10-Q

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 ended June 30, 2007

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.

(Exact name of registrant as specified in its charter)

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)

631-962-2000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

At August 2, 2007, the registrant had outstanding 57,911,290 shares of common stock, $.01 par value.

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONTENTS

	Page No.
PART I. FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
CONSOLIDATED BALANCE SHEETS - June 30, 2007 (Unaudited) and December 31, 2006		1
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - Three Months Ended June 30, 2007 and June 30, 2006		2
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - - Six Months Ended June 30, 2007 and June 30, 2006		3
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - Six Months Ended June 30, 2007 and June 30, 2006		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3. Quantitative and Qualitative Disclosures About Market Risks		37
Item 4. Controls and Procedures		38
PART II. OTHER INFORMATION		40
Item 1. Legal Proceedings		40
Item 1A. Risk Factors		40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		40
Item 3. Defaults Upon Senior Securities		40
Item 4. Submission of Matters to a Vote of Security Holders		40
Item 5. Other Information		41
Item 6. Exhibits		41
SIGNATURES		43
INDEX TO EXHIBITS		44
EX-10.2: NONQUALIFIED DEFERRED COMPENSATION PLAN
EX-10.3: FORM OF DEFERRED STOCK UNIT AGREEMENT
EX-10.5: CONSULTING AGREEMENT
EX-10.6: COMPENSATORY ARRANGEMENT
EX-10.7: COMPENSATORY ARRANGEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

i

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except per share data)

	June 30,			December 31,
	2007			2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	95,027		$	42,028
Investment securities		149,115			164,786
Restricted investment securities		9,774			9,554
Accounts receivables – net		74,573			80,075
Inventory – net		19,809			36,860
Interest receivable		954			3,674
Prepaid expenses and other current assets		6,429			9,102
Assets related to discontinued operations		37,167			—
Total current assets		392,848			346,079
Property, equipment and leasehold improvements – net		48,476			56,223
Debt issuance costs – net		3,979			4,910
Goodwill		39,446			39,373
Other intangible assets – net		5,924			6,742
Other assets		2,252			4,405
	$	492,925		$	457,732
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	36,406		$	54,741
Collaboration profit share payable		—			12,039
Unearned revenue – current		17,855			12,803
Liabilities related to discontinued operations		46,851			—
Total current liabilities		101,112			79,583
Other liabilities:
Rent obligations and deferred rent expenses		11,264			10,044
Unearned revenue – long-term		38,127			66,089
Convertible senior subordinated notes		265,000			265,000
Accrued postretirement benefit cost and other		3,398			8,422
Total liabilities		418,901			429,138
Stockholders’ equity:
Preferred stock, $.01 par value; 5,000 shares authorized; no shares issued at June 30, 2007 and December 31, 2006		—			—
Common stock, $.01 par value; 200,000 shares authorized, 59,638 and 59,179 shares issued at June 30, 2007 and December 31, 2006, respectively		596			592
Additional paid-in capital		1,634,174			1,616,874
Accumulated deficit		(1,527,744	)		(1,554,005	)
Accumulated other comprehensive income		4,219			2,354
		111,245			65,815
Less: treasury stock, at cost; 1,943 shares at June 30, 2007 and December 31, 2006		(37,221	)		(37,221	)
Total stockholders’ equity		74,024			28,594
Commitments and contingencies
	$	492,925		$	457,732

See accompanying notes to consolidated financial statements.

1

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands except per share data)

	Three Months Ended June 30,
	2007			2006
Revenues:
Net revenue from unconsolidated joint business	$	42,999		$	39,211
Royalties on product licenses		22,546			10,912
License, milestone and other revenues		13,338			5,529
		78,883			55,652
Expenses:
Cost of goods sold		2,047			1,999
Research and development		27,269			29,421
Selling, general and administrative		24,038			25,702
Amortization of intangibles		459			451
		53,813			57,573
Operating income (loss) from continuing operations		25,070			(1,921	)
Other income (expense):
Investment income — net		2,995			1,873
Interest expense		(1,809	)		(1,857	)
Other income (expense) — net		3,020			(535	)
Income (loss) from continuing operations		29,276			(2,440	)
Loss from discontinued operations		(9,654	)		(339,535	)
Net income (loss) before extraordinary item		19,622			(341,975	)
Extraordinary gain net of tax		—			22,046
Net income (loss)	$	19,622		$	(319,929	)
Basic and diluted net loss per common share:
Basic earnings (loss):
Income (loss) from continuing operations	$	0.51		$	(0.04	)
Loss from discontinued operations	$	(0.17	)	$	(5.96	)
Net income (loss) before extraordinary item	$	0.34		$	(6.00	)
Extraordinary gain net of tax	$	—		$	0.39
Net income (loss)	$	0.34		$	(5.62	)
Diluted earnings (loss):
Income (loss) from continuing operations	$	0.48		$	(0.04	)
Loss from discontinued operations	$	(0.16	)	$	(5.96	)
Net income (loss) before extraordinary item	$	0.33		$	(6.00	)
Extraordinary gain net of tax	$	—		$	0.39
Net income (loss)	$	0.33		$	(5.62	)
Shares used in the calculation of income (loss) per common share:
Basic		57,545			56,962
Diluted		62,182			56,962

See accompanying notes to consolidated financial statements.

2

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands except per share data)

	Six Months Ended June 30,
	2007			2006
Revenues:
Net revenue from unconsolidated joint business	$	82,121		$	74,866
Royalties on product licenses		41,839			18,926
License, milestone and other revenues		32,392			21,115
		156,352			114,907
Expenses:
Cost of goods sold		3,951			4,221
Research and development		57,895			56,499
Selling, general and administrative		49,167			53,510
Amortization of intangibles		917			899
		111,930			115,129
Operating income (loss) from continuing operations		44,422			(222	)
Other income (expense):
Investment income — net		6,090			3,240
Interest expense		(3,612	)		(3,655	)
Other income (expense) — net		2,071			(1,427	)
Income (loss) from continuing operations		48,971			(2,064	)
Loss from discontinued operations		(22,708	)		(357,766	)
Net income (loss) before extraordinary item		26,263			(359,830	)
Extraordinary gain net of tax		—			22,046
Net income (loss)	$	26,263		$	(337,784	)
Basic and diluted net loss per common share:
Basic earnings (loss):
Income (loss) from continuing operations	$	0.85		$	(0.04	)
Loss from discontinued operations	$	(0.40	)	$	(6.29	)
Net income (loss) before extraordinary item	$	0.46		$	(6.33	)
Extraordinary gain net of tax	$	—		$	0.39
Net income (loss)	$	0.46		$	(5.94	)
Diluted earnings (loss):
Income (loss) from continuing operations	$	0.82		$	(0.04	)
Loss from discontinued operations	$	(0.37	)	$	(6.29	)
Net income (loss) before extraordinary item	$	0.45		$	(6.33	)
Extraordinary gain net of tax	$	—		$	0.39
Net income (loss)	$	0.45		$	(5.94	)
Shares used in the calculation of income (loss) per common share:
Basic		57,424			56,889
Diluted		61,958			56,889

See accompanying notes to consolidated financial statements.

3

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
(In thousands)

	Six Months Ended June 30,
	2007			2006
Cash flows from operating activities:
Net income (loss)	$	26,263		$	(337,784	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Extraordinary gain from reversal of contingent consideration		—			(22,046	)
Loss on sale and disposals of equipment		1,319			4
Depreciation and amortization		5,294			17,576
Non-cash compensation charges		9,545			9,957
Impact of inventory step-up related to inventory sold		1,734			17,252
Goodwill impairment		—			319,391
Changes in assets and liabilities:
Receivables		(6,990	)		21,775
Inventory		(1,494	)		(5,617	)
Prepaid expenses and other current assets		1,849			1,554
Other assets		1,232			(4,155	)
Accounts payable and accrued expenses		(13,704	)		(24,688	)
Unearned revenue		8,154			35,011
Accrued postretirement benefit cost		(4,107	)		701
Net cash provided by operating activities		29,095			28,931
Cash flows from investing activities:
Purchases of investments (restricted and unrestricted)		(107,840	)		(64,641	)
Maturities and sales of investments (restricted and unrestricted)		124,516			2,437
Net additions to property, equipment and leasehold improvements		(1,498	)		(6,991	)
Proceeds from sale of assets		137			786
Additions to compound library assets		(3	)		(10	)
Net cash provided by (used) in investing activities		15,312			(68,419	)
Cash flows from financing activities:
Proceeds from the exercise of stock options, employee purchase plan and other		8,067			1,775
Other		—			(580	)
Net cash provided by financing activities		8,067			1,195
Net increase (decrease) in cash and cash equivalents		52,474			(38,293	)
Effect of exchange rate changes on cash and cash equivalents		525			45
Cash and cash equivalents at beginning of period		42,028			164,084
Cash and cash equivalents at end of period	$	95,027		$	125,836
Non-cash activities:
Purchase accounting adjustments	$	—		$	614
Cash paid for interest	$	3,588		$	3,588

See accompanying notes to consolidated financial statements.

4

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

     In this Quarterly Report on Form 10-Q, “OSI,” “our company,” “we,” “us,” and “our” refer to OSI Pharmaceuticals, Inc. and its subsidiaries. We own or have rights to use various copyrights, trademarks and trade names used in our business, including the following: Tarceva® (erlotinib), Macugen® (pegaptanib sodium injection) and Novantrone® (mitoxantrone for injection concentrate). This Form 10-Q also includes trademarks, service marks and trade names of other companies. As a result of our decision to divest the eye disease business held by our wholly-owned subsidiary, (OSI) Eyetech, Inc., the operating results for (OSI) Eyetech are shown as discontinued operations for all periods presented in the accompanying consolidated statement of operations. The (OSI) Eyetech-related assets and liabilities which, as a result of the divestiture, will be either sold or no longer result in ongoing cash in-flows or outflows, have been classified as assets and liabilities related to discontinued operations in our June 30, 2007 consolidated balance sheets.

(1) Basis of Presentation

     In the opinion of management, the accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2007 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2007. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

(2) Revenue Recognition

Net revenue from unconsolidated joint business

     Net revenue from unconsolidated joint business is related to our co-promotion and manufacturing agreements with Genentech, Inc., our U.S. partner for Tarceva, our small molecule epidermal growth factor inhibitor which is currently approved for treatment of second and third line advanced non-small cell lung cancer, and, in combination with gemcitabine, for first line advanced unresectable or metastatic pancreatic cancer. It consists of our share of the pretax co-promotion profit generated from our co-promotion arrangement with Genentech for Tarceva, the reimbursement from Genentech of our sales and marketing costs related to Tarceva, and the reimbursement from Genentech of our manufacturing costs related to Tarceva. Under the co-promotion arrangement, all U.S. sales of Tarceva and associated costs and expenses are recognized by Genentech. For the three months ended June 30, 2007 and 2006, Genentech recorded $102 million and $103 million, respectively, in net sales of Tarceva in the United States and its territories. For the six months ended June 30, 2007 and 2006, Genentech recorded $203 million and $196 million, respectively, in net sales of Tarceva in the United States and its territories. Sales reported by Genentech for the three and six months ended June 30, 2007 were negatively impacted by approximately $9 million of reserve adjustments due to unusually high product returns related to expiring inventory returned to Genentech. We record our 50% share of

5

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

the co-promotion pretax profit on a quarterly basis, as set forth in our agreement with Genentech. Pretax co-promotion profit under the co-promotion arrangement is derived by calculating U.S. net sales of Tarceva to third-party customers and deducting costs of sales, distribution, and selling and marketing expenses incurred by Genentech and us. The costs incurred during the respective periods represent estimated costs of both parties and are subject to further adjustment based on each party’s final review. Based on past experience, we do not believe that these cost adjustments, if any, will be significant to our consolidated financial statements. The reimbursement of our sales and marketing costs related to Tarceva is recognized as revenue as the related costs are incurred. We defer the recognition of the reimbursement of our manufacturing costs related to Tarceva until the time Genentech ships the product to third-party customers at which time our risk of inventory loss no longer exists. The unearned revenue related to shipments by our third party manufacturers of Tarceva to Genentech that have not been shipped to third-party customers was $5.4 million and $5.9 million as of June 30, 2007 and December 31, 2006, respectively, and is included in unearned revenue-current in the accompanying consolidated balance sheet.

     Net revenues from unconsolidated joint business consisted of the following (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Co-promotion profit and reimbursement of sales force and marketing related costs	$	40,749	$	36,478	$	77,409	$	69,352
Reimbursement of manufacturing costs		2,250		2,733		4,712		5,514
Net revenue from unconsolidated joint business	$	42,999	$	39,211	$	82,121	$	74,866

Royalties on Product Licenses

     We estimate royalty revenue and royalty receivables in the periods these royalties are earned, in advance of collection. Our estimate of royalty revenue and receivables is based upon communication with our collaborative partners. Differences between actual revenues and estimated royalty revenue, if any, are adjusted for in the period which they become known, typically the following quarter. Historically, such adjustments have not been material to our consolidated financial condition or results of operations.

Licenses, Milestones and Other Revenues

     Our revenue recognition policies for all nonrefundable upfront license fees and milestone arrangements are in accordance with the guidance provided in the Securities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” as amended by SEC Staff Accounting Bulletin No. 104, “Revenue Recognition.” In addition, in fiscal 2004, we adopted the provisions of EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables,” or EITF 00-21, for multiple element revenue arrangements entered

6

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

into or materially amended after September 30, 2003 with respect to recognition of upfront and milestone payments received under collaborative research agreements. Milestones which have been received from Genentech are being recognized over the term of our Manufacturing and Supply Agreement with Genentech, under which the last items of performance to be delivered to Genentech are set forth, on a straight-line basis, which approximates the expected level of performance under the Manufacturing and Supply Agreement. The milestone payments received from Roche, including a $4.0 million payment received during the quarter ended March 31, 2007, are recognized over the expected term of the research and development collaboration. At June 30, 2007, we had unearned revenue of $41.9 million relating to Genentech and Roche payments, of which $3.8 million was classified as short-term.

     We recognized $8.8 million and $3.5 million of revenue in the first and second quarters of 2007, respectively, in connection with our receipt of upfront payments, milestones, and royalties under license agreements granted under our patent portfolio covering the use of dipeptidyl peptidase IV, or DPIV, inhibitors for the treatment of type 2 diabetes and related indications. We recognize revenue from license agreements where we have no future obligations under the license agreements and the collection of payments is reasonably assured.

     In January 2007, we licensed our glucokinase activator, or GKA, program, including our clinical candidate PSN010, which is in Phase I studies, to Eli Lilly and Company for an upfront fee of $25 million and up to $360 million in potential development and sales milestones and other payments plus royalties on any compounds successfully commercialized from this program. We have deferred the initial recognition of the $25 million upfront fee based upon our obligation under the agreement to provide technical support during a transitional period of nine months from the date of execution. For the three and six months ended June 30, 2007, we recognized $8.3 million and $16.6 million, respectively, of the $25.0 million upfront fee. As of June 30, 2007, $8.3 million of the Eli Lilly upfront fee remains unamortized and will be recognized in the third quarter of 2007.

     Other revenues included miscellaneous revenue sources, including sales commissions representing commissions earned on the sales of the drug, Novantrone, in the United States for oncology indications pursuant to a co-promotion agreement dated March 11, 2003 with Ares Trading S.A., an affiliate of Serono, S.A.

(3) Earnings Per Share

     Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period increased to include all additional common shares that would have been outstanding assuming potentially dilutive common share equivalents had been issued. Dilutive common share equivalents include the dilutive effect of in-the-money shares related to stock options, which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an option, the average amount of compensation cost, if any, for future service that we have not yet recognized,

7

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

and the amount of tax benefits that would be recorded in additional paid-in capital, if any, when the option is exercised, are assumed to be used to repurchase shares in the current period. Dilutive common share equivalents also reflect the dilutive effect of unvested restricted stock units, deferred stock units and restricted stock and the conversion of convertible debt which is calculated using the “if-converted” method. In addition, in computing the dilutive effect of convertible debt, the numerator is adjusted to add back the after-tax amount of interest recognized in the period.

     The computations for basic and diluted income per share from continuing operations were as follows (in thousands, except per share amounts):

	Three Months					Six Months
	Ended					Ended
	June 30,					June 30,
	2007		2006			2007		2006
Net income (loss) from continuing operations – basic	$	29,276	$	(2,440	)	$	48,971	$	(2,064	)
Add: Interest related to convertible debt		776		—			1,551		—
Net income (loss) from continuing operations – diluted	$	30,052	$	(2,440	)	$	50,522	$	(2,064	)
Weighted average common shares outstanding – basic		57,545		56,962			57,424		56,889
Dilutive effect of options and restricted stock		729		—			626		—
Dilutive effect of convertible debt		3,908		—			3,908		—
Weighted-average common shares and dilutive potential common shares – diluted		62,182		56,962			61,958		56,889
Net income per share from continuing operations:
Basic	$	0.51	$	(0.04	)	$	0.85	$	(0.04	)
Diluted	$	0.48	$	(0.04	)	$	0.82	$	(0.04	)

     Under the “if-converted” method, common share equivalents related to our 2.0% convertible senior subordinated notes due 2025, or our 2025 Notes, were included in diluted earnings per share for the three and six months ended June 30, 2007 but our 3.25% convertible senior subordinated notes due 2023, or our 2023 Notes, were not because their effect would be anti-dilutive. Such common share equivalents for the three and six months ended June 30, 2007 amounted to 3 million. For the three and six months ended June 30, 2006, options, restricted stock, and common share equivalents related to our 2023 Notes and our 2025 Notes were not included in diluted earnings per share because their effect would be anti-dilutive. Such common share equivalents for the three and six months ended June 30, 2006 amounted to 7.6 million and 7.5 million, respectively.

(4) Discontinued Operations

     On November 6, 2006, we announced our intention to divest our eye disease business, a process which we expect to complete in 2007. Our eye disease business consists principally of Macugen, our marketed product for the treatment of neovascular age-related macular

8

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

degeneration, or wet AMD, as well as research assets in the eye disease area. We made the decision to exit the eye disease business because we believe that a key strategic goal of the acquisition of the business in November 2005 — the generation of significant cash flow from the business in the 2006 through 2008 fiscal years — has not been and will not be realized.

     We finalized our exit plan during the first quarter of 2007 and began to actively market our eye disease business. In April 2007, we restructured our relationship with Pfizer for Macugen, which resulted in the return to us of U.S. rights to Macugen in exchange for a royalty-free license to Pfizer to commercialize Macugen in the rest of the world. We have explored several potential transactions to divest our entire eye disease business, but, to date, have been unable to identify a transaction that would provide us with satisfactory terms for a complete sale of this business. We have switched to a strategy of separately divesting the assets and, in July 2007, we entered into an agreement with Ophthotech Corporation to divest our anti-platelet derived growth factor, or PDGF, aptamer program for an upfront cash payment, shares of Ophthotech, and potential future milestones and royalties. We continue to pursue the divestiture of the remaining Macugen assets and expect to complete this process by the end of 2007. As a result of our decision to divest the eye disease business, the financial information associated with these operations is presented as discontinued operations in the accompanying financial statements.

     In accordance with the provision of Statement of Financial Accounting Standards, or SFAS, No. 144 “Accounting for the Impairment or Disposal of Long Lived Assets,” the results of operations of (OSI) Eyetech for the current and prior period have been reported as discontinued operations. In addition, assets and liabilities of (OSI) Eyetech have been classified as assets and liabilities related to discontinued operations, including those held for sale. Net assets held for sale have been reflected at the lower of carrying amount or fair value, less cost to sell. We did not recognize any adjustment or loss upon the classification of the eye disease net assets as held for sale as of June 30, 2007.

     Operating results of (OSI) Eyetech for the three and six months ended June 30, 2007 and 2006 are summarized as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Net revenue	$	9,988		$	46,321		$	20,418		$	103,509
Pretax loss		(9,813	)		(339,535	)		(23,183	)		(357,766	)
Net loss from discontinued operations	$	(9,654	)	$	(339,535	)	$	(22,708	)	$	(357,766	)

     In order to facilitate the divestiture of our eye disease business, on April 20, 2007, we terminated our existing collaboration agreement with Pfizer with respect to the co-promotion of Macugen in the United States and amended and restated the license agreement pursuant to which

9

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

we had originally granted to Pfizer a number of exclusive licenses or sublicenses to patents and other intellectual property related to Macugen on a world-wide basis. Under the terms of the amended and restated license agreement, Pfizer agreed to return to us all rights to develop and commercialize Macugen in the United States, and we granted to Pfizer an exclusive right to develop and commercialize Macugen in the rest of the world. We also agreed with Pfizer to provide each other with certain transitional services related to Macugen.

     Prior to the April 2007 amendment, we shared sales and marketing responsibility for sales of Macugen in the United States and reported product revenue on a gross basis for these sales. We determined that we qualified as a principal under the criteria set forth in EITF 99-19, based on our responsibilities under our original contracts with Pfizer, which included manufacture of product for sale in the United States, distribution, ownership of product inventory and credit risk from customers. Since April 20, 2007, we no longer share the gross profits of U.S. sales with Pfizer and no longer receive royalties from Pfizer from rest of the world sales.

     In the second quarter of 2006, we received a $35 million milestone payment from Pfizer upon the launch of Macugen in select European countries. The milestone payment was recorded as unearned revenue and was being recognized as revenue on a straight-line basis over the expected term of our collaboration and license agreements with Pfizer, which approximates the expected level of performance under these agreements with Pfizer. The amortization of the unearned revenue and the related unrecognized revenue is included in discontinued operations. Under the amended and restated license agreement, we continue to provide services, share certain expenses and collaborate in specified studies with Pfizer and therefore, we are continuing to amortize the milestone payment over the term of the original agreement which corresponds to the term of the amended and restated license agreement. Any remaining balance of deferred revenue related to this milestone payment will be reversed upon the sale of the eye disease business and the termination of our obligations under the agreement.

     At June 30, 2007, certain assets and liabilities related to the eye disease business have been classified as assets or liabilities related to discontinued operations. The category includes not only assets which are held for sale, but also assets and liabilities which will no longer result in ongoing cash inflows or outflows after the divestiture.

     The summary of the assets and liabilities related to discontinued operations as of June 30, 2007 is as follows:

Assets:
Accounts receivable	$	15,313
Prepaid expenses and other assets		1,521
Inventories (assets held for sale)		16,810
Property, plant and equipment (assets held for sale)		3,523
Assets related to discontinued operations	$	37,167
Liabilities:
Accounts payable and accrued expenses	$	12,817
Collaboration profit share		2,831
Unearned revenue		31,203
Total liabilities	$	46,851

10

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

(OSI) Eyetech Integration – Severance Costs

     In connection with the acquisition of Eyetech Pharmaceuticals, Inc. on November 14, 2005, we implemented a plan to consolidate certain facilities and reduce the workforce. Included in the liabilities assumed in the acquisition, we recognized $6.2 million for the termination benefits and relocation cost of employees. Additional terminations occurred throughout 2006 for transition employees. In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” these payments were deemed to represent retention bonuses associated with future service. For the quarter ended March 31, 2006, we recognized an additional $2.7 million of retention bonus costs that are included in the loss from discontinued operations.

     The activity for the six months ended June 30, 2007 and 2006 was as follows (in thousands):

	Six Months Ended
	June 30,
	2007			2006
Opening liability January 1	$	699		$	4,870
Accrual for severance, relocation and retention bonuses		—			2,650
Cash paid for severance, relocation and retention bonuses		(699	)		(3,982	)
Ending liability	$	—		$	3,538

(OSI) Eyetech Divestiture – Severance Costs

     As a result of our decision to exit our eye disease business, we committed to a plan to re-scale the eye disease business in November 2006. The plan included the consolidation of facilities as well as a reduction in the workforce. We recognized $3.6 million of this cost in the fourth quarter of 2006. Included in this charge is $2.6 million for severance payments and $1.0 million related to the impairment of long-term assets offset by previously accrued rent expense of $280,000. During the three and six months ended June 30, 2007, we recorded additional severance costs of $1.6 million and $3.9 million, respectively, which are included in the loss from discontinued operations.

11

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

     The activity for the three months and six months ended June 30, 2007 was as follows (in thousands):

	Three Months			Six Months
	Ended			Ended
	June 30, 2007			June 30, 2007
Opening liability	$	1,478		$	2,584
Accrual for severance, relocation and retention bonuses		1,560			3,851
Cash paid for severance		(485	)		(3,882	)
Ending liability	$	2,553		$	2,553

(OSI) Eyetech Integration — Facility Restructuring

     In connection with the acquisition of Eyetech Pharmaceuticals on November 14, 2005, we implemented a plan to consolidate certain facilities. Included in the liabilities assumed in the acquisition, we recognized $5.4 million for the present value of future lease commitments. The facilities included in the accrual are Lexington, Massachusetts, a portion of the New York City office and one of our leased facilities in Boulder, Colorado. The present value of the lease payments was determined based upon the date that we plan to exit the facility and the remaining lease expiration, offset by estimated sublease income. Rental payments for the facilities prior to closure were included in operating expense. During 2006, the Boulder facility was sold and we subleased a portion of the New York City office. The Lexington facility and the remaining portion of the New York City office were closed during 2006. During the three and six months ended June 30, 2007, we recorded $774,000 and $3.5 million, respectively, of additional costs as a result of reevaluating our rental assumptions based upon the current rental market. These accruals are not included in the liabilities related to discontinued operations as of June 30, 2007 since the obligations will remain with us after the divestiture of the eye disease business.

     The activity for the three and six months ended June 30, 2007 and 2006 was as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Opening liability	$	4,460		$	5,122		$	2,053		$	5,391
Accrual for lease costs		774			—			3,484			(269	)
Accretion expense		85			116			120			267
Cash paid for rent		(567	)		(1,171	)		(905	)		(1,322	)
Ending liability	$	4,752		$	4,067		$	4,752		$	4,067

(5) Accounting for Stock–Based Compensation

     We have 12 equity plans pursuant to which there are shares available for future grant and/or outstanding grants issued to our employees, officers, directors and consultants. Two of these plans still have shares available for future grant: the 1999 Incentive and Non-Qualified Stock Option Plan and the Amended and Restated Stock Incentive Plan. The plans are administered by the Compensation Committee of the Board of Directors, which may grant stock options and, in the case of the Amended and Restated Stock Incentive Plan, restricted stock, restricted stock units, deferred stock units and stock bonuses. The Compensation Committee determines the terms of all equity grants under the plans. Our equity grants vest over various

12

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

periods and expire no later than 10 years from date of grant. The total authorized shares under these plans are 17,759,500, of which 7,687,933 shares were available for future grant as of June 30, 2007.

     We have an employee stock purchase plan under which eligible employees may contribute up to 10% of their base earnings toward the quarterly purchase of our common stock. The employee’s purchase price is derived from a formula based on the fair market value of the common stock. As of June 30, 2007, we had 490,187 shares of common stock available for future grant under this plan.

     We sponsor a stock purchase plan for our UK-based employees. Under the terms of the plan, eligible employees may contribute between £5 and £250 of their base earnings, in 36 monthly installments, towards the purchase of our common stock. As of June 30, 2007, we had reserved 81,691 shares of our common stock in connection with this plan.

     Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), “Share-Based Payments,” which establishes the accounting for employee stock-based awards. Under the provisions of SFAS No. 123(R), stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant).

     Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of, stock options, restricted stock, restricted stock units and deferred stock units. Compensation expense related to continuing operations and attributable to net stock-based compensation for the three months ended June 30, 2007 and 2006 was $4.0 million and $2.9 million, respectively, or $0.06 and $0.05 for diluted earnings per share, respectively. Compensation expense related to continuing operations and attributable to net stock-based compensation for the six months ended June 30, 2007 and 2006 was $8.0 million and $5.7 million, respectively, or $0.13 and $0.10 for diluted earnings per share, respectively. Compensation expense related to discontinued operations and attributable to net stock-based compensation for the three and six months ended June 30, 2007 was $826,000 and $1.7 million, respectively, compared to $3.7 million and $5.9 million for the three and six months ended June 30, 2006. At June 30, 2007, total remaining unrecognized compensation cost related to unvested stock-based payment awards was $38 million. That cost is expected to be recognized over a weighted average period of 2.9 years.

Stock Options

     We estimate the fair value of stock options using the Black-Scholes option-pricing model. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of our granted stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards. Historically, we have satisfied the exercise of options by issuing new shares.

13

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

     The per share weighted average fair value of stock options granted during the three months ended June 30, 2007 and 2006 was $15.71 and $14.72, respectively. The per share weighted average fair value of stock options granted during the six months ended June 30, 2007 and 2006 was $15.74 and $14.75, respectively. In addition to the exercise and grant date prices of the awards, certain weighted average assumptions that were used to estimate the fair value of stock option grants in the respective periods are listed in the table below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Expected dividend yield		0	%		0	%		0	%		0	%
Expected volatility		45.07	%		56.36	%		46.45	%		56.94	%
Risk-free interest rate		5.11	%		4.49	%		5.01	%		4.49	%
Expected term (years)		4.57			4.32			4.57			4.32

     A summary of our stock option programs as of June 30, 2007 and changes during the six-month period then ended, is presented below (shares in thousands):

								Weighted Average
						Aggregate Intrinsic		Contractual Life
				Weighted-Average		Value (1)		Remaining in
	Shares			Exercise Price		(in millions)		Years
Outstanding at December 31, 2006		6,737		$	36.00
Granted		15		$	33.94
Exercised		(183	)	$	18.42
Expired		—
Forfeited		(250	)	$	31.57
Outstanding at March 31, 2007		6,319		$	36.68
Granted		99		$	35.57
Exercised		(249	)	$	17.21
Expired		—			—
Forfeited		(302	)	$	46.35
Outstanding at June 30, 2007		5,867		$	37.04	$	29.6		5.53
Exercisable at June 30, 2007		4,320		$	39.54	$	19.0		5.57
Unvested at June 30, 2007		1,580		$	30.23	$	10.5		5.43

(1) The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option.

     The total intrinsic value of stock options exercised was $4.8 million and $7.6 million, respectively, for the three and six months ended June 30, 2007, and $827,000 and $1.4 million, respectively, for the three and six months ended June 30, 2006.

     Options granted prior to June 1, 2005 have exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of ten years and a vesting period of three

14

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

years. Options granted subsequent to May 31, 2005 have exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of seven years and a vesting period of four years. For the three and six months ended June 30, 2007, a projected forfeiture rate based upon historical experience of 21.8% was utilized for non-executive employees and no forfeitures for executive employees was assumed for purposes of recognizing compensation expense.

     We estimate expected volatility based upon a combination of historical, implied and adjusted historical stock prices. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. Commencing in the second quarter of fiscal 2005, the fair value of the options was estimated at the date of grant using a Black-Scholes option pricing model with the expected option term determined using a Monte Carlo simulation model that incorporates historical employee exercise behavior and post-vesting employee termination rates.

Restricted Stock, Restricted Stock Units and Deferred Stock Units

     Our outstanding shares of restricted stock, restricted stock units and deferred stock units vest annually over a two or four year period depending on the award, are valued at the stock price on date of grant and are subject to certain additional terms and conditions, including, but not limited to the continued service of the employee or director. As of June 30, 2007, an aggregate of 592,000 shares were subject to these awards, representing $16.9 million of unrecognized compensation expense. This expense is expected to be recognized over a weighted average period of 3.3 years. The aggregate intrinsic value of these awards was $13.5 million as of June 30, 2007.

     We also assumed 339,439 shares of Eyetech Pharmaceuticals restricted stock in connection with the acquisition of Eyetech Pharmaceuticals. Pursuant to the terms of the acquisition agreement, each share of restricted stock converted into the right to receive 0.12275 shares of our common stock and $15.00 cash payment upon vesting. As a result, on November 14, 2005, we reserved for issuance 41,666 shares of our common stock and $5.1 million in cash in connection with these restricted shares. As of June 30, 2007, 1,359 unvested shares of our common stock and $60,000 in cash remained subject to these restricted shares, representing $77,000 of unrecognized compensation expense.

     The following is a summary of the status of our restricted stock, restricted stock units, and deferred stock units (excluding the assumed restricted shares in the Eyetech Pharmaceuticals acquisition) as of June 30, 2007 and activity during the fiscal year then ended:

15

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

				Weighted
				Average Grant
	No. Shares			Date Fair
	(in thousands)			Value
Outstanding at December 31, 2006		623		$	35.87
Granted		—			—
Vested		—			—
Forfeited		(35	)	$	34.83
Outstanding at March 31, 2007		588		$	35.93
Granted		24		$	36.25
Vested		(6	)	$	32.12
Forfeited		(14	)	$	37.74
Outstanding at June 30, 2007		592		$	35.95

(6) Restricted Assets

     Certain of our facility leases have outstanding letters of credit issued by a commercial bank which serve as security for our performance under the leases. The collateral for these letters of credit are maintained in a restricted investment account. Included in restricted investment securities as of June 30, 2007 is $9.8 million of restricted cash and investments to secure these letters of credit.

(7) Inventory

     Inventory is stated at the lower of cost or market, with cost being determined using the weighted average method. Inventory is comprised of three components: raw materials, which are purchased directly by us, work in process, which is primarily active pharmaceutical ingredient, or API, where title has transferred from our contract manufacturer to us, and finished goods, which are packaged product ready for commercial sale.

     The December 31, 2006 inventory balances include both Tarceva and Macugen inventory values. As of March 31, 2007, Macugen inventories have been classified as assets related to discontinued operations. As of December 31, 2006, the total value of the Macugen inventories was $18.4 million.

     Inventory at June 30, 2007 and December 31, 2006 consisted of the following (in thousands):

	June 30,		December 31,
	2007		2006
Raw materials	$	2,969	$	3,032
Work in progress		5,619		22,282
Finished goods on hand, net		6,263		6,088
Inventory subject to return		4,958		5,458
Total inventory	$	19,809	$	36,860

16

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

     Inventory subject to return represents the amount of Tarceva shipped to Genentech which has not been recognized as revenue.

(8) Comprehensive Income (Loss)

     Comprehensive income (loss) for the three and six months ended June 30, 2007 and 2006 was as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007		2006
Net income (loss)	$	19,622		$	(319,929	)	$	26,263	$	(337,784	)
Other comprehensive income (loss):
Foreign currency translation adjustments		449			933			528		999
Post retirement curtailment		1,316			—			1,316		—
Unrealized holding gains (losses) arising during period		(281	)		(75	)		21		(169	)
		1,484			858			1,865		830
Total comprehensive income (loss)	$	21,106		$	(319,071	)	$	28,128	$	(336,954	)

     The components of accumulated other comprehensive income were as follows (in thousands):

	June 30,			December 31,
	2007			2006
Cumulative foreign currency translation adjustment	$	4,504		$	3,976
Adjustment to initially apply SFAS 158		—			(1,316	)
Unrealized loss on available-for-sale securities		(285	)		(306	)
Accumulated other comprehensive income	$	4,219		$	2,354

(9) Intangible Assets

     The components of other intangible assets-net were as follows (in thousands):

	June 30, 2007							December 31, 2006
	Carrying		Accumulated			Net Book		Carrying		Accumulated			Net Book
	Amount		Amortization			Value		Amount		Amortization			Value
Novantrone	$	46,008	$	(43,832	)	$	2,176	$	46,009	$	(43,108	)	$	2,901
Acquired patent estate		779		(169	)		610		760		(135	)		625
Acquired licenses issued to other companies		4,032		(894	)		3,138		3,932		(716	)		3,216
Total	$	50,819	$	(44,895	)	$	5,924	$	50,701	$	(43,959	)	$	6,742

17

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

     Total amortization expense was $459,000 and $917,000, respectively, for the three and six months ended June 30, 2007, and $5 million and $10 million, respectively, for the three and six months ended June 30, 2006. Amortization expense is estimated to be $920,000 for the remaining six months of 2007, $1.8 million for 2008 and $390,000 for the years 2009 through 2012.

(10) Consolidation of Facilities

Restructuring Plan

     On November 6, 2006, we announced our intention to exit our eye disease business, and committed to a plan to re-scale our eye disease business and other operations consistent with the streamlining of our overall business. The plan as it relates to ongoing OSI operations includes the consolidation of facilities, as well as a reduction in the workforce and is expected to cost between $2.6 million and $3.5 million. We recognized $2.5 million of this cost in the fourth quarter of 2006. Included in this charge is $653,000 for severance payments, $654,000 related to long term assets and their utilization, and $1.2 million for lease obligations. During the three and six months ended June 30, 2007, we recognized $456,000 and $1.3 million, respectively, of additional severance charges, of which $244,000 and $717,000, respectively, was included in selling, general and administrative expenses, and $212,000 and $575,000, respectively, was included in research and development expenses.

     The activity for the three and six months ended June 30, 2007 was as follows (in thousands):

	Three Months			Six Months
	Ended			Ended
	June 30, 2007			June 30, 2007
Opening liability	$	1,927		$	1,897
Accrual for severance payments		455			1,292
Accrual for lease payments		—			386
Cash paid for severance		(520	)		(1,591	)
Cash paid for rent		(122	)		(244	)
Ending liability	$	1,740		$	1,740

Corporate Headquarters

     During the first quarter of 2006, we relocated our corporate headquarters to our newly acquired facility in Melville, New York. As a result, in accordance with SFAS 146 we recognized a liability of $2.7 million and net expense of $2.3 million for the exit cost associated with the termination of the lease for the prior facility. The recognized net expense of $2.3 million is comprised of the net lease obligations of $2.7 million, offset by previously accrued rent expense of $369,000.

18

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

     The activity for the three and six months ended June 30, 2007 and 2006 was as follows (in thousands):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2007		2006			2007			2006
Opening liability	$	511	$	2,734		$	1,924		$	—
Accrual for lease termination costs		—		241			—			2,975
Accretion expense		10		58			31			58
Cash paid for rent		—		(853	)		(1,434	)		(853	)
Ending liability	$	521	$	2,180		$	521		$	2,180

Oxford, England

     In August 2004, we announced the decision to consolidate all of our U.K.-based oncology research and development activities into our New York locations by approximately November 30, 2004. The termination benefits provided to employees was estimated at $3.7 million as of September 30, 2004. During the year ended December 31, 2005, we recorded a charge of $4.4 million, in selling, general and administrative expenses, for estimated facility lease return costs and the remaining rental obligation net of estimated sublease rental income in accordance with SFAS No. 146.

     The activity for the three and six months ended June 30, 2007 and 2006 was as follows (in thousands):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2007			2006		2007			2006
Opening liability	$	3,927		$	3,844	$	4,062		$	4,210
Cash paid for rent		(155	)		—		(308	)		(403	)
Other		82			246		100			283
Ending liability	$	3,854		$	4,090	$	3,854		$	4,090

(11) Employee Post-Retirement Plan

     On April 18, 2007, we curtailed our post-retirement medical and life insurance plan and grandfathered those employees, board members and qualified dependants who were eligible to participate in the plan on that date. As a result of the curtailment, we reduced our liability for this plan by $5.6 million, recognized a gain of $4.3 million and recorded an adjustment to accumulated other comprehensive income of $1.3 million. The curtailment had the effect of decreasing the accumulated benefit obligation to $3.0 million.

     Only those grandfathered participants will continue to be entitled to receive benefits under the plan. Eligibility was determined based on age and service requirements. These benefits are subject to deductibles, co-payments and other limitations.

19

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

     Net post-retirement benefit cost for the three and six months ended June 30, 2007 and 2006, excluding the $4.3 million curtailment gain, included the following components (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Service costs for benefits earned during the period	$	95	$	264	$	383	$	527
Interest costs on accumulated post- retirement benefits obligation		38		102		153		205
Amortization of initial benefits attributed to past services		0		1		2		3
Amortization of loss		2		17		7		33
Net post-retirement benefit cost	$	135	$	384	$	545	$	768

     Of the $4.3 million curtailment gain, $4.2 million has been reflected as other income and expense-net and $159,000 has been recognized in loss of discontinued operations in the accompanying consolidated statement of operations.

(12) Sabbatical Leave Accrual

     Effective January 1, 2007, we adopted EITF 06-02 “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43.” Sabbatical leave is generally defined as an employee’s entitlement to paid time off after working for an entity for a specified period of time. The employee continues to be a compensated employee and is not required to perform any duties for the entity during the sabbatical leave. We provide a sabbatical leave of four weeks for employees who have achieved 15 years of service. We applied the consensus as a change in accounting principle through retrospective application to all prior periods in accordance with SFAS No. 154. The cumulative effect of the change in accounting principle is an increase of $352,000 in accrued expenses and a decrease in retained earnings of $352,000. The results for the three and six months ended June 30, 2006 have not been restated for the retrospective impact of adopting the EITF 06-02 because the effect was insignificant.

(13) Income Taxes

     In July 2006, the Financial Accounting Standards Board, or FASB, issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the criteria that must be met prior to recognition of the financial statement benefit of a position taken in a tax return. FIN 48 provides a benefit recognition model with a two-step approach consisting of a “more-likely-than-not” recognition criteria, and a measurement attribute that measures a given tax position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. FIN 48 also requires the recognition of liabilities created by differences between tax positions taken in a tax return and amounts recognized in the financial statements. FIN 48 is effective as of the

20

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

beginning of the first annual period beginning after December 15, 2006, and became effective for us on January 1, 2007. The adoption of FIN 48 on January 1, 2007 had no impact on the financial condition, results of operations, or cash flows for the quarter ended June 30, 2007.

     For the three and six months ended June 30, 2007, we recorded a provision for income taxes of $496,000 related to our alternative minimum tax obligations and $1.0 million related to income from continuing operations, respectively, and a tax benefit of $160,000 and $476,000 related to our loss from discontinued operations, respectively. Based on our ability to fully offset current taxable income by our net operating loss carryforwards, our estimated tax expense is principally related to alternative minimum tax. The provision for income taxes related to continuing operations has been included in other income (expense) in the accompanying statement of operations for the three and six months ended June 30, 2007.

(14) Litigation

     On or about December 16, 2004, several purported shareholder class action lawsuits were filed in the United States District Court for the Eastern District of New York against us, certain of our current and former executive officers, and the members of our Board of Directors. The lawsuits were brought on behalf of those who purchased or otherwise acquired our common stock during certain periods in 2004, which periods differed in the various complaints. The Court appointed a lead plaintiff who, on February 17, 2006, filed a consolidated amended class action complaint seeking to represent a class of all persons who purchased or otherwise acquired our common stock during the period from April 26, 2004 through November 22, 2004. The consolidated complaint alleges that the defendants made material misstatements and omissions concerning the survival benefit associated with our product, Tarceva and the size of the potential market of Tarceva upon FDA approval of the drug. It alleges violations of Sections 11 and 15 of the Securities Act of 1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The consolidated complaint seeks unspecified compensatory damages and other relief. On April 7, 2006, we filed a motion to dismiss the consolidated amended complaint. Briefing on this motion was completed on June 21, 2006. In an opinion dated March 31, 2007 (and entered on the docket on April 4, 2007), the Court granted in part and denied in part the motion to dismiss. The Court dismissed claims against some of the individual defendants and dismissed the Section 11 and 15 claims, but granted the plaintiff 30 days leave to replead the Section 11 claim in accordance with the Court’s order and to renew the Section 15 claim. The Court’s order states that if plaintiff does not properly amend the complaint within 30 days, the Section 11 and 15 claims will be dismissed with prejudice. As of the date of this filing, the plaintiff has not amended the complaint. Since the ultimate outcome of this litigation cannot be determined at this time, no provision has been recorded in the consolidated financial statements.

(15) Subsequent Events

     On July 26, 2007, we announced that (OSI) Eyetech had entered into an agreement with Ophthotech Corporation to divest the PDGF program. Under the terms of the agreement, (OSI) Eyetech will transfer to Ophthotech all rights in the PDGF Program, including rights to its pre-clinical compound E10030, in exchange for an upfront cash payment, shares of Ophthotech and potential future milestones and royalties. The closing of the transaction is expected to occur in August 2007.

     On July 10, 2007, we announced that our 2025 Notes were convertible at the option of the holders and will remain convertible through September 30, 2007, the last trading day of the current fiscal quarter, as provided for in the indenture governing the 2025 Notes. The 2025 Notes became convertible as our common stock closed at or above $35.32 per share for 20

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

trading days within the 30 trading day period ending on June 30, 2007. As a result, during the conversion period commencing July 1, 2007 and continuing through and including September 30, 2007, holders of the 2025 Notes may, if they elect, convert the 2025 Notes into shares of our common stock, subject to the terms of the related indenture. The 2025 Notes are convertible at the conversion rate of 33.9847 shares per $1,000 principal amount of each 2025 Note or an effective conversion price of $29.43 per share. There is currently outstanding $115 million principal amount of the 2025 Notes.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006

Overview

     We are a mid-cap biotechnology company committed to building a scientifically strong and financially successful top tier biopharmaceutical organization that discovers, develops and commercializes innovative molecular targeted therapies addressing major unmet medical needs in oncology, diabetes and obesity.

     Our largest area of focus is oncology where our business is anchored by our flagship product, Tarceva, a small molecule inhibitor of the epidermal growth factor receptor. In November 2004, Tarceva was approved by the U.S. Food and Drug Administration, or FDA, for the treatment of advanced non-small cell lung cancer, or NSCLC, in patients who have failed at least one prior chemotherapy regimen and, subsequently, in November 2005, for the treatment of patients with locally advanced and metastatic pancreatic cancer in combination with the chemotherapy agent, gemcitabine. Tarceva was also approved for sale in the European Union, or EU, for the treatment of advanced NSCLC in September 2005 and, in January 2007, as a first-line therapy for metastatic pancreatic cancer in combination with gemcitabine. Tarceva achieved global sales of approximately $650 million for 2006. We co-promote Tarceva in the United States with Genentech, Inc. and receive royalties on sales from our international partner, Roche. Behind Tarceva, we have an emerging oncology pipeline of molecular targeted therapies in clinical and late-stage pre-clinical development, including OSI-930 (a co-inhibitor of the vascular endothelial growth factor, or VEGF, and c-kit receptors with potential utility as an anti-angiogenic and anti-proliferative agent in certain tumors) and OSI-906 (an insulin-like growth factor 1, or IGF-1, receptor inhibitor implicated in all major tumor types). Tarceva, OSI-930 and OSI-906 are all small molecules designed to be administered orally as a tablet rather than by the less convenient intravenous infusion characteristic of many anti-cancer drugs.

     We also have research and early development programs in diabetes and obesity which are conducted through Prosidion Limited, our U.K. subsidiary. Our most advanced clinical candidate in the diabetes and obesity area is PSN9301, our dipeptidyl peptidase IV, or DPIV, inhibitor, which will enter Phase IIb studies in early 2008. Two additional agents, PSN602 and PSN821, are in late stage pre-clinical development and are anticipated to enter into clinical trials in 2008. In January 2007, we licensed our glucokinase activator program, including our clinical candidate PSN010, which is in Phase I studies, to Eli Lilly and Company for an upfront fee of $25 million and up to $360 million in potential development and sales milestones and other payments plus royalties on any compounds successfully commercialized from this program. We also generate revenues from our patent estate relating to the use of DPIV inhibitors for the treatment of type II diabetes and related indications. Twelve pharmaceutical companies have taken non-exclusive licenses to these patents, which provide us with upfront payments as well as potential milestones and royalties. In the fourth quarter of 2006, one of our licensees, Merck & Co., Inc., received approval by the FDA for its DPIV inhibitor, Januvia® (sitagliptin phosphate), and commenced marketing of the drug, which triggered the payment of a milestone and royalties to us. In March 2007, Merck received FDA approval of Janumet® (sitagliptin/metformin HCI) a combination DPIV

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inhibitor product, which also triggered the payment of a milestone and royalties to us. In July 2007, Novartis AG, another licensee, received a positive opinion from the Committee for Medicinal Products for Human Use, or the CHMP, in relation to its European regulatory approval application for its DPIV inhibitor, Galvus^® (vildagliptin).

     On November 6, 2006, we announced our intention to divest our eye disease business, a process which we expect to complete by the end of 2007. Our eye disease business consists principally of Macugen, our marketed product for the treatment of neovascular age-related macular degeneration, or wet AMD, as well as research assets in the eye disease area. We made the decision to exit the eye disease business because we believe that a key strategic goal of the acquisition of the business in November 2005 — the generation of significant cash flow from the business in the 2006 through 2008 fiscal years — has not been and will not be realized.

     During the first quarter of 2007, we finalized our exit plan and began to actively market the eye disease assets. In April 2007, we restructured our relationship with Pfizer Inc. for Macugen, which resulted in the return of U.S. rights to Macugen to us in exchange for a royalty-free license to Pfizer to commercialize Macugen in the rest of the world. We have explored several potential transactions to divest our entire eye disease business, but, to date, have been unable to identify a transaction that would provide us with satisfactory terms for a complete sale of this business. Therefore, we have switched to a strategy of separately divesting the assets and, in July 2007, we announced that we entered into an agreement with Ophthotech Corporation to divest our anti-platelet derived growth factor, or PDGF, aptamer program for an upfront cash payment, shares of Ophthotech, and potential future milestones and royalties. While we continue to pursue the divestiture of the remaining Macugen related assets, we now anticipate that it is likely that such transaction will be completed towards the end of this year and will likely occur after the second anniversary of our November 2005 acquisition of Eyetech Pharmaceuticals, at which time approximately $126 million of acquired (OSI) Eyetech net operating losses would become available for utilization by OSI. As a result of the finalization of our plan to sell the business during the first quarter of 2007, the financial information associated with these operations is presented as discontinued operations in the accompanying financial statements.

     Through diligent management of our business, in particular, our expenses, we have attained profitability for the first six months of 2007. We expect to achieve our goal of full year profitability for 2007 while sustaining a sufficient level of investment in research and development in order to allow for the continued expansion of Tarceva use and the progression of our pipeline of targeted oral small molecules for the treatment of cancer, diabetes and obesity.

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Quarterly Update

     On June 19, 2007, we announced that we initiated Phase I clinical trials for OSI-906, an orally active, potent and selective inhibitor of the insulin-like growth factor 1 receptor. The studies are designed to determine a recommended dose and dosing schedule for a Phase II trial, and will evaluate the safety and pharmacokinetic profiles of OSI-906 both as a monotherapy and, subsequently, in combination with Tarceva.

     In May 2007, Pfizer returned to us full commercial rights to OSI-632 (formerly CP-547,632), a small molecule VEGFR inhibitor which was jointly discovered in our collaboration with Pfizer as part of our longstanding alliance in cancer drug discovery. OSI-632, which has completed an initial Phase II trial, has a different selectivity profile than OSI-930, our VEGFR/c-kit inhibitor currently in Phase I studies. We will evaluate the data and potential positioning of OSI-632 in our portfolio prior to making any decision on its potential future development.

     On April 25, 2007, we announced that results published in the Journal of Clinical Oncology show that adding Tarceva to gemcitabine chemotherapy significantly improves survival when administered as first-line therapy to patients with advanced pancreatic cancer. Data from this study, conducted by the National Cancer Institute of Canada, formed the basis of both the U.S. and European approvals for Tarceva in this patient population.

Subsequent Events

     On July 27, 2007, we announced that our (OSI) Eyetech subsidiary had entered into an agreement with Ophthotech Corporation to divest the PDGF program. Under the terms of the agreement, (OSI) Eyetech will transfer to Ophthotech all rights in the PDGF program, including rights to its pre-clinical compound E10030, in exchange for an upfront cash payment, shares of Ophthotech and potential future milestones and royalties. The closing of the transaction is expected to occur in August 2007.

Critical Accounting Policies

     We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ significantly from our estimates and the estimated amounts could differ significantly under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and which require our most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Note 1 to the accompanying consolidated financial statements includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements.

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Discontinued Operations

     On November 6, 2006, we announced our intention to divest our eye disease business, a process which we expect to complete in 2007. During the first quarter of 2007, we finalized our exit plan and began to actively market our eye disease business assets. As a result of the finalization of our plan to sell the business during the first quarter of 2007, and as discussed in Note 4 to the accompanying consolidated financial statements, the financial information associated with these operations is presented as discontinued operations in the accompanying financial statements.

Revenue Recognition

     Net revenues from unconsolidated joint business

     Net revenues from unconsolidated joint business are related to our co-promotion and manufacturing agreements with Genentech for Tarceva. They consist of our share of the pretax co-promotion profit generated from our co-promotion arrangement with Genentech for Tarceva, the reimbursement from Genentech of our sales and marketing costs related to Tarceva and the reimbursement from Genentech of our manufacturing costs related to Tarceva. Under the co-promotion arrangement, all U.S. sales of Tarceva and associated costs and expenses, except our sales related costs, are recognized by Genentech. We record our 50% share of the co-promotion pretax profit on a quarterly basis, as set forth in our agreement with Genentech. Pretax co-promotion profit under the co-promotion arrangement is derived by calculating U.S. net sales of Tarceva to third-party customers and deducting costs of sales, distribution and selling and marketing expenses incurred by Genentech and us. The costs incurred during the respective periods represent estimated costs of both parties and are subject to further adjustment based on each party’s final review. Based on past experience, we do not believe that these adjustments, if any, will be significant to our consolidated financial statements. The partial reimbursement of sales and marketing costs related to Tarceva is recognized as revenue as the related costs are incurred. We defer the recognition of the reimbursement of our manufacturing costs related to Tarceva until the time Genentech ships the product to third-party customers at which time our risk of inventory loss no longer exists.

     License fees and milestones

     Our revenue recognition policies for all nonrefundable upfront license fees and milestone arrangements are in accordance with the guidance provided in the Securities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” as amended by SEC Staff Accounting Bulletin No. 104, “Revenue Recognition.” In addition, we follow the provisions of EITF, 00-21, “Revenue Arrangements with Multiple Deliverables” for multiple element revenue arrangements entered into or materially amended after June 30, 2003.

     Milestones received from Genentech after June 2004 and the remaining unearned upfront fee are being recognized over the term of our Manufacturing and Supply Agreement with Genentech, under which the last items of performance to be delivered to Genentech are set forth, on a straight line basis, which approximates the expected level of performance under the

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Manufacturing and Supply Agreement. Milestone payments received from Roche are recorded as unearned revenue and recognized over the expected term of the research collaboration on a straight-line basis, which approximates the expected level of performance under the development plan.

     In January 2007, we licensed our glucokinase activator program, including our clinical candidate PSN010, which is in Phase I studies, to Eli Lilly and Company for an upfront fee of $25 million and up to $360 million in potential development and sales milestones and other payments plus royalties on any compounds successfully commercialized from this program. We have deferred the initial recognition of the $25 million upfront fee based upon our obligation under the agreement to provide technical support during a transitional period of nine months from the date of execution. For the three and six months ended June 30, 2007, we recognized $8.3 million and $16.6 million, respectively, of the $25.0 million upfront fee. As of June 30, 2007, $8.3 million of the Eli Lilly upfront fee remains unamortized and will be recognized in the third quarter of 2007.

     Macugen Product Sales

     Macugen product sales are included in loss from discontinued operations. Macugen is sold primarily to distributors, who, in turn, sell to physicians, a limited number of specialty pharmacy providers and federal government buying groups. We recognize revenue from product sales when there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed and determinable, the buyer is obligated to pay us, the obligation to pay is not contingent on resale of the product, the buyer has economic substance apart from us, we have no obligation to bring about sale of the product, the amount of returns can be reasonably estimated and collectibility is reasonably assured.

     On April 20, 2007, we terminated our existing collaboration agreement with Pfizer with respect to the co-promotion of Macugen in the United States and amended and restated the license agreement pursuant to which we had originally granted to Pfizer a number of exclusive licenses or sublicenses to patents and other intellectual property related to Macugen on a world-wide basis. Under the terms of the amended and restated license agreement, Pfizer has agreed to return to us all rights to develop and commercialize Macugen in the United States, and we have granted to Pfizer an exclusive right to develop and commercialize Macugen in the rest of the world. We have also agreed with Pfizer to provide each other with certain transitional services related to Macugen.

     Prior to the April 2007 amendment, we shared sales and marketing responsibility for sales of Macugen in the United States and reported product revenue on a gross basis for these sales. We determined that we qualified as a principal under the criteria set forth in EITF 99-19, based on our responsibilities under our contracts with Pfizer, which included manufacture of product for sale in the United States, distribution, ownership of product inventory and credit risk from customers. Since April 20, 2007, we no longer share the gross profits of U.S. sales with Pfizer and no longer receive royalties from Pfizer from rest of the world sales.

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     Macugen Collaborative Revenue

     Collaborative program revenues related to Macugen for the three and six months ended June 30, 2007 and 2006 represented funding arrangements for Macugen research and development with Pfizer and were recognized when earned in accordance with the terms of the agreements and related research and development activities undertaken. These revenues are included in discontinued operations.

     Based on the terms of our collaboration agreement with Pfizer, revenues derived from reimbursements of costs associated with the development of Macugen were recorded in compliance with EITF 99-19, “Reporting Revenue Gross as Principal versus Net as an Agent” and EITF Issue 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out of Pocket’ Expenses Incurred.” According to the criteria established by these EITF Issues, we have met the criteria to record revenue for the gross amount of the reimbursements.

     Macugen Milestone Revenue

     In the second quarter of 2006, we received a $35 million milestone payment from Pfizer upon the launch of Macugen in select European countries. In accordance with EITF 00-21, the milestone payment was recorded as unearned revenue and was being recognized as revenue on a straight-line basis over the expected term of our collaboration and license agreements with Pfizer, which approximated the expected level of performance under these agreements with Pfizer.

     In April 2007, we terminated our collaboration and license agreements with Pfizer and entered into an amended and restated license agreement. Under the terms of this agreement, we continue to provide services, share certain expenses and collaborate in specified studies with Pfizer and therefore, we are continuing to amortize the milestone payment over the term of the original agreement which corresponds to the term of the amended and restated license agreement. Any remaining balance of deferred revenue related to this milestone payment will be reversed upon the sale of the eye disease business and the termination of our obligations under the agreement.

     The amortization of the unearned revenue is included in loss from discontinued operations. Any remaining balance of deferred revenue related to this milestone payment will be reversed upon the sale of the eye disease business.

Accruals for Clinical Research Organization and Clinical Site Costs

     We make estimates of costs incurred to date but not yet invoiced in relation to external clinical research organizations, or CROs, and clinical site costs. We analyze the progress of clinical trials, including levels of patient enrollment, invoices received and contracted costs when evaluating the adequacy of the accrued liabilities. Significant judgments and estimates must be made and used in determining the accrued balance in any accounting period.

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Goodwill and Other Long-Lived Assets

     We account for goodwill and other intangible assets in accordance with Statements of Financial Accounting Standards, or SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations. It specifies the criteria which intangible assets acquired in a business combination must meet in order to be recognized and reported apart from goodwill. SFAS No. 142 requires that goodwill and intangible assets determined to have indefinite lives no longer be amortized but instead be tested for impairment at least annually and whenever events or circumstances occur that indicate impairment might have occurred. We completed our annual impairment review of goodwill at December 31, 2006, and determined that no impairment charge was required.

     Our identifiable intangible assets are subject to amortization. SFAS No. 142 requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires, among other things, that long-lived assets be measured at the lower of carrying amount or fair value, less cost to sell, whether reported in continuing operations or in discontinued operations. We review our intangibles with determinable lives and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

     As discussed in note 4 to the accompanying consolidated financial statements, our (OSI) Eyetech operations have been classified as discontinued operations and certain assets have been classified as held for sale. In accordance with SFAS No. 144 these assets have been recorded at their lower of carrying amount or fair value, less cost to sell.

Stock-Based Compensation

     As discussed further in note 5 to the accompanying consolidated financial statements, “Accounting for Stock-Based Compensation,” we adopted SFAS No. 123(R) on January 1, 2006 using the modified prospective method.

     We have used and expect to continue to use the Black-Scholes option-pricing model to compute the estimated fair value of stock-based awards. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected option term and risk-free interest rates. We estimate expected volatility based upon a combination of historical, implied and adjusted historical stock prices. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. Commencing in the second quarter of fiscal 2005, the fair value of the options was estimated at the date of grant using a Black-Scholes option pricing model with the expected option term determined using a Monte Carlo simulation model that incorporates historical employee exercise behavior and post-vesting employee termination rates.

     The assumptions used in computing the fair value of stock-based awards reflect our best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of our control. As a result, if other assumptions or estimates had been used, the stock-based compensation expense that was recorded for the three and six months ended June 30, 2007

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and 2006 could have been materially different. Furthermore, if different assumptions are used in future periods, stock-based compensation expense could be materially impacted in the future.

Revenues (in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007		2006		$ Change		2007		2006		$ Change
Net revenue from unconsolidated joint business	$	42,999	$	39,211	$	3,788	$	82,121	$	74,866	$	7,255
Royalties on product licenses		22,546		10,912		11,634		41,839		18,926		22,913
License, milestone and other revenues		13,338		5,529		7,809		32,392		21,115		11,277
Total revenues	$	78,883	$	55,652	$	23,231	$	156,352	$	114,907	$	41,445

Net Revenue from Unconsolidated Joint Business

     Net revenue from unconsolidated joint business is related to our co-promotion and manufacturing agreements with Genentech for Tarceva. For the three and six months ended June 30, 2007, Genentech recorded net sales of Tarceva in the United States and its territories of $102 million and $203 million, respectively, compared to $103 million and $196 million for the three and six months ended June 30, 2006, respectively. Sales for the second quarter of 2007 were negatively impacted by an approximately $9 million reserve adjustment taken by Genentech due to unusually high product returns related to expiring inventory returned to Genentech. Excluding this adjustment, U.S. net sales for Tarceva in the second quarter of 2007 were up 7% versus the prior year quarter. Our share of these net sales is reduced by the costs incurred for cost of goods sold and for the sales and marketing of the product. For the three and six months ended June 30, 2007, we reported net revenues from our unconsolidated joint business for Tarceva of $43.0 million and $82.1 million, respectively, compared to $39.2 million and $74.9 million in the three and six months ended June 30, 2006, respectively. The increase in net revenue from unconsolidated joint business was primarily due to higher net sales related to price increases and higher reimbursement of marketing and sales costs.

Royalties on Product Licenses

     We receive royalties on the sales of Tarceva outside of the United States and its territories. In September 2005, our partner Roche received approval from the European Commission for the sale of Tarceva in the EU for the treatment of patients with locally advanced or metastatic NSCLC, and in January 2007, as a first-line therapy for metastatic pancreatic cancer in combination with gemcitabine. Roche has also received approval for reimbursement in a number of EU countries and is pursuing approval in other major markets in the EU. Tarceva sales are expected to increase outside the United States as additional reimbursement approvals are secured. For the three and six months ended June 30, 2007, Roche recorded $110 million and $206 million in net sales of Tarceva outside of the United States and its territories, respectively, compared to $54 million and $94 million for the three and six months ended June 30, 2006, respectively. For the three and six months ended June 30, 2007, we recorded $22.5 million and

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$41.8 million in royalty revenues from these sales, respectively, compared to $10.9 million and $18.9 million for the three and six months ended June 30, 2006, respectively.

License, Milestone and Other Revenues

     We recognized $13.3 million and $32.4 million of license, milestone and other related revenues during the three and six months ended June 30, 2007, respectively, compared to $5.5 million and $21.1 million for the three and six months ended June 30, 2006, respectively. The three and six months ended June 30, 2007 included $3.5 and $12.2 million of upfront payments, milestones and royalties, respectively, under the worldwide non-exclusive license agreements entered into by Prosidion under our DPIV patent portfolio covering the use of DPIV inhibitors for treatment of type II diabetes and related indications. For the three and six months ended June 30, 2006, revenue related to our DPIV patent portfolio was $2.1 million and $9.4 million, respectively. The amount of license revenues generated from our DPIV patent estate can be expected to fluctuate significantly from quarter to quarter based on (i) the level of future product sales by our licensees, (ii) the ability of our licensees to achieve specified events under the license agreements which entitle us to milestone payments and (iii) our ability to enter into additional license agreements in the future.

     In addition, in the three and six months ended June 30, 2007, we recognized $8.3 million and $16.6 million, respectively, of the $25.0 million upfront fee we received in January 2007 from licensing our glucokinase activator program, including our clinical candidate PSN010, which is in Phase I studies, to Eli Lilly. As of June 30, 2007, $8.3 million of the Eli Lilly upfront fee remains unamortized and will be recognized in the third quarter of 2007.

     Also included in license and milestone revenues was the recognition of the ratable portion of upfront fees from Genentech and milestone payments received from Genentech and Roche to date in connection with various regulatory acceptances and approvals for Tarceva in the United States, Europe and Japan. These payments were initially deferred and are being recognized as revenue in accordance with EITF 00-21. The ratable portion of the upfront fee and milestone payments recognized as revenue for the three and six months ended months ended June 30, 2007 were $944,000 and $1.9 million, respectively, compared to $810,000 and $1.6 million for the three and six months ended June 30, 2006, respectively. The unrecognized deferred revenue related to these upfront fees and milestone payments received was $41.9 million and $39.8 million as of June 30, 2007 and December 31, 2006, respectively.

     We also will be entitled to additional milestone payments from Genentech and Roche upon the occurrence of certain regulatory approvals and filings with respect to Tarceva. Additional milestone payments will be due from Genentech and Roche upon approval of adjuvant indications in the United States and Europe. Additional milestone payments will be due from Roche upon the approval of Tarceva in Japan. The ultimate receipt of these additional milestone payments is contingent upon the applicable regulatory approvals and other future events.

     Included in license, milestone and other revenues were sales commissions earned on the sales of Novantrone in the United States for oncology indications. Sales commissions for the three and six months ended June 30, 2007 were $376,000 and $1.2 million, respectively,

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compared to $2.3 million and $9.4 million for the three and six months ended June 30, 2006, respectively. Sales commissions declined significantly subsequent to April 2006 due to the patent expiration of Novantrone in April 2006, which resulted in our loss of market exclusivity for this product and the launch of generic competitors.

Expenses (in thousands)

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2007		2006		$ Change			2007		2006		$ Change
Cost of goods sold	$	2,047	$	1,999	$	48		$	3,951	$	4,221	$	(270	)
Research and development		27,269		29,421		(2,152	)		57,895		56,499		1,396
Selling, general and administrative		24,038		25,702		(1,664	)		49,167		53,510		(4,343	)
Amortization of intangibles		459		451		8			917		899		18
	$	53,813	$	57,573	$	(3,760	)	$	111,930	$	115,129	$	(3,199	)

Cost of Goods Sold

     Total cost of goods sold for the three and six months ended June 30, 2007 were $2.0 million and $4.0 million, respectively, compared to $2.0 million and $4.2 million for the three and six months ended June 30, 2006, respectively.

     Prior to receipt of approval of Tarceva for commercial sale on November 18, 2004, we had expensed all costs associated with the production of Tarceva to research and development. Effective November 18, 2004, we began to capitalize the costs of manufacturing Tarceva as inventory, including the costs to label, package and ship previously manufactured bulk inventory whose costs had already been expensed as research and development. Although it is our policy to state inventory reflecting full absorption costs until we sold all of our existing inventory for which all or a portion of the costs were previously expensed, certain components of inventory continued to reflect costs incurred to process into finished goods previously expensed raw materials and work in process. During 2006, we had sold the entire inventory partially produced and expensed prior to November 18, 2004. Cost of goods sold for the three and six months ended June 30, 2006 would have been $570,000 and $1.1 million higher, respectively, if the Tarceva inventory sold had reflected the full absorption manufacturing costs.

Research and Development

     We consider the active management and development of our clinical pipeline crucial to the long-term process of getting a clinical candidate approved by the regulatory authorities and brought to market. We manage our overall research, development and in-licensing efforts in a manner designed to generate a constant flow of clinical candidates into development to offset both the advancement of products to the market and the anticipated attrition rate of drug candidates that fail in clinical trials or are terminated for business reasons. The duration of each phase of clinical development and the probabilities of success for approval of drug candidates entering clinical development will be impacted by a variety of factors, including the quality of the molecule, the validity of the target and disease indication, early clinical data, investment in

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the program, competition and commercial viability. Because we manage our pipeline in a dynamic manner, it is difficult to give accurate guidance on the anticipated proportion of our research and development investments assigned to any one program prior to the Phase III stage of development, or to the future cash inflows from these programs. For the three and six months ended June 30, 2007, we expended a total of $11.9 million and $23.8 million, respectively, in research and $15.4 million and $34 million, respectively, in pre-clinical and clinical development. For the three and six months ended June 30, 2006, we expended a total of $12.6 million and $23.5 million, respectively, in research and $16.8 million and $32.9 million, respectively, in pre-clinical and clinical development. We consider this level of investment suitable for a company with our pipeline of clinical and pre-clinical candidates.

     Research and development expenses decreased $2.2 million for the three months ended June 30, 2007 compared to the same period last year, and increased $1.4 million for the six months ended June 30, 2007, compared to the same period last year. The decrease for the three months ended June 30, 2007 was primarily due to timing of clinical expenditures related to Tarceva, partially offset by an increase in non-Tarceva related oncology spending and equity based compensation cost. The increase for the six months ended June 30, 2007 was primarily due to increased spending in non-Tarceva related oncology programs, equity based compensation cost and severance related cost, partially offset by a small decline in Tarceva related expenditures.

     We manage the ongoing development program for Tarceva with our partners, Genentech and Roche, through a global development committee under a Tripartite Agreement among the parties. Together with our partners, we have implemented a broad-based global development strategy for Tarceva that implements simultaneous clinical programs currently designed to expand the number of approved indications of Tarceva and evaluate the use of Tarceva in new and/or novel combinations. Our global development plan has included major Phase III clinical trials in lung and pancreatic cancer in the past, and currently includes additional major Phase III clinical trials in lung cancer in the maintenance and adjuvant settings. Since 2001, the alliance partners have committed an aggregate of approximately $750 million to the global development plan which is shared by the three parties. As of June 30, 2007, we had expended in excess of $195 million in the development of Tarceva, representing our share of the costs incurred to date in the tripartite global development plan and additional investments outside of the plan.

Selling, General and Administrative

     Selling, general and administrative expenses for the three and six months ended June 30, 2007 were $24.0 million and $49.2 million, respectively, compared to $25.7 million and $53.5 million for the three and six months ended June 30, 2006, respectively. The decrease selling, general and administrative expenses for the three months ended June 30, 2007, compared to expenses in the same period last year was primarily attributable to a $3.5 million decline in maintenance fees for Novantrone partially offset by an increase in expenses recorded in 2007 for severance and equity based compensation. The decrease in selling, general and administrative expenses for the six months ended June 30, 2007, compared to expenses in the same period last year, was primarily attributable to a $7 million decline in maintenance fees for Novantrone and $2.4 million of lease return costs related to our relocation of our corporate headquarters in 2006,

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partially offset by an increase in expenses recorded in 2007 for severance and equity based compensation.

Other Income and Expense (in thousands)

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2007			2006			$ Change		2007			2006			$ Change
Investment income-net	$	2,995		$	1,873		$	1,122	$	6,090		$	3,240		$	2,850
Interest expense		(1,809	)		(1,857	)		48		(3,612	)		(3,655	)		43
Other income (expense)-net		3,020			(535	)		3,555		2,071			(1,427	)		3,498
Total other income (expense)	$	4,206		$	(519	)	$	4,725	$	4,549		$	(1,842	)	$	6,391

     Investment income for the three and six months ended June 30, 2007 increased $1.1 million and $2.9 million, respectively, compared to the same period last year. The increase was primarily due to an increase in the funds available for investment.

     Other income (expense)-net for the periods included the amortization of debt issuance costs related to the convertible senior subordinated notes, and other miscellaneous income and expense items. Other income (expense) for the three and six months ended June 30, 2007 included a provision for income taxes related to our alternative minimum tax obligations of $496,000 and $1.0 million, respectively, related to income from continuing operations. Based on our use of net operating loss carryforwards, our estimated effective tax rate for fiscal 2007 is approximately 2.0% based principally on the federal alternative minimum tax. Other income (expense)-net for the three and six months ended June 30, 2007 included a $4.1 million curtailment gain related to our decision to curtail our post-retirement medical and life insurance plan.

Discontinued Operations

     U.S. net sales of Macugen declined significantly in 2007, from $87.2 million in the first six months of 2006 to $9.4 million in the first six months of 2007. Despite the decline in sales, losses declined $335.1 million to $22.7 million for the six months ended June 30, 2007, compared to $357.8 million in the same period last year. The decline in losses was primarily attributable to $319.4 million goodwill impairment charge record in 2006 and lower operating expenses in 2007.

Extraordinary Gain

     In connection with the 2003 acquisition of Cell Pathways, Inc., we recognized contingent consideration of $22.0 million in the form of five-year contingent value rights through which each share of Cell Pathways’ common stock will be eligible for an additional 0.04 share of our common stock in the event of a filing of a new drug application by June 12, 2008 for either of the two clinical candidates acquired from Cell Pathways, OSI-461 or Aptosyn. We have ceased our development efforts of these two clinical candidates and have been seeking parties interested in licensing the candidates. We concluded that, in our judgment, the milestone will not be met based upon the current progress of our out-licensing efforts and the technical hurdles for filing a

34

new drug application by June 2008 and therefore, we reversed the $22.0 million liability and recorded an extraordinary gain for the three months ended June 30, 2006.

Liquidity and Capital Resources

     At June 30, 2007, cash and investments, including restricted securities, were $253.9 million compared to $216.4 million at December 31, 2006. The increase of $37.5 million was primarily due to the following changes: net cash of (i) $29 million from operating activities and (ii) $8.1 million proceeds from stock option exercises offset by cash used for capital expenditures of $1.5 million.

     Included in the cash from operations for the six months ended June 30, 2007 was $32 million of licensing fees related to our diabetes and obesity business.

     Through diligent management of our business, in particular, our expenses, we have attained profitability in the first six months of 2007 and expect to achieve our goal of full year profitability for 2007. If we continue to execute on our internal plans, we expect that our research and development investments and capital requirements over the next 12 to 18 months can be funded from the generation of cash flow from our commercialized product and out licensing activities. If we are successful, we anticipate funding the majority, if not all of our liquidity and capital needs from our current cash position and from the generation of cash flow from operations, with the potential exception of strategic acquisitions of products and/or businesses.

Commitments and Contingencies

     Our major outstanding contractual obligations relate to our senior subordinated convertible notes and our facility leases. The following table summarizes our significant contractual obligations at June 30, 2007 and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

	Remainder						2013 and
	of 2007		2008-2010		2011-2012		beyond
Senior convertible debt(a)	$	3,588	$	21,525	$	14,350	$	348,525
Operating leases		7,825		34,327		21,932		82,621
Purchase obligations(b)		21,768		59,797		7,700		6,000
Obligations related to exit activities(c)		2,924		3,375		108		1,144
Total contractual obligations	$	36,105	$	119,024	$	44,090	$	438,290

(a) Includes interest payments at a rate of 3.25% per annum relating to the $150.0 million principal amount of the 2023 Notes and at a rate of 2% per annum relating to the $115.0 million principal amount of the 2025 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. Holders of the 2025 Notes have the right to

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	require us to purchase, for cash, all of the 2025 Notes, or a portion thereof, in December 2010.
(b)	Purchase obligations include inventory commitments, commercial and research commitments and other significant purchase commitments. Included in these purchase obligations is our share of the remaining future commitment related to the Tarceva global development cost of approximately $90 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 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 $8.0 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. Eligibility is determined based on age and years of service. As of April 18, 2007, we curtailed this plan and grandfathered those employees, board members and qualified dependants who were eligible to participate in the plan on that date. Only those grandfathered participants will continue to be entitled to receive benefits under the plan. As of June 30, 2007, we have $3.0 million of accrued post-retirement benefit costs.

• 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

36

	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 Pharmaceuticals 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.
•	We have a minor investment in a privately owned venture fund, and are obligated to make an additional $1.7 million of capital contribution upon request.

Accounting Pronouncements

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or SFAS No. 159. SFAS No. 159 permits entities to choose to measure many financial instruments and certain items at fair value that are not currently required to be measured at fair value. We will be subject to the requirements of SFAS No. 159 for our fiscal year ending December 31, 2008. We are currently evaluating the impact of the provisions of SFAS No. 159.

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” or SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for our fiscal year ending December 31, 2008. We are currently evaluating the impact of the provisions of SFAS No. 157.

Forward Looking Statements

     A number of the matters and subject areas discussed in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report that are not historical or current facts deal with potential future circumstances and developments. The discussion of these matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and these discussions may materially differ from our actual future experience involving any one or more of these matters and subject areas. These forward looking statements are also subject generally to the other risks and uncertainties that are described below. These forward looking statements are also subject generally to the other risks and uncertainties that are described in our annual report on Form 10-K for the fiscal year ended December 31, 2006.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

     Our cash flow and earnings are subject to fluctuations due to changes in interest rates in our investment portfolio of debt securities, the fair value of equity instruments held and foreign

37

currency exchange rates. We maintain an investment portfolio of various issuers, types and maturities. These securities are generally classified as available-for-sale as defined by SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) included in stockholders’ equity.

     At June 30, 2007, we maintained a portion of our cash and cash equivalents in financial instruments with original maturities of three months or less. We also maintained an investment portfolio principally comprised of government and government agency obligations and corporate obligations that are subject to interest rate risk and will decline in value if interest rates increase. A hypothetical 10% change in interest rates during the periods would have resulted in a $300,000 and $609,000 change in our net income for the three and six months ended June 30, 2007, respectively.

     Our limited investments in certain biotechnology companies are carried on the equity method or cost method of accounting using the guidance of applicable accounting literature. Other-than-temporary losses are recorded against earnings in the same period the loss was deemed to have occurred.

     Our long-term debt totaled $265.0 million at June 30, 2007 and was comprised of our 2023 Notes which bear interest at a fixed rate of 3.25% and our 2025 Notes which bear interest at a fixed rate of 2.00%. Underlying market risk exists related to an increase in our stock price or an increase in interest rates which may make the conversion of the 2023 Notes or 2025 Notes to common stock beneficial to the holders of such notes. Conversion of the 2023 Notes or 2025 Notes would have a dilutive effect on any future earnings and book value per common share.

Item 4. Controls and Procedures

     Attached to this Quarterly Report on Form 10-Q as Exhibit 31.1 and 31.2, there are two certifications, or the Section 302 Certifications, one by each of our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO. This Item 4 contains information concerning the evaluation of our disclosure controls and procedures and internal control over financial reporting that is referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

     Evaluation of Our Disclosure Controls and Procedures. The Securities and Exchange Commission requires that as of the end of the period covered by this Quarterly Report on Form 10-Q, the CEO and the CFO evaluate the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13(a)-15(e)) under the Securities Exchange Act of 1934, as amended, and report on the effectiveness of the design and operation of our disclosure controls and procedures. Accordingly, under the supervision and with the participation of our management, including our CEO and CFO, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.

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     CEO/CFO Conclusions about the Effectiveness of the Disclosure Controls and Procedures. Based upon their evaluation of the disclosure controls and procedures, our CEO and CFO have concluded that our disclosure controls and procedures are effective at the reasonable assurance level to ensure that material information relating to OSI and our consolidated subsidiaries is made known to management, including the CEO and CFO, on a timely basis and during the period in which this Quarterly Report on Form 10-Q was being prepared.

     Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f)) under the Exchange Act identified in connection with the evaluation of such internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     On or about December 16, 2004, several purported shareholder class action lawsuits were filed in the United States District Court for the Eastern District of New York against us, certain of our current and former executive officers, and the members of our Board of Directors. The lawsuits were brought on behalf of those who purchased or otherwise acquired our common stock during certain periods in 2004, which periods differed in the various complaints. The Court appointed a lead plaintiff who, on February 17, 2006, filed a consolidated amended class action complaint seeking to represent a class of all persons who purchased or otherwise acquired our common stock during the period from April 26, 2004 through November 22, 2004. The consolidated complaint alleges that the defendants made material misstatements and omissions concerning the survival benefit associated with our product, Tarceva and the size of the potential market of Tarceva upon FDA approval of the drug. It alleges violations of Sections 11 and 15 of the Securities Act of 1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The consolidated complaint seeks unspecified compensatory damages and other relief. On April 7, 2006, we filed a motion to dismiss the consolidated amended complaint. Briefing on this motion was completed on June 21, 2006. In an opinion dated March 31, 2007 (and entered on the docket on April 4, 2007), the Court granted in part and denied in part the motion to dismiss. The Court dismissed claims against some of the individual defendants and dismissed the Section 11 and 15 claims, but granted the plaintiff 30 days leave to replead the Section 11 claim in accordance with the Court’s order and to renew the Section 15 claim. The Court’s order states that if plaintiff does not properly amend the complaint within 30 days, the Section 11 and 15 claims will be dismissed with prejudice. As of the date of this filing, the plaintiff has not amended the complaint. Since the ultimate outcome of this litigation cannot be determined at this time, no provision has been recorded in the consolidated financial statements.

Item 1A. Risk Factors

     There have been no material changes to the risk factors as previously disclosed in our Form 10-K for the year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     Not applicable.

Item 3. Defaults Upon Senior Securities

     Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

     Our annual meeting of stockholders was held on June 13, 2007. The following directors were elected:

	Votes For		Votes Withheld
Robert A. Ingram		45,941,330		5,377,450
Colin Goddard, Ph.D.		49,690,060		1,628,720
Santo J. Costa		46,280,415		5,038,365
Daryl K. Granner, M.D.		49,188,406		2,130,374
Joseph Klein, III		49,770,980		1,547,800

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	Votes For		Votes Withheld
Kenneth B. Lee, Jr.		49,774,066		1,544,694
Viren Mehta		46,423,343		4,895,437
David W. Niemiec		49,780,907		1,537,873
Herbert Pinedo, M.D., Ph.D.		49,784,654		1,534,125
Katharine B. Stevenson		49,785,526		1,533,254
John P. White		45,416,514		5,902,266

     In addition, the following matters were voted upon: (i) a proposal to amend the Amended and Restated Stock Incentive Plan to increase the number of shares available under the plan was approved (34,190,087 shares voted in favor, 9,108,165 shares voted against, 133,949 shares abstained, and there were 7,886,579 broker non-votes); and (ii) the appointment of KPMG LLP as independent registered public accounting firm for fiscal year ending December 31, 2007 was ratified (50,998,885 shares voted in favor, 246,646 shares voted against, 73,249 shares abstained, and there were no broker non-votes).

Item 5. Other Information

     On April 19, 2007, our Board of Directors approved the OSI Pharmaceuticals, Inc. Nonqualified Deferred Compensation Plan, or our Deferred Compensation Plan, for the benefit of the members of our Board of Directors and a select group of our management and highly compensated employees, including our executive officers. Employees who participate in the Deferred Compensation Plan can defer the receipt of up to (i) 80% of their annual base salary, (ii) 95% of their year end bonus and (iii) 100% of other non-salary cash compensation. Directors can defer the receipt of up to (i) 100% director fees, and, if applicable in the future, (ii) 95% of their year end bonus and (iii) 100% of other non-salary cash compensation. All compensation deferrals must be for a minimum of two years. Deferred amounts are invested on behalf of the participant in one or more investment funds. Participants may elect to receive distributions either while in-service or upon retirement, and receive mandatory distributions upon the occurrence of certain events, including termination, death and disability. This description of the Deferred Compensation Plan is qualified by reference to the plan document, a copy of which is attached to this Form 10-Q as Exhibit 10.2 and incorporated herein by reference.

Item 6. Exhibits

3.1	Certificate of Incorporation, as amended, filed by OSI Pharmaceuticals, Inc. 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	Amended and Restated Bylaws, filed by OSI Pharmaceuticals, Inc. 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.
10.1	Amended and Restated Stock Incentive Plan, filed by OSI Pharmaceuticals, Inc. as an exhibit to the Form 8-K filed on June 19, 2007 (file no. 000-15190), and incorporated herein by reference.

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10.2*	OSI Pharmaceuticals, Inc. Nonqualified Deferred Compensation Plan, effective July 1, 2007. (Filed herewith)
10.3*	Form of Deferred Stock Unit Agreement for the Non-Employee Directors of OSI Pharmaceuticals, Inc. (Filed herewith)
10.4†	Amended and Restated License Agreement, dated April 20, 2007, by and between OSI Pharmaceuticals, Inc. and Pfizer Inc., filed by OSI Pharmaceuticals, Inc. as an exhibit to the form 10-Q filed on May 8, 2007 (file no. 000-15190), and incorporated herein by reference.
10.5*†	Consulting Agreement by and between OSI Pharmaceuticals, Inc. and David Guyer, M.D., effective May 2, 2006. (Filed herewith)
10.6*	Compensatory Arrangements for Executive Officers. (Filed herewith)
10.7*	Compensatory Arrangements for Non-Employee Directors. (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)

*	Indicates a management contract or compensatory plan, contract or arrangement in which a director or executive officers participate.
†	Portions of this exhibit have been redacted and are subject to a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	OSI PHARMACEUTICALS, INC.
	(Registrant)
Date: August 7, 2007	/s/ Colin Goddard, Ph.D.
	Colin Goddard, Ph.D.
	Chief Executive Officer
Date: August 7, 2007	/s/ Michael G. Atieh
	Michael G. Atieh
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

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INDEX TO EXHIBITS

Exhibit

3.1	Certificate of Incorporation, as amended, filed by OSI Pharmaceuticals, Inc. 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	Amended and Restated Bylaws, filed by OSI Pharmaceuticals, Inc. 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.
10.1	Amended and Restated Stock Incentive Plan, filed by OSI Pharmaceuticals, Inc. as an exhibit to the Form 8-K filed on June 19, 2007 (file no. 000-15190), and incorporated herein by reference.
10.2*	OSI Pharmaceuticals, Inc. Nonqualified Deferred Compensation Plan, effective July 1, 2007. (Filed herewith)
10.3*	Form of Deferred Stock Unit Agreement for the Non-Employee Directors of OSI Pharmaceuticals, Inc. (Filed herewith)
10.4†	Amended and Restated License Agreement, dated April 20, 2007, by and between OSI Pharmaceuticals, Inc. and Pfizer Inc., filed by OSI Pharmaceuticals, Inc. as an exhibit to the form 10-Q filed on May 8, 2007 (file no. 000-15190), and incorporated herein by reference.
10.5*†	Consulting Agreement by and between OSI Pharmaceuticals, Inc. and David Guyer, M.D., effective May 2, 2006. (Filed herewith)
10.6*	Compensatory Arrangements for Executive Officers. (Filed herewith)
10.7*	Compensatory Arrangements for Non-Employee Directors. (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)

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32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350. (Filed herewith)

*	Indicates a management contract or compensatory plan, contract or arrangement in which a director or executive officers participate.
†	Portions of this exhibit have been redacted and are subject to a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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EX-10.2

EXHIBIT 10.2

OSI PHARMACEUTICALS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN

(Effective July 1, 2007)

Article 1.
PURPOSE

     OSI Pharmaceuticals, Inc. (the “Company”) has established the OSI Pharmaceuticals, Inc. Nonqualified Deferred Compensation Plan (the “Plan”) for the benefit of the members of the Board of Directors of the Company (the “Board”) and a select group of management and highly compensated Employees of the Company and certain affiliates (collectively, the “Select Employees”). The Board approved the Plan on April 19, 2007, with respect to pay received on or after July 1, 2007. The Company intends that the Plan shall be treated as an unfunded plan for purposes of the Internal Revenue Code of 1986, as amended (the “Code”), and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and as a plan for a select group of management and highly compensated employees for purposes of ERISA. Certain capitalized terms are defined in ARTICLE 10 of this plan.

Article 2.
ELIGIBILITY AND PARTICIPATION

     Eligibility to participate in the Plan shall be limited to members of the Board of Directors of the Company (collectively, “Directors”) and to Select Employees who are designated by the Deferred Compensation Committee of the Board (the “Committee”) to participate in the Plan (hereafter, each an “Eligible Person”). An Eligible Person may elect to defer a portion of Base Compensation, Bonus and Other Cash Compensation (as defined below) payable with respect to services to be performed as a Select Employee or Director by making a deferral election as further provided in Section 3.1.

Article 3.
ELECTIVE DEFERRALS

     3.1 Deferral Election

     An Eligible Person may make a deferral election with respect to an upcoming calendar year pursuant to the provisions of this Section 3.1. Any deferral election and any revocation of the election permitted under this Plan shall be made in the manner specified by the Plan Administrator and may be subject to guidelines of the Plan Administrator including, but not limited to establishing a minimum deferral amount for participation.

          (a) Compensation Deferral

          A Select Employee may elect to defer up to 80% of his or her Base Compensation payable during an upcoming calendar year, and a Director may elect to defer up to 100% of his or her Director Fees payable during an upcoming calendar year, by completing and filing an election with the Plan Administrator during the enrollment period established by the Plan Administrator for deferral of such Base Compensation or Director Fees and noting the timing and form of payment of such deferral. Except as set forth in Section 3.1(c) below, the enrollment period shall end no later than December 31st of the then-current year for deferrals in the upcoming calendar year. The Base Compensation or Directors Fees deferral election may be revoked in writing up to the end of the applicable enrollment period by submitting a revocation to the Plan Administrator by that date. Except as provided in Sections 4.4 and 4.5, a Base Compensation or Director Fees deferral election shall become irrevocable as of the close of the enrollment period applicable to the Base Compensation or Directors Fees. The Eligible Person shall set forth the amount to be deferred as a full percentage, or, if approved by the Committee, dollar amount, of Base Compensation or Directors Fees payable during the calendar year.

          (b) Bonus and Other Cash Compensation Deferrals

          An Eligible Person may elect to defer up to 95% of his or her Bonus, and, subject to the approval of the Committee, up to 100% of his or her other non-salary cash compensation (“Other Cash Compensation”), if any, payable with respect to the upcoming calendar year, by completing and filing an election with the Plan Administrator during the enrollment period established by the Plan Administrator for deferral of that Bonus and noting the timing and form of payment of such deferral. In the case of a performance-based Bonus (within the meaning of Section 409A of the Code), the enrollment period shall end no later than the date that is six (6) months prior to the end of the performance measurement period to which such Bonus relates and, in the case of a Bonus that is not performance-based, except as provided in Section 3.1(c) below, no later than December 31st of the calendar year prior to the calendar year to which the Bonus relates.

          Except as provided in Sections 4.4 and 4.5, a Bonus or Other Cash Compensation deferral election shall become irrevocable as of the close of the enrollment period applicable to the Bonus or Other Cash Compensation. The Bonus or Other Cash Compensation deferral election may be revoked in writing up to the end of the applicable enrollment period by submitting a revocation to the Plan Administrator by that date. The Eligible Person shall set forth the amount to be deferred as a full percentage, or if approved by the Committee, dollar amount, of the Bonus or Other Cash Compensation payable during the upcoming calendar year.

          (c) First-Year Participation

          If an Eligible Person first becomes eligible to participate in the Plan during a calendar year and has never previously participated in an account-

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based deferred compensation plan with the Company, any Participating Employer or certain affiliates (a “Newly Eligible Person”), then notwithstanding the general requirement stated in Sections 3.1(a) or 3.1(b), as applicable, that the election be completed and submitted before the calendar year of commencement (but in accordance with all other applicable provisions of Sections 3.1(a) and 3.1(b)), an election may be submitted to the Plan Administrator within thirty (30) days after the Participant first becomes a Newly Eligible Person. However, such election shall be effective only with respect to Base Compensation or Directors Fees, as applicable, Bonus and Other Cash Compensation earned and payable following submission of the election to the Plan Administrator. Where an Eligible Person has ceased being eligible to participate in the Plan (other than through the accrual of earnings) and later becomes eligible to participate in the Plan after a period of twenty-four (24) months or more since the last date of his or her eligibility, he or she shall again be treated as a Newly Eligible Person for the purposes of this Section 3.1(c).

          (d) Net Deferral Affected by 401(k) Deferrals and Other Pay Deductions

          In determining the actual amount of Base Compensation or Directors Fees, as applicable, Bonus and Other Cash Compensation to be credited to a Participant’s Annual Account, the total deferral election amount for the calendar year shall be reduced by the following amounts but only to the extent necessary to cover these contributions or the withholding obligation: (i) any elective deferrals contributed by the Participant for such year under the OSI Pharmaceuticals, Inc. Saving and Investment Plan (or any other 401(k) plan maintained by a Participating Employer); (ii) contributions by the Participant for such year to any flexible spending account, health savings account, cafeteria plan or similar arrangement; and (iii) Federal Insurance Contribution Act (“FICA”) amounts withheld from the Participant’s pay for such year. Accordingly, only the net deferral shall be credited under this Plan in a calendar year.

     3.2 Application of Election and Vesting

     An election for the deferral of Base Compensation or Directors Fees, as applicable, and the deferral of Bonus and Other Cash Compensation must be completed for each calendar year with respect to which amounts are deferred under the Plan, in accordance with this ARTICLE 3. A Participant shall at all times be 100% vested in his or her elective deferrals of Base Compensation, Directors Fees, Bonus and Other Cash Compensation and any earnings thereon.

     3.3 Effect of Employment Termination

     If a Participant ceases to be an Eligible Person at a time when he or she has in effect for the calendar year one or more deferral elections, the deferral election or elections shall terminate with respect to any amount not yet paid at the time the individual ceases to be an Eligible Person. Amounts already deferred into

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the Participant’s Account shall remain so credited and shall be distributed in accordance with the terms of this Plan.

     3.4 Company Contributions and Vesting

     The Company may elect to make discretionary contributions at any time, based on individual or overall corporate performance. Such contributions will be subject to a vesting schedule as selected by the Company at the time of the contribution.

Article 4.
PAYMENT OF DEFERRED COMPENSATION

     4.1 Selecting the Payment Commencement Date

          (a) Subject to the provisions of ARTICLE 6, payment of the applicable Annual Account shall be made on the date or dates set forth on the Participant’s deferral election, but in no event earlier than two (2) years after the end of the calendar year in which the deferral was made.

          (b) Notwithstanding any provision to the contrary in this ARTICLE 4, if an Eligible Person experiences a Separation from Service prior to attainment of the Retirement Age or suffering a Disability, and prior to complete distribution of his or her Account, then the portion of the Account remaining unpaid as of the Participant’s Termination Date shall be paid in a single lump sum as soon as practicable following the Termination Date, except as provided in Section 4.1(c) hereof and except that in the case of a “specified employee” (as such term is defined under Section 409A(2)(B) of the Code), the payment shall not be made earlier than the six (6) month anniversary of the Participant’s Termination Date.

          (c) Notwithstanding any provision to the contrary in this ARTICLE 4, if an Eligible Person who designated payment to be made pursuant to a series of annual installments experiences a Separation from Service on or after attaining Retirement Age or suffering a Disability, his or her Account shall be distributed in accordance with the installment schedule; provided, however, that if the series of annual installments with respect to any Annual Account was scheduled to begin on a date other than upon the Eligible Person’s Separation from Service after attaining Retirement Age and such installments have not commenced by the Participant’s Termination Date, then such Annual Account shall be paid in a single lump sum as soon as practicable following the Termination Date, except that in the case of a “specified employee” (as such term is defined under Section 409A(2)(B) of the Code), the payment shall not be made earlier than the six (6) month anniversary of the Participant’s Termination Date.

          (d) Notwithstanding anything to the contrary in the Plan, if any portion of a Participant’s Account remains unpaid at the time of his or her

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death, payment shall be made in accordance with the provisions of Sections 6.1 and 6.2, and this ARTICLE 4 shall be inapplicable to such payment.

     4.2 Method of Payment

          (a) In each deferral election completed and submitted, the Eligible Person also shall select the method of payment for distribution of all or the applicable portion of his or her Annual Account under the Plan, from one of the following methods:

               (i) A single lump sum; or

               (ii) A series of annual installments for between two (2) and fifteen (15) consecutive years, as elected by the Eligible Person.

          (b) If the method of payment is a series of annual installments, the amount of each installment shall equal the value of the Participant’s Annual Account as of the last Valuation Date preceding the installment payment, divided by the number of installment payments remaining in the series. Notwithstanding the foregoing, if a Participant’s Account balance is less than the applicable dollar amount under Code Section 402(g)(i)(B) for such year, his or her Account shall be distributed in a single lump sum.

          (c) An Eligible Person may elect to receive a distribution from his or her Annual Account following a Change in Control. In such case, his or her Account shall be distributed in a single lump sum.

          (d) If a method of payment under this Section 4.2 is not established at the time an Eligible Person submits his or her initial deferral election form, the payment method of his or her Annual Account shall be in a single lump sum. All payments under the Plan shall be in the form of cash.

     4.3 Change of Method or Timing of Payment

     Subject to approval of the Plan Administrator, a Participant may change his or her election as to the method or timing of payment for each deferral election under this ARTICLE 4, contingent on the following requirements having been satisfied:

          (a) the change must be made in the manner designated by the Plan Administrator;

          (b) the change must be made at a time when the Participant is still an Eligible Person, and must be consistent with Sections 4.1, 4.2 and 4.3;

          (c) the change must be made at least twelve (12) months prior to the date of the payment that is subject to the change;

5

          (d) the change must delay the payment date or, in the case of installments, each of the payment dates by at least five (5) years;

          (e) an election to receive a payment after a Separation from Service on or after attaining Retirement Age or suffering a Disability shall be irrevocable; and

          (f) one election shall govern all balances for deferrals (and earnings thereon) made in a given calendar year.

     4.4 Unforeseen Emergency

     The Plan Administrator may, in its sole discretion, make distributions to a Participant from his or her Account prior to the date that amounts would otherwise become payable if the Plan Administrator determines that the Participant has incurred an Unforeseeable Emergency. The amount of any such distribution shall be limited to the amount reasonably necessary to meet the Participant’s needs created by the Unforeseeable Emergency, plus the amount necessary to pay the taxes thereon, after taking into account reimbursement from insurance and liquidation of the Participant’s available assets (including any additional compensation available to the Participant in the event that his or her deferral election under the Plan is cancelled pursuant to this Section).

     In addition, the Plan Administrator in its discretion may at any time cancel a deferral election with respect to the remainder of the amount to be deferred under such deferral election upon determining that the Participant has suffered an Unforeseeable Emergency. The next deferral election made by a Participant following the cancellation of his or her deferral election due to an Unforeseeable Emergency shall be treated as an initial deferral election, subject to the requirements of ARTICLE 3 and this ARTICLE 4.

     4.5 Effect on this Plan of a 401(k) Plan Hardship Withdrawal

     To the extent required to comply with Treasury Regulation §1.401(k)-1(d)(3)(iv)(E)(2), or any amendment or successor thereto, a Participant’s “elective and employee contributions” (within the meaning of such Treasury Regulation) under this Plan shall be terminated following the Participant’s receipt of a hardship distribution made in reliance on such Treasury Regulation from any plan containing a cash or deferred arrangement under Section 401(k) of the Code maintained by the Company or a related party within the provisions of subsections (b), (c), (m) or (o) of Section 414 of the Code. The deferral election under the Plan made by the Participant next following the termination of his or her deferral election due to receipt of a hardship distribution shall be subject to the requirements of ARTICLE 3 and this ARTICLE 4.

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Article 5.
PLAN ACCOUNTS

     5.1 Accounts

     Bookkeeping deferral election Accounts shall be established and maintained by the Plan Administrator for each Participant in which shall be recorded the amounts deferred by the Participant under the Plan for each deferral election (credited as of the date that they would otherwise be currently payable).

     5.2 Investment Performance

     A Participant’s Account shall be treated as invested in such investment options as are made available by the Plan Administrator, and adjusted to reflect increases or decreases thereon.

     5.3 Valuation Date

     A Participant’s Account shall be valued as of December 31^st of each year, on the last day of the month in which the Participant ceases to be an Eligible Person and as of each distribution payment date, at which point credits under Section 5.2 shall be made with respect to the Account balance remaining in the Plan as of the Valuation Date. The Company also may establish such other date or dates as Valuation Dates with respect to all Accounts, particular investments in the Accounts or particular Accounts with respect to which payment or another transaction is to occur.

Article 6.
DEATH AND DISABILITY DISTRIBUTIONS

     6.1 Death Distributions

     Each Participant may designate a Beneficiary to receive payment of his or her Account balance in the event of his or her death. Each Beneficiary designation: (i) shall be made on a form filed in the manner prescribed by the Plan Administrator, (ii) shall be effective when, and only if made and filed in such manner during the Participant’s lifetime, and (iii) upon such filing, shall automatically revoke all previous Beneficiary designations. Upon the death of a Participant, the full amount of the Participant’s Account (or the remaining amount of the Account in the event that installment payments have commenced) shall be paid to the Participant’s Beneficiary in a single lump sum as soon as administratively practicable following the date that the Company is notified of the Participant’s death. Payment shall be made in cash.

     6.2 Failure to Designate Beneficiary

     If the payments to be made pursuant to this Section are not subject to a valid Beneficiary designation at the time of the Participant’s death (because of the

7

Participant’s failure to file a valid Beneficiary designation or because the designated Beneficiary predeceased the Participant or for any other reason), the estate of the Participant shall be the Beneficiary. If a Beneficiary designated by the Participant to receive all or any part of the Participant’s Account dies after the Participant but before complete distribution of that portion of the Account, and at the time of the Beneficiary’s death there is no valid designation of a contingent Beneficiary, the estate of such Beneficiary shall be the Beneficiary of the portion in question.

Article 7.
CLAIMS PROCEDURE

     7.1 Initial Claim

     If a Participant believes he or she is entitled to payments under the Plan which have not been paid or have been paid in a lesser amount, the Participant may submit a written claim to Attention: Deferred Compensation Committee, OSI Pharmaceuticals, Inc., 41 Pinelawn Road, Melville, New York 11747. If the Deferred Compensation Committee determines that the claim should be denied, written notice of the decision shall be furnished to the Participant within a reasonable period of time. This notice shall set forth in clear and precise terms the specific reasons for the denial, specific reference to pertinent Plan provisions on which the denial is based, a description of additional material or information necessary for the Participant to perfect the claim, and an explanation of the Plan’s review procedure. The written notice shall be given to the Participant within ninety (90) days after receipt of the claim, unless special circumstances require an extension of time for processing the claim, in which case a decision shall be rendered and written notice furnished within one hundred eighty (180) days after receipt of the claim. A written notice of such extension of time indicating the special circumstances and expected date of decision shall be furnished to the Participant within the initial ninety (90) day period.

     7.2 Claims Appeal

     The Participant may, within sixty (60) days after receiving notice denying the claim, request a review of the decision by written application to the Company. The Participant may also review pertinent documents and submit issues and comments in writing. A written decision on the appeal shall be made by the Company not later than sixty (60) days after receipt of the appeal, unless special circumstances require an extension of time, in which case a decision shall be rendered within a reasonable period of time, but in no event later than one hundred twenty (120) days after receipt of the appeal. A written notice of such extension of time shall be furnished to the Participant before such extension begins. The decision shall include the specific reason(s) for the decision and the specific reference(s) to the pertinent Plan provisions on which the decision is based. The decision shall be final. The Participant’s Beneficiary also may use the claim procedures set forth in this ARTICLE 7.

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Article 8.
MANAGEMENT AND ADMINISTRATION

     8.1 Administration

     The Company shall serve as the Plan Administrator. The Plan Administrator shall have the full power and authority to control and manage the operation and administration of the Plan, including the authority, in its sole discretion: (a) to promulgate and enforce such rules and regulations as deemed necessary or appropriate for the administration of the Plan; (b) to interpret the Plan consistent with the terms and intent thereof; and (c) to resolve any possible ambiguities, inconsistencies and omissions in the Plan. All such actions shall be in accordance with the terms and intent of the Plan.

     The Company may designate, by written instrument acknowledged by the parties, one or more persons to carry out its fiduciary responsibilities as Plan Administrator. To the extent of any such delegation, the delegate shall become the Plan Administrator responsible for the matters assigned by the Company, and references to the Company in such capacity shall apply instead to the delegate. Additionally, the Company may assign any of its responsibilities to specific persons who are directors, officers, or employees of the Company, or a committee composed of such persons, in order to execute its actions as the Plan Administrator. Any action by the Company assigning any of its responsibilities to specific persons who are directors, officers, or employees of the Company, or a committee composed of such persons, shall not constitute delegation of the Company’s responsibility as Plan Administrator, but rather shall be treated as the manner in which the Company has determined internally to discharge such responsibility. One such assignment is hereby made to the Deferred Compensation Committee, who shall have the power on behalf of the Company to execute Plan documents, trust agreements or other contracts relating to the Plan or Plan administration, and who shall serve generally as the Plan Administrator.

     The Plan Administrator may engage the services of accountants, attorneys, actuaries, consultants and such other professional personnel as deemed necessary or advisable to assist them in fulfilling responsibilities of the Plan Administrator under the Plan. The Plan Administrator, and its delegates and assistants, shall be entitled to act on the basis of all tables, valuations, certificates, opinions and reports furnished by such professional personnel.

     8.2 Amendment and Termination of the Plan

     The Company may, in its sole discretion, amend, modify or terminate this Plan at any time or from time to time, in whole or in part, and for any reason. However, no amendment shall reduce the amount accrued in any Account as of the date of such amendment. The Company may terminate the Plan with respect to the Participants employed or formerly employed by the Company, as follows:

9

          (a) Partial Termination

          The Company may partially terminate the Plan by instructing the Plan Administrator not to accept any additional deferral elections under this Plan. If such a partial termination occurs, the Plan shall continue to operate and be effective with regard to deferral elections properly completed and filed prior to the effective date of such partial termination.

          (b) Complete Termination

          The Company may completely terminate the Plan by instructing the Plan Administrator not to accept any additional deferral elections, and by terminating all existing Plan deferrals. In the event of complete termination, the Plan shall cease to operate and, to the extent permitted by Section 409A of the Code, the Plan Administrator shall distribute each Account to the appropriate Participant.

Article 9.
GENERAL PROVISIONS

     9.1 Alienation of Benefits

     No Account payable under the Plan shall be subject to alienation, sale, transfer, assignment, pledge, attachment, garnishment, lien, levy or like encumbrance. Neither the Company nor the Plan shall in any manner be liable for or subject to the debts or liabilities of any person entitled to payment under the Plan. Notwithstanding the foregoing, if the Plan Administrator receives a Domestic Relations Order with respect to a Participant, upon determination of the validity of such Domestic Relations Order, the Plan Administrator shall use all or a portion of the Participant’s Account to satisfy the obligations therein.

     9.2 Overpayments

     If any overpayment of an Account is made under the Plan, (a) the amount of the overpayment may be set off against further amounts payable to or on account of the person who received the overpayment until the overpayment has been recovered in full, or (b) the recipient shall be required to return the amount of the overpayment to the Plan Administrator. The foregoing remedy is not intended to be exclusive.

     9.3 FICA Obligation

     An Eligible Person’s deferrals of Base Compensation, Bonus and Other Cash Compensation payments are subject to taxation under FICA. The Plan Administrator, without the Eligible Person’s consent, shall withhold the FICA taxes payable by the Eligible Person with respect to these amounts from such Eligible

10

Person’s Base Compensation, Bonus and Other Cash Compensation payments that are not deferred.

     9.4 Withholding Taxes

     The Company and the Plan Administrator shall withhold such taxes and make such reports to governmental authorities as they reasonably believe to be required by law.

     9.5 Distributions to Minors and Incompetents

     If the Plan Administrator determines that any Participant or Beneficiary receiving or entitled to receive payment of an Account under the Plan is incompetent to care for his or her affairs, and in the absence of the appointment of a legal guardian of the property of the incompetent, payments due under the Plan (unless prior claim thereto has been made by a duly qualified guardian, committee or other legal representative) may be made to the spouse, parent, brother or sister or other person, including a hospital or other institution, deemed by the Plan Administrator to have incurred or to be liable for expenses on behalf of such incompetent. In the absence of the appointment of a legal guardian of the property of a minor, any minor’s share of an Account under the Plan may be paid to such adult or adults as in the opinion of the Plan Administrator have assumed the custody and principal support of such minor.

     The Plan Administrator, however, in its sole discretion, may require that a legal guardian for the property of any such incompetent or minor be appointed before authorizing the payment of the Account in such situations. Benefit payments made under the Plan in accordance with determinations of the Plan Administrator pursuant to this Section 9.5 shall be a complete discharge of any obligation arising under the Plan with respect to such Benefit payments.

     9.6 No Right to Employment

     Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of the Company or to interfere with the right of the Company to demote, discharge or discipline any Employee at any time without regard to the effect that such demotion, discharge or discipline may have upon the Employee under the Plan.

     9.7 Unfunded Plan

     The Plan shall be an unfunded, unsecured obligation of the Company. The Company shall not be required to segregate any assets to provide payment of Accounts, and the Plan shall not be construed as providing for such segregation. Any liability of the Company to any Participant or Beneficiary with respect to the payment of Accounts shall be based solely upon any contractual obligations created

11

by the Plan. Any such obligation shall not be deemed to be secured by any pledge or other encumbrance or any property of the Company.

     9.8 Trust Fund

     At its discretion, the Company may establish one or more irrevocable rabbi trusts for the purpose of assisting in the payment of Accounts, provided the establishment of such a trust is not in connection with a change in the financial health of the Company within the meaning of Section 409A of the Code. Any assets of the Company transferred to such trusts shall not be diverted to the Company, except in the event of the Company’s bankruptcy or insolvency. To the extent payments provided for under the Plan are made from any such trust, the Company shall not have any further obligation to make such payments. The establishment and maintenance of any such trust shall not alter the nature of Accounts under the Plan as unfunded and unsecured.

     The provisions of the Plan shall govern the rights of Participants to receive distributions pursuant to the Plan. The provisions of the trust shall govern the rights of the Company, Participants and the creditors of the Company to the assets transferred to the trust.

     9.9 Change in Control; Merger or Other Reorganization

     The Company may assign its obligations under this Plan to a successor, whether by merger, consolidation, asset sale or other business reorganization or transaction (“Business Transaction”) to the extent such assignment would not give rise to imposition of the additional tax under Section 409A of the Code.

     9.10 Miscellaneous

          (a) Construction

          Unless the contrary is plainly required by the context, wherever any words are used herein in the masculine gender, they shall be construed as though they were also used in the female gender, and vice versa, and wherever any words are used herein in the singular form, they shall be construed as though they were also used in the plural form, and vice versa. Furthermore, the terms of this Plan shall be construed in accordance with Section 409A of the Code so as to avoid the imposition of the penalty tax under Section 409A, and, in the event of any inconsistency between the Plan and Section 409A of the Code, Section 409A shall control.

          (b) Severability

          If any provision of the Plan is held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan,

12

and the Plan shall be construed and enforced as if such illegal or invalid provision had never been included in it.

          (c) Titles and Headings Not to Control

          The titles to Articles and the headings of Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than the titles or headings, shall control.

          (d) Complete Statement of Plan

          This document is a complete statement of the Plan. The Plan may be amended, modified or terminated only in writing and then only as provided herein.

     9.11 Governing Law

     The Plan shall be governed by ERISA, and to the extent not preempted by ERISA, the laws of the State of New York without regard to its choice of law provisions.

Article 10.
DEFINITIONS

     In addition to those definitions set forth in ARTICLE 1 or otherwise in the text of this Plan, the following terms shall have the meaning assigned below in this ARTICLE 10:

     10.1 “Account” means all Annual Accounts established under the Plan, which reflects all amounts deferred or contributed under the Plan and allocable returns and losses under ARTICLE 5 of the Plan.

     10.2 “Annual Account” means the book entry sub-account established under the Plan for each Participant for a given calendar year, which reflects all amounts deferred or contributed under the Plan for such calendar year and returns and losses attributable to such deferrals under ARTICLE 5 of the Plan.

     10.3 “Base Compensation” means, a Select Employee’s base pay payable with respect to services rendered during the calendar year (but excluding any amounts paid for employment taxes and remittances to pay premiums under any Company welfare benefit plan), less the elective deferral limit applicable under Code Section 402(g).

     10.4 “Beneficiary” means the person or persons designated by a Participant to receive payment of the amounts provided in the Plan, in accordance with ARTICLE 6, in the event of his or her death.

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     10.5 “Bonus” means, with respect to an Eligible Person, the Eligible Person’s annual incentive bonus payable with respect to services for a calendar year, but, for the avoidance of doubt, shall not include any bonus payable on account of a Participant’s initial employment with the Company.

     10.6 “Change in Control” shall have the meaning provided in Section 409A of the Code and the rules and regulations thereunder.

     10.7 “Deferred Compensation Committee” means a committee of two or more employees of the Company designated from time to time by the Plan Administrator.

     10.8 “Director Fees” means, a Director’s annual director fees payable with respect to services rendered during the calendar year (but excluding any amounts paid for employment taxes and remittances to pay premiums under any Company welfare benefit plan), less the elective deferral limit applicable under Code Section 402(g).

     10.9 “Disability” means a termination of employment as a result of the fact that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment, which can reasonably be expected to result in death or can be expected to last for a continuous period of at least twelve (12) months.

     10.10 “Domestic Relations Order” means a judgment, decree or order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Participant and is made pursuant to a state domestic relations law (including community property law).

     10.11 “Employee” means a common law employee of (i) the Company, (ii) a Participating Employer or (iii) any other employer treated as a single employer with the Company under Section 409A of the Code.

     10.12 “Participant” means a current or former Eligible Person who has an Account under the Plan.

     10.13 “Participating Employer” means the Company and all entities which are part of the same “controlled group” as the Company, as determined under Sections 414(b) or (c) of the Code, provided such an entity has adopted the Plan in writing with the consent of the Board. Non-United States entities or subsidiaries shall not be treated as part of the controlled group for this purpose. A business entity shall be treated as a Participating Employer only while a member of the controlled group that includes the Company.

     10.14 “Plan Administrator” means the Company, or if so appointed by the Company, the Deferred Compensation Committee.

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     10.15 “Retirement Age” means the earlier of the attainment of age 55 or 15 years of service with the Company.

     10.16 “Separation from Service” means termination of a Participant’s status as an Employee or Director by reason of retirement, Disability, resignation, discharge, or death. A transfer of employment with an affiliate treated as a single employer with the Company and the Participating Employers under Section 409A of the Code (which shall for these purposes include non-United States entities or subsidiaries that would otherwise be treated as part of the controlled group) shall not be treated as a Separation from Service.

     10.17 “Termination Date” means the date the Participant has a Separation from Service.

     10.18 “Unforeseeable Emergency” means one or more of the following events: (a) a sudden and unexpected illness or accident of the Participant or a dependent (as defined in Section 152(a) of the Code) of the Participant; (b) a loss of the Participant’s property due to casualty; or (c) other similar and extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, as determined by the Plan Administrator.

     10.19 “Valuation Date” means the date or dates as of which Accounts are valued, as set forth in Section 5.3.

*      *      *      *      *

     To reflect the approval of the Plan by the Board on April 19, 2007, the authorized officer hereby executes this Plan document on behalf of the Company.

OSI PHARMACEUTICALS, INC.
By:	/s/ Barbara A. Wood
Name:	Barbara A. Wood
Title:	Vice President, General Counsel and Secretary

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ERISA ALTERNATIVE COMPLIANCE STATEMENT

TO:	Top Hat Plan Exemption
	Pension and Welfare Benefits Administration
	Room N-5644
	U.S. Department of Labor
	200 Constitution Avenue NW
	Washington, DC 20210
FROM:	OSI Pharmaceuticals, Inc.
	41 Pinelawn Road
	Melville, New York 11747
	Employer Identification Number: 13-3159796

     This statement is meant to comply with the requirements of 29 C.F.R.2520.104-23, alternative method of compliance for pension plans for certain selected employees.

     The above employer maintains one plan primarily for the purpose of providing deferred compensation benefits for a select group of management or highly compensated employees.

     The number of employees and Directors eligible for the plan is 54 as of July 1, 2007.

     Date Plan Effective: July 1, 2007

OSI PHARMACEUTICALS, INC.
By:
Name:	Michael G. Atieh
Title:	Executive Vice President and Chief Financial Officer

EX-10.3

Exhibit 10.3

OSI PHARMACEUTICALS, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN
DEFERRED STOCK UNIT AGREEMENT

     THIS DEFERRED STOCK UNIT AGREEMENT (the “Agreement”) is made as of                     , 200___, by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and [DIRECTOR] (the “Director”). Capitalized terms, unless otherwise defined herein, shall have their respective meanings as set forth in the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”).

     WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) approved on                      (the “Grant Date”) the grant of Deferred Stock Units (as defined below) to the Director, as described herein;

     NOW, THEREFORE, the parties hereto mutually agree to the following terms and conditions of this Agreement:

          1. Grant of Deferred Stock Units. The Company hereby grants to the Director                      Deferred Stock Units. For the purposes of this Agreement, a “Deferred Stock Unit” shall mean the contractual right to receive one share of Common Stock of the Company (the “Common Stock”), subject to the terms, conditions and restrictions of this Agreement and the Plan.

          2. Vesting and Forfeiture. Except as the Committee may otherwise provide, Deferred Stock Units granted under this Agreement shall vest in four equal tranches of                      Deferred Stock Units on each anniversary of the Grant Date, commencing on                     , 20___ and terminating on                     , 20___. Upon the date that the Director ceases to be a member of the Board, all unvested Deferred Stock Units granted hereunder shall be forfeited as of such date, and the Director shall have no further rights with respect to such forfeited Deferred Stock Units. Notwithstanding the foregoing, in the event that the Director remains affiliated with the Company, or any parent or subsidiary of the Company, as an employee or consultant following the termination of the Director’s service on the Board, the Committee shall have the discretion to permit the Director’s unvested Deferred Stock Units to continue to vest upon such terms and conditions as the Committee may provide.

          3. Settlement of Deferred Stock Units. Settlement for any vested Deferred Stock Units shall be in shares of Common Stock (collectively, the “Settlement Shares”). For the purposes of this Agreement, the “Settlement Date” shall mean the date upon which the Common Stock is delivered to the Director in accordance with the Director’s Election for Receipt of Restricted Stock, Restricted Stock Units, or Deferred Stock Units, which signed election form is attached hereto as Exhibit A. The Company shall deliver the Settlement Shares to the Director as soon as reasonably practicable following the applicable Settlement Date. The Settlement Shares will be issued and evidenced in such manner as the Committee in its discretion shall deem appropriate, including, without limitation, book-entry, registration or issuance of one or more

stock certificates. Upon issuance of the Settlement Shares, the number of Deferred Stock Units equal to the Settlement Shares shall be extinguished and such number of Deferred Stock Units will no longer be considered to be held by the Director for any purpose.

          4. Restriction on Transferability. Deferred Stock Units granted hereunder shall not be sold, assigned, transferred, exchanged, pledged or otherwise encumbered or disposed of in any manner by the Director, except as otherwise approved by the Committee.

          5. Securities Laws. The Company shall not be obligated to issue or deliver any shares of Common Stock under this Agreement in any manner in contravention of the Securities Act of 1933, as amended, any other federal or state securities law or the rules of any exchange or market system upon which the Common Stock is traded. The Board or the Committee may, at any time, require, as a condition to the issuance or delivery of shares of Common Stock hereunder, the representation or agreement of the Director to the effect that the shares issuable hereunder are acquired by the Director for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws or the rules of any applicable exchange or market system.

          6. Withholding of Applicable Taxes. The Director shall pay, or make provision satisfactory to the Company for the payment of, any taxes that the Company is obligated to collect with respect to the issuance or vesting of Deferred Stock Units under this Agreement, including but not limited to, any applicable federal, state or local withholding or employment taxes (such amount, the “Withholding Amount”). If the Director shall fail to pay, or make provision for the payment of the Withholding Amount, the Company shall have the right to withhold the Withholding Amount from the Deferred Stock Units, compensation or other amounts the Company owes the Director. For these purposes, the Company may reduce the number of shares of Common Stock otherwise issuable to the Director to satisfy the Withholding Amount.

          7. Subject to Terms of Plan. The Deferred Stock Units are subject to the terms and provisions of the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee regarding any issue or question arising under this Agreement or the Plan shall be final, binding and conclusive on the Company and the Director.

          8. No Rights as Stockholder. The Deferred Stock Units granted under this Agreement do not provide the Director with any of the rights of a stockholder of the Company, including, without limitation, the right to vote or receive any dividends declared or paid on the Common Stock, unless and until shares of Common Stock relating to the Deferred Stock Units have been issued to the Director.

          9. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company.

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          10. Governing Law. This Agreement will be interpreted and enforced under the laws of the State of New York, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the exclusive jurisdiction of the U.S. federal or New York state courts within the New York counties of New York, Nassau, or Suffolk, and the parties hereby submit to, and waive any objection to, personal jurisdiction and venue in such courts for such purpose.

          11. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the parties hereto have executed, or caused to be duly executed on their behalf, this Deferred Stock Unit Agreement as of the day and year first above written.

OSI PHARMACEUTICALS, INC.

Name:

Title:

DIRECTOR

EXHIBIT A

ELECTION FOR RECEIPT OF RESTRICTED STOCK, RESTRICTED STOCK UNITS,
OR DEFERRED STOCK UNITS

As a director of OSI Pharmaceuticals, Inc. (“OSI”), you will be entitled to receive a grant of restricted stock, restricted stock units (“RSU’s”) or deferred stock units (“DSU’s”) of OSI (the “Restricted Grant”) upon your election or re-election to OSI’s Board of Directors. Please indicate below whether you would like to receive your Restricted Grant in the form of restricted stock, RSU’s or DSU’s by checking the applicable box and delivering this completed election form to OSI no later than                     . We must be made aware of your choice no later than                      in order to accurately prepare and file with the SEC the Form 4 concerning the grant which will be due on                     .

     In the event that you elect to receive restricted stock, please also indicate below whether you would like us to prepare on your behalf an election form under Section 83(b) of the U.S. Internal Revenue Code. Please note that only recipients of restricted stock may make a Section 83(b) election.

Election to Receive Restricted Stock, RSU’s or DSU’s

     I hereby elect to receive my Restricted Grant in the form of:

Restricted Stock 

Restricted Stock Units (RSU’s) 

Deferred Stock Units (DSU’s) 

     If you elect to receive DSU’s, please indicate below the date upon which your vested DSUs will convert into shares of OSI common stock and be delivered to you. Note that if you select both options below, your OSI shares will be delivered to you on the first to occur of six (6) months after the termination of your service on the Board of Directors or the alternate date that you select.

Six (6) months after my service on the Board of Directors terminates; and/or 

On the following alternate date:                                          [must be no earlier than                     ] 

Section 83(b) Election – for recipients of Restricted Stock only

I intend to make an 83(b) election and request that you prepare an election form on my behalf. 

I intend to make an 83(b) election but will use my personal accountant to prepare the election form. I will furnish OSI with a copy of the form within 30 days of filing. 

I do not intend to make an 83(b) election. 

Director’s Name (Print)
Signature	Date

EX-10.5

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE OMISSIONS

EXHIBIT 10.5

CONSULTING AGREEMENT

     This Consulting Agreement (“Agreement”) is signed on April 28, 2006 and effective as of May 2, 2006 (“Effective Date”) by and between OSI Pharmaceuticals, Inc., a Delaware corporation (together with its affiliates and subsidiaries, “OSI”), having executive offices at 41 Pinelawn Road, Melville, New York 11747, and David Guyer (“Consultant”), having an address at **.

1. CONSULTING SERVICES.

     The initial phase of the Term (as defined in Section 13 hereof) shall commence on the Effective Date and continue until the day immediately prior to the first anniversary of the Effective Date and shall be referred to herein as the “Transition Phase”. The period commencing with the first anniversary of the Effective Date and continuing through the remainder of the Term shall be referred to herein as the “Consulting Period”. Consultant shall provide consulting services to OSI during the Term as follows:

(a) During the Transition Phase, Consultant shall provide advice and consultation to, as needed and reasonably requested by, OSI and its subsidiary, (OSI) Eyetech, Inc. (“(OSI) Eyetech”) regarding the business and operations of (OSI) Eyetech so as to facilitate an orderly transition of the duties and responsibilities undertaken by Consultant prior to the Effective Date in his role as head of the (OSI) Eyetech business to his successor in such role. Consultant will be available to provide such Services not less than ^** days per month for this purpose during the Transition Phase.

^** This portion has been redacted pursuant to a confidential treatment request.

(b)

During the Transition Phase and during the Consulting Period, Consultant will provide advice and consultation to, as needed and reasonably requested by, the Board of Directors of OSI and the CEO and other members of senior management of OSI relating to the field of ophthalmology. In addition, during the Term, Consultant will serve as a technical advisor to the eye disease subcommittee of the OSI Board of Directors. Consultant will be available to provide such Services not less ** days per month during the Term.

(c)

The services described in subsection (a) and subsection (b) above shall be collectively referred to herein as the “Services.”

2. DELIVERY OF CONSULTING SERVICES.

     Consultant will carry out the Services to the best of Consultant’s ability in a professional manner consistent with industry standards, in accordance with the standard of care customarily observed with regard to such services in Consultant’s profession and using the Consultant’s expertise and creative talents. Consultant will perform the Services in a timely manner and at a location, time and place that Consultant deems appropriate. Consultant will perform the Services in compliance with all applicable laws, rules and regulations.

3. COMPENSATION AND REIMBURSEMENT.

(a) During the Transition Phase, OSI shall pay Consultant an annual retainer of $775,000 which shall be due and payable in two equal installments on November 2, 2006 and May 2, 2007. During the Consulting Period, OSI shall pay Consultant an annual retainer of $250,000 which shall be due and payable in two

^** This portion has been redacted pursuant to a confidential treatment request.

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	equal installments on the anniversaries of the payment dates during the Transition Phase.
(b)	OSI will reimburse Consultant for reasonable out-of-pocket expenses incurred in connection with the Consultant’s performance of the Services upon the presentation of receipts for such expenses. To the extent feasible, Consultant will use OSI-designated travel services to make all OSI requested travel arrangements.

4. USE OF OFFICE AND SUPPORT STAFF.

     During the Term, OSI shall provide to Consultant the use of an office at OSI’s Times Square facility or another OSI facility mutually agreed upon by Consultant and OSI; provided, however, that the foregoing shall in no way obligate OSI to maintain a facility in New York City for the duration of the Term. During the Term, OSI shall also provide to Consultant administrative support services mutually agreed upon by OSI and Consultant.

5. CONFIDENTIALITY.

(a) “Confidential Information” means confidential or proprietary information of OSI either disclosed orally, graphically, in writing, or in electronic or other form to or otherwise learned by Consultant during the course of his employment by OSI and (OSI) Eyetech and under this Agreement or that should reasonably be known by Consultant to be confidential or proprietary to OSI, including but not limited to information relating to OSI’s research, development, preclinical and clinical programs, data and results; product candidates and products; inventions, works of authorship, trade secrets, processes, conceptions, formulas, patents, patent applications and licenses; IP Rights (as defined in Section 8); business, product, marketing, sales, scientific and technical strategies, programs and results,

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including costs and prices; suppliers, manufacturers, customers, market data, personnel, and consultants; and other confidential matters related to OSI, but not including Consultant’s general knowledge and know how.

(b) Subject to Section 5(c), until ^** years after the expiration or termination of this Agreement, Consultant:

(i)	shall not use Confidential Information for his own benefit or the benefit of any third party except solely for the purpose of performing Services;
(ii)	shall hold Confidential Information in strictest confidence and shall not disclose Confidential Information to others;
(iii)	shall use reasonable efforts to protect the confidentiality of Confidential Information; and
(iv)	shall notify OSI as promptly as practicable of discovery of any unauthorized use or disclosure of Confidential Information.

(c) Consultant’s obligations under Section 5(b) shall not apply to any Confidential Information that:

(i)	is now, or becomes in the future, publicly available other than by an act or omission of Consultant in violation of this Section 5;
(ii)	a third party discloses to Consultant, without any legal restriction on disclosure known to Consultant, and without any breach of any direct or indirect obligation of confidentiality to OSI known to Consultant; or

^** This portion has been redacted pursuant to a confidential treatment request.

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(iii) was or is independently developed by Consultant or others on Consultant’s behalf without using any Confidential Information or violating any of Consultant’s obligations under this Agreement.

(d)	Notwithstanding other provisions of this Agreement, Consultant may disclose Confidential Information to the extent and to the persons or entities required under applicable governmental law, rule, regulation or order, provided that Consultant (i) first gives prompt notice of such disclosure requirement to OSI so as to enable OSI to seek any limitations on or exemptions from such disclosure requirement and (ii) reasonably cooperates at OSI’s request in any such efforts by OSI, at OSI’s expense.
(e)	Upon the earlier of the completion of the Services or OSI’s request for any reason at any time, Consultant will (i) immediately cease all commercial use of Confidential Information and notify OSI and (ii) promptly, at OSI’s instruction, either return to OSI or destroy all Confidential Information that exists in tangible form, including destroying (but not returning to OSI) any copies, extracts, summaries, or derivative works thereof, and certify in writing to OSI the completion of such return and/or destruction.
(f)	OSI retains all right, title and interest in and to Confidential Information. This Agreement gives Consultant no right or license to any Confidential Information or any intellectual property or other rights owned by or licensed to OSI, by implication or otherwise, except the right to use Confidential Information solely for performance of Services. OSI may freely transfer, disclose and/or use Confidential Information for its or others’ purposes.

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6. CERTAIN AGREEMENTS.

(a)

During the Term, Consultant shall not serve as an employee of, or consultant to, or owner of more than ** of the equity of, any company that is a Competing Business at the time Consultant serves in such capacity. For purposes of this Agreement, “Competing Business” means (i) during the period beginning on the Effective Date and ending on the first anniversary of the Effective Date, any company that ** of **, (ii) during the period beginning on the first anniversary of the Effective Date and ending on the second anniversary of the Effective Date, any company that ** and (iii) at any time during the Term, any company that **. For the avoidance of doubt, **.

(b)

During the Term, Consultant shall not, individually or on behalf of or through any third party, directly or indirectly, (i) solicit, entice or persuade or attempt to solicit, entice or persuade any employees of or consultants to OSI to leave the service of OSI for any reason, or employ, cause to be employed, or solicit the employment of, any employees of or consultants to OSI while any such person is providing services to OSI, or (ii) solicit, divert or appropriate or attempt to solicit, divert or appropriate, any customers of OSI’s Eye Business for the purpose of directly competing with OSI’s Eye Business. For purposes of this Section 6, “Eye Business” shall specifically refer to **.

7. INJUNCTIVE RELIEF.

     Consultant expressly acknowledges that any breach or threatened breach of any of the terms and/or conditions set forth in Sections 5 and 6 of this Agreement will result in substantial,

^** This portion has been redacted pursuant to a confidential treatment request.

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continuing and irreparable injury to OSI. Therefore, in addition to any other remedy that may be available to OSI, OSI will be entitled to injunctive or other equitable relief by a court of appropriate jurisdiction in the event of any breach or threatened breach of the terms of Sections 5 and 6 of this Agreement.

8. INTELLECTUAL PROPERTY.

     Consultant hereby assigns to OSI all of Consultant’s right, title and interest in and to any intellectual property rights arising from inventions, software programs, databases or other discoveries made, conceived, reduced to practice, authored or otherwise developed solely or jointly by Consultant or any of Consultant’s employees or agents in whole or in part through use of Confidential Information or in the course of performing Services (“IP Rights”). Consultant hereby grants OSI an irrevocable power of attorney to execute on Consultant’s behalf patent and copyright applications or other such documents required to protect, enforce or perfect OSI’s right, title and interest in and to such IP Rights.

9. PUBLICATION.

     Consultant agrees that, during the term of this Agreement and for a period of ^** years from termination of this Agreement, if for any reason Consultant wishes to present or publish scientific articles or papers concerning Consultant’s own research work, the content of which is based on Confidential Information first received from OSI, Consultant shall submit such proposed presentations, articles and papers to OSI for its review and possible action to protect OSI’s patent rights at least ^** days prior to the publication or disclosure date. OSI will promptly review Consultant’s proposed presentations or publications.^**

^** This portion has been redacted pursuant to a confidential treatment request.

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10. REPRESENTATION AND WARRANTIES.

     Consultant represents and warrants to OSI that:

(a)	Consultant has the full right, power and authority to enter into this Agreement and perform its obligations hereunder without the consent of any third party and without breach of any agreements with or obligations to any third party;
(b)	Consultant will not grant, transfer, assign or convey, directly or indirectly, any right, title or interest in or to any IP Rights to any third party;
(c)	Consultant has not entered and will not enter into any agreement with or obligation to a third party inconsistent, incompatible, or conflicting with its obligations under this Agreement; and
(d)	Consultant will inform OSI immediately of any contracts or subject matter with which Consultant or members of Consultant’s family are engaged in that may in any way raise a conflict of interest between Consultant and OSI.

11. INDEMNIFICATION.

     Each party will defend, indemnify and hold harmless the other party, its officers, directors, employees and agents from and against any and all losses, liabilities, damages, expenses and costs (including reasonable attorney’s fees) (“Losses”) directly caused by or resulting from a material breach of this Agreement by such party, except to the extent such Loss was caused by the gross negligence or willful misconduct of the party (including its officers, directors, employees and agents) seeking indemnification. Each party will notify the other party promptly upon learning of a claim, demand, suit, or proceeding of which it is aware that would reasonably be expected to give rise to a Loss, and the potentially indemnifying party may control defense and settlement thereof provided it does so diligently, in good faith and using reasonably

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experienced counsel with expertise in the relevant field. The potentially indemnified party will reasonably cooperate in such defense and/or settlement at the potentially indemnifying party’s request and expense and may participate at its own expense using its own counsel.

12. WAIVER AND RELEASE.

     Except with respect to compensation set forth in Section 3, Consultant hereby waives, fully releases and forever discharges OSI and its agents, employees, successors and assigns from and against any and all demands, claims, actions, causes of action, rights, suits, covenants, contracts and agreements of any kind, known or unknown, absolute or contingent, determined or speculative, both in law and in equity, brought or made by or on behalf of Consultant, arising out of Consultant’s services under and pursuant to the Agreement.

13. TERM AND TERMINATION.

(a)	The term of this Agreement shall commence on the Effective Date and expire on the fourth anniversary of the Effective Date (the “Term”) unless earlier terminated under this Section 13.
(b)	Either party may terminate this Agreement for a material breach by the other party upon ** days’ written notice specifying the breach unless such breach is cured within such ** day period.
(c)	The Consultant may terminate this Agreement at any time and for any reason upon ** days’ written notice to OSI.
(d)	Expiration or termination of this Agreement shall not affect accrued rights or obligations of the parties. Sections 5, 7, 8, 9, 10(c), 10(d), 10(e), 11, 12, 13(d), 15, 16, 17 and 18 shall survive termination or expiration of this Agreement.

^** This portion has been redacted pursuant to a confidential treatment request.

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14. CHANGE OF CONTROL.

     Upon a “Change of Control” of OSI, all amounts remaining to be paid to Consultant under this Agreement shall become immediately due and payable and this Agreement shall terminate. “Change of Control shall be defined as ^** .

15. STOCK OPTIONS.

     The Consultant’s stock options to acquire common stock of OSI shall not terminate as a result of the termination of Consultant’s employment with OSI and commencement of this consulting arrangement, but instead shall continue to vest during the Term on the same terms as they would have vested if Consultant had remained employed by OSI during such time period.

16. ACKNOWLEDGEMENT.

     OSI acknowledges that Consultant intends to commence immediately a relationship, which may be as a partner, consultant, advisor, employee, or in some other capacity, with SV Life Sciences. Without limiting the generality of the foregoing, OSI acknowledges that Consultant may, during the Term, (i) serve as an employee or partner of, or consultant to, any venture capital firm or other institutional investor, (ii) assist in the evaluation of investment opportunities by any venture capital firm or other institutional investor, and (iii) serve on the board of directors of, or as an employee of or consultant to, any company that is not a Competing Business. In particular, the Consultant has advised OSI that he may, and OSI acknowledges that Consultant may, join the board of directors of each of Optos plc, a retinal imaging company, and NeoVista, Inc., a company developing a radiation probe device for macular degeneration.

^** This portion has been redacted pursuant to a confidential treatment request.

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17. INDEMNITY.

     From the Effective Date through the sixth anniversary of the last day of the Term, OSI and (OSI) Eyetech shall jointly and severally indemnify the Consultant, and hold the Consultant harmless against, all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or by reason of the fact that the Consultant is or was an officer, director, employee or agent of OSI or any of its subsidiaries, to the fullest extent permitted under Delaware law. OSI shall pay all expenses, including reasonable attorneys’ fees, that may be incurred by the Consultant in connection with his enforcement of his rights provided in this Section 17. The provisions of this Section 17 are intended to be in addition to the rights otherwise available to the Consultant by law, charter, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, the Consultant and his heirs and representatives.

18. GENERAL.

(a)

This Agreement shall be interpreted and enforced in accordance with the laws of the State of New York, regardless of any choice of law principles that would cause the application of the law of any other jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the exclusive jurisdiction of the U.S. federal or New York state courts within the counties of New York or Suffolk, and the parties hereby submit to, and waive any objection to, personal jurisdiction and venue in such courts for such purpose.

(b)

Any purported assignment or delegation by Consultant of this Agreement in whole or in part without the prior written consent of OSI shall be void. OSI has

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the unconditional right to assign this Agreement if there is no resulting material change in the scope of the Services. This Agreement shall be binding upon the parties, their successors and their permitted assigns.

(c) All notices under this Agreement shall be in writing and shall be deemed given upon personal delivery, delivery by internationally- or nationally-recognized bonded courier service, or seven days after sending by certified or registered mail, postage prepaid and return receipt requested, to the following addresses of the respective parties or such other address as given by notice under this Section 18(c):

OSI:	OSI Pharmaceuticals, Inc.
	At the address set forth at the beginning of this Agreement
	Attention: General Counsel
Consultant:	David Guyer
	At the address set forth at the beginning of this Agreement

(d)	During the Term, Consultant agrees to abide by the terms of OSI’s insider trading policy attached hereto as Exhibit A; provided, however, that Consultant may enter into a trading plan compliant with Rule 10b5-1 under the Securities Exchange Act of 1934 providing for a sale by Consultant of securities of OSI at times that would otherwise be prohibited by OSI’s insider trading policy.
(e)	During the term of this Agreement, Consultant will not improperly use or disclose to OSI any proprietary information or trade secrets of any former or concurrent employer or other person or entity.
(f)	Consultant recognizes that OSI has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on OSI’s part to maintain the confidentiality of such information and to use it only

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for certain limited purposes. Consultant agrees to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out Consultant’s work for OSI consistent with the OSI’s agreement with such third party.

(g)

This Agreement sets forth the complete, final and exclusive agreement between the parties and supersedes and terminates all prior written and oral agreements and understandings between Consultant, on the one hand, and OSI and its subsidiaries, including (OSI) Eyetech, on the other hand, other than the stock option agreements between OSI and Consultant. No amendment to, or waiver of right under, this Agreement is effective unless in writing signed by authorized representatives of the parties. No waiver by a party of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by a party of any right under this Agreement shall be construed as a waiver of any other right. If any provision of this Agreement is judicially or administratively determined to be unenforceable, the provision will be reformed to most nearly approximate the parties’ original intent, but otherwise this Agreement will continue in full force and effect.

(h)

Consultant’s relationship with OSI will be that of an independent contractor, and nothing in this Agreement shall be construed to create a partnership, joint venture, or employer-employee relationship. Consultant is not the agent of OSI and is not authorized to make any representation, contract, or commitment on behalf of OSI. Consultant will be solely responsible for all tax returns and payments required to

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be filed with or made to any federal, state or local tax authority with respect to Consultant’s performance of services and receipt of fees under this Agreement. Consultant will not be entitled to any of the benefits that OSI may make available to OSI employees, such as group insurance, profit-sharing or retirement benefits. OSI will regularly report amounts paid to Consultant by filing Form 1099-MISC with the Internal Revenue Service as required by law, and OSI will not withhold or make payments for social security, make unemployment insurance or disability insurance contributions, or obtain worker’s compensation insurance on Consultant’s behalf. Consultant accepts exclusive liability for complying with all applicable state and federal laws governing self-employed individuals, including obligations such as payment of taxes, social security, disability and other contributions based on fees paid to Consultant, its agents or employees under this Agreement, and will defend, indemnify and hold harmless OSI from and against any and all such taxes or contributions, including penalties and interest.

(i) This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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     The parties hereto have entered into this Agreement as of the Effective Date by their duly authorized representatives.

/s/	OSI PHARMACEUTICALS, INC.
David Guyer
(Consultant)
Social Security Number	By:	/s/
**

^** This portion has been redacted pursuant to a confidential treatment request.

[Signature page to consulting agreement]

Exhibit A^**

^** This portion has been redacted pursuant to a confidential treatment request.

EX-10.6

EXHIBIT 10.6

Compensatory Arrangements for Executive Officers

     The Compensation Committee (the “Committee”) of the Board of Directors of OSI Pharmaceuticals, Inc. (“OSI” or the “Company”) approved the 2007 salaries and 2006 cash bonuses for OSI’s principal executive officer, principal accounting officer and other named executive officers (as that term is defined in Item 402 of Regulation S-K) as set forth in OSI’s proxy statement dated May 4, 2007 (the “2007 Proxy”), excluding David R. Guyer, M.D., who resigned from the Company in May 2006. The following table sets forth the annual base salary level of such officers for 2007 and the 2006 cash bonuses for each such officer:

Name and Position	2007 Base Salary		2006 Bonus
Colin Goddard, Ph.D. Chief Executive Officer(1)	$	600,000		—
Michael G. Atieh Executive Vice President, Chief Financial Officer and Treasurer	$	425,000	$	205,000
Gabriel Leung Executive Vice President and President, (OSI) Oncology	$	420,000	$	204,000
Anker Lundemose, M.D., Ph.D., D.Sc. Executive Vice President and President, (OSI) Prosidion	$	402,250	$	196,220
Paul Chaney Executive Vice President and President, (OSI) Eyetech	$	378,500	$	182,000

(1) Given the market performance of Macugen^® (pegaptanib sodium injection), and the resulting decision of OSI to exit the eye disease business it acquired through it acquisition of Eyetech Pharmaceuticals, Inc. in November 2005, the Committee concurred with Dr. Goddard’s recommendation that he not receive a 2006 bonus or merit increase to his 2007 base salary.

Cash Bonuses

     The 2006 bonus awards were computed in accordance with the Committee’s policy awarding annual bonuses for executive officers, as disclosed in the Compensation Discussion and Analysis section of the 2007 Proxy, and are consistent with past practices. OSI has established a discretionary annual cash bonus program for all of its employees, including its executive officers. The bonus targets, which are a percentage of base salary, for all of its executive officers are based upon their respective grade levels. The amount of bonus actually paid to its employees, including the executive officers (other than OSI’s CEO), is a function of the corporate and individual performance measures. The CEO’s bonus is based entirely on corporate performance measures. Consistent with its compensation objectives, a larger portion of the bonuses for OSI’s executive officers is tied to corporate performance as compared to individual performance. In addition, the performance of their respective department(s) or function group(s) is the largest component in measuring the individual performance for executive officers (other than the CEO).

     The actual amount of the bonuses paid to its executive officers, including the CEO, varies depending upon the Company’s performance and, for executive officers other than the CEO, such executive officers’ individual performance. The corporate component has historically ranged between 80% and 150% of the corporate component target and the individual performance component ranges between 90% and 120% of the individual performance component target depending upon an executive’s individual performance rating. In 2006, the Committee set the corporate component at 100%. The individual component of the annual cash bonus is based on the executive officer’s individual performance rating, determined in the manner discussed above. For 2006, the individual performance component of the annual cash bonus was set at 100% for executive officers who received one of the top three performance ratings. In 2006, each of the executive officers received one of the top three performance ratings, resulting in an individual performance component of 100% for each them.

     The bonus targets for the named executive officers are either set in accordance with their employment agreements or are based upon their respective grade levels. The 2007 bonus targets (which represents a percentage of base salary) for the named executive officers are as follows:

Name	Target
Colin Goddard, Ph.D.		*
Michael G. Atieh		50	%
Gabriel Leung		50	%
Paul G. Chaney		50	%
Anker Lundemose, M.D., Ph.D., D.Sc.		50	%

* No specific target. Determined by the Committee in its discretion.

Equity Awards

     OSI grants equity awards of stock options, restricted stock and restricted stock units to its employees under its Amended and Restated Stock Incentive Plan. Most of its employees, including its executive officers, receive an annual equity grant in December. The total amount of equity to be granted is initially determined by the CEO in consultation with the Vice President of Human Resources, and then recommended to the Committee for approval. The exercise price for all stock options is set at the closing price of OSI’s common stock on the date that the Committee approves the annual grant, with such approval date serving as the date of grant. Equity grants to the named executive officers are formula based and designed to provide a level of equity compensation that is at the approximate 50th percentile of that awarded by OSI’s peer group of companies. OSI determines the value of the grants provided to each executive officer by assigning such executive officer with a fixed grant percentage based on his or her grade level and then multiplying this percentage by his or her annual salary. For 2006, the named executive officers received either 100% or 75% of their formula grant, based on their individual performance ratings.

Perquisites

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     OSI provides very few perquisites to its executive officers. Certain of its named executive officers receive a leased car or car allowance, reimbursement of relocation expenses, legal fees and home security systems.

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EX-10.7

EXHIBIT 10.7

Compensatory Arrangements for Non-Employee Directors

Annual Retainer Fee:

     OSI Pharmaceuticals, Inc. (“OSI” or the “Company”) compensates its non-employee directors for service on the Board of Directors. The annual cash retainer fee payable to the members of the Board of Directors is set forth in the table below.

Service	Annual Retainer Fee
Chairman of the Board	$	150,000
Chairman of the Audit Committee	$	90,000
Member of Audit Committee	$	75,000
Member of Other Board Committee	$	62,500

Option Grants and Restricted Stock Awards:

     Each non-employee director receives an initial grant of options under the Plan upon his or her initial election to the Board. Each individual who becomes a director receives an initial option to purchase 25,000 shares of common stock and an award of 8,500 shares of restricted stock, restricted stock units or deferred stock units upon his or her initial election to the Board. Future appointees to the position of Chairman of the Board will receive an additional option to purchase 25,000 shares of common stock and an additional award of 8,500 shares of restricted stock, restricted stock units or deferred stock units upon his or her initial election as Chairman. The restricted stock and restricted stock units represent the right of a director to receive one share of OSI common stock upon vesting. Each deferred stock unit represent the right of a director to receive one share of OSI common stock upon the earlier of the director’s termination from service on the Board of Directors or on a date no earlier than two years from the date of grant, as designated by the director.

     In addition to initial equity awards, non-employee directors receive annual equity grants under the Plan. Non-employee directors with the exception of the Chairman of the Board receive an option to purchase 3,000 shares of common stock and an award of 1,500 shares of restricted stock, restricted stock units or deferred stock units upon each re-election for a one-year Board term. The Chairman of the Board receives an option to purchase 6,000 shares of common stock and an award of 3,000 shares of restricted stock restricted stock units or deferred stock units upon re-election for a one-year Board term.

     The stock option awards and restricted stock awards, including restricted stock units and deferred stock units, granted to the directors after June 14, 2006 vest annually over four years of the date of grant. The option awards expire on the seventh anniversary of their respective grant dates, subject to the earlier expiration upon the occurrence of certain events set forth under the terms of the Plan. The exercise price of all option awards is equal to 100% of the fair market value of the underlying common stock on the date of grant.

Post-Retirement Medical Benefits:

     Prior to April 2007, we provided post-retirement medical and life insurance benefits to eligible employees and qualified dependents, and members of our Board of Directors. Eligibility was based on age and service requirements. These benefits are subject to deductibles, co-payment provisions and other limitations. In April 2007, we terminated this benefit and grandfathered the directors who were eligible for participation in the plan at the time of termination (Mr. White and Drs. Mehta and Granner).

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

     I, Colin Goddard, certify that:

     1. I have reviewed this Quarterly Report on Form 10-Q of OSI Pharmaceuticals, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the

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audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2007

/s/ Colin Goddard, Ph.D.  

Colin Goddard, Ph.D. 

Chief Executive Officer 

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EX-31.2

EXHIBIT 31.2

CERTIFICATION

     I, Michael G. Atieh, certify that:

     1. I have reviewed this Quarterly Report on Form 10-Q of OSI Pharmaceuticals, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2007

/s/ Michael G. Atieh  

Michael G. Atieh 

Executive Vice President and Chief
Financial Officer 

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EX-32.1

EXHIBIT 32.1

OSI PHARMACEUTICALS, INC.

CERTIFICATION PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OSI Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Colin Goddard, Ph.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 7, 2007

/s/ Colin Goddard, Ph.D.  

Colin Goddard, Ph.D. 

Chief Executive Officer 

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EX-32.2

EXHIBIT 32.2

OSI PHARMACEUTICALS, INC.

CERTIFICATION PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OSI Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael G. Atieh, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 7, 2007

/s/ Michael G. Atieh  

Michael G. Atieh 

Executive Vice President and Chief
Financial Officer 

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