Updated from August 10

OSI Pharmaceuticals'

(OSIP)

shares fell Wednesday after the company late Tuesday reported a narrower third-quarter loss but still missed Wall Street estimates.

The Melville, N.Y.-based biotechnology company lost $47.3 million, or $1.19 per share, on revenue of $11.2 million for the three months ended June 30. The consensus prediction of analysts polled by Thomson First Call was for a loss of $48.3 million, or $1.18 per share, on sales of $12.7 million.

The quarter's results were affected, in part, by OSI calling for the redemption of certain convertible senior subordinated notes, which were converted into common stock. The weighted average number of outstanding shares as of June 30 was 39.6 million compared to 37 million for the same period last year. The total number of outstanding shares is now about 43.2 million.

In the year-ago quarter, OSI earned $75.1 million, or $2.03 a share, on sales of $8 million.

Although OSI markets two drugs now, it is staking its life on Tarceva, an experimental treatment for lung cancer, being developed with

Genentech

(DNA)

of South San Francisco, Calif.

Earlier this month, the companies submitted to the Food and Drug Administration their long-awaited application for Tarceva as a treatment for advanced non-small cell lung cancer (or NSCLC) in patients for whom chemotherapy has failed. According to the National Cancer Institute, lung cancer is the single largest cause of cancer deaths in the United States, accounting for about 30% of U.S. cancer deaths. NSCLC causes about 80% of U.S. lung cancer cases.

The FDA has given Tarceva the fast-track status, meaning clinical tests have shown it could provide a significant advance over available therapies.

In the U.S., OSI exclusively markets Gelclair, a pain management gel for mouth sores caused by chemotherapy, and Novantrone, which is used as a treatment for multiple sclerosis, a medication for a type of leukemia and as a pain reliever for patients with prostate cancer that hasn't responded to hormone therapy. OSI has also has created Prosidion Limited, a diabetes and obesity subsidiary in the U.K.

OSI said Tuesday that although it plans to expand Prosidion, it also plans to consolidate its U.K.-based cancer research and development efforts in New York by Nov. 30. That could cost 90 jobs overseas, but OSI added that it expects to continue adding sales representatives in anticipation of Tarceva's launch.

Shares fell 86 cents, or 1.6%, to $52.45 early Wednesday.

That means OSI's stock has given back much of the spectacular gain on April 26, when shares vaulted nearly $53 to close at $91.10. That eruption followed the announcement by OSI and Genentech that a late-stage clinical trial for NSCLC patients showed that Tarceva-treated patients lived longer than those receiving a placebo. The test was conducted with patients who had previously received one or two regimens of chemotherapy for their disease.