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Executives

Kathy Galante - Head of IR and PR

Colin Goddard - CEO

Mike Atieh - CFO

Gabe Leung - EVP and President of Oncology

Analysts

Terry Coyne - J.P. Morgan

Maged Shenouda - UBS

Joel Sendek - Lazard Capital Markets

May-Kin Ho with Goldman Sachs

Nick Abbott - Lehman Brothers

Han Li - Stanford Group

Mike King - Rodman & Renshaw

Jason Kantor - RBC Capital Markets

OSI Pharmaceuticals Inc. (OSIP) Q1 2008 Earnings Call May 6, 2008 5:00 PM ET

Operator

Welcome to today's OSI Pharmaceuticals first quarter 2008 financial results conference call. Just as a reminder, this call is being recorded. A telephone replay will be available from 7 PM Central Time today through midnight March 6 by dialing 888-203-1112; alternatively it is 719-457-0820, with a passcode of 9608247.

Now at this time it's my pleasure to turn the conference over to Kathy Galante, Senior Director of Investor Relations. Ms. Galante. Please go ahead.

Kathy Galante

Thank you. Good afternoon and welcome to our first-quarter earnings call. Joining me today I have Colin Goddard, our Chief Executive Officer, Mike Atieh, our Chief Financial Officer, and Gabe Leung, President of our Oncology business, and Anker Lundemose, President of our Diabetes and Obesity business.

We will begin with Mike, who will provide you with a summary of the financial results, after which Colin will come back and discuss corporate development in our oncology and diabetes obesity programs.

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

Now over to Mike.

Mike Atieh

Thank you, Kathy. Good afternoon, everyone. This afternoon we reported that net income from continuing operations for the first quarter increased 61% to $32 million, or $0.52 per share, compared to $20 million, or $0.33 per share, a year ago. Total revenues rose to $91 million, an increase of 17%, driven by a 39% increase in Tarceva-related revenues, offset by lower levels of revenue related to business development activities and our DP-IV patent estate. I will discuss these results in more detail, starting with revenues.

Global sales of Tarceva reported by our collaborators Genentech and Roche for the first quarter totaled $267 million, a 35% increase over the prior period. The US portion amounted to $111 million, an increase of 10% over the first quarter of 2007. We recorded $50 million in revenue from our unconsolidated joint business related to US sales, representing an increase of 27% versus a year ago, and a Q1 conversion factor of 45%.

However, Q1 was positively impacted by lower-than-budgeted spending, resulting in a higher-than-expected level of profit share. Similar to what happened in 2007 when this occurred, we expect the conversion factor will be lower over the remaining part of the year as spending accelerates.

International sales of Tarceva by Roche for Q1 were $156 million, an increase of 63% versus a year ago, and a 13% increase on a sequential basis from Q4 2007. The weakening US dollar played a favorable role in the quarter's results, which also included $8 million in Japanese sales. This resulted in royalty income to us of $32 million. Including revenue from the amortization of milestones, all Tarceva-related revenue totaled $82 million for Q1, an increase of 39% from a year ago.

Turning to our DP-IV patent estate, royalty revenues increased to $6.4 million in Q1 '08, but overall DP-IV related revenue declined slightly versus the year ago due to license and milestone fees recognized in Q1 '07.

On a sequential basis, you'll note that royalties are lower than Q4 2007, primarily reflecting the tiered structure of our royalty agreement with Merck. The revocation of one of our DP-IV patents in Europe in March of this year had a minor impact this quarter. As previously disclosed, revocation of this one patent, while disappointing, is not expected to have a significant impact on our future royalty streams. You will recall that a couple of weeks ago, Merck reported $330 million in worldwide sales of its DP-IV inhibitors, including $44 million of ex-US sales, only a portion of which were in Europe.

Finally, as part of our program to monetize noncore assets, we signed another business development deal this quarter relating to TGF-beta that resulted in $2 million of one-time revenue. With respect to expenses, in total they were flat with expenses a year ago, and came in at $58 million.

R&D costs for Q1 totaled just over $30 million, with approximately 75% related to oncology and 25% related to diabetes and obesity. Tarceva-related spending was approximately 30% of our oncology R&D. SG&A totaled just under $25 million for Q1, with approximately 38% related to our oncology commercial operation. Oncology commercial costs increased versus Q1, reflecting the expansion of OSI's role in selling Tarceva, which commenced in Q2 '07, while G&A costs declined by almost $2 million due to one-time items included in Q1 2007 and a continuation of focused cost management. Equity-based compensation costs included in operating expenses for the quarter totaled $5.5 million, an increase of $1.5 million compared to Q1 2007.

Investment income rose to $3.7 million, a significant increase over Q1 '07, reflecting increased cash balances. Interest expense and other expenses increased from higher interest costs and amortization of bond issuance costs, respectively, relating to the issuance of our 2038 notes. You will note the inclusion of a tax provision reflecting essentially the alternative minimum tax since we continued to utilize our significant level of net operating losses.

Finally, our loss from discontinued operations came in at under $3 million for the quarter, with the negative cash flow impact totaling approximately $2 million.

Turning to the balance sheet, we exited the quarter with $441 million of cash and investments on our balance sheet, an increase of $136 million from our year-end balance, due primarily to the recent convertible note offering that we discussed in detail on our year-end conference call. Cash flow from operations was approximately $28 million for the quarter.

Finally, during the first quarter ending in April, we opportunistically repurchased $38 million of our 2023 notes at a slight premium to par. However, the benefit from avoiding the 3.25 coupon on the repurchased notes, reduced by the loss of investment income on the cash used, is expected to offset most of the premium we paid.

The repurchase of the notes, we moved approximately 760,000 shares of potential dilution, assuming these notes would convert in September of this year. Coupled with the approximately 1.5 million treasury shares we purchased in January, we have now removed or offset approximately 75% of the dilution from the potential conversion of the 2023 notes in September. Now to Colin.

Colin Goddard

Thanks Mike. Good evening, everybody. During the first quarter of 2008, we continued to build on the core tenant of the business strategy we established during 2007. That is pursuing Tarceva aggressively, and appropriately balancing financial performance, which we consider to be a prerequisite for future success, with disciplined reinvestment in a differentiated pipeline of emerging, wholly-owned clinical assets in oncology and diabetes.

Part of our strategy of transition to profitability in 2007 included a decision to divest our eye business following the disappointing outcome of the 2005 Eyetech transaction. As a result, Eyetech financials have been reported as discontinued operations since this time last year. We have until recently been exploring, among other opportunities, a financed management buyout, but have been forced to abandon this approach given the downturn in the financing environment. As a result, we have pursued other alternatives aggressively this quarter, and recently signed a timesheet with a third party with the expectation that we will sign a definitive agreement during the coming quarter.

The pending transaction will allow us to ensure that Macugen continues to be available for patients, and also allows us to participate in any upside resulting from a possible turnaround in the brand arising as a result of the emergence of any safety-related complications with competitive products, the recently FDA approved Luer lock syringe presentation of the product, expansion to new indications, or the development of an extended release formulation.

However, we want to be clear to our shareholders that at this juncture, should we for any unforeseen reasons be unable to complete the proposed transaction, we would seek to close down the business in a timely and cost-effective manner while allowing a commitment to supply patients on Macugen through the duration of their treatment. As such, we intend to definitively bring closure to this disappointing chapter in the company's history during the current quarter.

Turning to our oncology business, 1Q US Tarceva sales of $111 million were up 10% over the prior-year period or approximately flat quarter-on-quarter, while rest of world sales of $156 million, demonstrated continued robust growth, up 63% versus the prior-year quarter and 30% versus 4Q 2007. The continued growth is especially noteworthy when you consider that only approximately $8 million of these sales were from the initial phases of the Japanese launch. You will recall that the launch process agreed with the Japanese authorities involves a close in monitoring for the first 3000 or so patients, and in fact, initial uptake have exceeded Chugai's expectations.

Tarceva is now approved in 88 countries worldwide and continues to gain market share in both lung and pancreatic indications. Back in the US, Genentech's tracking data indicates that non-small cell lung cancer second-line penetration and duration of therapy, and front-line pancreatic cancer penetration, have all increased versus the prior-year period.

The key tripartite Phase II/III studies continue on track. With all preplanned interim looks now past us, both BETA lungs and SATURN remain on track for top-line data in the second half of this year. A PDUFA date is scheduled in September for our supplement to the NDA covering the higher 300 milligram a day versus 150 milligram a day maximum tolerated dose and exposure profile in patients receiving Tarceva who continue to smoke. We are also continuing to pursue a program at cellular carcinoma, combining antiangiogenic targeting the VEGF receptor antagonists, such as Nexavar or Avastin, with Tarceva.

There continues to be much commentary surrounding the various key competitor events that are widely anticipated during the first half of 2008. AstraZeneca have indicated that the Zactima data will be communicated in the third quarter, but we will get clarity on the Erbitux data from the Flex study at ASCO, at which point in time we will all be able to better assess potential impact on the Tarceva business. We continue to believe that many of the pricing, both of delivery, reimbursement challenges to Tarceva that exist in the US are actually advantageous in most markets around the world.

And that it remains likely when we consider the full amount in the Tarceva phase III study data and competitive development, but Tarceva will continue to be competitively positioned and exhibit growth on a global basis going forward into 2009. We anticipate some 30 plus abstracts primarily from our ISP programs on Tarceva at ASCO this year, and we also enjoyed a successful AACR meeting, where, in addition to approximately 70 abstracts covering the Company's emerging portfolio, and a growing sense of the importance of EMT, important science was presented on the increasingly complex role of KRAS mutations in Tarceva therapy, on the ability of Tarceva, but not anti-EGFR antibodies, to block signaling through EGFR C3, and on the potential value of adding new therapies to continuing Tarceva treatment in a new treatment beyond progression paradigm.

We and our colleagues at Roche were disappointed that the appraisal committee at NICE has recommended against MHS funding of Tarceva treatment for lung cancer patients, potentially isolating England as the only Western European country not to fund Tarceva therapy. Roche will again appeal this ruling. Aggressive defense of Tarceva's intellectual property position around the world in the face of increasingly aggressive tactics from the generic industry remains a key goal for us in partnership with our collaborators at Genentech and Roche.

We have recently appealed an Indian court's ruling denying us an injunction against the Indian company Cipla, who are now distributing a generic form of Tarceva in India, despite the fact that we have a granted patent in India and will continue to vigorously defend our intellectual property in that country. In addition, we are pursuing an aggressive strategy in the US, where we filed a reissue request for the 498 Tarceva compositions of matter patents in February, in order to correct certain areas relating to the claiming of compound other than Tarceva, which fall outside of the scope of the main claim in the patent.

Tarceva itself is accurately described in the 498 patent. While the reissue application is pending, the 498 patent remains listed in the orange book with the FDA and enforceable against any infringer. On the oncology pipeline front, our IGF-1 receptor OSI-906 Phase I program, which includes both daily and intermittent dose trials, is proceeding through the dose escalation phase.

Today, PK profiles Alinia with dose escalation and we have not encountered any significant toxicity. There has been some evidence of similar activity even at these lower dose cohorts.

On our TORC1/TORC2 OSI-027 program, regulatory authorities have cleared our IMPD applications in both the UK and Belgium, and we expect to initiate Phase I trials for this project over the course of the second quarter. Our c-kit VEGF receptor inhibitor OSI-930 continues to approve patients for the dose expansion phase of the Phase I program.

We were encouraged by the growing presence of EMT at this year's AACR meeting, and view this as something of an endorsement of our decision two years ago to begin focusing our oncology R&D efforts into this area of cancer biology.

In our diabetes and obesity programs, we have just submitted an IMPD filing with the regulatory agents in Europe to begin Phase I trials for our anti-obesity agent, PSN602. 602 is our mixed-spectrum serotonin noradrenaline reuptake inhibitor, which also exhibits 5-HT1A agonism.

In preclinical models it is efficacious in inducing weight loss without exhibiting the acute hypertension and heart rate increases seen for sibutramine, the marketed agent PSN602 is designed to replace. Our GPR119 agonist PSN821 also continues on track in preparation for an IMPD filing over the summer.

As such, we would anticipate, absent any surprises that we would have all four core pipeline products -- OSI-906, OSI-027, PSN821, and PSN602 -- in clinical trials by the end of 2008, and we'll be in a position to fully assess the prospects for differentiating OSI-930 in an intensely competitive antiangiogenesis arena.

In mid-March, the European patent office upheld a prior decision to revoke one of our DP-IV patents in Europe, claiming the use of DP-IV inhibitors to treat type II diabetes. We were disappointed in the outcome of the appeal proceedings, but note that this is only one patent within our portfolio of DP-IV patents.

We had already anticipated the vast majority of 2008 and 2009 DP-IV sales would occur in the US, and the near-term financial impact is, therefore, relatively insignificant. As such, we are not changing our DP-IV patent estate revenue guidance for 2008.

The estate includes pending EU patents covering combinations of DP-IV inhibitors with other oral antidiabetics, such as Metformin, and in this regard, Merck's DP-IV inhibitor metformin combination inhibitor Janumet was recently recommended by the CHMP for EU approval. We anticipate that the combination patent could be issue in the 18-months to two-year timeframe.

In conclusion, we continue to believe that 2008 could be an important breakout year for the future growth of our business. If the turnkey second half Phase III trial readouts for Tarceva - SATURN and BETA-Lung are positive, we would anticipate an acceleration of top-line growth in 2009 for our core business that is already producing in excess of $100 million per year in free cash flow.

We see this occurring at a time when our four core development programs in oncology and diabetes disease are approaching the point where we can assess clinical proof of principal and believe that this combination of significant financial and strategic growth could represent a compelling thesis for biotech investors in a world where $2 billion to $10 billion biotech growth stories are becoming increasingly scarce.

That concludes our prepared remarks, and now, Duane, I'll be happy to hand it over to open the Q&A session.

Operator-and-Answer Session

Operator

(Operator Instructions) Our first question will come from Geoff Meacham with J. P. Morgan.

Terry Coyne - J.P. Morgan

This is Terry Coyne in for Geoff today. Thanks for taking the question. The question is on Alimta. We are curious to get your perspective on what you are thinking about the data for Alimta in the maintenance setting expected at ASCO, and how you ultimately think that could fit in, in lung cancer treatment?

Gabe Leung

Hey, Terry. This is Gabe. The only information that we know is the announcement from Lilly that they have met the primary endpoint for PFS in the Alimta maintenance study. We do not know -- we are expecting to see those data and perhaps even with survival data presented at ASCO. So, until we see it, it obviously is difficult to comment on exactly what role we think they will have. But as you well know, Alimta recently received approval for first-line treatment of adenocarcinoma in Europe, but at the same time also was restricted from being used in squamous cell cancer. So, you would argue in a way the Alimta development may well be becoming a little bit more positive for us in the second-line setting.

Terry Coyne - J.P. Morgan

Gabe, just in terms of how you think of it versus the SATURN study, just curious, given that it is an IV agent and the SATURN study has been your way of differentiating and getting pass the price concerns in the US, I am wondering how you think about that?

Colin Goddard

Terry, with the obvious exception, we have not seen either the SATURN or the Alimta data. Our view is that it is a different proposition to compete against a cytotoxic therapy with cytotoxic side effects in a maintenance setting than in an established first-line, second-line, or third-line setting. Clearly, we all need to see this data, but we remain confident that Tarceva can be effectively positioned in the maintenance setting.

Terry Coyne - J.P. Morgan

Okay. Thanks a lot.

Operator

Our next question is from Maged Shenouda with UBS.

Maged Shenouda - UBS

Hi. Can you just give us some guidance on the conversion factor we should be using for US Tarceva revenues for the full year 2008?

Mike Atieh

Sure. It is Mike. This is the year that we elected not to give guidance on the conversion factor. Remember, this is a construct of our own to try to help people understand when they see a Genentech sales number, what percentage of those sales are going to hit our top-line. So we created this back in 2005. It was very effective because the conversion factor was building over that timeframe, and it was really difficult to project it.

Now, The results this quarter, as with last year, are the results of marketing spending and other spending tends to move around that you might end up with a higher or a lower conversion factor than you are going to average for the year.

So when you think about 2007, we averaged 42%. I think there is an expectation by many people that that conversion factor will go up this year, but I would not go to that 45% level, because that was clearly inter-period spending driven.

Maged Shenouda - UBS

Okay. Great. Thank you. A question on the DP-IV patent issue in Europe; perhaps you would frame that a little bit numerically for us. So what percentage of the business would be affected over the next two years or so?

Mike Atieh

Sure. It is Mike again, and it is hard to project, because we are looking at a couple things. Obviously, if you look at current run rate for Merck, a very small percentage, 13% or so, of their sales were outside of the US, recognizing that the US launch is ahead of foreign markets. Obviously, out of that small percentage, then a percentage of that was in Europe.

So it is a little bit hard to predict. We feel very strongly about our guidance for this year, and even moving into next year. Recognize also that we have the potential issuance of the combination patent, and there is a view that as this therapy advances, there is going to be a real movement into the combination therapy. So, we feel very positive about that. So right now, it remains to be seen, but it's a very small percentage at this point where we are being impacted.

Maged Shenouda - UBS

Okay. Thank you.

Operator

(Operator Instructions) We'll next go to the Joel Sendek with Lazard Capital Markets.

Joel Sendek - Lazard Capital Markets

Well, hi, thanks. So, I know you can not predict what the day is going to be like at ASCO, but maybe we could advance to maybe after that data is out and after the SATURN data is out, and maybe if I can pose a scenario that both are positive, and we are sitting here a year from now in that type of scenario. What do you think the type of uptake will be, or the impact on -- for Tarceva. And in that scenario is that -- a net positive or a net negative for you guys?

Colin Goddard

I think Joel you are right, it's crystal ball-gazing, and none of us are really equipped to do that. We are absent the luxury of looking at the actual data. That being said, as we have said before, if you take the whole amalgam of the Tarceva Phase III programs, SATURN and BETA, if you take a look at the expectations, upside or downside, on all of the competitive scenarios, and you remember to consider Tarceva as the global brand that it is, we find it hard to believe that there will be a bad enough confluence of events that Tarceva isn't growing globally as we go forward.

It's going to be a question of what that growth curve looks like, and that of course is going to driven by the data itself. But I think our view is the downside risk here, from our perspective, is rather low.

Joel Sendek - Lazard Capital Markets

Okay. So you are saying downside risk is low, even in the scenario where the flex is widely viewed as positive by the physicians at the meeting?

Colin Goddard

Absolutely. In the context of our programs being positive, there will be a real and meaningful role for Tarceva in therapy in the US. However, more importantly, its strength as a global brand should not be overlooked.

Joel Sendek - Lazard Capital Markets

Okay. Concerning the timing with SATURN, did you say the enrollment is finished?

Colin Goddard

We have had no disclosure on enrollment.

Joel Sendek - Lazard Capital Markets

Okay. But you are still comfortable with the second half for data?

Colin Goddard

Correct.

Joel Sendek - Lazard Capital Markets

Okay. Does the combo patent require a combo pill, or is it just using the two drugs together? How does the intellectual property look there?

Colin Goddard

Our view is it will cover both. You know in Europe it's only combinations, so we are pretty comfortable there.

Joel Sendek - Lazard Capital Markets

Okay, thanks.

Operator

Our next question is from May-Kin Ho with Goldman Sachs.

May-Kin Ho with Goldman Sachs

Hi, just a question on the Zactima trial. I know that previously you indicated that it's difficult to compare the second-line lung cancer study on Zactima versus BR21, which is your pivotal study, because of different kinds of patients. If you kind of look at the BR21 data, and I know it's subgroup analysis, but looking at patients that are similar to the Zactima trial, what will you expect on the PFS there?

Colin Goddard

So, we have actually done that comparison May-Kin. So if you look at the Zactima data in that Phase II study, 11 weeks of PFS, it's 6.1 months for overall survival. If you take the PS01 patient population in BR21, it's 13.4 weeks, that's 2.4 weeks longer for PFS and 8.25 months for overall survival. That is why we said repeatedly anything can happen in clinical science or clinical development, but it seems to us highly unlikely that Zactima will be superior to Tarceva, as is the design of the ZEST trial.

May-Kin Ho with Goldman Sachs

Would you please elaborate on the K-ras situation?

Colin Goddard

Gabe, would you like to talk about that?

Gabe Leung

The K-ras situation. Well, I mean, the SATURN study require tissues, so we are looking forward to getting a more robust data set on K-ras analysis off from SATURN. As we have stated before, neither BR21 nor PA3 really give us any definitive read into K-ras interaction with Tarceva.

In fact, in PA3, when we did the analysis by K-ras mutation or wild-type, patients who develop a grade 2 rash on gemcitabine plus Tarceva seems to do equally well regardless of K-ras mutations. So, we are looking forward to getting more data from SATURN to help us.

May-Kin Ho with Goldman Sachs

Okay. Thank you.

Operator

Our next question is from Jim Birchenough with Lehman Brothers.

Nick Abbott - Lehman Brothers

Good afternoon this is Nick Abbott on Jim's team. A couple of questions related to 902. And my first question is, if you can help me understand whether in tumor models that are sensitive to the rapalogues, is the response superior with 902? My second question is, either in tumors that are resistant, or become resistant to rapalogues, can this be reversed by 902?

Gabe Leung

I assume, Nick, you are talking about 027, which is our TORC1/2 inhibitors.

Nick Abbott - Lehman Brothers

Yeah.

Gabe Leung

We do have preclinical data that suggests that in rapamycin-resistant cell lines that their activities by inhibiting with TORC1/TORC2 inhibitors.

Nick Abbott - Lehman Brothers

In tumors that are sensitive to the rapalogues, do you get a better response with the dual inhibitors, or is it really to rescue and sort of expand the universe of sensitive tumors?

Gabe Leung

In cell lines that do respond to rapamycin, we will see anywhere from comparable activity to better tumor inhibition by using a TORC1/TORC2 inhibitor. So the preclinical data as a whole seems to suggest TORC1/2 inhibitors will provide more complete coverage of various cellular pathway and better tumor control.

Nick Abbott - Lehman Brothers

Thank you.

Operator

Our next question is from Han Li with Stanford Group.

Han Li - Stanford Group

Yes, two quick questions. One is, how do we think about the first-line non-small cell lung cancer maintenance market that in terms of patient population? What's the percentage of patients who respond to chemo that can go onto Tarceva if this trial is a success? And also, treatment duration?

Gabe Leung

In the US alone, we have about 110,000 patients treating with first-line chemotherapy a year. Our estimate is roughly about half of those patients or about 50,000-60,000 of them will achieve a stable disease or a partial response or complete response, thus eligible for a SATURN-type maintenance treatment for Tarceva. So, that's what we are looking at the potential population of patients if SATURN indeed is positive.

Treatment duration is a little bit difficult to get at. We assume that patients on average without maintenance therapy will be roughly about four months in terms of time to progression. But, that is based on an estimate. It may be give and take a few weeks. And we are estimating that -- the study is powered to show that if it is indeed four months, it would go to five months with Tarceva. All these numbers can change depending on actual trial data.

Han Li - Stanford Group

Right. And then the 50%-60% you are quoting is including response and also stable disease. Does it -- I think as being the SATURN trial ongoing, is that you only treat patients who has response after the first four cycles?

Colin Goddard

The design, Han, is patients get their four cycles of chemotherapy. Those with a response or stabilization of their disease are randomized to Tarceva or best supportive care placebo. And at that juncture, by the way, that's the point of randomization, measurement of the PFS in the study. There has been some confusion reported over the last several months on that point.

Han Li - Stanford Group

I see. Okay. Lastly, a housekeeping item. Where are you at retiring the old -- the 2023 convert, 150 million, I think? Well, 115.

Mike Atieh

Hi, this is Mike. During March and in April, we repurchased $38 million of those bonds. So, of the $150 million that are out there, we repurchased $38 million.

Han Li - Stanford Group

So, do you still have …?

Mike Atieh

$112 million left.

Han Li - Stanford Group

112 left. But you have to purchase it by September?

Mike Atieh

No. I'm sorry. Just to be clear, those bonds can be put back to OSI in September of this year, or they will be converted by the holders. If OSI calls the bonds in September of this year, the conversion price is $50.25.

Han Li - Stanford Group

Right, got it. Thank you.

Operator

(Operator Instructions) We will next go to Mike King with Rodman & Renshaw.

Mike King - Rodman & Renshaw

Thanks for taking my question. I do not usually get my name mixed up like that but good afternoon, Colin and Gabe and everyone.

Colin Goddard

Hey Mike.

Mike King - Rodman & Renshaw

Hey. I would love to hear Colin and/or Gabe speak about what you think SATURN is going to mean in terms of translation into clinical practice. In other words, what do we get out of Tarceva in the post-chemo setting that we might not otherwise get out of, let us say, adjuvant platinum after treatment for metastatic disease?

Colin Goddard

Remember we are talking about a maintenance situation. Patients will come off their four cycles of chemotherapy and go on to Tarceva, which is a well tolerated therapy, which will prolong, presuming the study is a success, and to demonstrate this, the time to which they are not progressing on their disease, which would translate into an improved quality of life and duration of overall basis.

So that's the thesis that's being tested, and we have Alimta out there as having shown some kind of maintenance benefit, but we do not know details. Of course, is a cytotoxic therapy and we think the better at tolerated target agent is a preferable way and a preferable option for the patients in this setting.

Operator

And Mr. King, do you have a follow-up?

Mike King - Rodman & Renshaw

No, that's it. Thank you.

Colin Goddard

Thanks Mike.

Operator

We have a follow up and it is from Maged Shenouda with UBS.

Maged Shenouda - UBS

Hi. Thanks for taking the follow-up. Could you provide an update on the ATLAS trial?

Gabe Leung

The ATLAS trial is run by Genentech, and they continue to accrue on schedule. So I think we have talked about potential data in the '10 timeframe.

Maged Shenouda - UBS

Okay. And is there going to be an update at ASCO at all, a safety update at all?

Gabe Leung

I do not believe so.

Maged Shenouda - UBS

Okay. Thank you very much.

Operator

Our last question in the queue is, Jason Kantor with RBC Capital Markets.

Jason Kantor - RBC Capital Markets

Yeah. Hi, thanks for taking my call. Actually, all my questions have been answered. Thanks a lot.

Operator

Very good. And again, this does conclude today's Q&A session. I'd like to turn the call to Dr. Colin Goddard for any additional or closing comments.

Colin Goddard

Thanks, Duane and just to say thank you for joining us on our one quarter call. As you will see, we continue to make progress with the business. Tarceva is making excellent progress towards the two key Phase III milestones this year.

We feel as though we are executing very well on R&D. Our three or four key core programs there will arrive at clinical proof of principle over the next 12 months to 18 month and marry that to a financial performance of the type we have reported again this quarter, and we feel pretty confident and pretty comfortable with the progress we are making as a business going forward.

Well, thanks again for joining us, and we look forward to talking to you again in another quarter. Take care, and goodnight.

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Source: OSI Pharmaceuticals Inc. Q1 2008 Earnings Call Transcript

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