Noven Pharmaceuticals, Inc. (NASDAQ:NOVN) today announced that,
for the reasons described below, it intends to file a Form 12b-25 with
the United States Securities and Exchange Commission (the “SEC”),
which will extend the due date for filing Noven’s 2007 Form 10-K to
April 1, 2008. Noven also announced that it has postponed its planned
press release and conference call related to its financial results for
the quarter and year ended December 31, 2007, and provided preliminary
unaudited financial information for those periods.
SEC Comment Letters
Noven is extending the due date for filing its 2007 Form 10-K in
order to address an open accounting matter relating to revenue
recognition raised in an SEC comment letter. The open matter relates
to Noven’s accounting policy of deferring revenue recognition of
non-refundable upfront milestone payments and recognizing them as
revenues over the estimated life of its related licensed products. In
an SEC comment letter received in December 2007, and in a follow-up
comment letter received in February 2008 following Noven’s response to
the first letter, the SEC staff has asked Noven to clarify its basis
for deferring the recognition of such milestone payments, including
the approval and sales milestones that Noven has received from Shire
in connection with the license of Noven’s Daytrana(TM) product.
Noven has responded to the SEC comment letters. Based on recent
communications with the SEC staff, Noven has determined that the
revenue recognition comment remains under consideration and analysis
by the SEC. Noven is continuing to work with the SEC staff to resolve
the open matter. While Noven expects to file its 2007 Form 10-K by the
extended filing date, it cannot assure that it will be able to
satisfactorily resolve the open matter and file within that timeframe.
“Noven has consistently applied an accounting policy of
recognizing license revenues from these milestone payments over the
estimated life of its licensed products,” said Michael D. Price,
Noven’s Vice President & Chief Financial Officer. “We believe that
this is an appropriate method of accounting because, among other
things, it properly reflects the manner and period over which the
licensee has the benefit of the license. We are working closely with
the SEC staff to resolve this matter, and look forward to reporting
2007 financial results as soon as possible.”
Preliminary Unaudited Information Based on Current Accounting
Policy
In connection with its decision to extend the due date for filing
its 2007 Form 10-K, Noven is providing preliminary unaudited
information for the quarter and year ended December 31, 2007. This
information assumes that there is no required change to Noven’s
current accounting policy on revenue recognition as a result of the
SEC comment letters or otherwise.
Under the company’s current policy of deferring milestone and
similar payments, for the quarter ended December 31, 2007, Noven would
report net revenues of $23.2 million, equity in earnings of Novogyne
Pharmaceuticals (its joint venture with Novartis Pharmaceuticals
Corporation) of $10.8 million, and net income of $1.0 million, or
$0.04 diluted earnings per share. Noven’s results for the fourth
quarter will include a $3.3 million charge related to employee
separation arrangements, as noted below.
Also under its current accounting policy, for the year ended
December 31, 2007, Noven would report net revenues of $83.2 million,
equity in earnings of Novogyne of $35.9 million, and a net loss of
$45.4 million, or $1.84 loss per share. Noven’s results for 2007 will
include charges aggregating $106.8 million, as described below.
Noven’s 2007 consolidated financial results will include the
results of operations of JDS Pharmaceuticals, a specialty
pharmaceutical company acquired by Noven, from the acquisition date of
August 14, 2007 through December 31, 2007. Noven’s 2007 results will
also include the following charges:
— a one-time charge of $100.2 million reported in the 2007 third
quarter relating to the portion of the JDS acquisition
purchase price allocated to in-process research and
development;
— a $3.3 million charge reported in the 2007 third quarter
related to payments to Shire plc in connection with the
voluntary market withdrawal of a portion of Daytrana(TM)
product; and
— an aggregate $3.3 million charge expected to be reported in
the 2007 fourth quarter related to separation arrangements
associated with the retirement of certain executive officers.
Noven’s actual results for 2007 would be materially different than
the preliminary unaudited information discussed in this press release
if Noven were required to change its revenue recognition accounting
policy for upfront milestone payments. Such a change in accounting
policy would also likely result in a restatement of Noven’s financial
results for 2006 and/or other periods. In any event, resolution of the
accounting for milestone payments is not expected to have any impact
on Noven’s cash flows or liquidity since it relates only to the timing
of the recognition of previously-received milestone payments.
Postponement of Earnings Release and Conference Call
Noven is postponing its earnings press release and related
earnings conference call (previously scheduled for 8:30 a.m. Eastern
time on March 13, 2008). Noven will announce plans for the rescheduled
press release and conference call in a future 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 that are, in many instances, beyond Noven’s
control.
These risks and uncertainties include: the risk that the SEC may
not ultimately agree with Noven’s accounting for its Daytrana(TM) and
other milestone payments, which would, among other things, require
Noven to restate its financial results for prior years, result in
materially different financial results in 2007 than the preliminary
unaudited financial information referred to in this press release, and
cause Noven to cease amortizing all or a portion of its deferred
Daytrana and other license revenues in future periods, which would
have the effect of reducing Noven’s revenues in future periods by the
amount that would have otherwise been recognized; the risk that Noven
is unable to resolve the open accounting issue discussed in this
release and file its Form 10-K within the 15-day extended filing
deadline, in which case Noven would, among other things, likely be
required to seek from NASDAQ an extension of time to file its Form
10-K in order to avoid possible de-listing of its common stock from
the NASDAQ Global Market. 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.