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OSI Buys Eyetech, Market Rubs Eyes

Not the most obvious of biotech-biotech combinations. OSI thinks it can make money from Eyetech's lone product pegaptanib (Macugen), a breakthrough new treatment for age-related macular degeneration. The market has reacted poorly to the deal, worried that Macugen will be made obsolete by Genentech's Lucentis, due to be launched in late 2006.

Some biopharma transactions, once announced, are relatively obvious. Observers had been pointing out the likelihood of GlaxoSmithKline PLC buying ID Biomedical Corp. for some time before GSK bought the smaller flu vaccine producer for $1.4 billion in early September, for example. [See Deal] But few can claim to have called OSI Pharmaceuticals Inc. 's surprise acquisition of Eyetech Pharmaceuticals Inc. for $935 million in cash (75%) and stock just two weeks earlier. [See Deal] And given the market's reaction to the deal—at press time OSI's stock was down nearly 20%, bringing the deal value below $900 million—even fewer were thrilled with the combined company's prospects.

At first glance it's hard to see where OSI thinks it can make money from Eyetech's lone product pegaptanib (Macugen),...

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