West Coast Editor

Two months after buying a whole pipeline of oncology products, OSI Pharmaceuticals Inc. said it has entered into an agreement to sell $200 million worth of convertible subordinated notes.

Proceeds of the sale, which will total $230 million if an overallotment option is exercised, will go toward developing Melville, N.Y.-based OSI’s pipeline, as well as oncology-related licensing and acquisitions, plus general corporate purposes.

Kathy Galante, manager of corporate communications for OSI, said the money won’t go just toward advancing the basket of compounds gained through the November purchase from Gilead Sciences Inc., of Foster City, Calif.

“It’s to grow the business,” she said.

Under the terms of the offering to undisclosed initial purchasers, which is expected to close at the first of next month, the notes will accrue at a rate of 4 percent per year, maturing in 2009 and convertible into OSI shares at a price of $50 per share, subject to adjustment in certain circumstances.

OSI’s stock (NASDAQ:OSIP) closed Tuesday at $39.57, down 98 cents.

The company agreed to pay Gilead $130 million in cash and $40 million in stock, with up to $30 million more later. (See BioWorld Today, Nov. 27, 2001.)

The additional amount, either in cash or in cash with stock, would be paid when milestones are reached in development of OSI211 (liposomal lurtotecan, a topoisomerase I inhibitor). That drug candidate was Gilead’s most advanced in the deal, in Phase II trials for tumors including ovarian and small-cell lung cancers.

“It’s a next-generation cytotoxic [drug],” Galante said. “We acquired three of them from Gilead.”

OSI’s farthest-along candidate is Tarceva, a small-molecule, anti-epidermal growth factor receptor in Phase III trials for lung and pancreatic cancers. It’s being developed in a three-way alliance among OSI, Genentech Inc., of South San Francisco, and Roche Holdings Inc., of Basel, Switzerland. (See BioWorld Today, Jan. 9, 2001.)

“We’re not specifically getting into time lines, but the non-small-cell lung trial would be the first to finish, sometime in 2004,” Galante told BioWorld Today. The funds from the notes sale will help the Tarceva plans along, but “all [of the drug candidates] are playing a substantial role,” she added.

“Obviously, Tarceva is well up in the front,” she said.