##### Table of Contents



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 endedMarch 31, 2008
 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
  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, 2008 (Unaudited) and December 31, 2007
    
    
    1Consolidated Statements of Operations
- Three Months Ended March 31, 2008 and 2007 (Unaudited)
    
    
    2Consolidated Statements of Cash Flows
- Three Months Ended March 31, 2008 and 2007 (Unaudited)
    
    
    3Notes to Consolidated Financial Statements (Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risks
    
    
    36Item 4. Controls and Procedures
    
    
    37PART II. OTHER INFORMATION
    
    
    39Item 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3. Defaults Upon Senior Securities
    
    
    40Item 4. Submission of Matters to a Vote of Security Holders
    
    
    41Item 5. Other Information
    
    
    41Item 6. Exhibits
    
    
    41SIGNATURES
    
    
    43INDEX TO EXHIBITS
    
    
    44EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  i




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##### Table of Contents



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 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    313,373
    
    
    $
    162,737Investment securities
    
    
    122,946
    
    
    
    137,439Restricted investment securities
    
    
    5,060
    
    
    
    4,922Accounts receivable  net
    
    
    89,098
    
    
    
    87,523Inventory  net
    
    
    20,672
    
    
    
    21,064Interest receivable
    
    
    1,649
    
    
    
    1,116Prepaid expenses and other current assets
    
    
    9,412
    
    
    
    9,882Assets related to discontinued operations
    
    
    23,345
    
    
    
    25,442Total current assets
    
    
    585,555
    
    
    
    450,125Property, equipment and leasehold improvements  net
    
    
    45,293
    
    
    
    46,694Debt issuance costs  net
    
    
    9,019
    
    
    
    3,047Goodwill
    
    
    39,412
    
    
    
    39,411Other intangible assets  net
    
    
    12,391
    
    
    
    4,966Other assets
    
    
    15,124
    
    
    
    14,137$
    706,794
    
    
    $
    558,380LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    43,377
    
    
    $
    45,843Unearned revenue  current
    
    
    9,933
    
    
    
    10,912Liabilities related to discontinued operations
    
    
    40,099
    
    
    
    45,739Convertible senior subordinated notes
    
    
    137,000
    
    
    
    150,000Total current liabilities
    
    
    230,409
    
    
    
    252,494Other liabilities:Rent obligations and deferred rent expenses
    
    
    10,393
    
    
    
    10,812Unearned revenue  long-term
    
    
    36,096
    
    
    
    37,075Convertible senior subordinated notes
    
    
    315,000
    
    
    
    115,000Accrued post-retirement benefit cost and other
    
    
    4,143
    
    
    
    4,043Total liabilities
    
    
    596,041
    
    
    
    419,424Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value; 5,000 shares authorized; no shares issued at
March 31, 2008 and December 31, 2007
    
    
    
    
    
    
    Common stock, $.01 par value; 200,000 shares authorized, 60,425 and 60,352
shares issued at March 31, 2008 and December 31, 2007, respectively
    
    
    604
    
    
    
    604Additional paid-in capital
    
    
    1,665,861
    
    
    
    1,658,737Accumulated deficit
    
    
    (1,458,449
    )
    
    
    (1,487,686
    )Accumulated other comprehensive income
    
    
    4,956
    
    
    
    4,522212,972
    
    
    
    176,177Less: treasury stock, at cost; 3,396 and 1,943 shares at March 31, 2008 and
December 31, 2007, respectively
    
    
    (102,219
    )
    
    
    (37,221
    )Total stockholders equity
    
    
    110,753
    
    
    
    138,956$
    706,794
    
    
    $
    558,380
  1




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 (In thousands, except per share data)
 Three Months EndedMarch 31,2008
    
    2007Revenues:Net revenue from unconsolidated joint business
    
    $
    49,795
    
    
    $
    39,122Royalties on product licenses
    
    
    31,583
    
    
    
    19,293License, milestone and other revenues
    
    
    9,357
    
    
    
    19,05490,735
    
    
    
    77,469Expenses:Cost of goods sold
    
    
    2,170
    
    
    
    1,904Research and development
    
    
    30,549
    
    
    
    30,626Selling, general and administrative
    
    
    24,531
    
    
    
    25,129Amortization of intangibles
    
    
    602
    
    
    
    45857,852
    
    
    
    58,117Operating income from continuing operations
    
    
    32,883
    
    
    
    19,352Other income (expense):Investment income  net
    
    
    3,734
    
    
    
    3,095Interest expense
    
    
    (3,131
    )
    
    
    (1,803
    )Other (expense) income  net
    
    
    (1,007
    )
    
    
    (438
    )Income from continuing operations before income taxes
    
    
    32,479
    
    
    
    20,206Income tax provision
    
    
    816
    
    
    
    511Net income from continuing operations
    
    
    31,663
    
    
    
    19,695Loss from discontinued operations
    
    
    (2,426
    )
    
    
    (13,054
    )Net income
    
    $
    29,237
    
    
    $
    6,641Basic and diluted income (loss) per common share:Basic earnings (loss):Income from continuing operations
    
    $
    0.55
    
    
    $
    0.34Loss from discontinued operations
    
    $
    (0.04
    )
    
    $
    (0.23
    )Net income
    
    $
    0.51
    
    
    $
    0.12Diluted earnings (loss):Income from continuing operations
    
    $
    0.52
    
    
    $
    0.33Loss from discontinued operations
    
    $
    (0.04
    )
    
    $
    (0.21
    )Net income
    
    $
    0.49
    
    
    $
    0.12Weighted average shares of common stock outstanding:Basic
    
    
    57,130
    
    
    
    57,302Diluted
    
    
    64,657
    
    
    
    61,733
  2




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 (In thousands)
 Three Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    29,237
    
    
    $
    6,641Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization
    
    
    3,081
    
    
    
    2,835Non-cash compensation charges
    
    
    5,324
    
    
    
    4,748Impact of inventory step-up related to inventory sold
    
    
    36
    
    
    
    965Other
    
    
    
    
    
    
    (29
    )Changes in assets and liabilities:Receivables
    
    
    276
    
    
    
    (2,475
    )Inventory
    
    
    269
    
    
    
    (4,125
    )Prepaid expenses and other current assets
    
    
    528
    
    
    
    (1,142
    )Other assets
    
    
    (750
    )
    
    
    1,366Accounts payable and accrued expenses
    
    
    (7,623
    )
    
    
    (5,764
    )Unearned revenue
    
    
    (2,772
    )
    
    
    18,120Accrued post-retirement benefit cost
    
    
    10
    
    
    
    406Net cash provided by operating activities
    
    
    27,616
    
    
    
    21,546Cash flows from investing activities:Purchases of investments (restricted and unrestricted)
    
    
    (38,239
    )
    
    
    (47,468
    )Maturities and sales of investments (restricted and unrestricted)
    
    
    52,948
    
    
    
    83,561Purchase of patent rights
    
    
    (8,000
    )
    
    
    Net additions to property, equipment and leasehold improvements
    
    
    (803
    )
    
    
    (729
    )Proceeds from sale of equipment and other
    
    
    
    
    
    
    28Net cash provided by investing activities
    
    
    5,906
    
    
    
    35,392Cash flows from financing activities:Proceeds from the exercise of stock options and employee purchase plan
    
    
    1,800
    
    
    
    2,946Proceeds from the issuance of 2038 Notes
    
    
    200,000
    
    
    
    Purchase of treasury shares
    
    
    (64,998
    )
    
    
    Debt issuance costs
    
    
    (6,711
    )
    
    
    Repurchase of a portion of the 2023 Notes
    
    
    (13,000
    )
    
    
    Net cash provided by financing activities
    
    
    117,091
    
    
    
    2,946Net increase in cash and cash equivalents
    
    
    150,613
    
    
    
    59,884Effect of exchange rate changes on cash and cash equivalents
    
    
    23
    
    
    
    13Cash and cash equivalents at beginning of period
    
    
    162,737
    
    
    
    42,028Cash and cash equivalents at end of period
    
    $
    313,373
    
    
    $
    101,925Cash paid for taxes
    
    $
    108
    
    
    $
    Cash paid for interest
    
    $
    2,444
    
    
    $
    2,438
  3




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




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
   Three Months EndedMarch 31,2008
    
    2007Co-promotion profit and reimbursement of sales
force and marketing related costs
    
    $
    47,346
    
    
    $
    36,660Reimbursement of manufacturing costs
    
    
    2,449
    
    
    
    2,462Net revenue from unconsolidated joint business
    
    $
    49,795
    
    
    $
    39,122
 Royalties on Product Licenses
   Licenses, Milestones and Other Revenues
  5




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
      6




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
 Earnings Per Share
   Three Months EndedMarch 31,2008
    
    2007Income from continuing operations  basic
    
    $
    31,663
    
    
    $
    19,695Add: Interest and amortization of debt issuance
costs related to dilutive convertible debt
    
    
    2,219
    
    
    
    756Income from continuing operations  diluted
    
    $
    33,882
    
    
    $
    20,451Weighted average common shares outstanding  basic
    
    
    57,130
    
    
    
    57,302Dilutive effect of options and stock awards
    
    
    683
    
    
    
    523Dilutive effect of 2025 Notes
    
    
    3,908
    
    
    
    3,908Dilutive effect of 2023 Notes
    
    
    2,936
    
    
    
    Weighted-average common shares and dilutive potential
common shares  diluted
    
    
    64,657
    
    
    
    61,733Income per share from continuing operations:Basic
    
    $
    0.55
    
    
    $
    0.34Diluted
    
    $
    0.52
    
    
    $
    0.33
  7




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
  Three Months EndedMarch 31,2008
    
    2007Common share equivalents
    
    
    2,465
    
    
    
    2,999Convertible note interest and amortization
of debt issuance expense not added back
under the if converted method
    
    $
    1,591
    
    
    $
    1,454
 Comprehensive Income
  Three Months EndedMarch 31,2008
    2007Net income
    
    $
    29,237
    
    
    $
    6,641Other comprehensive income:Foreign currency translation adjustments
    
    
    33
    
    
    
    79Unrealized holding gains during period
    
    
    401
    
    
    
    302434
    
    
    
    381Total comprehensive income
    
    $
    29,671
    
    
    $
    7,022
  March 31,
    
    December 31,2008
    
    2007Cumulative foreign currency translation adjustment
    
    $
    4,375
    
    
    $
    4,342Unrealized loss on available-for-sale securities
    
    
    581
    
    
    
    180Accumulated other comprehensive income
    
    $
    4,956
    
    
    $
    4,522
 Fair Value Measurements
   Accounting for StockBased Compensation
  8




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
   Stock Options
    Three Months EndedMarch 31,2008
    
    2007Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    46.57
    %
    
    
    50.48
    %Risk-free interest rate
    
    
    3.54
    %
    
    
    4.71
    %Expected term (years)
    
    
    4.67
    
    
    
    4.57
 Restricted Assets
  9




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
 Inventory
   March 31,
    
    December 31,2008
    
    2007Raw materials
    
    $
    934
    
    
    $
    1,704Work in process
    
    
    10,687
    
    
    
    8,595Finished goods on hand, net
    
    
    3,799
    
    
    
    4,614Inventory subject to return
    
    
    5,252
    
    
    
    6,151Total inventory
    
    $
    20,672
    
    
    $
    21,064
   Intangible Assets
  March 31, 2008
    
    December 31, 2007Carrying
    
    Accumulated
    
    Net Book
    
    Carrying
    
    Accumulated
    
    Net BookAmount
    
    Amortization
    
    Value
    
    Amount
    
    Amortization
    
    ValueNovantrone
    
    $
    46,009
    
    
    $
    (44,921
    )
    
    $
    1,088
    
    
    $
    46,009
    
    
    $
    (44,558
    )
    
    $
    1,451Acquired patent estate
    
    
    8,785
    
    
    
    (347
    )
    
    
    8,438
    
    
    
    770
    
    
    
    (198
    )
    
    
    572Acquired licenses
issued to other
companies
    
    
    3,984
    
    
    
    (1,119
    )
    
    
    2,865
    
    
    
    3,984
    
    
    
    (1,041
    )
    
    
    2,943Total
    
    $
    58,778
    
    
    $
    (46,387
    )
    
    $
    12,391
    
    
    $
    50,763
    
    
    $
    (45,797
    )
    
    $
    4,966
  10




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
  Consolidation of Facilities
 Restructuring Plan
   Three Months EndedMarch 31,2008
    
    2007Opening liability  January 1
    
    $
    1,556
    
    
    $
    1,897Accrual for severance payments
    
    
    
    
    
    
    837Accrual for lease payments
    
    
    
    
    
    
    386Cash paid for severance
    
    
    (410
    )
    
    
    (1,071
    )Cash paid for rent
    
    
    (1,146
    )
    
    
    (122
    )Ending liability  March 31
    
    $
    0
    
    
    $
    1,927
 Corporate headquarters
  11




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
 Three Months EndedMarch 31,2008
    
    2007Opening liability  January 1
    
    $
    544
    
    
    $
    1,924Accretion expense
    
    
    
    
    
    
    21Cash paid for rent
    
    
    (544
    )
    
    
    (1,434
    )Ending liability  March 31
    
    $
    0
    
    
    $
    511
 Oxford, England
   Three Months EndedMarch 31,2008
    
    2007Opening liability  January 1
    
    $
    2,882
    
    
    $
    4,062Cash paid for rent
    
    
    (473
    )
    
    
    (153
    )Other (including accretion)
    
    
    101
    
    
    
    18Ending liability  March 31
    
    $
    2,510
    
    
    $
    3,927
 Employee Post-Retirement Plan and Other
 (a) Post-Retirement Plan
  12




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
   Three Months EndedMarch 31,2008
    
    2007Service costs for benefits earned during the
period
    
    $
    
    
    
    $
    287Interest costs on accumulated post-retirement
benefits obligation
    
    
    44
    
    
    
    115Amortization of initial benefits attributed
to past
services
    
    
    
    
    
    
    2Amortization of loss
    
    
    
    
    
    
    5Net post-retirement benefit cost
    
    $
    44
    
    
    $
    409
 (b) Sabbatical Leave Accrual
  (c) Nonqualified Deferred Compensation Plan
  Income Taxes
  13




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
    Discontinued Operations
  14




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
     Three Months EndedMarch 31,2008
    
    2007Net revenue
    
    $
    5,829
    
    
    $
    10,430Pretax loss
    
    $
    (2,492
    )
    
    $
    (13,369
    )Loss from discontinued operations
    
    $
    (2,426
    )
    
    $
    (13,054
    )
  15




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
  March 31,
    
    December 31,2008
    
    2007Assets:Accounts receivable
    
    $
    16,029
    
    
    $
    18,411Prepaid expenses and other assets
    
    
    381
    
    
    
    470Inventories (assets held for sale)
    
    
    5,184
    
    
    
    5,098Property, plant and equipment (assets held for sale)
    
    
    1,751
    
    
    
    1,463Assets related to discontinued operations
    
    $
    23,345
    
    
    $
    25,442Liabilities:Accounts payable and accrued expenses
    
    $
    11,340
    
    
    $
    13,382Collaboration profit share
    
    
    
    
    
    
    2,783Unearned revenue
    
    
    28,759
    
    
    
    29,574Total liabilities
    
    $
    40,099
    
    
    $
    45,739
 (OSI) Eyetech Divestiture  Severance Costs
   Three Months EndedMarch 31,2008
    
    2007Opening liability at January 1
    
    $
    800
    
    
    $
    2,584Accrual for severance and retention bonuses
    
    
    1,087
    
    
    
    2,290Cash paid for severance and retention bonuses
    
    
    (90
    )
    
    
    (3,397
    )Ending liability
    
    $
    1,797
    
    
    $
    1,477
 (OSI) Eyetech Integration  Facility Restructuring
  16




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
   Three Months EndedMarch 31,2008
    
    2007Opening liability at January 1
    
    $
    3,282
    
    
    $
    2,053Accrual for lease termination costs
    
    
    
    
    
    
    2,710Accretion expense
    
    
    40
    
    
    
    35Cash paid for rent
    
    
    (1,189
    )
    
    
    (745
    )Sublease income
    
    
    1,374
    
    
    
    407Ending liability
    
    $
    3,507
    
    
    $
    4,460
 Convertible Debt
  17




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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (continued)
(Unaudited)
     Subsequent Event
  
 18




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 Overview
   - ®
 19




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1A
  Quarterly Update
  20




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Subsequent Events
  Critical Accounting Policies
  21




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Revenue Recognition
 Net Revenue from Unconsolidated Joint Business
  License Fees and Milestones
   22




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Inventory
   Stock-Based Compensation
   Accruals for Clinical Research Organization and Clinical Site Costs
  23




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Income Taxes
    24




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Investments and Other-than-Temporary Impairments of Available-for-Sale Marketable Securities
   Goodwill and Other Long-Lived Assets
   25




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Discontinued Operations
   (a) Macugen Product Sales
    26




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(b) Macugen Collaborative Revenue
   (c) Macugen Milestone Revenue
   27




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Revenues
 Three Months EndedMarch 31,(in thousands)2008
    
    2007
    
    $ ChangeNet revenue from unconsolidated joint
business
    
    $
    49,795
    
    
    $
    39,122
    
    
    $
    10,673Royalties on product licenses
    
    
    31,583
    
    
    
    19,293
    
    
    
    12,290License, milestone and other revenues
    
    
    9,357
    
    
    
    19,054
    
    
    
    (9,697
    )Total revenues
    
    $
    90,735
    
    
    $
    77,469
    
    
    $
    13,266
 Net Revenue from Unconsolidated Joint Business
  Royalties on Product Licenses
  License, Milestone and Other Revenues
  28




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29




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Expenses
 Three Months EndedMarch 31,(in thousands)2008
    
    2007
    
    $ ChangeCost of goods sold
    
    $
    2,170
    
    
    $
    1,904
    
    
    $
    266Research and development
    
    
    30,549
    
    
    
    30,626
    
    
    
    (77
    )Selling, general and administrative
    
    
    24,531
    
    
    
    25,129
    
    
    
    (598
    )Amortization of intangibles
    
    
    602
    
    
    
    458
    
    
    
    144$
    57,852
    
    
    $
    58,117
    
    
    $
    (265
    )
 Cost of Goods Sold
  Research and Development
   30




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##### Table of Contents



Selling, General and Administrative
  Other
Income and Expense
 Three Months EndedMarch 31,(in thousands)2008
    
    2007
    
    $ ChangeInvestment income-net
    
    $
    3,734
    
    
    $
    3,095
    
    
    $
    639Interest expense
    
    
    (3,131
    )
    
    
    (1,803
    )
    
    
    (1,328
    )Other income (expenses)-net
    
    
    (1,007
    )
    
    
    (438
    )
    
    
    (569
    )Total other income (expenses)
    
    $
    (404
    )
    
    $
    854
    
    
    $
    (1,258
    )
    31




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Discontinued
Operations
  Liquidity and Capital Resources
   32




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Commitments and Contingencies
  2009-
    
    2011-
    
    2013 &2008
    
    2010
    
    2012
    
    ThereafterContractual Obligations:Senior convertible debt (a)
    
    $
    7,526
    
    
    $
    25,505
    
    
    $
    25,505
    
    
    $
    683,878Operating leases
    
    
    9,280
    
    
    
    22,647
    
    
    
    21,871
    
    
    
    82,364Purchase obligations (b)
    
    
    27,693
    
    
    
    47,700
    
    
    
    8,300
    
    
    
    8,400Obligations related to exit
activities (c)
    
    
    1,798
    
    
    
    2,316
    
    
    
    
    
    
    
    1,486Total contractual obligations
    
    $
    46,297
    
    
    $
    98,168
    
    
    $
    55,676
    
    
    $
    776,128
 
 (a)
    
    Includes interest payments at a rate of (i) 3.25% per annum relating to the $137.0 million
principal amount of the 2023 Notes, (ii) 2% per annum relating to the $115.0 million principal
amount of our 2% Convertible Senior Subordinated Notes due 2025, or our 2025 Notes, and (iii)
3% per annum relating $200.0 million principal amount of the 2038 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. If the holders of the 2023 Notes require us to purchase all or a portion of the
2023 Notes in September 2008, our future obligation for interest payments shown in the table
and the repayment of principal obligation included in the 2013 & Thereafter column would
decrease. 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. Holders of the 2038 Notes have the
right to require us to purchase, for cash, all of the 2038 Notes, or a portion thereof, in
January 2013.(b)
    
    Includes inventory commitments, commercial and research commitments and other significant
purchase commitments. Also includes our share of the remaining future commitment related to
the Tarceva global development costs of approximately $84 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
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##### Table of Contents



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.
    
    We have outstanding letters of credit of $7.0 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. We curtailed
this plan in 2007, however, certain employees, board members and qualified dependents
remain eligible for these benefits. Eligibility is determined based on age and years
of service. We had accrued liability for post-retirement benefit costs of $3.2 million
at March 31, 2008.
    
    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 in November 2005, we assumed various
contracts related to the in-licensing, development, manufacture and marketing of
Macugen. These license agreements represent rights and obligations of our subsidiary,
(OSI) Eyetech. 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.
 Accounting Pronouncements
   34




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35




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Forward-Looking Statements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risks
   36




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Item 4. Controls and Procedures
  Evaluation of Our Disclosure Controls and Procedures
 CEO/CFO Conclusions about the Effectiveness of the Disclosure Controls and Procedures
 37




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Changes in Internal Control Over Financial Reporting.
 38




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Unregistered Sales of Equity Securities
  39




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##### Table of Contents



Issuer Purchases of Equity Securities
  Maximum Number (orTotal Shares (or Units)
    
    Approximate Dollar Value)Total Number of
    
    
    
    
    
    Purchased as Part of
    
    Shares (or Units) that MayShares (or Units)
    
    Average Price Paid
    
    Publicly Announced
    
    Yet Be Purchased Under thePeriod
    
    Purchased
    
    Per Share (or Unit)
    
    Plans or Programs
    
    Plans or ProgramsJanuary 1, 2008 
January 31, 2008
    
    
    1,452,800
    (1)
    
    $
    44.74
    
    
    
    N/A
    
    
    
    N/AFebruary 1, 2008 
February 29, 2008
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMarch 1, 2008 
March 31, 2008
    
    
    259,903
    (2)
    
    $
    50.02
    (2)
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    We used a portion of our proceeds from the issuance of our 2038 Notes to repurchase 1,452,800
shares concurrently with the offering in open market transactions for an aggregate price of $65.0
million.(2)
    
    On March 10, 2008 and March 11, 2008, we repurchased an aggregate of $13.0 million principal
amount of our 2023 Notes in open market transactions at a premium to their par value. The
repurchased 2023 Notes were subsequently cancelled. The table reflects the number of shares of
common stock into which the cancelled notes would have been convertible if the holders of such
notes exercised their right to convert the notes at the conversion price of $50.02 prior to the
maturity of the 2023 Notes in accordance with the terms of the Indebture for the 2023 Notes. 
 Item 3. Defaults Upon Senior Securities
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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 8-K, filed on December 17, 2007 (file no. 000-15190),
and incorporated herein by reference.4.1
    
    Indenture, dated January 9, 2008, by and between OSI Pharmaceuticals, Inc. and
The Bank of New York, filed by the Company as an exhibit to the Form 8-K filed on
January 15, 2008 (file no. 000-15190), and incorporated herein by reference.4.2
    
    Form of 3% Convertible Senior Subordinated Note Due 2038 (included in Exhibit
4.9), filed by the Company as an exhibit to the Form 8-K filed on January 15, 2008
(file no. 000-15190), and incorporated herein by reference.4.3
    
    Registration Rights Agreement, dated January 9, 2008, by and between OSI
Pharmaceuticals, Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities Inc., filed by the Company as an exhibit to the
Form 8-K filed on January 15, 2008 (file no. 000-15190), and incorporated herein by
reference.10.1
    
    Letter Agreement, dated January 1, 2008, by and between Dr. Daryl Granner and
OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 10-K filed on
February 28, 2008 (file no. 000-15190), and incorporated herein by reference.10.2
    
    Consulting Agreement, dated January 28, 2008, by and between OSI
Pharmaceuticals, Inc. and Herbert M. Pinedo, M.D., Ph.D., filed by the Company as an
exhibit to the Form 10-K filed on February 28, 2008 (file no. 000-15190), and
incorporated herein by reference.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a). (Filed herewith)
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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)
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##### Table of Contents



SIGNATURES
  OSI PHARMACEUTICALS, INC.(Registrant)Date: May 8, 2008
    
    
    
    /s/ Colin Goddard, Ph.D.Colin Goddard, Ph.D.Chief Executive OfficerDate: May 8, 2008
    
    
    
    /s/ Michael G. AtiehMichael G. AtiehExecutive Vice President, ChiefFinancial Officer and Treasurer(Principal Financial Officer)
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##### Table of Contents



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 8-K, filed on December 17, 2007 (file no. 000-15190),
and incorporated herein by reference.4.1
    
    Indenture, dated January 9, 2008, by and between OSI Pharmaceuticals, Inc. and
The Bank of New York, filed by the Company as an exhibit to the Form 8-K filed on
January 15, 2008 (file no. 000-15190), and incorporated herein by reference.4.2
    
    Form of 3% Convertible Senior Subordinated Note Due 2038 (included in Exhibit
4.9), filed by the Company as an exhibit to the Form 8-K filed on January 15, 2008
(file no. 000-15190), and incorporated herein by reference.4.3
    
    Registration Rights Agreement, dated January 9, 2008, by and between OSI
Pharmaceuticals, Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities Inc., filed by the Company as an exhibit to the
Form 8-K filed on January 15, 2008 (file no. 000-15190), and incorporated herein by
reference.10.1
    
    Letter Agreement, dated January 1, 2008, by and between Dr. Daryl Granner and
OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 10-K filed on
February 28, 2008 (file no. 000-15190), and incorporated herein by reference.10.2
    
    Consulting Agreement, dated January 28, 2008, by and between OSI
Pharmaceuticals, Inc. and Herbert M. Pinedo, M.D., Ph.D., filed by the Company as an
exhibit to the Form 10-K filed on February 28, 2008 (file no. 000-15190), and
incorporated herein by reference.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)
 44