Noven Reports Third Quarter Earnings Per Share of $0.12

-- Noven Pharmaceuticals, Inc. (NASDAQ: NOVN) today announced financial results for the quarter and nine-month period ended September 30, 2002.

2002 Third Quarter
Noven reported net income of $2.8 million ($0.12 diluted earnings per share) for the third quarter of 2002 (the "current quarter"), compared to $2.5 million ($0.10 diluted earnings per share) for the third quarter of 2001 (the "2001 quarter"). Current quarter revenues increased 27% to $13.2 million, largely due to higher Vivelle® family sales to Novogyne Pharmaceuticals, Noven's joint venture with Novartis Pharmaceuticals Corporation of East Hanover, New Jersey ("Novartis"), and sales of Estradot® to Novartis Pharma AG ("Novartis Pharma"). Noven recognized $2.0 million in earnings from Novogyne, compared to $5.3 million in the 2001 quarter.

Compared to the 2001 quarter, Novogyne's current quarter net revenues declined 24% to $21.5 million, reflecting higher returns for the original Vivelle estrogen patch (which is no longer promoted) and the impact of the Women's Health Initiative (WHI) and other recent studies (the "July studies") on demand for hormone replacement therapy (HRT) products. Vivelle returns principally relate to product that has reached or is approaching its expiration date. (Vivelle represents less than 20% of Novogyne's total U.S. prescriptions.) Novogyne increased its provision for sales allowances and returns to $9.4 million (from $4.3 million in the 2001 quarter) in recognition of higher returns for Vivelle and diminished demand for HRT products following the July studies. Novogyne's selling, general and administrative expenses remained largely unchanged at $9.8 million. Novogyne amortized $1.5 million of CombiPatch® acquisition cost during the current quarter. Novogyne's net income for the current quarter was $4.2 million, compared to $12.0 million in the 2001 quarter.

2002 First Nine Months
Noven reported net income of $10.9 million ($0.46 diluted earnings per share) for the first nine months of 2002 (the "current period"), compared to $8.3 million ($0.35 diluted earnings per share) for the first nine months of 2001 (the "2001 period"). Current period revenues increased 18% to $42.1 million, mostly due to higher Vivelle family sales to Novogyne. In the current period, Noven recognized $10.7 million in earnings from Novogyne, compared to $9.0 million in the 2001 period.

Compared to the 2001 period, Novogyne net revenues increased 30% to $81.9 million, largely due to higher Vivelle family sales and the addition of CombiPatch in March 2001. For the 2002 period, Novogyne increased its provision for sales allowances and returns to $20.4 million (from $10.2 million in the 2001 period) in recognition of higher Vivelle returns and lower demand for HRT products. Novogyne s selling, general and administrative expenses increased to $30.7 million from $22.9 million in the 2001 period, mostly due to CombiPatch promotional expenses and a sales force expansion implemented after CombiPatch was acquired. Novogyne amortized $4.6 million of CombiPatch acquisition cost during the current period. Current period net income at Novogyne increased to $29.3 million from $26.6 million in the 2001 period.

At September 30, 2002, Noven s cash and cash equivalents increased to $59.8 million from $49.4 million at December 31, 2001.

Business Update
"WHI significantly disrupted demand for HRT products," said Robert C. Strauss, Noven's President, CEO & Chairman. "It also increased awareness of and interest in transdermal therapy. We remain focused on advancing our transdermal message, managing the impact of diminished HRT demand, and positioning ourselves with new products in large non-HRT markets that utilize our industry leading patch technology."

U.S. HRT Business
"As the U.S. market leader in transdermals, we stand to benefit as physicians and patients consider alternatives to oral HRT in the wake of the July studies," said Strauss. "Our products are different from the leading oral HRT products, although there are no studies demonstrating they are safer." (See Transdermal Difference  below.)

"Since the July studies, prescription data suggest that the market recognizes this difference and the benefits of our patch products," said Strauss. "Total U.S. prescriptions for the leading oral combination HRT product (Prempro®) declined 34.0% in the 2002 third quarter compared to the 2002 second quarter. Total prescriptions for our CombiPatch product, the only transdermal alternative to Prempro, were down 15.1%. Total prescriptions for the leading oral estrogen product (Premarin®) were down 14.1% in the same period, while Vivelle-Dot®, our principal U.S. growth driver, saw no decline in total prescriptions, and saw new prescriptions increase 1.1%."

"In September, the Vivelle family increased its share of the U.S. transdermal estrogen market to 36.4%, up 1.5% from June 2002," said Strauss. "This puts us in a good position to benefit should transdermals rebound."

Strauss continued: "Our immediate challenge is to align inventory with current demand. We believe trade inventories for our original Vivelle product are significantly higher than justified in the current market, and that Novogyne's inventories are higher than desirable. Together with Novartis, we are taking aggressive action to correct this. In the third quarter, Novogyne increased its provision for sales allowances and returns by over $5 million. In addition, Novogyne is reducing Vivelle shipments to trade customers, and Noven is deferring shipments to Novogyne. These steps will impact our financial results in the 2002 fourth quarter and the first quarter of next year. Our goal is to substantially align inventories with prescription demand by mid-year 2003."

International HRT Business
"Noven's business extends beyond the U.S. HRT market," said Strauss. "Our third quarter revenues included significant sales of Estradot to Novartis Pharma, the licensee of our international HRT products. Estradot is the international version of Vivelle-Dot, and Novartis Pharma has launched the product in Germany and in a number of other smaller countries. We are pleased to see that Estradot is gaining market share in each of these markets. In addition, in October we received a $1.0 million milestone payment from Novartis Pharma relating to the continuing development of our next-generation transdermal estrogen/progestin patch product."

New Product Pipeline
"We are working to diversify our business into non-HRT markets," said Strauss. "The FDA is currently reviewing our New Drug Application for MethyPatch®, our developmental methylphenidate patch for ADHD. MethyPatch targets a growing $1.4 billion U.S. market. If approved in a timely fashion, we expect that it will be commercialized in the second half of 2003. We believe that peak U.S. sales for the product could exceed $100 million."

Strauss added: "We are also developing a number of undisclosed non-HRT patch products. The two lead candidates address separate U.S. markets that together exceed $1 billion annually. During the third quarter, one of these undisclosed molecules successfully completed an early clinical trial. The other is being readied for clinicals, and should be the first transdermal formulation in an otherwise oral market. We continue to market our patented technologies to potential partners seeking to extend the life cycles of their proprietary molecules. While we expect to remain a leader in transdermal HRT, our goal is to build a portfolio of products and partnerships that offer growth opportunity in a number of other large commercial markets."

Transdermal Difference
Noven's transdermal HRT products are different from the leading oral HRT products, although there are no studies demonstrating they are safer. Noven's patches use a plant-derived estradiol that is identical to a woman's own estrogen, not conjugated estrogens derived from horse urine. Patches deliver hormones through the skin and directly into the bloodstream, avoiding first pass liver metabolism, permitting continuous release of hormones, and delivering much less drug to achieve therapeutic blood levels. Noven's Vivelle-Dot estrogen patch line offers one of the broadest dose ranges and lowest doses available, and Noven's CombiPatch estrogen/progestin product uses a different progestin than the one used in the leading oral combination product.

Conference Call
A telephone conference with management to discuss Noven's financial results will be broadcast live via the Internet at beginning at 5:00 p.m. Eastern time this afternoon, October 31. 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 October 31 at 8:00 p.m. Eastern time until the evening of November 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 1628 and I.D. #46268. 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       Nine Months Ended
(amounts in
 thousands, except          September 30,           September 30,
                       ----------------------- -----------------------
per share amounts)        2002        2001        2002        2001
                       ----------- ----------- ----------- -----------
                       (Unaudited) (Unaudited) (Unaudited) (Unaudited)
     Product sales        $12,317      $9,705     $39,585     $33,569
     License revenue          881         698       2,504       2,117
                       ----------- ----------- ----------- -----------

     Total revenues        13,198      10,403      42,089      35,686

     Cost of products
      sold                  5,111       4,982      17,032      15,692
     Research and
      development           2,585       3,716       9,267       8,353
      general and
      administrative        3,492       3,383      10,104       9,219
                       ----------- ----------- ----------- -----------

     Total  expenses       11,188      12,081      36,403      33,264
                       ----------- ----------- ----------- -----------

Income (loss) from
 operations                 2,010      (1,678)      5,686       2,422

Equity in earnings of
 Novogyne                   2,010       5,278      10,657       9,010
Interest income, net          223         398         625       1,499
                       ----------- ----------- ----------- -----------

Income before income
 taxes                      4,243       3,998      16,968      12,931

Provision for income
 taxes                      1,480       1,542       6,109       4,585
                       ----------- ----------- ----------- -----------

Net income                 $2,763      $2,456     $10,859      $8,346
                       =========== =========== =========== ===========

Basic earnings per
 share                      $0.12       $0.11       $0.48       $0.37
                       =========== =========== =========== ===========

Diluted earnings per
 share                      $0.12       $0.10       $0.46       $0.35
                       =========== =========== =========== ===========

Weighted average
 number of common
 shares outstanding:
      Basic                22,549      22,427      22,523      22,334
                       =========== =========== =========== ===========

      Diluted              23,127      23,542      23,424      23,571
                       =========== =========== =========== ===========

                                As Of
                        Sept. 30,   Dec. 31,
Balance Sheet Data:       2002        2001
                       ----------- -----------
                       (Unaudited) (Unaudited)

      Cash and cash
       equivalents        $59,760     $49,389

      Investment in
       Novogyne           $30,973     $32,043

      Total assets       $136,084    $136,228

       revenue            $30,327     $32,758

       equity             $93,585     $81,898

About Noven
Noven Pharmaceuticals, Inc., headquartered in Miami, Florida, is a leading developer of advanced transdermal drug delivery technologies and prescription transdermal products. Together with Novartis Pharmaceuticals Corporation, Noven owns a highly profitable women s health products company called Novogyne Pharmaceuticals. Noven's existing products include advanced estrogen transdermal delivery systems (including Vivelle-Dot®, licensed to Novogyne, and Estradot®, licensed to Novartis Pharma AG) and combination estrogen/progestin transdermal delivery systems (including CombiPatch®, licensed to Novogyne, and Estalis®, licensed to Novartis Pharma AG). With a range of additional products in development, including MethyPatch®, Noven is committed to becoming the world's premier developer, manufacturer and marketer of transdermal drug delivery systems. For additional information on Noven, visit the company's web site at

This release contains forward-looking statements related to the business of Noven that can be identified by the use of forward-looking terminology such as "believe", "will", "hope", "should", "expect", "our goal", and similar words and phrases. Such statements are qualified by and subject to the risks and uncertainties specified in Noven s most recent filings with the Securities and Exchange Commission and those specified herein, including the risk that: MethyPatch may not be approved in a timely fashion or at all, or, if approved, that it may not be the first transdermal ADHD therapy on the market or that it may not be successfully commercialized due to competitive market conditions or other factors, including physician/patient preferences for other ADHD therapies; developmental patches using undisclosed molecules may not advance on a timely basis, or may not be approved by FDA or successfully commercialized; Noven may not be successful in licensing its technologies to third parties; the market for Noven's HRT products could decline significantly as a result of the July studies, either as physicians withdraw patients from HRT or as women elect to discontinue HRT on their own; health care regulators could, as a result of the July studies, modify the permitted use of Noven's products by mandatory product label changes, remove the products from the market, delay approval of new HRT products, or require that any new HRT products be subject to more extensive testing prior to being approved; Novartis could, as a result of the studies or otherwise, change its strategies or launch schedules relating to the commercialization of Noven s products; Noven could be named as a defendant in product liability lawsuits relating to its HRT products; physicians and patients may not consider or select HRT patches as desirable alternatives to oral HRT because of the lack of head-to-head safety data or otherwise; evolving HRT prescribing trends may make Noven s product line less attractive than other therapies; Noven s new low dose patches may not be successfully commercialized and, in the case of the lower dose combination patches, may not complete development or be approved by regulatory authorities; Noven may be unable to diversify its sources of revenues beyond HRT due to the inability to develop or commercialize non-HRT products; Noven s estimates of inventory levels may be inaccurate, whether as a result of inaccurate third party data or otherwise; Noven and Novogyne may be unable to align inventories with demand as soon as hoped because of inaccurate estimates, lack of cooperation of third parties or otherwise; the decline in the demand for HRT products after the July studies could further exacerbate the effect of high product inventory levels and delay any return to growth. Currently, Noven s liquidity, results of operations and business prospects are almost entirely dependent on sales of transdermal HRT products. Accordingly, any adverse change in the market for HRT products (including any adverse changes resulting from the July studies) could have a material adverse impact on Noven s liquidity, results of operations and business prospects.

Joseph C. Jones
Vice President – Corporate Affairs
Noven Pharmaceuticals, Inc.