OSI Pharmaceuticals Inc. agreed to end early its funded research alliance in cosmeceuticals with Anaderm Research Corp., a wholly owned subsidiary of Pfizer Inc., in an effort to further concentrate in oncology.

New York-based Pfizer will pay OSI, of Melville, N.Y., an $8 million "wind-down fee," the company said, in return for OSI transferring to Pfizer the research it has amassed since the alliance began in 1999. The alliance centered on areas including skin pigmentation, skin wrinkling and hair loss. (See BioWorld Today, May 28, 1999.)

"We are focusing everything on oncology right now," said OSI Chief Financial Officer Robert Van Nostrand, explaining the decision to end the deal. "Pfizer had a strong interest to take this in-house, and we wanted to direct our resources to oncology."

Contractually, the alliance would have lasted three more years, during which OSI would have received $15 million, Van Nostrand said. OSI had been funded at about $11 million each year. Under the new agreement accelerating the wind-down, OSI will receive the $8 million and would be paid royalties on any commercialized products.

"We didn't have to commit any resources" to the alliance, Van Nostrand said.

In the collaboration, OSI provided discovery efforts, including identifying compounds and taking them to the preclinical stage. The most advanced of the compounds, Van Nostrand said, is in skin pigmentation. Pfizer will now take the compounds into clinical development.

"We are very pleased that these products are being pursued," Van Nostrand said, noting that the products are in large markets.

In November, seeking to strengthen its oncology pipeline, OSI acquired Foster City, Calif.-based Gilead Sciences Inc.'s cancer portfolio for $170 million in cash and stock. OSI paid $130 million in cash and $40 million in stock for all rights, plus Gilead's Boulder, Colo., operations. OSI is scheduled to pay $30 million more when milestones are reached in development of OSI-211 (formerly NX-211, or liposomal lurtotecan, a topoisomerase l inhibitor). OSI-211 is in Phase II trials for tumors, including refractory-ovarian and small-cell lung cancer. (See BioWorld Today, Nov. 27, 2001.)

Milestones would be paid if and when OSI-211 advances into Phase III trials, said Kathy Galante, manager of corporate communications for OSI.

OSI's most advanced drug candidate is Tarceva (erlotinib HCl, OSI-774), a small-molecule inhibitor of the epidermal growth factor receptor, which is in Phase III trials for non-small-cell lung and pancreatic cancers. OSI is in an alliance with Genentech Inc., of South San Francisco, and Roche Holdings Inc., of Basel, Switzerland, for the drug, a deal valued at $187 million and announced in January 2001. All three companies share in the development costs, Galante said. However, Genentech and OSI would share equally in profits if the product is commercialized in the U.S. Roche has foreign rights to the product and Genentech and OSI would receive royalties if the product is approved outside the U.S. (See BioWorld Today, Jan. 9, 2001.)

OSI originally partnered Tarceva with Pfizer, but the product was returned to OSI when Pfizer acquired Morris Plains, N.J.-based Warner-Lambert Co. The return of rights was required by the Federal Trade Commission as a condition of the merger.

Gilead's pipeline includes OSI-7836, a nucleoside analogue that is in Phase I trials. Also in Phase I trials is OSI-7904L, a liposomal thymidylate synthase inhibitor.

OSI's stock (NASDAQ:OSIP) rose 95 cents Wednesday to close at $25.

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