171,005
    
    
    
    
    
    
    
    179,300
    
    
    
    
    
    
    
    179,3002025 Notes (Face value $115,000)
    
    
    101,588
    
    
    
    
    
    
    
    156,900
    
    
    
    
    
    
    
    156,9002023 Notes (Face value $99,950)
    
    
    99,950
    
    
    
    
    
    
    
    89,100
    
    
    
    
    
    
    
    89,100
   13




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
   Accounting for StockBased Compensation
  Stock Options
    Three Months EndedMarch 31,2009
    
    2008Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    49.98
    %
    
    
    46.57
    %Risk-free interest rate
    
    
    2.06
    %
    
    
    3.54
    %Expected term (years)
    
    
    5.66
    
    
    
    4.67
 14




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 Inventory
   March 31,
    
    December 31,2009
    
    2008Raw materials
    
    $
    533
    
    
    $
    676Work-in-process
    
    
    7,474
    
    
    
    8,532Finished goods on hand
    
    
    4,609
    
    
    
    4,897Inventory subject to return
    
    
    5,868
    
    
    
    6,034Total inventory
    
    $
    18,484
    
    
    $
    20,139
  Other Intangible Assets  Net
  March 31, 2009
    
    December 31, 2008Carrying
    
    Accumulated
    
    Net Book
    
    Carrying
    
    Accumulated
    
    Net BookAmount
    
    Amortization
    
    Value
    
    Amount
    
    Amortization
    
    ValueAcquired intangibles
    
    $
    9,212
    
    
    $
    (1,842
    )
    
    $
    7,370
    
    
    $
    9,386
    
    
    $
    (1,675
    )
    
    $
    7,711
    15




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
  Consolidation of Facilities
 Oxford, England
   Three Months EndedMarch 31,2009
    
    
    2008Opening liability January 1
    
    $
    1,899
    
    
    $
    2,882Cash paid for rent
    
    
    
    
    
    
    (473
    )Refurbishment adjustment
    
    
    (1,674
    )
    
    
    Other
    
    
    (225
    )
    
    
    101Ending liability
    
    $
    
    
    
    $
    2,510
 Eyetech Acquired Facilities
  16




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
  Three Months EndedMarch 31,2009
    
    2008Opening liability at January 1
    
    $
    2,295
    
    
    $
    3,282Accretion expense
    
    
    39
    
    
    
    40Cash paid for rent
    
    
    (1,298
    )
    
    
    (1,189
    )Sublease income
    
    
    1,274
    
    
    
    1,374Ending liability
    
    $
    2,310
    
    
    $
    3,507
 Employee Post-retirement Plan and Other
 Employee Post-retirement Plan
   Three Months EndedMarch 31,2009
    
    2008Service costs for benefits earned during the period
    
    $
    
    
    
    $
    Interest costs on accumulated post-retirement
benefits obligation
    
    
    34
    
    
    
    44Amortization of loss
    
    
    (8
    )
    
    
    Net post-retirement benefit cost
    
    $
    26
    
    
    $
    44
 17




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 Sabbatical Leave Accrual
  Nonqualified Deferred Compensation Plan
  Income Taxes
   18




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 Convertible Debt
     March 31, 2009
    
    December 31, 2008Long-term
    
    Principal
    
    Discount
    
    Net Carrying Value
    
    Principal
    
    Discount
    
    Net Carrying Value2023 Notes
 3.25%
    
    $
    99,950
    
    
    $
    
    
    
    $
    99,950
    
    
    $
    99,950
    
    
    $
    
    
    
    $
    99,9502025 Notes  2.00%
    
    
    115,000
    
    
    
    13,412
    
    
    
    101,588
    
    
    
    115,000
    
    
    
    15,181
    
    
    
    99,8192038 Notes  3.00%
    
    
    200,000
    
    
    
    28,995
    
    
    
    171,005
    
    
    
    200,000
    
    
    
    30,674
    
    
    
    169,326$
    414,950
    
    
    $
    42,407
    
    
    $
    372,543
    
    
    $
    414,950
    
    
    $
    45,855
    
    
    $
    369,095
   19




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
  Change in Accounting Principle
   20




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
  Three Monthsended March
    
    As Adjusted31, 2008 as
    
    andOriginally
    
    Currently
    
    Effect ofReported
    
    Reported
    
    ChangeRevenues
    
    $
    90,735
    
    
    $
    90,735
    
    
    $
    Operating expenses
    
    
    57,852
    
    
    
    57,852
    
    
    
    Operating income from continuing operations
    
    
    32,883
    
    
    
    32,883
    
    
    
    Interest expense
    
    
    (3,131
    )
    
    
    (6,305
    )
    
    
    (3,174
    )Investment income & other expense
    
    
    2,727
    
    
    
    2,834
    
    
    
    107Income from continuing operations before income taxes
    
    
    32,479
    
    
    
    29,412
    
    
    
    (3,067
    )Income tax provision
    
    
    816
    
    
    
    816
    
    
    
    Net income from continuing operations
    
    
    31,663
    
    
    
    28,596
    
    
    
    (3,067
    )Loss from discontinued operations
    
    
    (2,426
    )
    
    
    (2,426
    )
    
    
    Net income
    
    $
    29,237
    
    
    $
    26,170
    
    
    $
    (3,067
    )
  Three Monthsended March
    
    As Adjusted31, 2008 as
    
    andOriginally
    
    Currently
    
    Effect ofReported
    
    Reported
    
    ChangeNet income from continuing operations  basic
    
    $
    31,663
    
    
    $
    28,596
    
    
    $
    (3,067
    )Add: Interest and issuance costs related to convertible debt  net of
tax
    
    
    2,219
    
    
    
    
    
    
    
    (2,219
    )Net income from continuing operations  diluted
    
    $
    33,882
    
    
    $
    28,596
    
    
    $
    (5,286
    )Weighted average common shares outstanding  basic
    
    
    57,130
    
    
    
    57,130
    
    
    
    Dilutive effect of options and restricted stock
    
    
    683
    
    
    
    683
    
    
    
    Dilutive effect of 2023 Notes
    
    
    2,936
    
    
    
    
    
    
    
    (2,936
    )Dilutive effect of 2025 Notes
    
    
    3,908
    
    
    
    
    
    
    
    (3,908
    )Dilutive effect of 2038 Notes
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares and dilutive potential common shares 
diluted
    
    
    64,657
    
    
    
    57,813
    
    
    
    (6,844
    )Net income per share from continuing operations:Basic
    
    $
    0.55
    
    
    $
    0.50
    
    
    $
    (0.05
    )Diluted
    
    $
    0.52
    
    
    $
    0.49
    
    
    $
    (0.03
    )
 21




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##### Table of Contents



OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
  As AdjustedDecember 31,
    
    and2008 As
    
    Currently
    
    Effect ofReported
    
    Reported
    
    ChangeCurrent assets
    
    $
    690,381
    
    
    $
    690,381
    
    
    $
    Deferred tax assets  net
    
    
    291,205
    
    
    
    273,797
    
    
    
    (17,408
    )Debt issuance costs  net
    
    
    7,080
    
    
    
    5,632
    
    
    
    (1,448
    )Other Assets  non current
    
    
    104,393
    
    
    
    104,393
    
    
    
    Total assets
    
    $
    1,093,059
    
    
    $
    1,074,203
    
    
    $
    (18,856
    )Current liabilities
    
    
    61,121
    
    
    
    61,121
    
    
    
    Non-current liabilities
    
    
    45,442
    
    
    
    45,442
    
    
    
    Convertible senior subordinated notes  non-current
    
    
    414,950
    
    
    
    369,095
    
    
    
    (45,855
    )Total liabilities
    
    
    521,513
    
    
    
    475,658
    
    
    
    (45,855
    )Common and preferred stock, net of treasury
stock
    
    
    (101,608
    )
    
    
    (101,608
    )
    
    
    Additional paid-in-capital
    
    
    1,693,263
    
    
    
    1,761,179
    
    
    
    67,916Accumulated deficit
    
    
    (1,016,201
    )
    
    
    (1,057,118
    )
    
    
    (40,917
    )Accumulated other comprehensive income
    
    
    (3,908
    )
    
    
    (3,908
    )
    
    
    Total stockholders equity
    
    
    571,546
    
    
    
    598,545
    
    
    
    26,999Total liabilities and stockholders equity
    
    $
    1,093,059
    
    
    $
    1,074,203
    
    
    $
    (18,856
    )
 Eyetech Discontinued Operations
   Three Months EndedMarch 31,2009
    
    2008Net revenue
    
    $
    308
    
    
    $
    5,829Pretax loss
    
    $
    (169
    )
    
    $
    (2,492
    )Loss from discontinued operations
    
    $
    (104
    )
    
    $
    (2,426
    )
 22




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##### Table of Contents



OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
   March 31,
    
    December 31,2009
    
    2008Assets:Accounts receivable
    
    $
    
    
    
    $
    917Assets related to discontinued operations
    
    $
    
    
    
    $
    917Liabilities:Accounts payable and accrued expenses
    
    $
    2,007
    
    
    $
    1,522Liabilities related to discontinued operations
    
    $
    2,007
    
    
    $
    1,522
 ®
  (OSI) Eyetech Divestiture  Severance Costs
  23




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##### Table of Contents



OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
   Three Months EndedMarch 31,2009
    
    2008Opening liability at January 1
    
    $
    387
    
    
    $
    800Accrual for severance and retention bonuses
    
    
    27
    
    
    
    1,087Cash paid for severance and retention bonuses
    
    
    (156
    )
    
    
    (90
    )Ending liability
    
    $
    258
    
    
    $
    1,797
 24




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 Overview
    25




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1A
 26




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Quarterly Update
 ® th
   th
 27




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Critical Accounting Policies
  Revenue Recognition
 Net Revenue from Unconsolidated Joint Business
  28




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Royalties
   License Fees and Milestones
   Investments and Other-than-Temporary Impairments of Available-for-Sale Marketable Securities
  29




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Inventory
   30




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Stock-Based Compensation
   Accruals for Clinical Research Organization and Clinical Site Costs
  Income Taxes
   31




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Goodwill and Other Long-Lived Assets
    32




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Discontinued Operations
  ®
  33




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Revenues
 Three Months EndedMarch
31,(in thousands)2009
    
    2008
    
    $ ChangeTarceva-related revenues
    
    $
    83,856
    
    
    $
    82,358
    
    
    $
    1,498Other revenues
    
    
    9,821
    
    
    
    8,377
    
    
    
    1,444Total revenues
    
    $
    93,677
    
    
    $
    90,735
    
    
    $
    2,942
 Tarceva-Related Revenues
  Net Revenue from Unconsolidated Joint Business
   34




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Tarceva-Related Royalties
  Tarceva-Related Milestones
  Other Revenues
  ® TM ® ®
 35




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Expenses
 Three Months EndedMarch
31,(in thousands)2009
    
    2008
    
    $ ChangeCost of goods sold
    
    $
    2,194
    
    
    $
    2,170
    
    
    $
    24Research and development
    
    
    35,436
    
    
    
    30,549
    
    
    
    4,887Selling, general and administrative
    
    
    24,201
    
    
    
    24,531
    
    
    
    (330
    )Amortization of intangibles
    
    
    228
    
    
    
    602
    
    
    
    (374
    )$
    62,059
    
    
    $
    57,852
    
    
    $
    4,207
 Cost of Goods Sold
  Research and Development
    36




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##### Table of Contents



Selling, General and Administrative
  Other Income and Expense
 Three Months EndedMarch
31,(in thousands)2009
    
    2008
    
    $ ChangeInvestment income-net
    
    $
    2,214
    
    
    $
    3,734
    
    
    $
    (1,520
    )Interest expense
    
    
    (6,393
    )
    
    
    (6,305
    )
    
    
    (88
    )Other income
(expense)  net
    
    
    (384
    )
    
    
    (900
    )
    
    
    516Total other income (expense)
    
    $
    (4,563
    )
    
    $
    (3,471
    )
    
    $
    (1,092
    )
    37




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##### Table of Contents



Income taxes
  Discontinued Operations
  Liquidity and Capital Resources
   Commitments and Contingencies
  New Accounting Standards
 Recently Adopted Standards
  38




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39




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40




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Recently Issued Standards (Not Yet Adopted)
    Forward Looking Statements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  41




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Item 4. Controls and Procedures
  42




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Evaluation of Our Disclosure Controls and Procedures
 CEO/CFO Conclusions about the Effectiveness of the Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting.
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  43




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Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 3.1
    
    Restated Certificate of Incorporation of OSI Pharmaceuticals, Inc., filed by
the Company 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
    
    Second Amended and Restated Bylaws of OSI Pharmaceuticals, Inc., filed by the
Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008
(file no. 000-15190), and incorporated herein by reference.10.1
    
    Consulting Agreement, dated March 31, 2009, by and between OSI Pharmaceuticals,
Inc. and Herbert M. Pinedo, M.D., Ph.D. (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)
 44




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##### Table of Contents



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)
 45




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##### Table of Contents



SIGNATURES
  OSI PHARMACEUTICALS, INC.(Registrant)Date:  May 8, 2009
    /s/ Colin Goddard, Ph.D.Colin Goddard, Ph.D.Chief Executive OfficerDate:  May 8, 2009
    /s/ Pierre LegaultPierre LegaultExecutive Vice President,
ChiefFinancial Officer
and Treasurer
(Principal Financial Officer) 46




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INDEX TO EXHIBITS
 Exhibit
 3.1
    
    Restated Certificate of Incorporation of OSI Pharmaceuticals, Inc., filed by
the Company 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
    
    Second Amended and Restated Bylaws of OSI Pharmaceuticals, Inc., filed by the
Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008
(file no. 000-15190), and incorporated herein by reference.10.1
    
    Consulting Agreement, dated March 31, 2009, by and between OSI Pharmaceuticals,
Inc. and Herbert M. Pinedo, M.D., Ph.D. (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)
 47