OSI to buy Eyetech for $935 million

MELVILLE, N.Y. — OSI Pharmaceuticals plans to purchase Eyetech Pharmaceuticals for $935 million in cash and stock, according to a press release from the two companies. The deal will need approval from both companies’ shareholders and from government regulators before being finalized.

“The combination of OSI and Eyetech will create a substantial biopharmaceutical company with more than $600 million of projected revenues in 2006,” said Colin Goddard, PhD, chief executive of OSI.

With the acquisition, OSI will focus on three therapeutic areas: oncology, ophthalmology and diabetes. OSI plans to continue co-marketing Macugen (pegaptanib sodium), for the treatment of age-related macular degeneration, with Pfizer, the press release said. The company expects to launch both Macugen and its own cancer drug Tarceva (erlotinib) in the European Union in early 2006, the release stated.

Under the merger agreement, OSI will acquire all outstanding shares of Eyetech for $20 a share, a 43% premium over Eyetech’s closing market price last week, the press release said.

Numerous press reports indicated that financial markets were less than impressed with the deal, noting that Eyetech’s stock had fallen dramatically after news of competitive AMD treatment Lucentis (ranibizumab, Genentech) was announced earlier this year. First Albany Capital reiterated its neutral rating for Eyetech, calling the deal “a merger of weaknesses,” according to Marketwatch. Forbes.com quoted Dr. Goddard as saying the company “could face a rough patch” as Lucentis is launched. However, Dr. Goddard also told the Forbes Web site he sees “real opportunities for Macugen.”

Eyetech’s management will continue as its own division of OSI, the release said.

Interestingly, OSI currently co-promotes its oncology drug Tarceva with Genentech; the merger will puts OSI into direct competition with Genentech in ophthalmology once Lucentis is launched.

Dr. Goddard told Forbes.com he didn’t foresee “any problems with the partnership with Genentech going forward — the Tarceva and Macugen teams will remain completely separate within OSI,” he said.

Tarceva is approved in the United States for the treatment of advanced non-small cell lung cancer and is under regulatory review for the treatment of pancreatic cancer. OSI and Genentech jointly market the drug in the United States.

Macugen is scheduled to begin phase 3 trials for the treatment of diabetic macular edema during 2005 and is being studied for the treatment of retinal vein occlusion, the release said. Eyetech’s PDGF inhibitor E10030 for the treatment of neovascular age-related macular degeneration is scheduled to enter clinical trials during the next 6 months, the release said.