Noven Pharmaceuticals, Inc. (NASDAQ:NOVN), a specialty
pharmaceutical company with transdermal drug delivery expertise, today
announced financial results for the quarter and year ended December
31, 2007. The financial results announced today are unchanged from the
preliminary unaudited financial information previously announced by
Noven on March 12, 2008.
For full-year 2007, Noven reported net revenues of $83.2 million
and a net loss (including an aggregate $106.8 million in special
charges described below under the caption “2007 Charges”) of $45.4
million or $1.84 loss per share. Excluding the 2007 Charges and
related tax effects, Noven would have reported net income of $23.6
million or $0.94 diluted earnings per share for 2007, compared to net
income of $16.0 million or $0.66 diluted earnings per share for 2006.
As part of its transition from drug delivery to a broader-based
specialty pharmaceutical company, on August 14, 2007, Noven completed
the acquisition of JDS Pharmaceuticals (now known as Noven
Therapeutics), a specialty pharmaceutical company focused in
psychiatry and women’s health. Noven’s 2007 results include the
results of operations of Noven Therapeutics from the acquisition date
through December 31, 2007.
“All of our business units made important contributions to our
2007 operations and results,” said Jeffrey F. Eisenberg, Noven’s
Executive Vice President & Interim Chief Executive Officer.
“In 2007, our Novogyne joint venture posted its fourth consecutive
year of double digit growth in net income, and contributed a record
$35.9 million to our results through our equity interest,” said
Eisenberg. “Noven Transdermals, our transdermal development and
manufacturing unit, generated a 55% increase in gross profit compared
to 2006, having benefited from higher product sales and improved gross
margins compared to 2006. During the year, we also completed the
acquisition of JDS Pharmaceuticals, now Noven Therapeutics, which
currently sells the oral products Pexeva(R) and Lithobid(R) through a
focused psychiatry/CNS sales force.”
Eisenberg continued: “Looking ahead, we expect Noven Therapeutics
to launch our Stavzor(TM) product in the second half of 2008, having
received tentative approval from the FDA in December 2007. We also
plan to begin pivotal Phase 3 studies for Mesafem(TM), our
non-hormonal product for menopausal hot flashes, this year. While
Mesafem(TM) and other developmental products will require significant
investments in research and development and sales and marketing in the
years ahead, we believe this will advance our mission to establish
Noven as a dynamic specialty pharmaceutical company with diversified
prospects, control over the success of our products, and substantially
higher revenue and earnings growth rates.”
2007 Charges
Noven’s 2007 results included: (i) a one-time charge of $100.2
million in the third quarter relating to the portion of the JDS
acquisition purchase price allocated to in-process research and
development; (ii) a $3.3 million charge in the third quarter related
to payments to Shire in connection with the voluntary withdrawal of a
portion of Daytrana(TM) product (the “Withdrawal Charge”); and (iii)
an aggregate $3.3 million charge in the fourth quarter related to
separation arrangements associated with the retirement of certain
executive officers (the “Separation Charge”). Together, these charges
are referred to in this press release as the “2007 Charges.”
Full-Year Results
Including the impact of the 2007 Charges, Noven reported a net
loss for 2007 of $45.4 million or $1.84 loss per share compared to net
income of $16.0 million or $0.66 diluted earnings per share in 2006.
Excluding the 2007 Charges and related tax effects, 2007 net income
would have been $23.6 million or $0.94 diluted earnings per share.
Noven’s net revenues for 2007 increased 37% from 2006 to $83.2
million, reflecting an aggregate $9.2 million in sales of Pexeva(R)
and Lithobid(R), a full year of Daytrana(TM) sales, higher sales of
Vivelle-Dot(R), and higher license revenues due to the amortization of
Daytrana(TM) milestone payments received in 2007 and 2006.
Gross margin, as a percentage of product sales, increased to 37%
in 2007 from 24% in 2006, reflecting higher overall product revenues,
greater manufacturing facility utilization, and the margin
contribution of Noven Therapeutics’ products, which have higher
margins than Noven Transdermals’ products. Daytrana(TM) gross margin
was negatively affected in 2007 by production and yield issues, a
portion of the Withdrawal Charge, and increased quality assurance
activities and costs.
Research and development expenses for 2007 increased 22% from 2006
to $14.0 million, primarily due to higher clinical research activities
at Noven Transdermals and to $1.5 million in research and development
expenses at recently-acquired Noven Therapeutics.
Selling, general and administrative expenses increased 82% from
2006 to $39.6 million, reflecting the addition of $10.2 million in
Noven Therapeutics expenses ($8.1 million of which were sales and
marketing expenses, including costs associated with the expected
launch of Stavzor(TM)), the $3.3 million Separation Charge, $2.2
million of the Withdrawal Charge, and a $1.6 million increase in
professional fees.
In 2007, Noven recognized a record $35.9 million in earnings from
Novogyne Pharmaceuticals, the women’s health products company owned
jointly by Noven and Novartis Pharmaceuticals Corporation,
representing a 25% increase over 2006.
Novogyne’s net income for 2007 increased 22% from 2006 to $79.8
million. Novogyne’s 2007 net revenues increased 12% to $148.0 million,
primarily due to increased sales of Vivelle-Dot(R). Novogyne’s gross
margin percentage for 2007, at 79%, was slightly higher than 2006
levels, and its selling, general and administrative expenses increased
2% to $38.1 million, primarily due to increased samples expense and
sales force costs in support of Vivelle-Dot(R).
2007 Fourth Quarter Results
Including the impact of the $3.3 million Separation Charge,
Noven’s net income for the quarter ended December 31, 2007 (the
“fourth quarter”) was $1.0 million or $0.04 diluted earnings per share
compared to net income of $7.1 million or $0.29 diluted earnings per
share for the quarter ended December 31, 2006 (the “2006 fourth
quarter”). Excluding the Separation Charge and related tax effects,
fourth quarter 2007 net income would have been $3.4 million or $0.14
diluted earnings per share.
Noven’s net revenues for the fourth quarter were $23.2 million, a
35% increase from the $17.2 million reported in the 2006 fourth
quarter, primarily reflecting $5.9 million in sales of Pexeva(R) and
Lithobid(R).
Gross margin, as a percentage of product sales, was 28% in the
fourth quarter compared to 30% in the 2006 fourth quarter, reflecting
lower transdermal product revenues, Daytrana(TM) production and yield
issues, and increased quality assurance activities and costs,
partially offset by the margin contribution of Noven Therapeutics’
products, which have higher margins than Noven Transdermals’ products.
Research and development expenses for the fourth quarter increased
44% from the 2006 fourth quarter to $3.7 million, primarily due to
$1.0 million in research and development expenses at recently-acquired
Noven Therapeutics.
Selling, general and administrative expenses increased to $16.6
million from $5.3 million in the 2006 fourth quarter, reflecting $6.7
million in Noven Therapeutics expenses ($5.3 million of which were
sales and marketing expenses) and the $3.3 million Separation Charge.
Noven recognized $10.8 million in earnings from Novogyne in the
fourth quarter, representing a 16% increase over the 2006 fourth
quarter.
Novogyne’s fourth quarter net income increased 15% from the 2006
fourth quarter to $22.2 million. Novogyne’s fourth quarter net
revenues increased 11% to $40.1 million, primarily due to increased
sales of Vivelle-Dot(R). Novogyne’s fourth quarter gross margin
percentage, at 80%, was slightly improved over the 2006 fourth
quarter, and its selling, general and administrative expense increased
10% to $10.1 million in the fourth quarter, primarily due to higher
selling and promotional expenses in support of Vivelle-Dot(R).
Balance Sheet
At December 31, 2007, Noven had $14.0 million in cash and cash
equivalents, $21.6 million in short-term investments, and $32.8
million in other investments (non-current). This compares with $9.1
million in cash and cash equivalents and $144.5 million in short-term
investments at December 31, 2006. The net decrease primarily reflects
the payment of $130.4 million in the acquisition of JDS
Pharmaceuticals, tax payments of $23.7 million, and $5.1 million used
in the third quarter to purchase shares under Noven’s share repurchase
program, partially offset by the receipt of an aggregate $50.0 million
in Daytrana(TM) milestone payments, $28.8 million in distributions
received from Novogyne, and $5.9 million received from Shire in
connection with Noven’s amphetamine patch development program.
Noven’s investments at December 31, 2007, consisted of $54.4
million in auction rate securities (”ARS”), $32.8 million of which
have been classified as non-current on Noven’s balance sheet following
failed auctions occurring since mid-February 2008. Noven liquidated
approximately $17.6 million in ARS subsequent to December 31, 2007.
Noven believes its ARS are of high credit quality, as over 75% carry
an AAA or AA credit rating, and all are considered investment grade
securities. 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. None of Noven’s ARS were classified
as impaired at December 31, 2007. Noven continues to monitor the
market for ARS and to consider its impact on the fair market value of
Noven’s investments.
2007 Prescription Update
Total prescriptions for Vivelle-Dot(R) increased 4% in 2007
compared to 2006, and total prescriptions for Novogyne’s products,
taken as a whole, increased 2%. By comparison, the overall U.S.
hormone therapy market declined 8% for the same period.
Total prescriptions for Daytrana(TM) (launched in June 2006)
increased 165% in 2007 compared to 2006, reflecting the impact of the
first full year of sales. Prescriptions for ADHD stimulant therapies
as a class increased 8% in 2007 compared to 2006. Comparing the fourth
quarter to the 2006 fourth quarter, Daytrana(TM) prescriptions
increased 10%, while prescriptions for the class increased 7% for the
same period.
Total prescriptions for Pexeva(R) increased 16% for full-year 2007
compared to full-year 2006. Prescriptions for the SSRI class of
antidepressants increased 2% in 2007 compared to 2006. Reflecting
ongoing generic substitution, total prescriptions for
Lithobid(R) decreased 41% in 2007 compared to 2006.
Non-GAAP Financial Information
Under accounting principles generally accepted in the United
States (”GAAP”), “net income (loss)” and “diluted earnings (loss) 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
three and twelve month periods ended December 31, 2007 excluding the
2007 Charges. Noven believes that comparing Noven’s period-to-period
financial results without giving effect to those items, as
appropriate, 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 broadcast live via the Internet at www.noven.com
beginning at 8:30 a.m. Eastern time this morning, March 27.
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 March 27 through March 29 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 279741. The conference
call will contain forward-looking information in addition to that
contained in this press release.
About Noven
Noven Pharmaceuticals, Inc., headquartered in Miami, Florida, is a
specialty pharmaceutical company engaged in the research, development,
manufacture, marketing and sale of prescription pharmaceutical
products. Noven’s commercialized transdermal products utilize its
proprietary DOT Matrix(R) drug delivery technology and include
Vivelle-Dot(R) (estradiol transdermal system), the most prescribed
estrogen patch in the U.S., and Daytrana(TM) (methylphenidate
transdermal system), the first and only patch approved for the
treatment of ADHD. Oral products currently offered through the Noven
marketing and sales infrastructure consist of Pexeva(R) (paroxetine
mesylate) and Lithobid(R) (lithium carbonate). Developmental products
in psychiatry consist of Stavzor(TM) (delayed release valproic acid
capsule), Lithium QD (once-daily lithium carbonate), and Stavzor(TM)
ER (extended release valproic acid capsule). The development program
in women’s health consists of Mesafem(TM) (low-dose paroxetine
mesylate), a non-hormonal product scheduled to enter Phase 3 clinical
trials for vasomotor symptoms (hot flashes). See www.noven.com for
additional information.
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 which are,
in many instances, beyond Noven’s control. By category, 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 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 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(TM) - the risk that Daytrana(TM) could be adversely affected
by a number of factors, including: (i) the 2007 market withdrawal of
Daytrana(TM) as well as any potential continuing issues relating to
difficulties in removing the release liner from the Daytrana(TM)
patch, (ii) if Noven is unable to adequately resolve the
Daytrana-related issues raised by the FDA in the warning letter and
August 2007 Form 483, (iii) new market entrants, including from other
ADHD products marketed or under development by Shire, (iv) raw
material supply interruptions and/or the inability to obtain the
active ingredient methylphenidate, and (v) delays or inability to
obtain necessary DEA methylphenidate procurement quota; the risk that
any adverse effect to the market for Daytrana(TM) due to the foregoing
or other factors could adversely affect Noven’s results of operations
and/or its financial position, including limiting Noven’s ability to
achieve the additional milestone payments under its agreement with
Shire, and the risk that past Daytrana(TM) results may not be
indicative of future Daytrana(TM) results; Noven’s Pipeline -
uncertainties as to the cost and success of ongoing and planned
clinical trials 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 Stavzor(TM) and other
products, including timing, the possibility that the Stavzor(TM)
launch 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; and the impact of competitive responses to
Noven’s sales, marketing and strategic efforts, and 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 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 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(R) product; and risks and
uncertainties related to the fact that Vivelle-Dot(R) comprises a
substantial majority of Novogyne’s aggregate total prescriptions;
Other - risks associated with Noven’s current transition of executive
leadership, including those related to the identification,
recruitment, hiring and ultimate retention of qualified senior
executives. sildenafil. 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 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.
Noven Pharmaceuticals, Inc. and Subsidiaries
Statements of Operations Data:
(amounts in thousands, except per share amounts) (unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
—————— ——————-
2007 2006 2007 2006
——— ——– ———- ——–
Revenues:
Product revenues - Novogyne:
Product sales $ 6,451 $ 5,724 $ 22,425 $19,714
Royalties 1,694 1,707 7,458 6,845
——— ——– ———- ——–
Total product revenues -
Novogyne 8,145 7,431 29,883 26,559
Product revenues - third
parties 9,933 6,119 35,553 21,767
——— ——– ———- ——–
Total product revenues 18,078 13,550 65,436 48,326
Contract and license revenues:
Contract 278 854 457 1,966
License 4,836 2,838 17,268 10,397
——— ——– ———- ——–
Total contract and license
revenues 5,114 3,692 17,725 12,363
Net revenues 23,192 17,242 83,161 60,689
Costs and expenses:
Cost of products sold -
Novogyne 3,153 3,798 13,683 14,102
Cost of products sold - third
parties 9,812 5,642 27,334 22,406
——— ——– ———- ——–
Total cost of products sold 12,965 9,440 41,017 36,508
Acquired in-process research
and development — — 100,150 –
Research and development 3,678 2,555 13,978 11,454
Selling, general and
administrative 16,568 5,315 39,571 21,701
——— ——– ———- ——–
Total costs and expenses 33,211 17,310 194,716 69,663
——— ——– ———- ——–
Loss from operations (10,019) (68) (111,555) (8,974)
Equity in earnings of Novogyne 10,825 9,309 35,850 28,632
Interest income, net 703 1,382 5,454 4,272
——— ——– ———- ——–
Income (loss) before income
taxes 1,509 10,623 (70,251) 23,930
Provision (benefit) for income
taxes 460 3,503 (24,875) 7,942
——— ——– ———- ——–
Net income (loss) $ 1,049 $ 7,120 $ (45,376) $15,988
========= ======== ========== ========
Basic earnings (loss) per share $ 0.04 $ 0.30 $ (1.84) $ 0.67
========= ======== ========== ========
Diluted earnings (loss) per
share $ 0.04 $ 0.29 $ (1.84) $ 0.66
========= ======== ========== ========
Weighted average number of
common shares outstanding:
Basic 24,552 23,921 24,728 23,807
========= ======== ========== ========
Diluted 24,796 24,578 24,728 24,252
========= ======== ========== ========
As of December 31,
——————-
2007 2006
——— ———
Balance Sheet Data:
(amounts in thousands) (unaudited)
Cash and cash equivalents $ 13,973 $ 9,144
Short-term investments 21,565 144,455
Other investments (non-current) 32,835 –
Investment in Novogyne 24,310 23,296
Total assets 286,698 281,365
Deferred license and contract revenues 105,244 90,799
Stockholders’ equity 134,294 176,675 Noven Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Measures to GAAP
Statements of Operations Data:
(amounts in thousands, except per share amounts) (unaudited)
Three Months Ended
December 31, 2007
——————————-
Non-
GAAP (1) Adjustments GAAP (3)
——————————-
Net revenues $23,192 $ — $ 23,192
Costs and expenses:
Cost of products sold 12,965 — 12,965
Acquired in-process R&D — — –
Research and development 3,678 — 3,678
Selling, general and administrative 13,185 3,383 16,568
——– ———– ———-
Total costs and expenses 29,828 3,383 33,211
——– ———– ———-
Loss from operations (6,636) (3,383) (10,019)
Equity in earnings of Novogyne 10,825 — 10,825
Interest income, net 703 — 703
——– ———– ———-
Income (loss) before income taxes 4,892 (3,383) 1,509
Provision (benefit) for income
taxes 1,500 (1,040) 460
——– ———– ———-
Net income (loss) $ 3,392 $ ( 2,343) $ 1,049
======== =========== ==========
Basic earnings (loss) per share $ 0.14 $ (0.10) $ 0.04
======== =========== ==========
Diluted earnings (loss) per share $ 0.14 $ (0.10) $ 0.04
======== =========== ==========
Weighted average number of common
shares outstanding:
Basic 24,552 — 24,552
======== =========== ==========
Diluted (4) 24,796 — 24,796
======== =========== ==========
Twelve Months Ended
December 31, 2007
——————————-
Non-
GAAP (2) Adjustments GAAP (3)
——————————-
Net revenues $83,987 $ (826) $ 83,161
Costs and expenses:
Cost of products sold 40,705 312 41,017
Acquired in-process R&D — 100,150 100,150
Research and development 13,978 — 13,978
Selling, general and administrative 34,068 5,503 39,571
——– ———– ———-
Total costs and expenses 88,751 105,965 194,716
——– ———– ———-
Loss from operations (4,764) (106,791) (111,555)
Equity in earnings of Novogyne 35,850 — 35,850
Interest income, net 5,454 — 5,454
——– ———– ———-
Income (loss) before income taxes 36,540 (106,791) (70,251)
Provision (benefit) for income
taxes 12,938 (37,813) (24,875)
——– ———– ———-
Net income (loss) $23,602 $ (68,978) $ (45,376)
======== =========== ==========
Basic earnings (loss) per share $ 0.95 $ (2.79) $ (1.84)
======== =========== ==========
Diluted earnings (loss) per share $ 0.94 $ (2.78) $ (1.84)
======== =========== ==========
Weighted average number of common
shares outstanding:
Basic 24,728 — 24,728
======== =========== ==========
Diluted (4) 25,146 (418) 24,728
======== =========== ==========
(1) Non-GAAP amounts for the three-month period exclude a total of
$3.4 million in fourth quarter charges related to separation
arrangements associated with the retirement of certain executive
officers and to an immaterial amount related to the voluntary market
withdrawal of a portion of Daytrana(TM) product by Shire.
(2) Non-GAAP amounts for the twelve-month period exclude: (i) IPR&D of
$100.2 million, which was immediately expensed following the
completion of the acquisition of JDS; (ii) a $3.3 million charge
associated with the voluntary market withdrawal of a portion of
Daytrana(TM) product by Shire, and (iii) a $3.3 million fourth
quarter charge related to separation arrangements associated with the
retirement of certain executive officers.
(3) Reflects operating results in accordance with accounting
principles generally accepted in the United States (GAAP).
(4) Diluted weighted average number of shares outstanding for the
three-month and twelve-month periods on a non-GAAP basis have been
adjusted to include shares that were excluded from the GAAP
calculation since such shares were anti-dilutive on a GAAP basis.
*T