NOVEN
REPORTS THIRD QUARTER 2006 FINANCIAL RESULTS |
BackReports Third Quarter EPS of $0.20, Adjusted EPS of $0.24
Quarterly Net Revenues Increase 28%,
Quarterly Gross Margin Improves to 30%
Miami, FL, November
6, 2006 -- Noven Pharmaceuticals, Inc. (NASDAQ: NOVN) today announced
financial results for the three-month and nine-month periods ended
September 30, 2006.
"The highlights of the 2006 third quarter included increased demand
for our lead products, a 28% increase in net revenues, and improvement
in our overall gross margin," said Robert C. Strauss, Noven's
President, CEO and Chairman. "Vivelle-Dot™, the most
prescribed transdermal estrogen therapy in the U.S., had the highest
quarterly prescriptions in its history and contributed to another
solid quarter at our Novogyne joint venture. Daytrana™, the
first and only patch for ADHD, continued to gain acceptance in the
ADHD market thanks to the continuing efforts of our partner Shire
plc, with prescriptions growing 17% in the most recent month for
which data are available. A company-wide program to reduce costs
and improve production efficiencies at Noven contributed to an overall
gross margin of 30% for the third quarter – a substantial improvement
over the 2006 second quarter,” said Strauss. "On the
product development front, we recently submitted an Investigational
New Drug Application for our developmental amphetamine patch for
ADHD. We expect to begin human pharmacokinetic testing for that product
by year-end."
Noven Third Quarter Results
Noven's net revenues for the quarter ended September
30, 2006 (the "current quarter") increased to $15.7 million compared
to $12.2 million for the quarter ended September 30, 2005 (the "2005
quarter"). This 28% increase reflected $2.0 million in Daytrana™ product
sales to Shire, $2.0 million in Daytrana™ license revenues,
and higher hormone therapy (“HT”) product sales to Novogyne.
Cost of products sold for the current quarter was $9.0 million compared
to $15.4 million in the 2005 quarter. Cost of products sold for the
2005 quarter included a $9.5 million charge related to the write-off
of fentanyl inventory. Noven’s gross margin for the current
quarter was 30%.
Research and development expenses for the current quarter decreased
$1.3 million or 34% to $2.5 million compared to the 2005 quarter,
primarily as a result of higher expenses in the 2005 quarter associated
with development of Daytrana™. Marketing, general and administrative
expenses increased $1.8 million or 42% to $6.0 million, primarily
reflecting $0.6 million in stock-based compensation expenses that
were not required to be recognized in the 2005 quarter and a $0.6
million one-time termination charge related to the current quarter
cost reduction program referenced above.
Noven recognized $8.2 million in earnings from Novogyne Pharmaceuticals
(a women’s health products company owned jointly by Noven
and Novartis Pharmaceuticals Corporation) in the current quarter,
slightly
higher than the $8.1 million recognized in the 2005 quarter. In
the current quarter, Noven reported net income of $5.0 million
($0.20
diluted earnings per share), compared to a net loss of $1.4 million
($0.06 diluted loss per share) in the 2005 quarter. Results for
the 2005 quarter reflected a $9.5 million charge related to the
write-off
of fentanyl inventory.
Noven Adjusted (Non-GAAP) Earnings
In 2006, Noven began recognizing stock-based compensation expenses
associated with stock options and other equity compensation in
its statements of operations ("Stock-Based Compensation Expenses").
These expenses totaled $0.8 million in the current quarter. Noven’s
marketing, general and administrative expenses for the current
quarter included the $0.6 million one-time termination charge referenced
above (the "Termination Charge"). The 2005 quarter included
the $9.5 million charge referenced above associated with the write-off
of fentanyl inventory (the "2005 Fentanyl Charge").
Excluding the Stock-Based Compensation Expenses, the Termination
Charge, the
2005 Fentanyl Charge and all related tax effects, net income for
the current quarter would have been $6.0 million or $0.24 diluted
earnings per share, compared to $4.7 million or $0.19 diluted earnings
per share in the 2005 quarter. A reconciliation of net income and
earnings per share to net income and earnings per share as adjusted
to reflect the excluded items is included in an attachment to this
press release.
Novogyne Third Quarter Results
Current quarter net revenues at Novogyne were $33.7 million, largely
unchanged from the 2005 quarter, reflecting increased sales of
Vivelle-Dot™,
offset by increased sales and returns allowances. Novogyne’s
gross margin for the current quarter increased slightly to 78% due
to increased Vivelle-Dot™ sales, which have a higher margin
than sales of Novogyne’s other products. Novogyne’s selling,
general and administrative expenses increased 7% to $9.4 million,
primarily reflecting increased promotional spending in support of
Vivelle-Dot™. Novogyne’s net income for the current
quarter was $17.0 million compared to $16.8 million for the 2005
quarter.
Noven Balance Sheet
At September 30, 2006, Noven had an aggregate $139.2 million in
cash and cash equivalents and short-term investments, compared
to $84.9
million at December 31, 2005. The net cash increase for the nine-months
ended September 30, 2006 included receipt of a $50.0 million milestone
payment following approval of Daytrana™, $17.6 million in distributions
from Novogyne, and $8.1 million received in connection with the exercise
of stock options, partially offset by $5.1 million in payments of
amounts owed to Shire in connection with clinical development of
Daytrana™. Noven’s working capital at September 30,
2006 increased to $148.2 million from $91.1 million at December
31, 2005.
Prescription Update
Total prescriptions for Vivelle-Dot™ increased 4% in the current
quarter compared to the 2005 quarter, and total prescriptions for
Novogyne’s products, taken as a whole, increased 1%. By comparison,
the overall U.S. HT market declined 4% over the same period. Total
prescriptions for Daytrana™ (launched in June 2006) increased
17% in September 2006 (the most recent month for which data is
available) compared to August 2006, while prescriptions for ADHD
stimulant therapies
as a class were largely unchanged for the same period.
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 9:00 a.m. Eastern time this morning, November 6th. 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 November 6th through November
8th 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 217735. 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 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 current quarter
excluding the Stock-Based Compensation Expenses, the Termination
Charge and the 2005 Fentanyl Charge. Because the Fentanyl Charge
impacted Noven’s reported financial results for the 2005
quarter but not the current quarter and the Stock-Based Compensation
Expenses
and the Termination Charge impacted Noven's reported financial
results for the current quarter but not the 2005 quarter, Noven
believes that comparing Noven’s period-to-period financial
results without giving effect to those items 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 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 is committed to expanding
the universe of available transdermal therapies for the benefit
of patients, partners and shareholders. Noven’s prescription patches
are approved in over 30 countries and include Vivelle-Dot™ (the
most prescribed estrogen patch in the U.S.) and Daytrana™ (the
first and only patch approved for the treatment of ADHD). A range
of new patches is being developed by Noven in collaboration with
industry partners. 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™ - the risk of supply interruptions of methylphenidate, which is necessary for the production of Daytrana™, including uncertainties relating to future DEA awards of methylphenidate procurement quota, which interruptions could negatively affect production, facility utilization and Noven’s gross margin in future periods as well as market acceptance for Daytrana™; the risk that Noven may continue to encounter production inefficiencies or may encounter other issues in the process of manufacturing commercial quantities of Daytrana™, which could adversely affect the success of the product and Noven’s results of operations; the risk that only limited prescription data is presently available for Daytrana™ and such data may not be representative of the future market for the product; ongoing initiatives intended to reduce manufacturing costs and improve Daytrana™ gross margins may not result in further gross margin improvement; risks related to competition (including from other ADHD products marketed or under development by Shire) and market acceptance of Daytrana™ that could adversely affect the commercial success of Daytrana™ and could, among other things, limit Noven’s ability to achieve the additional milestone payments under its agreement with Shire; the possibility that the market for methylphenidate products may be negatively affected by the ongoing public debate in the United States regarding the appropriateness of using methylphenidate and other medications to treat children with ADHD, as well as the outcome of the FDA’s ongoing inquiry into the possible cardiac, psychiatric and other side effects of ADHD medications, and that the FDA’s inquiry 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; 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; the possibility that the FDA’s review of the IND application for our amphetamine patch may delay commencement of human pharmacokinetic testing; 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. 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.
Statements of Operations Data: Three Months Ended Nine Months Ended
(amounts in thousands, except per September 30, September 30,
share amounts) (unaudited) ------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Revenues:
Product revenues - Novogyne:
Product sales $5,273 $4,740 $13,990 $14,432
Royalties 1,791 1,790 5,138 4,617
--------- -------- -------- --------
Total product revenues -
Novogyne 7,064 6,530 19,128 19,049
Product revenues - third
parties 5,761 3,917 15,648 11,888
--------- -------- -------- --------
Total product revenues 12,825 10,447 34,776 30,937
Contract and license revenues:
Contract 44 769 1,112 1,793
License 2,839 1,024 7,559 3,017
--------- -------- -------- --------
Contract and license revenues 2,883 1,793 8,671 4,810
Net revenues 15,708 12,240 43,447 35,747
Expenses:
Cost of products sold -
Novogyne 3,702 3,521 10,304 9,219
Cost of products sold - third
parties 5,339 11,895 16,764 17,307
--------- -------- -------- --------
Total cost of products
sold(1) 9,041 15,416 27,068 26,526
Research and development 2,527 3,826 8,899 9,752
Marketing, general and
administrative 6,010 4,237 16,386 12,481
--------- -------- -------- --------
Total expenses 17,578 23,479 52,353 48,759
--------- -------- -------- --------
Loss from operations (1,870) (11,239) (8,906) (13,012)
Equity in earnings of Novogyne 8,234 8,081 19,323 17,094
Interest income, net 1,168 512 2,890 1,608
--------- -------- -------- --------
Income before income taxes 7,532 (2,646) 13,307 5,690
Provision for income taxes 2,501 (1,224) 4,439 1,780
--------- -------- -------- --------
Net income $5,031 $(1,422) $8,868 $3,910
========= ======== ======== ========
Basic earnings per share $0.21 $(0.06) $0.37 $0.17
========= ======== ======== ========
Diluted earnings per share $0.20 $(0.06) $0.37 $0.16
========= ======== ======== ========
Weighted average number of common
shares outstanding:
Basic 23,954 23,586 23,768 23,554
========= ======== ======== ========
Diluted 24,574 23,586 24,142 24,021
========= ======== ======== ========
As Of
--------------------------
Balance Sheet Data: September 30, December 31,
(amounts in thousands)(unaudited) 2006 2005
------------- ------------
Cash and cash equivalents $8,676 $66,964
Short-term investments 130,510 17,900
Investment in Novogyne 22,710 23,243
Total assets 244,823 185,910
Deferred license revenues 67,110 23,655
Stockholders' equity 162,328 140,621
(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 share amounts) Three Months Ended Three Months Ended
(unaudited) September 30, 2006 September 30, 2005
------------------------ ------------------------
Non- Adjust- GAAP(3) Non- Adjust- GAAP(3)
GAAP(1) ments(1) GAAP(2) ments(2)
------------------------ ------------------------
Net revenues $15,708 $15,708 $12,240 $12,240
Expenses:
Cost of products
sold(4) 8,971 70 9,041 5,941 9,475 15,416
Research and
development 2,461 66 2,527 3,826 3,826
Marketing, general
and
administrative 4,725 1,285 6,010 4,237 4,237
------------------------ ------------------------
Total expenses 16,157 1,421 17,578 14,004 9,475 23,479
------------------------ ------------------------
Loss from operations (449) (1,421) (1,870) (1,764) (9,475)(11,239)
Equity in earnings
of Novogyne 8,234 8,234 8,081 8,081
Interest income, net 1,168 1,168 512 512
------------------------ ------------------------
Income before income
taxes 8,953 (1,421) 7,532 6,829 (9,475) (2,646)
Provision for income
taxes 2,954 (453) 2,501 2,152 (3,376) (1,224)
------------------------ ------------------------
Net income $5,999 $(968) $5,031 $4,677 $(6,099)$(1,422)
======================== ========================
Basic earnings per
share $0.25 $(0.04) $0.21 $0.20 $(0.26) $(0.06)
======================== ========================
Diluted earnings per
share $0.24 $(0.04) $0.20 $0.19 $(0.25) $(0.06)
======================== ========================
Weighted average
number of common
shares outstanding:
Basic 23,954 23,954 23,586 23,586
======================== ========================
Diluted(5) 24,838 (264) 24,574 24,028 (442) 23,586
======================== ========================
(1) Non-GAAP amounts for the three months ended September 30, 2006
exclude equity compensation adjustments associated with the adoption
of FAS 123(R) - Share Based Payments and a $0.6 million one-time
termination charge related to Noven's cost reduction program
undertaken in the current quarter, net of income taxes.
(2) Non-GAAP amounts for the three months ended September 30, 2005
exclude adjustments associated with the write-off of existing
inventories related to Noven's developmental fentanyl patch, net of
income taxes.
(3) Reflects operating results in accordance with accounting
principles generally accepted in the United States (GAAP).
(4) Cost of products sold has been revised in all periods to include
certain amounts that were previously included in research and
development expenses.
(5) Diluted weighted average number of shares outstanding for the
three months ended September 30, 2006 on a non-GAAP basis have been
adjusted to include shares that were excluded from the GAAP
calculation as a result of the adoption of FAS 123(R). Diluted
weighted average number of shares outstanding for the three months
ended September 30, 2005 on a non-GAAP basis have been adjusted to
include shares that were excluded from the GAAP calculation since
such shares were antidilutive on a GAAP basis.
Noven Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Measures to GAAP
Statements of
Operations Data:
(amounts in
thousands, except
per share amounts) Nine Months Ended Nine Months Ended
(unaudited) September 30, 2006 September 30, 2005
------------------------ ------------------------
Non- Adjust- GAAP(3) Non- Adjust- GAAP(3)
GAAP(1) ments(1) GAAP(2) ments(2)
------------------------ ------------------------
Net revenues $43,447 $43,447 $35,747 $35,747
Expenses:
Cost of products
sold(4) 26,835 233 27,068 17,051 9,475 26,526
Research and
development 8,609 290 8,899 9,752 9,752
Marketing, general
and
administrative 13,959 2,427 16,386 12,481 12,481
------------------------ ------------------------
Total expenses 49,403 2,950 52,353 39,284 9,475 48,759
------------------------ ------------------------
Loss from operations (5,956) (2,950) (8,906) (3,537) (9,475)(13,012)
Equity in earnings
of Novogyne 19,323 19,323 17,094 17,094
Interest income, net 2,890 2,890 1,608 1,608
------------------------ ------------------------
Income before income
taxes 16,257 (2,950) 13,307 15,165 (9,475) 5,690
Provision for income
taxes 5,288 (849) 4,439 5,156 (3,376) 1,780
------------------------ ------------------------
Net income $10,969 $(2,101) $8,868 $10,009 $(6,099) $3,910
======================== ========================
Basic earnings per
share $0.46 $(0.09) $0.37 $0.42 $(0.25) $0.17
======================== ========================
Diluted earnings per
share $0.45 $(0.08) $0.37 $0.42 $(0.26) $0.16
======================== ========================
Weighted average
number of common
shares outstanding:
Basic 23,768 23,768 23,554 23,554
======================== ========================
Diluted(5) 24,424 (282) 24,142 24,021 24,021
======================== ========================
(1) Non-GAAP amounts for the nine months ended September 30, 2006
exclude equity compensation adjustments associated with the adoption
of FAS 123(R) - Share Based Payments and a $0.6 million one-time
termination charge related to Noven's cost reduction program
undertaken in the current quarter, net of income taxes.
(2) Non-GAAP amounts for the nine months ended September 30, 2006
exclude adjustments associated with the write-off of existing
inventories related to Noven's developmental fentanyl patch, net of
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%.
(3) Reflects operating results in accordance with accounting
principles generally accepted in the United States (GAAP).
(4) Cost of products sold has been revised in all periods to include
certain amounts that were previously included in research and
development expenses.
(5) Diluted weighted average number of shares outstanding for the nine
months ended September 30, 2006 on a non-GAAP basis have been
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 (305) 253-1916 |
Copyright © 2006 Noven Pharmaceuticals, Inc. All rights reserved.