The medical war on cancer is being waged along several fronts. A biotech outfit in Melville, New York is one of the more successful combatants.

OSI Pharmaceuticals (NASDAQ: OSIP) is a biotechnology company engaged in the discovery, development, and commercialization of pharmaceutical products. Its Traceva compound has been approved by the FDA for treating lung and pancreatic cancer and is being investigated for other applications. Partner Genentech (NYSE: DNA) co-promotes the drug in the United States. OSI and marketing partner Pfizer (NYSE: PFE) sell Macugen, a treatment for the "wet" form of age-related macular degeneration. Novantrone, an anthracenedione, is offered as an intravenous chemotherapy agent. OSI's developmental pipeline includes additional cancer drugs and treatments for diabetes and obesity.

The firm pleased the Street late last month, when it reported Q3 EPS of 59 cents and revenues of $100.4 million. Analysts had been expecting 40 cents and $86.6 million. Lazard Capital subsequently reiterated its "buy" rating on the shares and analysts from JP Morgan and Lehman Brothers issued positive remarks about the prospects for improved Traceva sales. The stock popped on the news and has since been forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with three "strong buys," four "buys" and nine "holds." Analysts see a 17% average annual growth rate through the next five years. The OSIP PEG ratio (1.49), Sales Growth rate (76.76%) and EPS Growth rate (-0.23 to +0.59 y/y) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $28.68 and $43.43. A stop-loss of $35.70 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.