UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
October 15, 2004
Date of Report (Date of earliest event reported)
OSI PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-15190 13-3159796
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
58 SOUTH SERVICE ROAD
MELVILLE, NY 11747
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(Address of principal executive offices)
(631) 962-2000
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address,
if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
( ) Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
( ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
( ) Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
( ) Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.06 MATERIAL IMPAIRMENT
On October 15, 2004, management of OSI Pharmaceuticals, Inc. (the
"Company") determined that it will be necessary to record an impairment charge
as of September 30, 2004 related to its intangible asset for exclusive
distribution rights to the marketed product, Gelclair(R), a bioadherent oral gel
for the relief of pain associated with oral mucositis, a frequent side-effect of
chemotherapy, in North America.
The Company assesses the potential impairment of its long-lived assets,
under the provision of Statement of Financial Accounting Standards (SFAS) No.
144, "Accounting for the Impairment or Disposal of Long Lived Assets". SFAS No.
144 indicates that long-lived assets such as our Gelclair(R) intangible asset
should be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. In performing such
recoverability test in connection with the preparation of our annual financial
statements, the Company determined that the total of the expected future
undiscounted cash flows directly related to the Gelclair(R) asset was less than
the carrying value of the Gelclair(R) asset. As a result an impairment charge
was required. The amount of the impairment charge represents the difference
between the fair value of the intangible asset and its associated carrying
value. The Company calculated the fair value of the intangible asset using
discounted cash flows. The discounted cash flows calculation was made utilizing
various assumptions and estimates regarding future revenues and expenses, cash
flow and discount rates. Based on these calculations, the Company determined
that an impairment charge of approximately $24.6 million, which represented the
full unamortized balance of the Gelclair(R) intangible asset, was necessary as
of September 30, 2004.
The impairment charge is non-cash and will not result in future cash
expenditures. The impairment charge resulted from both the recent discontinuance
of discussions with a replacement dental partner to Butler, and slower than
originally expected sales growth in the oncology marketplace following the
re-launch of the product in October 2003. In accordance with SFAS No. 144, these
events indicated that the carrying value of the Gelclair(R) intangible should be
tested for recoverability. The revised forecast indicated a period of continuing
losses associated with the sales and distribution of Gelclair(R). In addition to
the impairment charge related to the Gelclair(R) intangible asset, the Company
also expects to record a provision for obsolete inventory, for both inventory on
hand and additional committed inventory purchases, that the Company considers to
be in excess of forecasted future demand based on the expiration dates of the
product. The Company is currently in the process of quantifying the impact of
the potential inventory write off, which the Company expects to be material.
Despite the impairment charge, the Company believes that Gelclair(R) is
a useful product for the treatment of oral mucositis, and the Company expects to
continue to sell the product in the oncology market and pursue its efforts of
identifying a marketing partner for the dental market.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 21, 2004 OSI PHARMACEUTICALS, INC.
By: /s/ Robert L. Van Nostrand
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Robert L. Van Nostrand
Vice President and Chief Financial
Officer (Principal Financial Officer)
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