Noven Reports First Quarter 2004 Financial Results

-- 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 ended March 31, 2004, affirmed its prior public financial guidance, and provided an update on its business, prospects and collaborations.

"Noven’s strategy is to build shareholder value by commercializing our patented DOT Matrix® platform and other transdermal technologies across diverse markets with strong partners," said Robert C. Strauss, Noven's President, CEO & Chairman. "We made progress toward this goal in the first quarter by establishing an important new industry collaboration and advancing several others, and we continue to expect to report full year earnings per share in the $0.40 to $0.45 range."

First Quarter Results
Noven’s net revenues for the quarter ended March 31, 2004 (the "current quarter") increased 11% to $11.1 million compared to the quarter ended March 31, 2003 (the "2003 quarter"). Net revenues were lower in the 2003 quarter due in part to steps taken by Noven in early 2003 to reduce inventories at Novogyne Pharmaceuticals, Noven’s joint venture with Novartis Pharmaceuticals Corporation ("Novartis"), which reduced Noven’s product sales to Novogyne for that quarter.

Noven's research and development expenses for the current quarter decreased 10% to $2.3 million, primarily due to decreased MethyPatch® product development costs. Noven’s investment in research and development for full-year 2004 is expected to exceed 2003 levels due to product development initiatives expected to begin in the balance of 2004.

In the current quarter, Noven recognized $0.6 million in earnings from Novogyne compared to $1.5 million in the 2003 quarter. Noven reported net income of $0.2 million ($0.01 diluted earnings per share), compared to $0.5 million ($0.02 diluted earnings per share) in the 2003 quarter.

Novogyne’s current quarter net revenues decreased 13% to $21.4 million. Noven believes that the timing of orders for Vivelle Dot® patches by trade customers adversely affected Novogyne’s first quarter sales. Novogyne’s sales are expected to increase in the second quarter of 2004 compared to first quarter levels. Net income was $7.4 million compared to $9.4 million in the 2003 quarter. In the current quarter, Novogyne satisfied the annual $6.1 preferred profit distribution to Novartis required under the joint venture agreements.

At March 31, 2004, Noven had $101.9 million in cash and cash equivalents compared to $83.4 million at December 31, 2003. The increase primarily reflects receipt of $8.0 million from Endo Pharmaceuticals Inc. ("Endo") upon closing of the fentanyl license transaction, a $6.0 million cash distribution from Novogyne, and $5.2 million received in connection with the exercise of Noven stock options.

HT Prescription Overview
"Although the Women’s Health Initiative and other study results caused the overall HT market to decline, our U.S. HT products have significantly outperformed their respective market segments," said Strauss. "In fact, our Vivelle Dot patch is the only major estrogen therapy product to increase total prescriptions since WHI."

Primarily due to the continuing impact of the WHI studies, the overall U.S. HT market declined 20% in the first quarter of 2004 compared to the first quarter of last year. For the same period, aggregate prescriptions for Noven's products (Vivelle®, Vivelle Dot and CombiPatch® combined) decreased just 6%.

Vivelle Dot, which represents approximately 75% of total prescriptions for Noven’s U.S. products, increased 6% for the period, while the estrogen segment of the U.S. HT market declined 19%. Prescriptions for the Vivelle® product family (Vivelle Dot and Vivelle combined) decreased 2.6%. At the end of the current quarter, the Vivelle family held a 41% share of total prescriptions in the estrogen patch segment, compared to a 38% share at the end of the 2003 quarter.

"The U.S. estrogen therapy market continues to represent an opportunity of well over $1.0 billion,” said Neil Jones, Noven’s Vice President – Marketing & Sales. “We see room for Vivelle Dot to grow, and we are committed to extending that product’s market-leading position through efficient marketing and sales strategies at Novogyne.”

Collaborations
"During the first quarter, we advanced several aspects of our industry collaborations,” said Strauss. “If successful, these collaborations could drive substantial growth in 2005 and thereafter."

"In February, we licensed our developmental generic fentanyl patch to Endo," said Strauss. "Our patch is intended to be the generic equivalent of Johnson & Johnson’s Duragesic® fentanyl patch. Based on the current patent and exclusivity status of the Duragesic product, we believe that the earliest our patch could be launched is January 2005, assuming FDA approval is received by that time. We also established a collaboration with Endo to develop new transdermal therapies, and we expect to undertake feasibility studies for selected compounds in 2004."

Strauss continued: "In the first quarter, we received a $400,000 development milestone under our collaboration with P&G Pharmaceuticals, a subsidiary of The Procter & Gamble Company (“P&GP”). The products under development explore follow-on product opportunities for P&GP’s in-licensed investigational Intrinsa™ testosterone patch designed to help restore desire in menopausal women who have Hypoactive Sexual Desire Disorder. P&GP has initiated studies of the first product in humans. Potential development milestones totaling $4.4 million remain to be received under the P&GP collaboration, a portion of which is expected to be received in the remainder of 2004."

"Noven and Shire Pharmaceuticals Group plc ("Shire") continue to work together to address the not approvable letter received in April 2003 from the FDA on our developmental MethyPatch methylphenidate transdermal system for Attention Deficit Hyperactivity Disorder. We have been in dialogue with the FDA regarding our development strategy, and we expect to meet with them during the 2004 second quarter in this regard. Assuming we can reach agreement with the FDA on an appropriate strategy, Noven and Shire expect to undertake additional MethyPatch product clinical studies during 2004. Noven’s costs incurred in pursuit of approval are expected to be offset against deferred revenue previously received from Shire, so these costs are not expected to impact our research and development expenses in 2004."

"Industry demand for our technology remains high, and we are working diligently to establish additional collaborations," said Strauss. "We believe we are the partner of choice for transdermal drug development, and we have earned that reputation based on our technology and on the performance of products like Vivelle Dot. This reputation should serve us well as we seek to further diversify our business through new products and alliances, and as we advance our goal of leading the industry in the development of new prescription patches,” said Strauss.

Financial Guidance
Confirming prior guidance provided in its 2003 financial results press release, for full-year 2004 Noven expects: net revenues to approximate 2003 results; research and development spending to increase compared to 2003; and fully diluted earnings per share to be in the $0.40 to $0.45 range. Noven also expects Novogyne’s 2004 net revenues and net income to approximate 2003 results.

Novogyne’s operating results are expected to fluctuate by quarter in part due to the timing of orders placed by trade customers. Novogyne’s 2004 second quarter contribution to Noven’s profit is expected to be higher than in the 2004 first quarter, due in part to the satisfaction in the first quarter of the $6.1 million preferred return to Novartis, and to the timing of orders placed by trade customers, which Noven believes had a negative impact on Novogyne’s 2004 first quarter sales.

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 11:00 a.m. Eastern time this morning, April 30. Thereafter, a rebroadcast of the call will be accessible at the same website. A taped replay of the conference call will be available by telephone from April 30 at 12:00 Noon Eastern time until May 2 by calling 877-660-6853 (from within the U.S.) or 201-612-7415 (from outside the U.S.) and entering the access code 1628 and I.D. #101482. The conference call will contain forward-looking information in addition to that contained in this press release.

                   
Noven Pharmaceuticals, Inc.

Statements of Operations Data: Three Months Ended
(amounts in thousands, except March 31,
per share amounts) (unaudited) -----------------------
2004 2003
----------- -----------
Revenues:
Product revenues - Novogyne:
Product sales $5,808 $2,930
Royalties 890 1,231
----------- -----------
Total product revenues - Novogyne 6,698 4,161
Product revenues - third parties 2,977 4,957
----------- -----------
Total product revenues 9,675 9,118
License and contract revenues 1,455 907
----------- -----------
Net revenues 11,130 10,025
Expenses:
Cost of products sold 5,518 4,285
Research and development 2,255 2,493
Marketing, general and administrative 3,904 4,181
----------- -----------
Total expenses 11,677 10,959
----------- -----------
Loss from operations (547) (934)
Equity in earnings of Novogyne 637 1,525
Interest income, net 156 148
----------- -----------
Income before income taxes 246 739
Provision for income taxes 88 266
----------- -----------
Net income $158 $473
=========== ===========
Basic earnings per share $0.01 $0.02
=========== ===========
Diluted earnings per share $0.01 $0.02
=========== ===========
Weighted average number of common
shares outstanding:
Basic 23,066 22,581
=========== ===========
Diluted 24,281 22,920
=========== ===========
As Of
-----------------------
March 31, Dec. 31,
Balance Sheet Data: 2004 2003
(unaudited) ----------- -----------
Cash and cash equivalents $101,942 $83,381
Investment in Novogyne $22,961 $28,368
Total assets $184,599 $169,484
Deferred license revenues $55,422 $50,005
Stockholders' equity $116,987 $108,823

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 sold in over 30 countries, and a range of new patches are being developed in collaboration with Novartis Pharma AG, Shire Pharmaceuticals Group plc, P&G Pharmaceuticals, Endo Pharmaceuticals Inc. and others. Together with Novartis Pharmaceuticals Corporation, Noven owns Novogyne Pharmaceuticals, a profitable women’s health products company with over $100 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 dispensed estrogen patch in the U.S. With the most advanced and broadly applicable transdermal technology in its class, 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 “believe,” “expect,” “see,” “will,” “should,” “would” 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: HT Market, risks associated with increased competition in the HT market, including as a result of the 2004 launches of estrogen cream and gel products, each of which is a new dosage form in this category; any further impact on Noven’s HT business due to the announcement of additional negative clinical results or otherwise, which could reduce or eliminate any profit contribution by Novogyne to Noven and/or sales of HT products from Noven to Novartis Pharma; uncertainties regarding any future regulatory developments resulting from those studies; the risk that Novogyne may not be able to realize the full value of the marketing rights for Noven’s CombiPatch product; and the European HT market may be limited due to pricing pressures and delayed Estradot launches in certain countries due to labeling issues; Regulatory Matters, uncertainties relating to actions that may be taken against Noven by the FDA or other regulators, whether relating to manufacturing processes, suppliers, commercialized products, products in development or otherwise, and any related costs; 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; Production Matters, risks related to Noven’s reliance on suppliers for the availability and quality of raw materials used in Noven’s products; risks related to Noven’s reliance on a single supplier for certain raw materials and compounds used in Noven’s products; uncertainties regarding the timing and magnitude of any product recalls; the impact of the recalls or related issues on Novartis’ or other partners’ strategy for the commercialization of Noven’s products; the possibility that Noven’s estimates of the impact of future returns and charges may prove inaccurate, incomplete or otherwise incorrect; the impact of detected or undetected product stability failures or other product defects on Noven’s ability to estimate Noven’s reserves for sales returns and other associated accounting consequences; 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; uncertainties regarding Noven’s ability to attract additional development partners; 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; the possibility that Noven may be unsuccessful in achieving milestone objectives under Noven’s development programs and may not receive any further payments; 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 under our development 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; risks related to Noven’s dependence on Novartis to perform Novogyne’s financial, accounting, inventory, distribution and sales deductions functions (including any asset impairment decisions for Novogyne), including the risk that Novartis may perform these functions differently than Noven would have, inadequately or incorrectly; and the possibility that Noven’s financial results could fluctuate from period to period or otherwise be affected by Novartis’ monitoring of trade inventory levels for Novogyne and its decisions related thereto; MethyPatch®, the risk that FDA may determine that Noven’s proposed protocols and/or proposed clinical strategies are not acceptable or do not address the FDA's concerns regarding the approval of the MethyPatch product NDA; the possibility that additional MethyPatch product studies may not be commenced in a timely manner or at all due to FDA concerns or otherwise; Shire’s control over the management of any additional MethyPatch product clinical trials, including the risk that Shire may elect to manage any such studies differently than Noven might have, incorrectly or inadequately; the possibility that any additional studies of MethyPatch will not produce results that support approval or that, even if the additional studies are completed and are successful, MethyPatch may not ultimately be approved or commercialized; the availability of non-stimulant or other once-daily ADHD therapies could negatively impact market penetration of MethyPatch; the possibility that the cost of any additional MethyPatch product study and related expenses may be higher than anticipated and may exceed the total amount of license revenues available to offset such costs and expenses; the possibility that Noven’s method of accounting for the $25 million received from Shire could change under certain circumstances, including if the parties' MethyPatch product strategy changes or if Noven’s MethyPatch product development is discontinued; and the likelihood that Noven’s development strategy would change if Shire were to terminate the agreement under certain circumstances, or if Noven’s MethyPatch product were not ultimately approved or were abandoned; Fentanyl Patch, the risks and uncertainties associated with the FDA's review of Noven’s fentanyl ANDA; the possibility that milestone payments may be reduced and/or that Endo may exercise its contractual right to terminate the license agreement if the product launch is delayed for any reason, including delay in obtaining FDA approval; patent or other strategies by third parties could delay or prevent the launch of Noven’s fentanyl patch or other products; the possibility that Noven may be unable to recover significant costs to manufacture fentanyl patches prior to product launch if FDA approval is not obtained on a timely basis or at all; and the possibility that, even if approved, Noven’s fentanyl patch or other products may not be successfully commercialized due to competitive market conditions or other factors, including physician/patient preferences for other therapies; Other Matters, expected fluctuations in quarterly revenues and research and development expenses; and uncertainties regarding Noven’s beliefs regarding the timing of trade customer orders. In addition to the risks and factors identified above, reference is also made to the other risks and factors detailed in reports filed by Noven with the Securities and Exchange Commission. Noven cautions that the foregoing list of factors is not exhaustive.

Contact:
Investor & Media Contact

Joseph C. Jones
Vice President – Corporate Affairs
Noven Pharmaceuticals, Inc.
305-253-1916