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NOVEN REPORTS THIRD QUARTER 2005 FINANCIAL RESULTS |
BackMiami, FL, November
3, 2005 -- Noven Pharmaceuticals, Inc. (NASDAQ: NOVN), a leading developer
of advanced transdermal drug delivery technologies and prescription
transdermal products, today announced financial results for the third
quarter and the nine months ended September 30, 2005, and provided
an update on its business and prospects.
For the third quarter, Noven reported net revenues of $12.2 million
and a net loss of $1.4 million ($0.06 diluted loss per share). Net
loss and diluted loss per share include a previously-announced charge
associated with the write-off of existing inventories related to Noven’s
developmental fentanyl patch (the "Inventory Charge") in
the amount of $9.5 million. Excluding the Inventory Charge and related
tax effects, Noven would have reported quarterly net income of $4.7
million or $0.19 diluted earnings per share. These measures are non-GAAP
financial measures which are reconciled to GAAP in an attachment to
this news release.
"The FDA's decision to cease review of our fentanyl patch application
overshadowed an otherwise solid quarter at Noven and record revenues
at our Novogyne joint venture," said Robert C. Strauss, Noven's
President, CEO & Chairman. "Certainly our short-term results
were impacted by this disappointing development, but we remain confident
in our long-term prospects, and our commitment to apply our patented
drug delivery technology across a range of molecules in several therapeutic
categories remains unchanged," said Strauss. "In that regard,
our developmental methylphenidate patch, licensed to Shire Pharmaceuticals,
is currently under review at the U.S. Food and Drug Administration
and will be the subject of a December 2nd FDA Advisory Committee meeting.
In addition, we are developing other patches with Shire, Endo Pharmaceuticals
and others, and we are working to establish new collaborations to further
leverage our technology and enhance growth.”
Third Quarter Results
Noven’s net revenues for the quarter ended September 30, 2005
(the "current quarter") were $12.2 million, a 21% increase
over the $10.1 million reported in the quarter ended September 30,
2004 (the "2004 quarter"), reflecting increases in U.S. and
international product revenues and higher contract revenues. Research
and development expenses for the current quarter increased 44% to $4.0
million, primarily due to higher non-clinical development expenses,
including expenses related to production and launch preparations for
Noven’s developmental methylphenidate and fentanyl patches. Noven
recognized $8.1 million in earnings from Novogyne Pharmaceuticals (the
women’s health products company owned jointly by Noven and Novartis
Pharmaceuticals Corporation), representing a 30% increase over the
$6.2 million recognized in the 2004 quarter.
Noven reported a net loss of $1.4 million ($0.06 diluted loss per share)
in the current quarter, compared to net income of $2.6 million ($0.11
diluted earnings per share) in the 2004 quarter. Excluding the Inventory
Charge and related tax effects, Noven’s net income and diluted
earnings per share for the current quarter were $4.7 million and $0.19,
reflecting increases of 78% and 73%, respectively, over the 2004 quarter.
These non-GAAP measures are reconciled to GAAP in an attachment to
this news release.
Current quarter net revenues at Novogyne increased 23% to $33.8 million
(the highest in Novogyne's history), reflecting increased sales
of Vivelle-Dot, increased sales of Estradot to Novartis in Canada,
and decreased sales and returns allowances. Novogyne’s selling,
general and administrative expense increased 15% to $9.2 million due
primarily to increased costs associated with litigation, product samples,
insurance and other costs. Novogyne’s net income for the current
quarter was $16.8 million, representing a 33% increase from the $12.7
million reported in the 2004 quarter.
Nine Month Results
Noven’s net revenues for the nine-months ended September 30,
2005 (the "current period") were $35.7 million, an 8% increase
over the $33.2 million reported for the nine-months ended September
30, 2004 (the "2004 period"), reflecting higher international
product revenues and higher contract revenues. Research and development
expenses increased 31% to $10.1 million, primarily due to higher non-clinical
development expenses, including expenses related to production and
launch preparations for Noven’s developmental methylphenidate
and fentanyl products. Noven recognized $17.1 million in earnings from
Novogyne, 13% higher than the $15.1 million recognized in the 2004
period.
Noven reported net income of $3.9 million ($0.16 diluted earnings per
share), compared to $8.5 million ($0.35 diluted earnings per share)
reported in the 2004 period. Excluding the Inventory Charge and related
tax effects, Noven would have reported net income for the current period
of $10.0 million ($0.42 diluted earnings per share). These non-GAAP
measures are reconciled to GAAP in an attachment to this news release.
Novogyne’s current period net revenues increased 9% to $88.4
million, reflecting increased sales of Vivelle-Dot™ and lower
sales and returns allowances. Novogyne’s selling, general and
administrative expense increased 14% to $25.6 million, primarily due
to increased costs associated with the sales force, insurance, litigation
and other costs. Novogyne’s net income for the current period
was $41.7 million, 13% higher than the $37.1 million reported in the
2004 period.
Balance Sheet
At September 30, 2005, Noven had an aggregate $83.2 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. Net cash used in operating activities for the first nine
months of 2005 reflected payment of amounts owed to Shire Pharmaceuticals
in connection with development of Noven’s methylphenidate patch,
as well as purchases of fentanyl and other inventory, partially offset
by distributions received from Novogyne. Noven’s working capital
at September 30, 2005 was $90.6 million compared to $97.3 million at
December 31, 2004.
HT Prescription Overview
Aggregate total prescriptions for Novogyne's products (Vivelle®,
Vivelle-Dot™ and CombiPatch® combined) increased 5% in the
third quarter of 2005 compared to the third quarter of 2004, while
the overall U.S. hormone therapy (“HT”) market declined
8% for the same period. Total prescriptions for Vivelle-Dot™,
which represented approximately 84% of total prescriptions for Noven’s
U.S. products, increased 11% compared to the third quarter of 2004,
while the estrogen segment of the U.S. HT market decreased 9%. For
the same period, total prescriptions for the Vivelle® product family
(Vivelle-Dot™ and Vivelle® combined) increased 8%. Noven’s
Vivelle-Dot™ patch remains the most frequently prescribed transdermal
estrogen therapy product in the U.S., and held a 43% share of the transdermal
estrogen therapy market at the end of the 2005 third quarter.
“The Novogyne sales force continues to do an outstanding job
against larger sales forces with greater resources,” said Strauss. “I
am very pleased to report that, effective January 1, 2006, the Novogyne
sales force, formerly a contract sales force, will become direct employees
of Noven, with Novogyne continuing to bear the associated expenses.
This move reflects our commitment to the hormone therapy category,
and our confidence in a sales team that has taken Vivelle-Dot™ to
market leadership,” said Strauss.
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, November 3. 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 November
3 at 1:00 p.m. Eastern time until November 5 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 I.D. number 173951. 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 quarter and nine-months
ended September 30, 2005 excluding a $9.5 million charge related to
the write-off of fentanyl inventories and related tax effects in the
quarter. Management believes that presenting non-GAAP net income and
diluted earnings per share under these circumstances are useful to
investors in order to meaningfully evaluate Noven’s ongoing,
underlying business and compare Noven’s financial results in
the current period to those in the prior period. 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 the overall financial performance
of the company. 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 income from continuing operations calculated in accordance with
GAAP. Noven's non-GAAP measures are reconciled to those determined
in accordance with GAAP in an attachment to this press release.
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 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 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 “believe,” “expect,” “will,” 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; 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 the risk of product liability
claims resulting from the use of HT products, such as the lawsuits
pending against Noven, Novogyne and Novartis with respect to Noven's
products, as well as any indemnification or contribution obligations
that Noven may have to Novartis or Novogyne related to product liability
claims. 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; uncertainties regarding Noven's
ability to attract additional development partners; 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 Noven's development programs
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; risks related to Noven's dependence
on Novartis to perform all of Novogyne's financial, accounting, inventory,
distribution, revenues and sales deductions functions; risks and
uncertainties related to the fact that Vivelle-Dot™ comprises
a substantial majority of Novogyne's aggregate total prescriptions;
risks and uncertainties relating to the integration of Novogyne’s
contract sales force into Noven’s employee force, including
the risk that such integration may be unsuccessful or prove more
costly than expected. Fentanyl Patch – the risk that Endo may
exercise its contractual right to terminate the license agreement;
the risk that Noven may not receive any milestone payments under
the license agreement; and the risk that Noven’s results of
operations may be adversely affected by increased overhead expenses
associated with fentanyl production unless and until Noven successfully
redeploys the personnel and other assets previously associated with
fentanyl production. Methylphenidate Patch - the possibility that
FDA and/or the advisory committee scheduled to review the amended
NDA for Noven’s methylphenidate patch (MTS) will determine
that the amended NDA does not support approval or that MTS may not
ultimately be approved or commercialized; the possibility that safety
concerns regarding the use of controlled substances in patches may
delay or prevent approval of MTS; risks and uncertainties related
to the fact that MTS is a novel delivery system for this controlled
substance, which may result in new and additional concerns for the
advisory committee and/or the FDA; uncertainties related to the FDA's
discretion to approve or not approve a product, as well as the timing
of any FDA approval for MTS and the timing of any DEA award of methylphenidate
procurement quota, which are outside Noven's control and may impact
the success of product launch and market penetration; any exercise
of Shire's right to terminate the MTS development agreement; and
the likelihood that Noven's development strategy would change if
Shire were to terminate the agreement under certain circumstances,
or if MTS were not ultimately approved or were abandoned. Other
Matters
- expected fluctuations in quarterly revenues and research and development
expenses and risks related to estimated trade inventory levels.
Noven Pharmaceuticals, Inc.
Statements of Operations Data: Three Months Nine Months
(amounts in thousands, except per Ended Ended
share amounts) (unaudited) September 30, September 30,
---------------- -----------------
2005 2004 2005 2004
-------- ------- -------- --------
Revenues:
Product revenues - Novogyne:
Product sales $4,740 $4,364 $14,432 $15,058
Royalties 1,790 1,411 4,617 3,909
-------- ------- -------- --------
Total product revenues - Novogyne 6,530 5,775 19,049 18,967
Product revenues - third parties 3,917 3,287 11,888 9,828
-------- ------- -------- --------
Total product revenues 10,447 9,062 30,937 28,795
Contract and license revenues:
Contract 769 43 1,793 1,415
License 1,024 996 3,017 2,976
-------- ------- -------- --------
Contract and license revenues 1,793 1,039 4,810 4,391
Net revenues: 12,240 10,101 35,747 33,186
Expenses:
Cost of products sold 15,289 4,984 26,170 15,477
Research and development 3,953 2,741 10,108 7,730
Marketing, general and
administrative 4,237 4,358 12,481 12,024
-------- ------- -------- --------
Total expenses 23,479 12,083 48,759 35,231
-------- ------- -------- --------
Loss from operations (11,239) (1,982) (13,012) (2,045)
Equity in earnings of Novogyne 8,081 6,232 17,094 15,097
Interest income, net 512 279 1,608 619
-------- ------- -------- --------
Income (loss) before income taxes (2,646) 4,529 5,690 13,671
Provision (benefit) for income
taxes (1,224) 1,895 1,780 5,201
-------- ------- -------- --------
Net income (loss) $(1,422) $2,634 $3,910 $8,470
======== ======= ======== ========
Basic earnings (loss) per share $(0.06) $0.11 $0.17 $0.36
======== ======= ======== ========
Diluted earnings (loss) per share $(0.06) $0.11 $0.16 $0.35
======== ======= ======== ========
Weighted average number of common
shares outstanding:
Basic 23,586 23,416 23,554 23,290
======== ======= ======== ========
Diluted 23,586 24,361 24,021 24,344
======== ======= ======== ========
As Of
--------------------------
Balance Sheet Data: September December
(amounts in thousands) 30, 2005 31, 2004
(unaudited) ------------- ------------
Cash and cash equivalents $32,340 $93,958
Short-term investments 50,825 -
Investment in Novogyne 23,778 26,233
Total assets 186,721 201,975
Deferred license revenues 30,898 39,085
Stockholders' equity 134,378 129,039 Noven Pharmaceuticals, Inc. Reconciliation of Non-GAAP Measures to GAAP
Statements of Operations Data:
(amounts in thousands, except
per share amounts) Three Months Ended
(unaudited) September 30, 2005
----------------------------
Non-GAAP(1) Difference GAAP(2)
----------------------------
Net revenues $12,240 $12,240
Expenses:
Cost of products sold 5,814 9,475 15,289
Research and development 3,953 3,953
Marketing, general and
administrative 4,237 4,237
----------------------------
Total expenses 14,004 9,475 23,479
----------------------------
Loss from operations (1,764) (9,475) (11,239)
Equity in earnings of Novogyne 8,081 8,081
Interest income, net 512 512
----------------------------
Income (loss) before income taxes 6,829 (9,475) (2,646)
Provision (benefit) for income taxes 2,152 (3,376) (1,224)
----------------------------
Net income (loss) $4,677 $(6,099) $(1,422)
============================
Basic earnings (loss) per share $0.20 $(0.26) $(0.06)
============================
Diluted earnings (loss) per share $0.19 $(0.25) $(0.06)
============================
Weighted average number of common
shares outstanding:
Basic 23,586 23,586
============================
Diluted 24,028 (442)(3) 23,586
============================
Statements of Operations Data:
(amounts in thousands,
except per share amounts) Nine Months Ended
(unaudited) September 30, 2005
----------------------------
Non-GAAP(1) Difference GAAP(2)
----------------------------
Net revenues $35,747 $35,747
Expenses:
Cost of products sold 16,695 9,475 26,170
Research and development 10,108 10,108
Marketing, general and
administrative 12,481 12,481
----------------------------
Total expenses 39,284 9,475 48,759
----------------------------
Loss from operations (3,537) (9,475) (13,012)
Equity in earnings of Novogyne 17,094 17,094
Interest income, net 1,608 1,608
----------------------------
Income (loss) before income taxes 15,165 (9,475) 5,690
Provision (benefit) for income taxes 5,156 (3,376) 1,780
----------------------------
Net income (loss) $10,009 $(6,099) $3,910
============================
Basic earnings (loss) per share $0.42 $(0.25) $0.17
============================
Diluted earnings (loss) per share $0.42 $(0.26) $0.16
============================
Weighted average number of common
shares outstanding:
Basic 23,554 23,554
============================
Diluted 24,021 24,021
============================
(1) Non-GAAP amounts exclude adjustments associated with the write-off
of existing inventories related to Noven's developmental fentanyl
patch, net of incremental income taxes. Noven's non-GAAP effective
tax rate for the nine months ended September 30, 2005 was
approximately 34% as compared to its GAAP effective tax rate of
31%.
(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 September 30, 2005 on a non-GAAP basis was
adjusted to include shares that were excluded from the GAAP
calculation as the shares were antidilutive.
Contact:
Joseph C. Jones
Vice President – Corporate Affairs
Noven Pharmaceuticals, Inc.
(305) 253-1916
Copyright © 2005 Noven Pharmaceuticals, Inc. All rights reserved.