Shares of

OSI Pharmaceuticals

(OSIP)

rose Tuesday on the news that its partner,

Genentech

(DNA)

, will increase wholesale prices of the cancer drug Tarceva.

OSI shares rose $2.86, or 7.2%, to $42.67. Genentech shares rose 73 cents, or 1.3% to $56.63.

OSI shares were on a steady decline in recent months, as analysts drastically lowered OSI price targets and sales projections blaming competition from

Eli Lilly's

(LLY) - Get Report

cancer drug Alimta, the preferred second-line treatment of non-small-cell lung cancer. Tarceva prescriptions have been lower than expected.

Last month, Jim Birchenough of Lehman Brothers lowered his price target for OSI to $58 from $80 and reduced 2006 sales estimates to $336 million from $396 million and 2007 sales to $520 million from $600 million. His price targets last summer were as much as $120.

When Genentech revealed last month that trials of its biologic drug Avastin combined with traditional chemotherapy drugs prolonged survival in lung cancer patients, OSI shares spurted on the assumption that Tarceva, also a biologic drug, will also be successful in combination with chemotherapy. Tarceva is also increasingly being used as a post-surgery drug therapy.