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NOVEN ANNOUNCES 2005 FINANCIAL RESULTS |
BackNoven Reports 2005 EPS of $0.42, Adjusted (Non-GAAP) EPS of $0.53
Novogyne’s Annual Net Income Increases 37% Over 2004
Miami, FL, March
7, 2006 -- Noven Pharmaceuticals, Inc. (NASDAQ: NOVN), a leading
developer of advanced transdermal drug delivery technologies and prescription
transdermal products, today announced financial results for the quarter
and year ended December 31, 2005.
"The highlights of our results in 2005 included improvement in product
sales of our hormone therapy patches, strong performance at our Novogyne
joint venture, and progress made toward the commercialization of
Daytrana™, our developmental methylphenidate patch licensed
to Shire plc, including the receipt of an approvable letter from
the FDA and the commencement of Daytrana™ inventory production,” said
Robert C. Strauss, Noven’s President, CEO & Chairman. "We
have submitted an amendment to the Daytrana™ New Drug Application
which is intended to address the issues raised in the approvable
letter. If we are successful in addressing these issues, this new
ADHD therapy could establish a new source of revenue and income for
Noven."
Full Year Results
Noven's net income for the year ended December 31, 2005 was
$10.0 million (or $0.42 diluted earnings per share), compared to
$11.2 million (or $0.46 diluted earnings per share) in 2004. Net
income and diluted earnings per share for 2005 reflected (i) the
impact of a $9.5 million charge to cost of products sold in the 2005
third quarter associated with the write-off of fentanyl pre-launch
inventories, and a related $0.4 million charge in the 2005 fourth
quarter for fentanyl inventory destruction; and (ii) the recognition
in the 2005 fourth quarter of $5.7 million in deferred license revenues
related to fentanyl (together, the "Fentanyl Items").
Excluding the Fentanyl Items and related tax effects, Noven’s
net income in 2005 would have been $12.7 million (or $0.53 diluted
earnings per share). A reconciliation of net income and earnings
per share to net income and earnings per share as adjusted to exclude
the Fentanyl Items is included in an attachment to this press release.
Noven's net revenues for 2005 were $52.5 million, an increase
of 14% compared to 2004. Product revenues increased 10% to $40.5
million. Contract and license revenues increased 34% to $12.1 million,
primarily reflecting the recognition of fentanyl deferred license
revenues, partially offset by the effect of $4.4 million in contract
revenues earned in 2004 related to certain milestones achieved under
our collaboration with P&G Pharmaceuticals.
As a result of the FDA’s decision in the third quarter of 2005
to not approve Noven's developmental fentanyl patch, Noven
and Endo Pharmaceuticals, Inc. (“Endo”) terminated those
aspects of their collaboration agreements related to fentanyl in
the quarter ended December 31, 2005 (the "current quarter").
With no further obligations or continuing involvement under those
agreements related to fentanyl, Noven recognized the $5.7 million
of fentanyl deferred license revenues in the current quarter. Noven
is currently evaluating the feasibility of reformulating the fentanyl
patch to address the FDA’s concerns, and has granted Endo a
right of first negotiation with respect to any reformulated fentanyl
patch that it may develop. Noven and Endo continue to proceed with
other areas of their development collaboration that are unrelated
to fentanyl.
Research and development expense in 2005 increased 39% to $13.2 million,
primarily due to higher non-clinical development expenses related
to development engineering for Daytrana™. Marketing, general
and administrative expense decreased 2% from the prior year, reflecting
lower professional fees related to compliance with the Sarbanes-Oxley
Act of 2002 and other regulatory requirements.
Noven recognized $24.7 million in earnings from Novogyne Pharmaceuticals,
the women’s health products company owned jointly by Noven
and Novartis Pharmaceuticals Corporation, representing a 40% increase
compared to 2004.
Novogyne's 2005
net revenues increased 15% to $121.6 million, reflecting increased
sales of Vivelle-Dot™ and lower
sales and returns allowances. Novogyne’s selling, general
and administrative expense was $35.6 million, largely unchanged
from
2004. Novogyne's
net income for 2005 increased 37% to $57.8 million.
Total prescriptions for Vivelle-Dot™ increased 11% in 2005
compared to 2004, and total prescriptions for Novogyne's products,
taken as a whole, increased 4%. In 2005, Vivelle-Dot™ was
the most dispensed transdermal estrogen therapy in the U.S. for
the third
consecutive year, holding a 44.6% share of that market at year
end.
Fourth Quarter Results
Noven's net income for the current quarter was $6.1 million
(or $0.25 diluted earnings per share), compared to net income of
$2.8 million (or $0.11 diluted earnings per share) in the quarter
ended December 31, 2004 (the "2004 quarter"). As discussed
above, net income and diluted earnings per share for the current
quarter reflected (i) the recognition of $5.7 million in fentanyl
deferred license revenues; and (ii) a $0.4 million charge for the
destruction of fentanyl inventory (together, the "Fourth Quarter
Fentanyl Items"). Excluding the Fourth Quarter Fentanyl Items
and related tax effects, net income for the current quarter would
have been $2.7 million (or $0.11 diluted earnings per share). A reconciliation
of net income and earnings per share to net income and earnings per
share as adjusted to exclude the Fourth Quarter Fentanyl Items is
included in an attachment to this press release.
Noven's net revenues for the current quarter were $16.8 million,
a 32% increase from the $12.7 million reported in the 2004 quarter.
Product revenues increased 18% to $9.5 million. Contract and license
revenues increased 57% to $7.3 million, primarily due to the recognition
of $5.7 million in fentanyl deferred license revenues in the current
quarter, partially offset by the effect of $3.0 million in contract
revenues earned in the 2004 quarter under our collaboration with
P&G Pharmaceuticals.
Research and development expenses increased 67% to $3.5 million
in the current quarter compared to the 2004 quarter, primarily
due to
higher non-clinical development expenses related to development
engineering for Daytrana™. Marketing, general and administrative
expense decreased 15% from the 2004 quarter, reflecting lower professional
fees in the current quarter related to compliance with the Sarbanes-Oxley
Act and other regulatory requirements.
Noven recognized $7.6 million in earnings from Novogyne in the current
quarter, representing an approximate three-fold increase over the
$2.5 million recognized in the 2004 quarter.
Current quarter net revenues at Novogyne increased 36% to $33.2
million, reflecting increased sales of Vivelle-Dot™ and decreased sales
and returns allowances. Novogyne’s selling, general and administrative
expense in the current quarter decreased 24% to $9.9 million, primarily
reflecting higher expenses in the 2004 quarter related to promotional
spending, insurance premiums and litigation accruals. Novogyne’s
net income for the current quarter was $16.0 million, more than
triple the $5.1 million reported in the 2004 quarter.
Total prescriptions for Vivelle-Dot™ increased 8% in the current
quarter compared to the 2004 quarter, and total prescriptions for
Novogyne’s products, taken as a whole, increased 4%.
Balance Sheet
At December 31, 2005, Noven had an aggregate $84.9 million in cash
and cash equivalents and short-term investments. At December 31,
2004, Noven had $94.0 million in cash and cash equivalents and
no short-term investments. Noven’s capital expenditures in
2005 were $13.7 million, a substantial portion of which related
to the
expansion of production capacity for future products. Noven expects
capital spending to decrease significantly for full-year 2006 compared
to 2005 levels.
Analyst Conference Call
A conference call with management relating to Noven's financial results
will be broadcast live via the Internet at www.noven.com beginning
at 10:00 a.m. Eastern time this morning, March 7. Thereafter, a rebroadcast
of the call will be accessible at the same website for at least two
weeks. A taped replay of the conference call will be available from
the afternoon of March 7 through March 9 by calling 877-660-6853
(from within the U.S.) or 201-612-7415 (from outside the U.S.) and
entering the access code number 286 and ID number 193251. The conference
call will contain forward-looking information in addition to that
contained in this press release.
Non-GAAP Financial Information
Under accounting principles generally accepted in the United States
("GAAP"), "net income" and "diluted
earnings per share" include all charges for the periods reported.
In addition to results determined in accordance with GAAP, Noven
has provided net income and diluted earnings per share for (i) the
year ended December 31, 2005, excluding the Fentanyl Items and related
tax effects, and (ii) the quarter ended December 31, 2005, excluding
the Fourth Quarter Fentanyl Items and related tax effects.
Management believes that presenting non-GAAP net income and diluted
earnings per share under these circumstances is useful to investors
in order to meaningfully evaluate Noven’s ongoing, underlying
business and compare Noven’s financial results for the quarter
and year ended December 31, 2005 to those in the prior periods based
on comparable trends. For the same reasons, management uses these
non-GAAP financial measures to evaluate Noven’s ongoing, underlying
business. These measures should not be considered alternatives to
measures computed in accordance with GAAP, nor should they be considered
indicators of Noven’s overall financial performance.
Adjusted net income and adjusted earnings per share are limited by
the fact that companies may not necessarily compute them in the
same manner, thereby making these measures less useful than the same
measures
calculated in accordance with GAAP.
About Noven
Noven Pharmaceuticals, Inc., headquartered in Miami, Florida, is
a leading developer of advanced transdermal drug delivery technologies
and prescription transdermal products. Noven’s prescription
patches are approved in over 30 countries, and a range of new patches
are being developed in collaboration with Novartis Pharma AG, Shire
plc, P&G Pharmaceuticals, Endo Pharmaceuticals Inc. and others.
Together with Novartis Pharmaceuticals Corporation, Noven owns Novogyne
Pharmaceuticals, a women’s health products company with over
$120 million in annual sales. Among other products, Novogyne markets
and sells Noven’s Vivelle-Dot™ product – the
smallest estrogen patch in the world, and the most prescribed transdermal
estrogen therapy in the U.S. Noven is committed to expanding the
universe of available transdermal therapies for the benefit of
patients,
partners and shareholders. See www.noven.com for additional information.
Except
for historical information contained herein, the matters discussed
in this press release contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 that involve substantial
risks and uncertainties. When used in this press release, the words “could,” “expect,” “intend,” “should,” and
similar expressions identify certain of such forward-looking statements.
Actual results, performance or achievements could differ materially
from those contemplated, expressed or implied by the forward-looking
statements contained herein. These forward-looking statements are
based largely on the current expectations of Noven and are subject
to a number of risks and uncertainties that are subject to change
based on factors which are, in many instances, beyond Noven's control.
By category, these risks and uncertainties include: Daytrana™ –
the risk that Daytrana™ may not ultimately be approved; risks
related to final product labeling, including the risk that warnings
or limitations required by the FDA may adversely affect the commercial
success of Daytrana™; risks related to post-marketing surveillance
and studies; the risk of supply interruptions and other uncertainties
relating to future DEA awards of methylphenidate procurement quota
necessary for the production of Daytrana™; the risk that Noven
may encounter production issues and/or inefficiencies in the process
of manufacturing commercial quantities of Daytrana™, which
could adversely affect the success of product launch and Noven’s
results of operations; risks related to competition (including from
other ADHD products marketed by Shire) and market acceptance of Daytrana™ that
could adversely affect the commercial success of Daytrana™ and
could, among other things, limit Noven’s right to receive the
additional milestone payments under its agreement with Shire; the
possibility that the market for methylphenidate products may be negatively
affected by the outcome of the FDA’s ongoing inquiry into the
possible side effects of ADHD medications, the FDA Drug Safety and
Risk Management Advisory Committee’s recent recommendation
that ADHD medications carry a “black-box” warning about
possible cardiac events, a 2005 study by researchers at the M.D.
Anderson Cancer Center that found adverse chromosomal effects on
12 children treated with oral methylphenidate, as well as ongoing
public debate in the United States regarding the appropriateness
of using methylphenidate and other medications to treat children
with ADHD; Regulatory Matters – uncertainties
related to the FDA's discretion to approve or not approve a product;
and
the timing of
any FDA approval for any of Noven's products in development, which
is outside Noven's control and which may impact the success of product
launch and market penetration; Noven's Partners – the
risk that Noven's development partners may have different or conflicting
priorities
than Noven's, which may adversely impact their ability or willingness
to assist in the development and commercialization of Noven's products
or to continue the development programs; the possibility that Noven's
development programs may not proceed on schedule or as expected,
which could, among other things, prevent Noven from achieving milestone
objectives and/or cause delays or cancellations of programs; the
possibility that Noven's current development priorities could render
Noven unable to advance Noven's other development projects or increase
the cost of advancing those projects; Technology Matters – the
possibility that Noven's technologies may not be approvable or
suitable for use
in additional therapeutic categories, including those categories
addressed through products developed with Noven's development partners; Other Matters – the risk that Noven’s
estimates of expected capital expenditures for 2006 could be incorrect
or that such estimates
may change. For additional information regarding these and other
risks associated with this product and Noven’s business, readers
should refer to Noven’s Annual Report on Form 10-K as well
as other reports filed from time to time with the Securities and
Exchange Commission.
Noven Pharmaceuticals, Inc.
Statements of Operations Data: Three Months Twelve Months
(amounts in thousands, except per Ended Ended
share amounts)(unaudited) December 31, December 31,
--------------- -----------------
2005 2004 2005 2004
------- ------- -------- --------
Revenues:
Product revenues - Novogyne:
Product sales $5,478 $3,740 $19,910 $18,798
Royalties 1,827 1,295 6,444 5,204
------- ------- -------- --------
Total product revenues - Novogyne 7,305 5,035 26,354 24,002
Product revenues - third parties 2,209 3,041 14,097 12,869
------- ------- -------- --------
Total product revenues 9,514 8,076 40,451 36,871
Contract and license revenues:
Contract 735 3,606 2,528 5,021
License 6,536 1,023 9,553 3,999
------- ------- -------- --------
Contract and license revenues 7,271 4,629 12,081 9,020
Net revenues 16,785 12,705 52,532 45,891
Expenses:
Cost of products sold(1) 7,521 4,735 34,047 20,514
Research and development(1) 3,463 2,070 13,215 9,498
Marketing, general and
administrative 4,434 5,247 16,915 17,271
------- ------- -------- --------
Total expenses 15,418 12,052 64,177 47,283
------- ------- -------- --------
Income (loss) from operations 1,367 653 (11,645) (1,392)
Equity in earnings of Novogyne 7,561 2,544 24,655 17,641
Interest income, net 634 380 2,242 999
------- ------- -------- --------
Income before income taxes 9,562 3,577 15,252 17,248
Provision for income taxes 3,500 823 5,280 6,024
------- ------- -------- --------
Net income $6,062 $2,754 $9,972 $11,224
======= ======= ======== ========
Basic earnings per share $0.26 $0.12 $0.42 $0.48
======= ======= ======== ========
Diluted earnings per share $0.25 $0.11 $0.42 $0.46
======= ======= ======== ========
Weighted average number of common
shares outstanding:
Basic 23,603 23,457 23,566 23,332
======= ======= ======== ========
Diluted 23,861 24,187 23,981 24,305
======= ======= ======== ========
As Of
--------------------
Balance Sheet Data: December December
(amounts in thousands) (unaudited) 31, 2005 31, 2004
--------- ---------
Cash and cash equivalents $ 66,964 $ 93,958
Short-term investments 17,900 -
Investment in Novogyne 23,243 26,233
Total assets 185,910 201,975
Deferred license revenues 23,655 39,085
Stockholders' equity 140,621 129,039
(1) Cost of products sold has been revised in all periods to
include certain amounts that were previously included in research and
development expenses.
Noven Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Measures to GAAP
Statements of Operations Data:
(amount in thousands, except per
share amount)(unaudited)
Three Months Ended Year Ended
December 31, 2005 December 31, 2005
------------------------ ------------------------
Non- Adjust- GAAP(2) Non- Adjust- GAAP(2)
GAAP(1)ments(1) GAAP(1)ments(1)
------------------------ ------------------------
Revenues:
Total product
revenues $9,514 $9,514 $40,451 $40,451
Contract and
license revenues:
Contract 735 735 2,528 2,528
License 882 5,654 6,536 3,899 5,654 9,553
------------------------ ------------------------
Contract and
license revenues 1,617 5,654 7,271 6,427 5,654 12,081
Net revenues $11,131 5,654 $16,785 $46,878 5,654 $52,532
Expenses:
Cost of products
sold(3) 7,079 442 7,521 24,130 9,917 34,047
Research and
development(3) 3,463 3,463 13,215 13,215
Marketing, general
and administrative 4,434 4,434 16,915 16,915
------------------------ ------------------------
Total expenses 14,976 442 15,418 54,260 9,917 64,177
------------------------ ------------------------
Income (loss) from
operations (3,845) 5,212 1,367 (7,382) (4,263)(11,645)
Equity in earnings
of Novogyne 7,561 7,561 24,655 24,655
Interest income, net 634 634 2,242 2,242
------------------------ ------------------------
Income (loss) before
income taxes 4,350 5,212 9,562 19,515 (4,263) 15,252
Provision (benefit)
for income taxes 1,674 1,826 3,500 6,830 (1,550) 5,280
------------------------ ------------------------
Net income (loss) $2,676 $3,386 $6,062 $12,685 $(2,713) $9,972
======================== ========================
Basic earnings
(loss) per share $0.11 $0.15 $0.26 $0.54 $(0.12) $0.42
======================== ========================
Diluted earnings
(loss) per share $0.11 $0.14 $0.25 $0.53 $(0.11) $0.42
======================== ========================
Weighted average
number of common
shares outstanding:
Basic 23,603 23,603 23,566 23,566
======================== ========================
Diluted 23,861 23,861 23,981 23,981
======================== ========================
(1) Non-GAAP amounts exclude adjustments associated with the earning
and recognition of the remaining deferred license revenue as well as
the write-off of pre-launch inventories related to Noven's
developmental fentanyl patch, net of applicable income taxes.
(2) Reflects operating results in accordance with accounting
principles generally accepted in the United States (GAAP).
(3) Cost of products sold has been revised in all periods to include
certain amounts that were previously included in research and
development expenses.
Contact:
Joseph C. Jones
Vice President – Corporate Affairs
Noven Pharmaceuticals, Inc.
(305) 253-1916
Copyright © 2006 Noven Pharmaceuticals, Inc. All rights reserved.