OSI to Leave Eye Business

This is how a strange acquisition ends.
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OSI Pharmaceuticals

(OSIP)

reported a wider net loss in the third quarter and announced plans to exit the eye business, saying it won't reach the goals it set when it acquired Eyetech Pharmaceuticals last year.

"It is evident that a key strategic goal behind our acquisition of Eyetech -- that of generating positive cash flow from the eye business in the 2006-2008 period -- will not be realized," said OSI Chief Executive Colin Goddard.

The company bought Eyetech, the maker of the eye-disease treatment Macugen, last November despite the prospects of fierce competition from

Genentech's

(DNA)

drug Lucentis.

Macugen, which was shown to stop vision loss due to age related macular degeneration, was approved in December 2004. Lucentis, which a product studies found could halt and possibly even reverse vision loss, was cleared by the Food and Drug Administration in June.

The Eyetech acquisition was never especially popular with OSI shareholders -- who didn't get to vote on the deal -- and some analysts on Wall Street questioned the wisdom of the purchase from the outset.

While it's now planning to leave the eye business, partner with another company, or sell the business outright, in the near-term OSI expects to continue to market Macugen with its partner

Pfizer

(PFE) - Get Report

.

For the third quarter, OSI reported a loss of $21.3 million, or 37 cents a share, compared with a loss of $20 million, or 39 cents a share, in the year-ago period. Excluding certain items, OSI would have lost 23 cents a share in the latest quarter. Analysts were expecting a loss of 16 cents.

Revenue for the quarter reached $74 million, up from $34 million a year ago, but analysts were expecting $92.9 million on the top line.

Total U.S. Macugen sales were $9 million. OSI first began recording Macugen sales in the fourth quarter of last year.

Worldwide net sales of cancer drug Tarceva, as reported by OSI's partners Genentech and

Roche

, were $170 million in the quarter.

Shares of OSI were gaining 1.9% to $39.51.