Targeting Cancer Pathways
Targeted therapies have the potential to change cancer from an acute and often fatal disease to a chronic, manageable illness. These therapies are designed to disrupt the “cellular pathways,” or the flow, from the outside of the cell to the inside, of biological signals that cancer cells use to grow, divide, repair themselves and communicate. Targeted therapies are often more focused on the particular biology of the cancer cell. This results in patients experiencing fewer of the toxic side effects of traditional cytotoxic drugs, which usually harm normal tissues.

Tarceva – A Paradigm-Shifting Therapy for
Cancer Patients Today
Tarceva is a small molecule inhibitor of the epidermal growth factor receptor, or HER1/EGFR. Tarceva is designed as an oral once-a-day therapy to inhibit the tyrosine kinase activity of the HER1 signaling pathway inside the cell, which blocks tumor cell growth. We are developing and commercializing Tarceva in a global alliance with Genentech and Roche.

In November of 2004, the U.S. Food and Drug Administration (FDA) approved Tarceva for use as a monotherapy in the treatment of advanced non-small cell lung cancer (NSCLC) patients who have failed at least one prior chemotherapy regimen. OSI and its partner Genentech initiated the launch of Tarceva less than three business days after its approval, making Tarceva available to lung cancer patients immediately. By year end, Tarceva had captured over 60% of all new prescriptions for EGFR targeted drugs in lung cancer.

The Tarceva approval was based on results from the BR.21 study that were presented in full at the 2004 meeting of the American Society of Clinical Oncology (ASCO) meeting in June. These results showed that the study met its primary endpoint of improving overall survival and its key secondary endpoints of progression-free survival and objective tumor response in a 731-patient, randomized, double-blind, placebo-controlled trial which compared single-agent Tarceva to placebo in the treatment of patients with advanced NSCLC following the failure of first- or second-line chemotherapy. Tarceva improved overallsurvival in the study, with a hazard ratio of 0.73 (hazard ratio (HR) is a measure of the risk of death and a hazard ratio of less than one indicates a survival benefit) and also demonstrated a survival benefit in essentially all subsets of patients examined, including males and females, patients with adenocarcinoma and squamous cell histology, patients with good as well as impaired performance status, and both smokers and non-smokers. Median and one-year survival of the overall population in the BR.21 study was improved by 42.5 percent (6.7 versus 4.7 months) and 45 percent (31.2 versus 21.5 percent) respectively, and patients were treated with Tarceva for an average of just over four months in the study (23% of patients were on therapy for more than 6 months). Certain subsets of patients, including never smokers and patients who had tumors determined to be EGFR-positive, were seen to have a large survival benefit in response to treatment with Tarceva. The subgroup of patients who never smoked had a substantial survival benefit with a hazard ratio of 0.42. The subgroup of smokers also had a survival benefit (HR = 0.87) despite the fact that this group was also seen to have a 24 percent higher rate of Tarceva clearance (higher clearance rates lead to lower levels of exposure to a drug).

Although patients with tumors determined to be EGFR-negative did not appear to have a survival benefit the statistical variation on this small subset of patients was large and a survival benefit in this group cannot be ruled out. However, we believe that, in practice, an appreciable majority of patients with relapsed NSCLC presenting for therapy will have tumors of unknown EGFR status. Indeed, this represented the largest EGFR status subgroup in the BR.21 study and this group of “EGFR-Unknown” patients had a robust survival benefit (HR = 0.76). No EGFR diagnostic test is validated or approved for use in lung cancer and the FDA has not required EGFR testing prior to the initiation of therapy with Tarceva.

In the pivotal study, the principal side effects associated with Tarceva were rash (in 75% of patients, with approximately 9% of patients exhibiting grade 3/4 rash) and a generally mild-moderate diarrhea (in 54% of patients, with approximately 6% of patients exhibiting grade 3/4 diarrhea).

In September of 2004, OSI announced the positive results of a second Phase III study which evaluated Tarceva in pancreatic cancer, comparing Tarceva in combination with gemcitabine versus chemotherapy alone in patients with locally advanced or metastatic pancreatic cancer who had not received any prior drug therapy. The study met its primary endpoint of improving survival, demonstrating a statistically significant (23.5%) improvement in overall survival for patients receiving Tarceva plus gemcitabine when compared to patients receiving gemcitabine plus placebo (HR = 0.81).

Each of the pivotal trials (BR.21 and the pancreatic Phase III program) were sponsored by OSI and conducted by the National Cancer Institute of Canada Clinical Trials Group at Queen’s University in collaboration with our development group.

The ability of Tarceva to show a survival benefit in two cancers that are widely recognized among the most difficult to treat suggests that Tarceva has broad therapeutic potential in the treatment of cancer and is clearly distinguished as a highly competitive agent within its class. In addition, Tarceva has demonstrated indications of activity in head and neck, ovarian, liver and brain cancers. Currently there are over 110 ongoing clinical studies, including a Phase IV development program to seek expanded use of Tarceva to earlier-stage lung cancer patients (where the compound has already shown indications of activity), additional disease settings, and to develop all targeted therapy combinations as a truly paradigm-shifting approach to cancer therapy. Studies of Tarceva used in combination with Avastin in renal cell carcinoma have demonstrated an encouraging initial response rate in the early stages of an ongoing study, and a similar study is under way in NSCLC.

We and our partners are confident that Tarceva will emerge as the leader in its class with the ability to provide a meaningful difference to the lives of cancer patients around the world.

Novantrone is a synthetic antineoplastic anthracenedione used intravenously as an anti-cancer agent. The FDA approved the product in 1987 for acute nonlymphocytic leukemia (ANLL) and in 1996 for the relief of pain associated with hormone-refractory prostate cancer (HRPC). It was also registered for multiple sclerosis (MS) indications in October 2000 and is approved for use in the treatment of Non-Hodgkin’s Lymphoma in markets outside the U.S. In March 2003, OSI entered into an agreement with Serono to market and promote Novantrone in the oncology marketplace in the United States.

While the transaction was executed largely as a strategy to allow us to establish our commercial organization in preparation for the launch of Tarceva, we are proud to participate in marketing a quality anti-cancer drug like Novantrone to the oncology community. We now have an 80-person-plus core commercial organization including sales, marketing, medical affairs and commercial planning. We are also happy to report that we exceeded our revenue goals for Novantrone by 15% generating $34.5 million in sales commission revenues during fiscal year 2004. Our sales force will continue to actively promote Novantrone through its patent expiration date of April 2006.

Nearly 15% of all cancer patients who receive chemotherapy and more than 90% of all patients receiving a combination of chemotherapy and radiation therapy experience oral mucositis, a painful and often debilitating side effect. Pain associated with oral mucositis can be so severe that patients have difficulty eating and drinking. In 2003, through the acquisition of Cell Pathways, we acquired the North American rights to Gelclair, a bioadherent oral gel that provides rapid and durable relief of pain by adhering to the mucosal surface of the mouth, forming a protective barrier over the mouth and throat and thus shielding and soothing the exposed and sensitized nerves. Although, as a device, Gelclair is not a major product commercially, we will continue to offer this valuable treatment option to cancer patients and their healthcare providers, who are dealing with this painful side-effect of chemo- and radiotherapy.

Beyond Tarceva – A Franchise Delivered
The successful FDA approval and subsequent launch of Tarceva has established a substantial corporate presence for OSI in the oncology arena. Our strategy over the last several years has been focused on assembling all of the pieces of a puzzle that adds up to a first-rate oncology organization built around Tarceva.

We believe that we have achieved this goal and that only minimal infrastructural investments will be required for the continued growth of our oncology business. We believe it is essential that we continue to aggressively manage our pipeline and to explore licensing and acquisition initiatives designed to add oncology products and clinical candidates to our pipeline in order to further strengthen our growing position in oncology.

We believe that in order to function as a successful oncology franchise in the 21st century, we should focus on developing targeted therapies as viable, next-generation options for patients who suffer from cancer.

Additionally, we consider the expansion into a second disease area to be an important part of our strategy for long-term value creation. We have therefore established Prosidion as a subsidiary of OSI with the mission of establishing a portfolio of innovative diabetes and obesity products that will make a meaningful impact on these growing healthcare threats.