NOVEN ANNOUNCES 2008 SECOND QUARTER FINANCIAL RESULTS |
BackNoven
Reports Quarterly EPS of $0.18, Adjusted EPS of $0.23
Quarterly
Net Income at Novogyne Joint Venture Increases 34% to $25.4 Million
Miami, FL, August 6, 2008 -- Noven Pharmaceuticals, Inc. (NASDAQ: NOVN)
today announced financial results for the second quarter and first half
of 2008. Noven reported net income of $4.5 million or $0.18 diluted earnings
per share for the quarter ended June 30, 2008, including a charge of
$1.7 million (discussed below) relating to a previously disclosed voluntary
product recall initiated during the quarter. Excluding this charge and
related tax effects, Noven would have reported net income of $5.6 million
or $0.23 diluted earnings per share for the second quarter of 2008.
Financial & Business
Highlights
Novogyne & Vivelle-Dot®. At Novogyne Pharmaceuticals,
Noven’s joint venture with Novartis Pharmaceuticals Corporation,
net income for the second quarter of 2008 increased 34%, and net revenues
increased 21%, compared to the second quarter of 2007. Total prescriptions
for Vivelle-Dot®, Novogyne’s lead product, increased 6% in
the second quarter of 2008 compared to the same quarter in 2007, while
total prescriptions in the overall U.S. hormone therapy market decreased
6% for the same period.
Daytrana®. Sales of Daytrana® by Shire Limited in the 2008 second quarter were sufficient to trigger the third and final $25 million sales milestone due to Noven. In addition, together with Shire, Noven believes the definitive root cause of the peel force issue affecting Daytrana has been identified, and testing of solutions expected to address the issue is ongoing.
Stavzor™. On July 29, 2008, the FDA granted final approval of Noven’s Stavzor™ product (valproic acid delayed release capsules). The product will be marketed and sold by Noven Therapeutics, Noven’s specialty pharmaceutical subsidiary, and is expected to be available in pharmacies in the second half of August 2008.
Organizational Initiatives. Since June 2008, Noven has added three highly experienced pharmaceutical industry veterans to lead the critical functions of marketing and sales, transdermal research and development, and clinical, regulatory and medical affairs. With the participation of these new executives, Noven is continuing its review of all areas of spending and investment to assure that they advance the interests of shareholders.
CEO Comment
“The 2008 second quarter
included another strong financial performance by Novogyne, as well as
continued operational improvement in other areas of our business,” said
Peter Brandt, Noven’s President and Chief Executive Officer. “At
Novogyne, net income increased 34% over the same quarter last year, Vivelle-Dot
total prescriptions and market share continued to increase, and we believe
there is opportunity for continued significant growth in this business.
At Noven Therapeutics, we are well prepared for the August launch of
Stavzor, which received final FDA approval just last week. At Noven Transdermals,
we believe, together with Shire, that we have identified the definitive
root cause of the peel force issue affecting Daytrana, and we are testing
solutions that we believe will address the issue. Daytrana continues
to bring important benefits to patients with ADHD, and sales of the product
by Shire in the second quarter triggered the third and final $25 million
milestone to Noven,” said Brandt. “In addition, across key
functions within the company – including research and development,
sales and marketing, and clinical and regulatory – we have added
new senior executives with substantial industry experience that should
help us successfully execute our growth strategy.”
Financial Results
Noven’s
financial results for the second quarter and first six months of 2008
included the results of operations of Noven Therapeutics (formerly
JDS Pharmaceuticals, LLC), a specialty pharmaceutical company acquired
by Noven in August 2007. The second quarter and first half of 2008
also included charges of $1.7 million and $1.95 million, respectively,
representing reimbursement due to Shire in connection with the voluntary
recall of two lots of Daytrana product initiated in 2008 (the “Daytrana
Charge”).
Second Quarter Results
Including
the impact of the Daytrana Charge, for the second quarter of 2008,
Noven reported net income of $4.5 million ($0.18 diluted earnings per
share), compared to $7.6 million ($0.30 diluted earnings per share)
for the quarter ended June 30, 2007. Excluding the Daytrana Charge
and the related tax effects, net income for the 2008 second quarter
would have been $5.6 million ($0.23 diluted earnings per share). A
reconciliation of net income and earnings per share on a GAAP basis
to net income and earnings per share as adjusted to reflect the excluded
items is attached to this press release.
Noven’s net revenues in the 2008 second quarter were $24.6 million, a 31% increase over the second quarter of 2007. This increase reflects the addition of $6.6 million in Pexeva® and Lithobid® product sales through Noven Therapeutics, as well as increased license and contract revenues, primarily due to amortization of deferred revenue from additional Daytrana sales milestones received in 2007.
Gross margin, as a percentage of total net product revenues, was 35% in the 2008 second quarter compared to 38% in the same quarter last year. Gross margin in the second quarter of 2008 was adversely affected by increased quality assurance activities and expenses, primarily related to Daytrana production, which offset the favorable impact of higher gross margins on Noven Therapeutics’ products.
Research and development expenses in the 2008 second quarter, at $3.3 million, were largely unchanged from the second quarter of 2007. Selling and marketing expenses increased to $5.3 million from $0.2 million in the 2007 second quarter due to the addition of the Noven Therapeutics marketing and sales infrastructure supporting Pexeva, Lithobid and Stavzor (approved by the FDA in July 2008). General and administrative expenses increased $3.4 million, or 62%, due primarily to the Daytrana Charge and the addition of Noven Therapeutics.
Noven recognized $12.4 million in earnings from Novogyne in the 2008 second quarter, an increase of 35% compared to the $9.2 million recognized in the same quarter last year.
Novogyne’s net income for the second quarter of 2008 increased 34% to $25.4 million, compared to $18.9 million in the 2007 second quarter. Novogyne’s net revenues for the 2008 second quarter increased 21% to $43.8 million. Novogyne’s gross margin for the second quarter of 2008 increased slightly to 80%, and its selling, general and administrative expenses were largely unchanged at $9.8 million.
First Half Results
Including
the impact of the Daytrana Charge, Noven reported net income of $7.1
million ($0.29 diluted earnings per share) for the first six months
of 2008, compared to $12.6 million ($0.50 diluted earnings per share)
reported for the first six months of 2007. Excluding the Daytrana Charge
and the related tax effects, Noven would have reported net income for
the first six months of 2008 of $8.3 million ($0.34 diluted earnings
per share).
Noven’s net revenues for the first six months of 2008 were $46.1 million, a 21% increase over the same period last year. This increase reflects the addition of $12.3 million in Pexeva and Lithobid product sales, as well as increased license and contract revenues, primarily due to amortization of deferred revenue from additional Daytrana sales milestones received in 2007.
Gross margin, as a percentage of total net product revenues, was 33% in the first six months of 2008 compared to 41% in the same period in 2007. Gross margin in the first half of 2008 was adversely affected by inventory write-offs and costs associated with the equipment failure in transdermal manufacturing described above, as well as increased quality assurance activities and expenses, primarily related to Daytrana production, both of which offset the favorable impact of higher gross margins on Noven Therapeutics’ products.
Research and development expenses were largely unchanged at $6.6 million for the first half of 2008. Selling and marketing expenses increased to $10.2 million from $0.5 million in the first six months of 2007 due to the addition of Noven Therapeutics. General and administrative expenses increased 49% to $15.9 million, primarily due to the Daytrana Charge and the addition of Noven Therapeutics.
Noven recognized $20.7 million in earnings from Novogyne in the first half of 2008, an increase of 47% from the $14.1 million recognized in the first half of last year. Novogyne’s net income for the first six months of 2008 was $48.3 million, a 37% increase from the $35.2 million reported in the same period last year.
Novogyne’s net revenues for the first six months of 2008 increased 20% to $83.3 million. Novogyne’s gross margin for the first six months of 2008 increased slightly to 80%, and its selling, general and administrative expenses decreased 5% to $18.8 million.
Noven Balance Sheet
At
June 30, 2008, Noven had $35.4 million in cash and cash equivalents
and $17.5 million in investments in auction rate securities (“ARS”),
representing an aggregate $52.9 million in cash, cash equivalents and
investments in ARS. This compares with $14.0 million in cash and cash
equivalents and $54.4 million in investments in ARS at December 31, 2007,
representing an aggregate $68.4 million in cash, cash equivalents and
investments in ARS. In July 2008, Noven established a $15.0 million revolving
credit facility. As of the date of this press release, no amounts had
been borrowed pursuant to the credit facility.
Noven’s investments in ARS at June 30, 2008 had a fair value of $17.5 million and all were classified as non-current on Noven’s balance sheet following failed auctions occurring since February 2008. Noven’s ARS are collateralized primarily by tax-exempt municipal bonds, and to a lesser extent, guaranteed student loans. Noven does not hold any ARS collateralized by mortgages or collateralized debt obligations. Noven believes its ARS are of high credit quality, as nearly 80% carry an AAA or AA credit rating, and all are considered investment grade securities. Noven had recorded a temporary change in fair value of $0.5 million relating to its investments in ARS in the first quarter of 2008; no additional change in fair value was required in the 2008 second quarter.
In early August 2008, Noven was advised that Shire’s net sales of Daytrana had triggered the third and final $25 million milestone due to Noven. Under Noven’s agreement with Shire, the $25 million milestone is due to be paid in the third quarter of 2008. As with prior Daytrana sales milestones, Noven expects to defer recognition of the latest sales milestone and recognize it as license revenue over time.
Non-GAAP Financial
Information
Under accounting principles generally accepted in the U.S.
(“GAAP”), “net
income” and “diluted earnings per share” include all
charges for the periods reported. In addition to results determined in
accordance with GAAP, in this press release Noven has provided net income
and diluted earnings per share for the 2008 periods presented excluding
the Daytrana Charge. Noven believes that comparing Noven’s period-to-period
financial results without giving effect to the Daytrana Charge may be
helpful to investors to permit them to compare Noven’s period-to-period
financial results on a more uniform basis. For the same reasons, management
uses these non-GAAP financial measures to evaluate Noven’s current
performance against its historical performance and to plan its 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 diluted 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.
Conference Call
A
conference call with management relating to Noven's financial results
will be webcast live at www.noven.com beginning at 11:00 a.m. Eastern
time this morning, August 6. Thereafter, a rebroadcast of the call
will be accessible at the same website for at least two weeks. A taped
replay will be available beginning August 6 through August 8 by calling
877-660-6853 (from within the U.S.) or 201-612-7415 (from outside the
U.S.) and entering the access code 286 and conference ID number 290903.
The conference call is expected to contain forward-looking information
in addition to that contained in this press release.
About Noven
Noven
Pharmaceuticals, Inc. is a specialty pharmaceutical company engaged
in the research, development, manufacture, marketing and sale of prescription
pharmaceutical products. Noven’s business
and operations are focused in three principal areas – transdermal
drug delivery, the Novogyne joint venture, and Noven Therapeutics, Noven’s
specialty pharmaceutical unit.
Safe Harbor Statement under the Private
Litigation Reform Act of 1995
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.
Statements that are not historical facts, including statements that are
preceded by, followed by, or that include, the words “believes,” “anticipates,” “plans,” “expects” or
similar expressions and statements are forward-looking statements. Noven’s
estimated or anticipated future results, product performance or other
non-historical facts are forward-looking and reflect Noven’s current
perspective on existing trends and information. 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 that are, in many instances, beyond
Noven's control. By category and not necessarily listed in order of priority,
these risks and uncertainties include: Regulatory
Matters - the risk
that Noven’s response to the FDA warning letter that Noven received
in January 2008 may not be acceptable to the FDA or adequately address
the FDA’s concerns, and in such case, the risk that the FDA may
take regulatory action against Noven, which may include fines, product
seizures or recalls, injunctions, suspension of production and/or the
withdrawal of product approval; and the likelihood that any fine or product
recall, injunction, seizure, suspension of production and/or withdrawal
of product approval would have a material adverse effect on Noven, including
the loss of product sales, potentially significant costs associated therewith
and the potential for litigation related to this matter; Daytrana - the
risk that Noven’s assessment of the root cause of the Daytrana
tight release issue may prove inaccurate or incomplete; the risk that
the solutions currently in testing to address the Daytrana tight release
issue may be costly, require regulatory approval and take time to implement
and the possibility that such solutions ultimately do not resolve the
issue; the risk that Daytrana could be adversely affected by a number
of factors, including: (i) if Noven is unable to adequately resolve the
Daytrana-related issues raised by the FDA in the warning letter and August
2007 Form 483, (ii) new market entrants, including from other ADHD products
marketed or under development by Shire, (iii) raw material supply interruptions
and/or the inability to obtain the active ingredient methylphenidate,
and (iv) delays or inability to obtain necessary DEA methylphenidate
procurement quota; the risk that any adverse effect to the market for
Daytrana due to the foregoing or other factors could adversely affect
Noven’s results of operations and/or its financial position; Noven's
Pipeline - uncertainties as to the cost, timing and success of ongoing
and planned clinical trials, including with respect to Mesafem, and the
risk that results from early-stage clinical trials may not be indicative
of results in later-stage trials; the unproven safety and efficacy of
products under development; the difficulty of predicting FDA approval
of products, including timing; the possibility that product launches
may be delayed; the risk that any expected period of exclusivity for
a new product may not be realized; unexpected adverse events or side
effects or inadequate efficacy of a product that could delay or prevent
regulatory filings, approval or commercialization, or that could result
in recalls or product liability claims of approved products; the difficulty
of predicting acceptance and demand for new pharmaceutical products;
the impact of competitive products and pricing; the risk that product
acceptance may be less than anticipated as well as risks related to compliance
with extensive, costly, complex and evolving governmental regulations
and restrictions, and reimbursement policies of government and private
health insurers and others; the possibility that patent applications
may not result in issued patents, and that issued patents may not be
enforceable or could be invalidated; the impact of competitive responses
to Noven’s sales, marketing and strategic efforts, and the risk
that Noven's development partners may have priorities that are different
from or conflict with those of Noven, which may adversely impact their
ability or willingness to assist in the development and commercialization
of Noven's products or to continue the development program; Liquidity – liquidity
and investment risks related to Noven’s auction rate securities,
including the risk that Noven’s liquidity will be adversely affected
to the extent that auctions for its auction rate securities experience
further failures and the risk that Noven would be required to record
an additional impairment charge if Noven determines that it is necessary
to lower the carrying value of its auction rate securities to reflect
the prevailing fair market value; 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. 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, 2007 as well as other
reports filed from time to time with the Securities and Exchange Commission.
Unless required by law, Noven undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
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