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NOVEN REPORTS FIRST QUARTER 2006 FINANCIAL RESULTS |
BackMiami, FL, May 1,
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 first
quarter of 2006.
Noven's net income for the quarter ended March 31, 2006 (the
"current quarter") was $0.5 million (or $0.02 diluted earnings per
share), compared to net income of $0.2 million (or $0.01 diluted earnings
per
share) in the quarter ended March 31, 2005 (the "2005 quarter").
Novogyne Pharmaceuticals, the women’s health products company
jointly owned by Noven and Novartis Pharmaceuticals Corporation, reported
net income for the current quarter of $15.1 million, an 88% increase
from the 2005 quarter.
Effective January 1, 2006, Noven was required to begin recognizing
compensation expenses (a non-cash charge) associated with stock options
and other equity awards ("Equity Compensation Expenses")
in its Statements of Operations. Excluding Equity Compensation Expenses
totaling $0.5 million, net income for the current quarter would have
been $0.9 million (or $0.04 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 Equity Compensation Expenses is included
in an attachment to this press release. Noven expects its Equity Compensation
Expenses for the remaining three quarters of 2006 to total approximately
$3.0 million.
Noven's net revenues for the current quarter were $10.2 million,
a 13% decrease from the 2005 quarter, primarily due to the timing of
Vivelle-Dot™ shipments to Novogyne. Noven's gross margin
for the current quarter was negatively affected by manufacturing scale-up
for Noven's recently-approved Daytrana™ methylphenidate
patch, and lower production volume in its menopausal hormone therapy
("HT") business due to the timing of orders.
Research and development expenses in the current quarter increased
20% to $3.5 million compared to the 2005 quarter, primarily due to
increases in development engineering costs related to Daytrana™ as
well as higher preclinical and clinical costs for other projects. Marketing,
general and administrative expenses increased 17% to $4.7 million,
reflecting Equity Compensation Expenses, which commenced in the current
quarter, and increased professional fees.
Noven recognized $4.3 million in earnings from Novogyne (a non-cash
item) in the current quarter (after satisfaction by Novogyne of Novartis’ annual
preferred return of $6.1 million) compared to $0.9 million recognized
in the 2005 quarter.
Novogyne's current quarter net revenues increased 39% to $31.6
million, primarily due to a $9.4 million increase in net sales of Vivelle-Dot™.
Noven believes that the increase in Vivelle-Dot™ sales was related
to trade customers reducing their inventories in the 2005 quarter and,
to a lesser extent, increased prescription demand and price increases.
Noven estimates that, at the end of the current quarter, trade inventory
levels for Vivelle-Dot™ were within the desired range.
Novogyne’s selling, general and administrative expenses in the
current quarter increased 6% to $9.2 million, due primarily to increased
HT litigation expenses and higher expenses associated with sales force
expansion.
Total prescriptions for Vivelle-Dot™ increased 8% in the current
quarter compared to the 2005 quarter, and total prescriptions for Novogyne's
products, taken as a whole, increased 4%. By comparison, the overall
U.S. HT market declined 5% in the current quarter compared to the 2005
quarter.
At March 31, 2006, Noven had an aggregate $82.3 million in cash and
cash equivalents and short-term investments, compared to $84.9 million
at December 31, 2005. Noven’s working capital at March 31, 2006
was $96.7 million compared to $91.1 million at December 31, 2005. In
April 2006, Noven received a $50 million cash milestone payment from
Shire plc, the global licensee of Daytrana™, as a result of the
FDA approval of Daytrana™.
"Novogyne had an outstanding first quarter, satisfying our joint venture
partner's preferred return, while still contributing over $4
million to our results,” said Robert C. Strauss, Noven's
President, CEO & Chairman. “Our strategy is to build upon
this foundation by diversifying our business into other areas, and
the April 6th approval of Daytrana™ for ADHD was a major step
toward that goal. We are currently working to complete production of
Daytrana™ launch quantities, while Shire – the market share
leader in the ADHD category – is organizing the sales and marketing
efforts for a U.S. launch that is expected to begin by mid-year. As
we move into the second half of the year, we are confident in our prospects
in light of Novogyne's strong performance, the expected commencement
of license and manufacturing revenues from Daytrana™, and the
overall improvements in facility utilization and gross margin that
should accompany ongoing production of the Daytrana™ product."
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, May 1. 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 May 1 through May 3 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 199318. 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 the current quarter excluding
the Equity Compensation Expenses.
Management believes that presenting non-GAAP net income and diluted
earnings per share under these circumstances is useful to investors
in order to compare the financial results Noven reported for the
current quarter compared to those reported in periods prior to
the adoption
of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 123 – revised 2004 (SFAS 123(R)),
"Share-Based Payment". Management uses these non-GAAP financial
measures to
evaluate Noven’s current performance against its historical
performance and to plan our future business activities. 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 2005 sales of over
$120 million. 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 “expect,” “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™ -
risks relating to the timing of the launch of Daytrana™ by
Shire; 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 timing and/or 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 cardiac, psychiatric and other side effects of ADHD medications,
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; and the possibility that
the FDA’s ongoing inquiry into possible side effects of ADHD
medication could result in “black-box” warnings being
added to the labeling for these medications; HT Market - risks associated
with increased competition in the HT market; 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 Novogyne and Novartis Pharma; the risk that Novogyne
may not be able to realize the full value of the marketing rights
for Noven's CombiPatch product; and risks and uncertainties related
to the fact that Vivelle-Dot™ comprises a substantial majority
of Novogyne's aggregate total prescriptions; the risk that Noven’s
estimate of trade inventory levels for Vivelle-Dot™ may be
inaccurate; 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; and 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; Other Matters - the risk that Noven’s
gross margins may not improve in accordance with expectations in
the second half of 2006, including as a result of delays or inefficiencies
in the manufacture of Daytrana™; and the risk that Noven’s
Equity Compensation Expenses for the remainder of 2006 may exceed
the estimate provided in this press release. For additional information
regarding these and other risks associated with Noven’s business,
readers should refer to Noven’s Annual Report on Form 10-K
for the year ended December 31, 2005 as well as other reports filed
from time to time with the Securities and Exchange Commission.
Noven Pharmaceuticals, Inc. Inc.Statements of Operations Data: Three Months Ended
(amounts in thousands, except per share amounts) March 31,
(unaudited) ------------------
2006 2005
------- -------
Revenues:
Product revenues - Novogyne:
Product sales $ 3,087 $ 4,978
Royalties 1,689 1,114
------- -------
Total product revenues - Novogyne 4,776 6,092
Product revenues - third parties 3,871 4,038
------- -------
Total product revenues 8,647 10,130
Contract and license revenues:
Contract 664 595
License 881 1,011
------- -------
Contract and license revenues 1,545 1,606
Net revenues 10,192 11,736
Expenses:
Cost of products sold(1) 6,140 5,874
Research and development 3,482 2,893
Marketing, general and administrative 4,738 4,055
------- -------
Total expenses 14,360 12,822
------- -------
Loss from operations (4,168) (1,086)
Equity in earnings of Novogyne 4,327 912
Interest income, net 611 503
------- -------
Income before income taxes 770 329
Provision for income taxes 266 118
------- -------
Net income $ 504 $ 211
======= =======
Basic earnings per share $ 0.02 $ 0.01
======= =======
Diluted earnings per share $ 0.02 $ 0.01
======= =======
Weighted average number of common shares
outstanding:
Basic 23,657 23,509
======= =======
Diluted 23,774 23,966
======= ======= As Of
---------------------------
Balance Sheet Data: March 31, December 31,
(amounts in thousands) (unaudited) 2006 2005
---------- ------------
Cash and cash equivalents $ 31,418 $ 66,964
Short-term investments 50,925 17,900
Investment in Novogyne 20,252 23,243
Total assets 182,936 185,910
Deferred license revenues 23,835 23,655
Stockholders' equity 142,255 140,621 (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:
(amounts in thousands, except per Three Months Ended
share amounts) (unaudited) March 31, 2006
----------------------------------
Non-
GAAP(1) Adjustments(1) GAAP(2)
----------------------------------
Net revenues $ 10,192 $ 10,192
Expenses:
Cost of products sold 6,079 61 6,140
Research and development 3,391 91 3,482
Marketing, general and
administrative 4,341 397 4,738
----------------------------------
Total expenses 13,811 549 14,360
----------------------------------
Loss from operations (3,619) (549) (4,168)
Equity in earnings of Novogyne 4,327 4,327
Interest income, net 611 611
----------------------------------
Income before income taxes 1,319 (549) 770
Provision for income taxes 419 (153) 266
----------------------------------
Net income $ 900 $ (396) $ 504
==================================
Basic earnings per share $ 0.04 $ (0.02) $ 0.02
==================================
Diluted earnings per share $ 0.04 $ (0.02) $ 0.02
==================================
Weighted average number of common
shares outstanding:
Basic 23,657 23,657
==================================
Diluted(3) 24,044 (270) 23,774
==================================
(1) Non-GAAP amounts exclude equity compensation adjustments
associated with the adoption of FAS 123 (R) - Share-Based Payment.
Noven's non-GAAP effective tax rate for the three months ended
March 31, 2006 was approximately 32% as compared to its GAAP effective
tax rate of 35%.
(2) Reflects operating results in accordance with accounting
principles generally accepted in the United States (GAAP).
(3) Diluted weighted average number of shares outstanding for the
three months ended March 31, 2006 on a non-GAAP basis was adjusted to
include shares that were excluded from the GAAP calculation as a
result of the adoption of FAS 123 (R).
Contact:
Joseph C. Jones
Vice President – Corporate Affairs
Noven Pharmaceuticals, Inc.
(305) 253-1916
Copyright © 2006 Noven Pharmaceuticals, Inc. All rights reserved.