OSI Pharmaceuticals Announces Year End 2005 Financial Results

OSI Pharmaceuticals, Inc. (Nasdaq: OSIP) announced todayits financial results for the Company's year ended December 31, 2005.The Company reported a net loss of $157.1 million (or $3.02 per share)for fiscal 2005 compared with $268.6 million (or $6.36 per share) forthe 12 month period ending December 31, 2004. The 2005 results reflectthe operations of Eyetech Pharmaceuticals, Inc. for the periodNovember 14, 2005 through December 31, 2005. On an adjusted basis, theCompany's net loss was $77.1 million (or $1.48 per share) for 2005compared to the net loss of $188 million (or $4.45 per share) for2004. Adjusted net loss and adjusted loss per share excludes purchaseaccounting adjustments, merger-related costs, and certain othersignificant items. In 2004, the Company changed its fiscal year endfrom September 30 to December 31.

With the Company's acquisition of Eyetech on November 14, 2005,the Company now has two major marketed products (one for the treatmentof cancer and another for age-related macular degeneration) and arobust pipeline offering both new indications for the marketedproducts and novel therapeutics in three disease areas: oncology, eyediseases, and diabetes. Total world-wide net sales of Tarceva(R)(erlotinib) for 2005 were $309 million. Total U.S. sales of Macugen(R)(pegaptanib sodium injection) for 2005 were $185 million.

Total revenues for 2005 were $174.2 million, an increase of $130.4million or 298% compared to revenues of $43.8 million for 2004. Theincrease was primarily due to the following new revenue streams in2005:
(i) net revenues from the unconsolidated joint business for
Tarceva of $84.7 million arising from the Company's
co-promotion arrangement with Genentech, Inc., the Company's
U.S. marketing collaborator for Tarceva. U.S. sales for
Tarceva recorded by Genentech were $275 million for 2005, the
first full year of sales since its launch in November 2004;

(ii) royalty revenues from Roche, the Company's international
partner for Tarceva, of $7.0 million based upon Tarceva sales
in countries outside the United States, totaling $34.2 million
following the approval of Tarceva in Switzerland in March
2005, Canada in July 2005, and the European Union in September
2005;

(iii) Macugen sales in the United States and its territories of
$31.5 million between November 14, 2005 and December 31, 2005.
Macugen was approved by the FDA in December 2004 for treatment
of neovascular age-related macular degeneration, or wet AMD,
and launched by Eyetech and its co-promotion partner Pfizer
Inc. in January 2005;

(iv) license revenues of $14.2 million related to upfront fees and
milestone payments relating to worldwide non-exclusive license
agreements under the Company's DPIV patent portfolio covering
the use of DPIV inhibitors for treatment of type 2 diabetes
and related indications; and

(v) collaborative program revenues from Pfizer for its share of
development costs for Macugen totaling $4.1 million for the
period November 14, 2005 through December 31, 2005.

Total operating expenses for 2005 were $337.5 million, an increaseof $30.7 million or 10% compared to $306.9 million for the prior year.Total research and development expenses were $126.0 million and $118.2million in 2005 and 2004, respectively. Total selling, general andadministrative expenses were consistent at $98.4 million in both 2005and 2004. The 2005 expenses reflected costs associated with Eyetech'sresearch and development activities, and selling, general andadministrative operations for the period November 14, 2005 throughDecember 31, 2005, as well as cost of goods sold associated withMacugen sales and Macugen profit share expense with Pfizer.

On an adjusted basis, operating expenses were $257.6 million and$229.7 million in 2005 and 2004, respectively, and exclude purchaseaccounting adjustments, merger-related costs, and certain othersignificant items. Adjusted research and development expenses were$124.7 million and $111.7 million for 2005 and 2004, respectively,reflecting the increase in expenses associated with the Eyetechoperations in the fourth quarter of 2005. Adjusted selling, generaland administrative expenses were $93.2 million and $92.3 million for2005 and 2004, respectively. This decrease was primarily due to thechange in the Company's accounting for Genentech's commercial expensesrelating to Tarceva. The Tarceva expenses are no longer being includedin selling, general and administrative expense and are now beingincluded as part of the co-promotion profit and included in thecalculation of net revenues from unconsolidated joint business in theaccompanying consolidated statement of operations for 2005. Thisdecrease was offset by the increase in selling, general andadministrative expenses associated with the activities of Eyetech inthe fourth quarter of 2005. The adjusted figures above are reconciledto reported U.S. GAAP amounts in the table accompanying this report.

In November 2005, OSI acquired Eyetech for approximately $690million in cash (excluding merger related costs), and approximately5.7 million of OSIP shares. Net of Eyetech's cash and investments atclosing and including the value of converting stock options issued anddeal related costs, OSI values the acquisition at approximately $638million.

In December 2005, the Company issued $115 million aggregateprincipal amount of convertible senior subordinated notes in a privateplacement for net proceeds of approximately $111 million, of whichapproximately $24 million was used to purchase concurrently with theoffering 500,000 shares of the Company's common stock and call spreadoptions with respect to the Company's common stock. The call spreadtransaction is intended to reduce the potential dilution upon futureconversion of the notes. The call spread provides the Company with theoption, subject to certain customary exceptions, to acquire shares ofthe Company's common stock at the initial conversion price ofapproximately $29.43 per share, which offset the delivery of newlyissued shares upon settlement of conversions of the notes. This wouldhave the impact of increasing the effective conversion price of thenotes from the Company's perspective to $40.00 per share, representinga conversion premium of approximately 70% to the per share closingprice on December 21, 2005. The Company closed the year withapproximately $180 million in cash and investments.

The accompanying table details the charges excluded in thecalculation of the Company's adjusted amounts above, includingpurchase accounting adjustments, merger related costs and othersignificant items. Management believes that these charges are notreflective of the Company's normal on-going operations. These adjustedfinancial results can assist in making meaningful period-over-periodcomparisons and in identifying operating trends that could otherwisebe masked or distorted by the items subject to the adjustments.Management uses these adjusted results internally to evaluate theperformance of the business, including the allocation of resources aswell as the planning and forecasting of future periods and believesthese results are useful to others in analyzing operating performanceand trends of the Company. A reconciliation to reported U.S. GAAPamounts is provided in the table accompanying this report. Theadjusted amounts are not, and should not be viewed as, substitutes forU.S. GAAP amounts.

Conference Call

OSI will host a conference call reviewing the Company's financialresults, product portfolio and business developments on March 8, 2006at 7:30AM (Eastern Time). To access the live webcast and slides or thefourteen-day archive via the Internet, log on to www.osip.com. Pleaseconnect to the Company's website at least 15 minutes prior to theconference call to ensure adequate time for any software download thatmay be needed to access the webcast. Alternatively, please call 1-866-713-8307 (U.S.) or 1-617-597-5307 (international) to participatein the call. The conference ID number for the live call is 95579613.Telephone replay is available approximately two hours after the callthrough April 8, 2006. To access the replay, please call 1-888-286-8010 (U.S.) or 1-617-801-6888 (international). The conferenceID number is 35068937.

About OSI Pharmaceuticals

OSI Pharmaceuticals is committed to "shaping medicines andchanging lives" by discovering, developing and commercializinghigh-quality and novel pharmaceutical products that extend life orimprove the quality of life for patients with cancer, eye diseases anddiabetes. The Company operates through three business teams, (OSI)Oncology, (OSI) Eyetech and (OSI) Prosidion. (OSI) Oncology is focusedon developing molecular targeted therapies designed to change theparadigm of cancer care. (OSI) Eyetech specializes in the developmentand commercialization of novel therapeutics to treat diseases of theeye. (OSI) Prosidion is committed to the generation of novel, targetedtherapies for the treatment of type 2 diabetes and obesity. OSI'sflagship product, Tarceva(R) (erlotinib), is the first drug discoveredand developed by OSI to obtain FDA approval and the only EGFRinhibitor to have demonstrated the ability to improve survival in bothnon-small cell lung cancer and pancreatic cancer patients. OSI marketsTarceva through partnerships with Genentech, Inc. in the United Statesand with Roche throughout the rest of the world. Macugen(R)(pegaptanib sodium injection) is approved in the United States andEurope for the treatment of neovascular age-related maculardegeneration. OSI commercializes Macugen in partnership with PfizerInc. For additional information about OSI, please visithttp://www.osip.com.

This news release contains forward-looking statements. Thesestatements are subject to known and unknown risks and uncertaintiesthat may cause actual future experience and results to differmaterially from the statements made. Factors that might cause such adifference include, among others, the completion of clinical trials,the FDA review process and other governmental regulation, OSI's andits collaborators' abilities to successfully develop and commercializedrug candidates, competition from other pharmaceutical companies, theability to effectively market products, and other factors described inOSI Pharmaceuticals' filings with the Securities and ExchangeCommission.

OSI Pharmaceuticals, Inc. and Subsidiaries
Selected Financial Information

Consolidated Statements
of Operations
(In thousands, except -------------------------------------------
per share data) Three Months Ended Twelve Months Ended
(unaudited) December 31, December 31,
--------------------- ---------------------
2005 2004 2005 2004*
----------- --------- ---------- ----------
Revenues:
Net revenue from
unconsolidated joint
business $ 29,835 $ - $ 84,727 $ -
Product sales 31,886 360 32,411 1,285
Sales commissions 8,106 11,396 29,684 35,854
Royalties on product
sales 5,175 - 7,127 -
License and milestone
revenues 7,427 591 16,164 6,616
Collaborative program
revenues 4,081 - 4,081 -
----------- --------- ---------- ----------
Total revenues 86,510 12,347 174,194 43,755
----------- --------- ---------- ----------

Expenses:
Cost of goods sold 15,246 (1,247) 18,882 7,628
Collaborative profit
share 12,312 - 12,312 -
Net expense from
unconsolidated joint
business - 7,661 - 7,661
Research and
development 39,947 31,913 125,953 118,206
Acquired in-process
research and
development 60,900 - 64,442 32,785
Selling, general and
administrative 32,628 20,313 98,393 98,402
Impairment of
intangible asset - - - 24,599
Amortization of
intangibles 6,108 3,804 17,544 17,572
----------- --------- ---------- ----------
Total expenses 167,141 62,444 337,526 306,853
----------- --------- ---------- ----------

Loss from operations (80,631) (50,097) (163,332) (263,098)

Other income (expense):
Investment income - net 2,760 2,380 13,322 6,152
Interest expense (1,408) (1,219) (5,064) (11,835)
Other expense (income)
- net (767) 541 (2,049) 147

----------- --------- ---------- ----------
Net loss $(80,046) $(48,395) $(157,123) $(268,634)
=========== ========= ========== ==========


Basic and diluted net
loss per common share $(1.47) $(1.02) $(3.02) $(6.36)
=========== ========= ========== ==========


Weighted average shares
of common stock
outstanding 54,432 47,375 52,078 42,226
=========== ========= ========== ==========



Condensed Consolidated December 31, December 31,
Balance Sheet 2005 2004
(In thousands) ----------- -----------
(unaudited)


Cash and investments
securities (including
restricted
investments) $ 179,606 $656,239
=========== =========

Total assets $1,058,582 $780,116
=========== =========

Total stockholders'
equity $578,467 $539,390
=========== =========


* Results for the 12 month period ended December 31, 2004 are derived
from the results of our operations for the last nine months of our
fiscal year ended September 30, 2004 and the transition quarter
ended December 31, 2004. Such amounts are unaudited and are
presented for comparison purposes.



OSI Pharmaceuticals, Inc. and Subsidiaries
Reconciliation From Reported Net Loss and Reported Basic and Diluted
Net Loss Per Share to Adjusted Net Loss and Adjusted Basic and
Diluted Net Loss Per Share
(Unaudited)
(In thousands, except per share data)

--------------------- ---------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2005 2004 2005 2004*
----------- --------- ---------- ----------


Reported net loss $(80,046) $(48,395) $(157,123) $(268,634)
Purchase accounting
adjustments 69,990 - 73,532 32,785
Merger-related costs 975 - 2,355 -
Other significant items 2,308 1,782 4,088 47,861
----------- --------- ---------- ----------
Adjusted net loss $(6,773) $(46,613) $(77,148) $(187,988)
=========== ========= ========== ==========

Reported basic and
diluted net loss per
common share $(1.47) $(1.02) $(3.02) $(6.36)
Purchase accounting
adjustments 1.29 - 1.41 0.78
Merger-related costs 0.02 - 0.05 -
Other significant items 0.04 0.04 0.08 1.13
----------- --------- ---------- ----------
Adjusted basic and
diluted net loss per
common share $(0.12) $(0.98) $(1.48) $(4.45)
=========== ========= ========== ==========

Adjusted net loss and adjusted basic and diluted net loss per common
share shown above include the following:

Purchase accounting adjustments:
In-process research
and development
charges (a) $ 60,900 $ - $ 64,442 $ 32,785
Sale of acquired
inventory written up
to fair value (b) 6,827 - 6,827 -
Intangible
amortization (c) 2,263 - 2,263 -
----------- --------- ---------- ----------
Total purchase
accounting
adjustments 69,990 - 73,532 32,785
----------- --------- ---------- ----------
Merger-related costs:
Restructuring costs (d) 975 - 975 -
Buyout of Prosidion
options (e) - - 1,380 -
----------- --------- ---------- ----------
Total merger-
related costs 975 - 2,355 -
----------- --------- ---------- ----------
Other significant
items:
Impairment of
Gelclair intangible (f) - - - 24,599
Restructuring charges (g) 2,308 3,150 4,088 12,598
Gelclair inventory
reserve (h) - (1,368) - 7,197
Guaranteed interest
on redemption of debt (i) - - - 3,467
----------- --------- ---------- ----------
Total other
significant items 2,308 1,782 4,088 47,861
----------- --------- ---------- ----------

----------- --------- ---------- ----------
Total adjustments $ 73,273 $ 1,782 $ 79,975 $ 80,646
=========== ========= ========== ==========

* Results for the 12 month period ended December 31, 2004 are derived
from the results of our operations for the last nine months of our
fiscal year ended September 30, 2004 and the transition quarter
ended December 31, 2004. Such amounts are unaudited and are
presented for comparison purposes.

(a) In-process research and development related to the (i) the
acquisition of Eyetech Pharmaceuticals, Inc. of $60,900 in November
2005, (ii) the acquisition of the minority interest in Prosidion
Limited of $3,542 in April 2005 (iii) the purchase of Probiodrug AG
assets of $32,785 in 2004.

(b) Represents sale of Eyetech inventory written up to fair value
in the acquisition.

(c) Represents the amortization of the Macugen intangible assets
recognized with the acquisition of Eyetech

(d) Represents severance charges related to planned workforce
reductions related to the Eyetech acquisition ($712 included in R&D,
$263 included in SG&A).

(e) Represents the buyout of Prosidion options, of which $577 is
included in R&D, and $803 is included in SG&A.

(f) Represents an impairment charge related to unamortized intangible
asset related to Gelclair rights.

(g) Represents $2,308 of facility restructuring charges included in
SG&A for the three months ended December 2005; represents facility
restructuring charges of $1,832 in R&D and $1,318 in SG&A for the
three months ended December 2004; represents $4,088 of facility
restructuring charges in SG&A for the year ended December 2005; and
represents facility restructuring charges of $6,490 in R&D and $6,108
in SG&A for the year ended December 2004.

(h) Represents the net write off of Gelclair inventory for the year
ended December 31, 2004; and represents the reversal for a portion of
the Gelclair inventory write off for the three months ended December
31, 2004

(i) Represents the payment of remaining guaranteed interest
associated with the redemption of our 2009 Notes.


Reconciliation of adjusted operating expenses, adjusted research
and development, and adjusted selling, general and administrative
expenses included in the text of this press release:

Adjusted operating expenses of $257,551 for 2005 excludes from the
reported expenses of $337,526 the $79,975 of adjustments shown above.
Adjusted operating expenses of $229,675 for 2004 excludes from the
reported expenses of $306,853 the adjustments shown above of $80,646
except for $3,467 related to the guaranteed interest on redemption of
debt, which is included in interest expense.


Adjusted research and development expense of $124,664 for 2005
excludes $712 for severance cost and $577 related to the buyout of
Prosidion options from the reported expenses of $125,953. Adjusted
research and development expense of $111,716 for 2004 excludes $6,490
of facility restructuring costs from the reported expenses of
$118,206.


Adjusted selling, general and administrative expenses of $93,239
for 2005 excludes $4,351 for severance and facility realignment costs
and $803 related to the buyout of Prosidion options from the reported
expenses of $98,393. Adjusted selling, general and administrative
expenses of $92,294 for 2004 excludes $6,108 for facility realignment
costs from the reported expenses of $98,402.