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Merrill Cuts OSI Pharmaceuticals to Neutral


Merrill Lynch downgraded OSI Pharmaceuticals (OSIP) to neutral from buy.

Analyst Eric Ende says he downgraded OSI on price. The shares skyrocketed Monday after OSI. Genentech, and Roche said their experimental lung-cancer treatment, Tarceva, improved survival rates in patients who have advanced stages of the disease.

Ende cautions investors not to get overly aggressive even though they may feel compelled to compare these results and the drug's potential to Avastin, a competing drug. He hasn't seen the magnitude of the survival benefit; it should be released in early June. Ende says the actual benefit will determine if results are clinically meaningful, and will affect product pricing and market penetration.

He notes pricing for Tarceva is a big unknown as a similar drug, Iressa, is already priced at only $4,500 per patient. He says OSI and Genentech to will split profits and OSI will receive only a low, 20% royalty.


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