SC 14D9

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14D-9

(Rule 14d-101)

Solicitation/Recommendation Statement
Under Section 14(d)(4) of the Securities Exchange Act of 1934

NOVEN PHARMACEUTICALS, INC.

(Name of Subject Company)

NOVEN PHARMACEUTICALS, INC.

(Name of Person Filing Statement)

Common Stock, par value $.0001 per share
(Title of Class of Securities)

670009109
(Cusip Number of Class of Securities)

Peter Brandt
President and Chief Executive Officer
Noven Pharmaceuticals, Inc.
11960 S.W. 144th Street
Miami, Florida 33186
(305) 253-5099

(Name, address and telephone number of person authorized to
receive notices and communications on behalf of
the person(s) filing statement)

With a copy to:

Richard Hall, Esq.
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
(212) 474-1293

o  Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

TABLE OF CONTENTS

		Page
Item 1.	Subject Company Information		1
Item 2.	Identity and Background of Filing Person		1
Item 3.	Past Contacts, Transactions, Negotiations and Agreements		2
Item 4.	The Solicitation or Recommendation		9
Item 5.	Persons/Assets Retained, Employed, Compensated or Used		25
Item 6.	Interest in Securities of the Subject Company		26
Item 7.	Purposes of the Transaction and Plans or Proposals		26
Item 8.	Additional Information		26
Item 9.	Exhibits		30
SIGNATURE			31
Annex I.	Opinion of J.P. Morgan Securities Inc		I-1
EX-99.(A)(3)
EX-99.(E)(2)
EX-99.(E)(4)
EX-99.(E)(5)
EX-99.(E)(7)

Item 1.   Subject Company Information.

Name and Address.

The name of the subject company is Noven Pharmaceuticals, Inc., a corporation organized under the laws of the State of Delaware (the “Company” or “Noven”). The principal executive offices of the Company are located at 11960 S.W. 144th Street, Miami, Florida 33186, and its telephone number is (305) 253-5099.

Securities.

The class of equity securities to which this Solicitation/Recommendation Statement on Schedule 14D-9 (together with the Exhibits and Annex hereto, this “Statement”) relates is the common stock, par value $.0001 per share (the “Shares”), of the Company, together with the associated Series A junior participating preferred stock purchase rights (the “Rights”) issued pursuant to the rights agreement, dated as of November 6, 2001, as amended on March 18, 2008 and July 14, 2009, between Noven and American Stock Transfer and Trust Company, LLC (the “Rights Agreement”). Unless the context otherwise requires, all references to Shares include the Rights, and all references to the Rights include the benefits that may inure to holders of the Rights under the Rights Agreement. As of July 21, 2009, there were 25,061,791 Shares issued and outstanding.

Item 2.   Identity and Background of Filing Person.

Name and Address.

The name, address and telephone number of the Company, which is the person filing this Statement, are set forth in Item 1 above under the heading “Name and Address” and are incorporated into this Item 2 by reference. The Company’s website is www.noven.com. The website and the information on or connected to the website are not a part of this Statement, are not incorporated herein by reference and should not be considered a part of this Statement.

Tender Offer.

This Statement relates to the cash tender offer by Northstar Merger Sub, Inc. (“Purchaser”), a Delaware corporation and wholly owned subsidiary of Hisamitsu U.S., Inc. (“Holdings”), a Delaware corporation and a wholly owned subsidiary of Hisamitsu Pharmaceutical Co., Inc. (“Parent”), a company organized under the laws of Japan, described in the Tender Offer Statement on Schedule TO (as it may be amended or supplemented from time to time, the “Schedule TO”) filed with the Securities and Exchange Commission (the “SEC”) on July 23, 2009. Pursuant to the tender offer, Purchaser is offering to purchase all the issued and outstanding Shares of the Company at a price of $16.50 per Share (the “Offer Price”), net to the seller in cash, without interest thereon and otherwise upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 23, 2009 (the “Offer to Purchase”), and in the related letter of transmittal (the “Letter of Transmittal,” which, together with the Offer to Purchase, each as may be amended or supplemented from time to time, constitute the “Offer”). The Offer to Purchase and Letter of Transmittal are attached hereto as Exhibit (a)(1) and (a)(2), respectively, and are incorporated into this Item 2 by reference.

The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of July 14, 2009, among the Company, Purchaser, Holdings and Parent (as it may be amended or supplemented from time to time, the “Merger Agreement”). The Merger Agreement provides that, subject to the satisfaction or waiver of certain conditions, following completion of the Offer and in accordance with Delaware General Corporation Law (the “DGCL”), Purchaser will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation (the “Surviving Corporation”) of the Merger and an indirect wholly owned subsidiary of Parent. At the effective time of the Merger (the “Effective Time”), each Share (other than Shares owned by Parent, Holdings, Purchaser or the Company or by stockholders who have properly perfected their statutory appraisal rights in accordance with Section 262 of the DGCL) shall automatically be converted into the right to receive the Offer Price in cash, less any applicable withholding taxes. Each Share owned by Parent, Holdings, Purchaser or the Company shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor, and each Share owned by any subsidiary of the Company or Parent (other than

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Purchaser) shall automatically be converted into one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

A summary of the Merger Agreement is set forth in Section 11 of the Offer to Purchase and is incorporated into this Item 2 by reference. Such summary is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached as Exhibit (e)(1) hereto and is also incorporated into this Item 2 by reference.

Parent formed Holdings and Purchaser in connection with the Merger Agreement, Offer and Merger. The Schedule TO states that the location of the principal executive offices of Hisamitsu is Marunouchi, Chiyoda-Ku 1-11-1, Tokyo, 100-6221 Japan, and that its telephone number is 81-3-5293-1700. The Schedule TO states that the location of the principal executive offices of both Holdings and Purchaser is 3528 Torrance Blvd., Suite 112 Torrance, CA 90503 U.S.A., and that the telephone number of Holdings and Purchaser is (310) 540-1408. Unless the context indicates otherwise, in this Statement “Hisamitsu” refers to Purchaser, Holdings and Parent, collectively.

Item 3.   Past Contacts, Transactions, Negotiations and Agreements.

Except as described herein or in the Company’s proxy statement, dated April 6, 2009 and filed with the SEC on April 9, 2009 (the “Proxy Statement”), to the knowledge of the Company, as of the date of this Statement, there are no material contracts, agreements, arrangements or understandings or any actual or potential conflicts of interest between the Company or its affiliates and (a) its executive officers, directors or affiliates or (b) Parent, Holdings, Purchaser or any of their respective executive officers, directors or affiliates.

In the case of each plan or agreement described below and in the relevant provisions of the Proxy Statement to which the terms “change in control” or “change of control” apply, consummation of the Offer would constitute a change in control or change of control, as applicable, of the Company for purposes of determining the entitlements due to the executive officers and directors of the Company under such plan or agreement. Any information contained in the documents incorporated herein by reference shall be deemed modified or superseded for purposes of this Statement to the extent that any information contained herein modifies or supersedes such information.

Arrangements with Current Executive Officers, Directors or Affiliates of the Company.

Related Party Transactions; Director and Officer Compensation.  Certain information regarding contracts, agreements, arrangements or understandings between the Company and its affiliates, on the one hand, and the Company’s executive officers and directors, on the other hand, are described under the headings “Related Party Transactions,” “Director Compensation,” and “Executive Compensation” in the Proxy Statement. The relevant portions of the Proxy Statement are attached hereto as Exhibit (e)(2) and are incorporated into this Item 3 by reference.

Director and Officer Indemnification and Insurance.  Section 102(b)(7) of the DGCL allows a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend, approved a stock repurchase in violation of Delaware law, or engaged in a transaction from which the director derived an improper personal benefit. The Company’s certificate of incorporation (the “Charter”) includes a provision limiting or eliminating the personal liability of its directors to the fullest extent permitted under Delaware law, as it now exists or may in the future be amended and supplemented.

Section 145 of the DGCL provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with an action or proceeding to which he or she is or is threatened to be made a party by reason of such position, if such person shall have acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his or her conduct was unlawful. The Company has included in the Charter and its amended and restated bylaws (the “Bylaws”) provisions that require the Company to provide the foregoing indemnification to the fullest extent permitted under Delaware or other

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applicable law as it now exists or may in the future be amended or supplemented. In addition, the Company may advance expenses incurred in connection with any such proceeding upon an undertaking to repay if indemnification is ultimately not permitted. In the case of actions brought by or in the right of the corporation, such indemnification is limited to expenses, and no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court or the Delaware Court of Chancery determines that such indemnification is proper under the circumstances.

In addition, the Company maintains insurance on behalf of its directors and officers against liability for actions taken by them in their capacities as directors or officers or arising out of such status.

The Company also has entered into indemnification agreements with each of its directors and executive officers, which generally provide for the indemnification of the indemnitee and for advancement and reimbursement of reasonable expenses (subject to limited exceptions) incurred in various legal proceedings in which the indemnitee may be involved by reason of his or her service as an officer or director. This description of the indemnification agreements entered into between the Company and each of its directors and executive officers is qualified in its entirety by reference to the form of indemnification agreement filed as Exhibit (e)(3) hereto, which is incorporated into this Item 3 by reference.

Pursuant to the Merger Agreement, Parent, Holdings and Purchaser have agreed that all rights to indemnification and exculpation from liabilities for acts or omissions (and rights for advancement of expenses) occurring at or prior to the Effective Time now existing in favor of the current or former directors or officers of the Company and its subsidiaries as provided in their respective certificates of incorporation or by-laws (or comparable organizational documents) and any indemnification or other agreements of the Company shall be assumed by the Surviving Corporation in the Merger, without further action, at the Effective Time, and shall survive the Merger and shall continue in full force and effect in accordance with their terms with respect to any claims against such directors or officers arising out of such acts or omissions, and Parent shall ensure that the Surviving Corporation complies with and honors these obligations.

The Merger Agreement further provides that, through the sixth anniversary of the Effective Time, it will either maintain the current or substantially similar directors’ and officers’ liability insurance policies maintained by the Company with respect to claims arising from or related to facts or events which occurred at or prior to the Effective Time (the “D&O Insurance”) for all persons who are currently covered by such D&O Insurance; provided, however, that Parent shall not be obligated to make annual premium payments for such insurance to the extent such premiums exceed 250% of the last annual premium paid prior to the date of the Merger Agreement for such insurance. In lieu of the foregoing, however, Parent will have the right to purchase a substitute policy with the same coverage limits and substantially similar terms as the current D&O Insurance.

Interests of Certain Persons in the Offer and the Merger.  In considering the recommendation of the board of directors of the Company (the “Board of Directors” or the “Board”) with respect to the Merger Agreement, the Offer and the Merger, the Company’s stockholders should be aware that certain officers and directors of the Company have interests in the Offer and Merger, as described below, which may present them with certain conflicts of interest. The Board is aware of these potential conflicts and considered them along with the other factors described in this Item 3 and in Item 4 below under the heading “Reasons for the Recommendation of the Board of Directors.”

If the directors and officers of the Company who own Shares tender their Shares for purchase pursuant to the Offer, they will receive the same cash consideration on the same terms and conditions as the other stockholders of the Company. As of July 21, 2009, the directors and executive officers of the Company beneficially owned, in the aggregate, 348,124 Shares, which for purposes of this subsection excludes any Shares issuable upon exercise of stock options or settlement of stock-settled stock appreciation rights (“SARs”), restricted Shares or restricted stock units (collectively, “Equity Awards”) granted by the Company and held by such individuals. If the directors and executive officers were to tender all of their Shares (excluding Equity Awards) pursuant to the Offer and those Shares were accepted and purchased by Purchaser, the directors and executive officers would receive an aggregate of $5,744,049 in cash, without interest and less any required withholding taxes. For a description of the treatment of Equity Awards held by the directors and executive officers of the Company, see below under the heading “Effect of the Offer and Merger on Certain Equity Awards.”

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The following table sets forth, as of July 21, 2009, the cash consideration that each executive officer and non-employee director would be entitled to receive for his Shares if he were to tender all of his Shares pursuant to the Offer and those Shares were accepted and purchased by Purchaser (excluding Equity Awards).

			Aggregate Offer
			Price Payable for
Name	Number of Shares		Shares
Peter Brandt, President, Chief Executive Officer and Director		111,667	$	1,842,506
Jeffrey F. Eisenberg, Executive Vice President		11,846	$	195,459
Michael D. Price, Vice President and Chief Financial Officer		25,000	$	412,500
Richard P. Gilbert, Vice President — Operations		0	$	0
Steven M. Dinh, Vice President and Chief Scientific Officer		0	$	0
Joel S. Lippman, M.D., Vice President — Clinical Development and Chief Medical Officer		0	$	0
Anthony Venditti, Vice President — Marketing and Sales		0	$	0
Wayne P. Yetter, Chairman of the Board		35,082	$	578,853
John G. Clarkson, M.D., Director		23,587	$	389,186
Donald A. Denkhaus, Director		33,659	$	555,374
Pedro P. Granadillo, Director		32,817	$	541,481
Francois E. Nader, M.D., Director		3,648	$	60,192
Phillip M. Satow, Director		47,159	$	778,124
Robert G. Savage, Director		23,659	$	390,374
Total		348,124	$	5,744,049

Noven has change of control employment agreements with each of Messrs. Price, Dinh, Gilbert, Lippman and Venditti. Pursuant to these agreements, if the executive officer is terminated other than for cause or terminates his employment for good reason during the two year period following a change in control (as defined in the agreement), he will be entitled to severance of (i) a lump sum equal to two times the sum of the his annual base salary and highest annual bonus and (ii) a pro rata highest annual bonus. The agreements also provide that upon such termination the executive officer will be entitled to (a) continued participation in welfare benefit plans for two years following the change in control, (b) outplacement services for one year following termination and (c)  any other welfare or fringe benefits that such executive officer is eligible to receive or that are available generally to other peer executives. In the event that an executive officer becomes subject to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) due to the application of Section 280G of the Code, each change of control employment agreement provides for an additional “gross-up” payment such that the executive officer will be placed in the same after-tax position as if no such excise tax had been imposed. The Company also has a change in control employment agreement in place with Mr. Eisenberg which contains the same terms described above; however, as described in further detail below under the heading “Employment Agreements Following the Merger,” on July 14, 2009, the Company entered into an agreement with Mr. Eisenberg which amended and restated his existing employment agreement with the Company and which will supersede his change of control agreement upon its effectiveness.

This description of the Company’s change of control employment agreements with the executive officers named above is qualified in its entirety by reference to the full text of the amended and restated form of employment agreement (change of control), which is attached as Exhibit (e)(6) hereto and is incorporated herein by reference.

Pursuant to his employment agreement, if Mr. Brandt is terminated for any reason other than death, disability or for cause, or if he terminates his employment for good reason (as defined in the agreement), or if the Company declines to renew his employment agreement for at least the two-year period following a change in control (as defined in the agreement), then Mr. Brandt is entitled to (i) a severance payment equal to two times the sum of his current annual base salary and highest annual bonus and (ii) a pro rata highest annual bonus. Mr. Brandt has indicated that he does not intend to remain with the Company following the consummation of the Offer and the Merger. Consummation of the Offer will constitute a change of control under Mr. Brandt’s employment agreement

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and Mr. Brandt would be entitled to terminate his employment agreement for good reason after the change of control. In the event that Mr. Brandt becomes subject to the excise tax under Section 4999 of the Code due to the application of Section 280G of the Code, he will be entitled to an additional “gross-up” payment such that he will be placed in the same after-tax position as if no such excise tax had been imposed.

This description of the Company’s employment agreement with Mr. Brandt is qualified in its entirety by reference to the full text thereof, which is attached as Exhibit (e)(7) hereto and is incorporated herein by reference.

The amounts set forth in the table below are estimates of the amounts payable to each of Messrs. Brandt, Dinh, Gilbert, Lippman, Price and Venditti if their employment with the Company is terminated, other than for cause, following consummation of the Offer. The amounts shown in these tables do not include distributions of plan balances under the Company’s non-qualified deferred compensation plan.

Potential Payments Upon Termination Following a Change in Control

												Total Payments
				Pro-Rata		Benefit						Following
Name	Severance			Bonus		Continuation		Other(1)		Gross-Up(2)		Termination
Peter Brandt President, Chief Executive Officer and Director	$	1,998,750		$	202,123	$	0	$	67,438	$	1,210,264	$	3,478,575
Michael D. Price Vice President and Chief Financial Officer	$	1,062,777	(2)	$	80,041	$	45,909	$	86,059		n/a	$	1,274,786
Richard P. Gilbert Vice President — Operations	$	780,000		$	72,764	$	33,447	$	71,859		n/a	$	958,070
Steven M. Dinh Vice President and Chief Scientific Officer	$	901,230		$	86,134	$	47,278	$	82,288		n/a	$	1,116,928
Joel S. Lippman, M.D. Vice President — Clinical Development and Chief Medical Officer	$	976,172		$	97,073	$	13,560	$	100,204		n/a	$	1,187,009
Anthony Venditti Vice President — Marketing and Sales	$	926,744		$	96,629	$	11,683	$	81,932		n/a	$	1,116,988

(1)	Includes continuing perquisites, certain benefits under the Company’s 401(k) plan, accrued vacation and outplacement services.
(2)	The calculation of the gross-up payment takes into account estimated compensation payable following a change of control that would qualify as reasonable compensation for the non-competition covenant.
(3)	Includes a grossed-up stipend payment of $81,627 and a Cost of Living Adjustment of $73,750.

Effect of the Offer and Merger on Certain Equity Awards.  Pursuant to the Merger Agreement, as of the Effective Time each outstanding Equity Award granted under the Company’s 1999 Long-Term Incentive Plan, as amended, and the Company’s 2009 Equity Incentive Plan (collectively, the “Equity Award Plans”), without regard to the extent then vested or exercisable, will be cancelled and the holder of such Equity Award will become entitled to receive an amount in cash equal to (a) in the case of unexercised stock options and SARs, the excess, if any, of the Offer Price minus the exercise price per Share subject to the stock option or SAR, multiplied by the number of Shares subject to the option or SAR immediately prior to the Effective Time, and (b) in the case of outstanding restricted Shares and restricted stock units, the Offer Price for each such restricted Share or restricted stock unit held. All outstanding and unexercised Equity Awards held by the directors and executive officers of the Company are expected to be cancelled and converted in accordance with the foregoing.

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The following table sets forth, as of July 23, 2009, the cash consideration that each executive officer and non-employee director would be entitled to receive for his or her outstanding Equity Awards at the Effective Time pursuant to the Merger Agreement.

	Offer		Offer
	Price Payable		Price Payable
	for Stock		for Restricted
Name	Options/SARs		Shares		Total
Peter Brandt President, Chief Executive Officer and Director	$	3,765,808	$	3,024,995	$	6,790,803
Jeffrey F. Eisenberg Executive Vice President	$	787,120	$	30,278	$	817,398
Michael D. Price Vice President and Chief Financial Officer	$	522,673	$	0	$	522,673
Richard P. Gilbert Vice President — Operations	$	490,360	$	0	$	490,360
Steven M. Dinh Vice President and Chief Scientific Officer	$	458,669	$	0	$	458,669
Joel S. Lippman M.D. Vice President — Clinical Development and Chief Medical Officer	$	623,871	$	0	$	623,871
Anthony Venditti Vice President — Marketing and Sales	$	670,988	$	0	$	670,988
Wayne P. Yetter Chairman of the Board	$	46,800	$	186,599	$	233,399
John G. Clarkson M.D. Director	$	0	$	150,480	$	150,480
Donald A. Denkhaus Director	$	0	$	150,480	$	150,480
Pedro P. Granadillo Director	$	0	$	150,480	$	150,480
Francois E. Nader M.D. Director	$	0	$	180,560	$	180,560
Phillip M. Satow Director	$	0	$	150,480	$	150,480
Robert G. Savage Director	$	0	$	150,480	$	150,480

Arrangements with Parent, Holdings, Purchaser or their Respective Executive Officers, Directors or Affiliates.

Interests of Parent in the Company.  Parent is currently the beneficial owner of 1,240,000 Shares, representing approximately 4.9% of the Company’s outstanding Shares, and has been a stockholder of the Company since 2002.

Confidentiality Agreement.  On June 25, 2008, the Company and Parent entered into a confidentiality agreement (the “Confidentiality Agreement”) in connection with ongoing discussions regarding a possible collaborative transaction or transactions between the parties, under which each party agreed to keep certain information concerning the other party which is furnished by or on behalf of the other party, and to use such information solely for the purposes of evaluating a possible negotiated transaction. Under this agreement, the parties also agreed that for a period expiring on the earlier of (a) June 25, 2010 and (b) the date of any public announcement of a partnership or collaboration agreement entered into between the parties, neither party would, among other things, purchase five percent or more of any class of securities of the other party registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), unless specifically invited in writing to do so

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by the other party. This description of the Confidentiality Agreement is qualified in its entirety by reference to the full text of that agreement, which is attached as Exhibit (e)(4) hereto and is incorporated into this Item 3 by reference.

Exclusivity Agreement.  The Company and Parent entered into an exclusivity letter agreement, dated June 4, 2009 (the “Exclusivity Agreement”), in connection with Parent’s commencement of its due diligence investigation of the Company and the negotiation of the Merger Agreement. The Exclusivity Agreement provides, among other things, that for a period ending July 1, 2009, the Company shall not, nor shall it permit any of its officers, directors, agents, advisors, representatives or affiliates to, directly or indirectly solicit, initiate or knowingly encourage, enter into any agreement or understanding with respect to, or participate in any discussions regarding, or furnish to any person information with respect to or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or that could reasonably be expected to lead to, the acquisition of the Company. This description of the Exclusivity Agreement is qualified in its entirety by reference to the full text of that agreement, which is attached as Exhibit (e)(5) hereto and is incorporated into this Item 3 by reference.

Merger Agreement.  The summary of the Merger Agreement and the description of the conditions of the Offer contained in Sections 11 and 15, respectively, of the Offer to Purchase are incorporated into this Item 3 by reference. Such summary and description are qualified in their entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit (e)(1) hereto and is incorporated into this Item 3 by reference.

The Merger Agreement governs the contractual rights among the Company, Parent, Holdings and Purchaser in relation to the Offer and Merger. The Merger Agreement has been filed as an exhibit to this Statement to provide you with information regarding the terms of the Merger Agreement and is not intended to modify or supplement any factual disclosures about the Company in its public reports filed with the SEC. In particular, the Merger Agreement and any summary of its terms set forth in, or incorporated by reference into, this Statement are not intended to be, and should not be relied upon as, disclosures regarding any facts or circumstances relating to Noven. The representations and warranties contained in the Merger Agreement have been negotiated with the principal purpose of establishing the circumstances in which the Purchaser may have the right not to consummate the Offer, or in which a party may have the right to terminate the Merger Agreement if the representations and warranties of the other party prove to be untrue, due to a change in circumstance or otherwise, and to allocate risk between the parties, rather than establish matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from that generally applicable to stockholders of the Company.

Employment Agreements Following the Merger.  On July 14, 2009, and as a condition to Hisamitsu’s willingness to enter into the Merger Agreement, the Company entered into an agreement (the “Employment Agreement”) with Jeffrey F. Eisenberg, currently the Executive Vice President of the Company and President of Novogyne Pharmaceuticals, the Company’s joint venture with Novartis Pharmaceuticals Corporation, which amended and restated Mr. Eisenberg’s existing employment agreement with the Company. When the Employment Agreement becomes effective, Mr. Eisenberg will serve as the President and Chief Executive Officer of the Company and will report solely to the Board of Directors of the Company and the Chief Executive Officer of Parent.

The Employment Agreement becomes effective as of the earlier of the Effective Time and the first business day following the day on which representatives of Hisamitsu hold a majority of seats on the Company’s board of directors (the “Start Date”), and expires on the second anniversary of the Start Date. When effective, the Employment Agreement will supersede the prior letter agreement and change of control agreement between Mr. Eisenberg and the Company, provided that the Employment Agreement will have no force or effect if the Merger Agreement is terminated, if Hisamitsu owns less than a majority of the Shares following the consummation of the Offer or if a third party unaffiliated with Hisamitsu owns a majority of the Shares. On the second anniversary of the Start Date and each annual anniversary date thereafter, the term of the Employment Agreement will automatically be extended for a one-year period, unless either party delivers written notice at least 60 days prior to such anniversary.

Mr. Eisenberg will receive an annual base salary of $475,000, subject to annual review for merit increases, which base salary may not be decreased. He will be entitled to participate in the Company’s annual incentive bonus plan, with annual target incentive bonuses for years after 2009 of at least 75% of his annual base salary. Within

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60 days of the Effective Time, the Company will establish a long-term incentive plan that is consistent with the terms and conditions agreed to between the Company and Hisamitsu and in which Mr. Eisenberg will participate.

If Mr. Eisenberg is terminated without cause or if he terminates the agreement for good reason during the two-year period following the Start Date, he will receive a lump sum payment equal to the sum of (i) two times the sum of (x) his annual base salary as in effect as of the date of termination and (y) his highest recent bonus, and (ii) his highest recent bonus prorated for the year of termination. He will also receive continued medical, welfare and fringe benefits for the remainder of the two-year period following the Start Date and outplacement services for one year at the highest level provided pursuant to Company plans, if such plans are in effect.

If Mr. Eisenberg is terminated without cause or if he terminates the agreement for good reason after the two-year period following the Start Date, he will receive a lump sum payment equal to 18 months of his annual base salary as in effect as of the date of termination and a prorated bonus for the year of termination, such bonus to be paid at the time it would have been paid had his employment continued. Mr. Eisenberg will be required to execute a waiver and release of claims to receive any severance benefits that are payable upon a termination without cause or for good reason.

If Mr. Eisenberg is terminated due to his death or Disability (as defined in the Employment Agreement), he will receive a prorated bonus for the year of termination, such bonus to be paid at the time it would have been paid had his employment continued. If the Company declines to extend the term of the Employment Agreement, Mr. Eisenberg’s employment will terminate at the end of then-current term of the Employment Agreement and it will be treated as if he were terminated without cause.

Mr. Eisenberg will be subject to 18-month non-competition, non-solicitation, non-disruption and no-hire covenants following the termination of his employment for any reason and will be entitled to a full gross-up for any payments due as a result of the application of Section 280G of the Code.

The foregoing description of the Employment Agreement is qualified in its entirety by reference to the full text of the Employment Agreement, which is attached as Exhibit (e)(8) hereto and is incorporated into this Item 3 by reference.

In addition to the Employment Agreement with Mr. Eisenberg described above, Parent has informed the Company that it currently intends to retain all of the other members of the Company’s current management who wish to remain with the Surviving Corporation following the Effective Time. As part of these retention efforts, Parent may enter into employment or consultancy compensation, severance or other employee or consultant benefit arrangements with the Company’s executive officers and certain other key employees; however, there can be no assurance that any other party will reach and/or execute a definitive agreement. These matters are subject to negotiation and discussion and no terms or conditions have been finalized. Any such arrangements are currently expected to be entered into at or prior to the Effective Time and would not become effective until the Effective Time.

Representation on the Company’s Board.  The Merger Agreement provides that, promptly upon the payment by Purchaser for any Shares accepted for payment pursuant to the Offer, Purchaser will be entitled to designate such number of directors on the Board as will give Purchaser, subject to compliance with Section 14(f) of the Exchange Act, representation on the Board equal to at least that number of directors, rounded up to the next whole number, which is the product of (a) the total number of directors on the Board (giving effect to the directors elected pursuant to this provision) multiplied by (b) the percentage that (i) such number of Shares so accepted for payment and paid for by Purchaser plus the number of Shares otherwise owned by Parent, Holdings, Purchaser or any other subsidiary of Parent bears to (ii) the number of such Shares outstanding and the Company shall, at such time, cause Purchaser’s designees to be so elected. The Company has agreed, subject to applicable law, to take all action necessary to effect any such election or appointment, including, at the option of Purchaser, either increasing the size of the Board or obtaining the resignations of such number of its current directors.

The Merger Agreement provides further that in the event Purchaser’s designees are elected or appointed to the Board, until the Effective Time the Board will have at least three directors who were directors on the date of the Merger Agreement and who will be independent for purposes of Rule 10A-3 under the Exchange Act (the “Continuing Directors”). If Purchaser’s designees to the Board constitute at least a majority thereof prior to the Effective Time, each of the following actions may be effected only if such action is approved by a majority of the

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Continuing Directors: (x) amendment or termination of the Merger Agreement, (y) exercise or waiver of any of the Company’s rights under the Merger Agreement, or (z) extension of the time for performance of any obligation of Parent, Holdings or Purchaser under the Merger Agreement.

Post-Closing Employee Benefit Arrangements.  Pursuant to the Merger Agreement, for a period of one year following the Effective Time, Parent will provide or cause the Surviving Corporation to provide to employees of the Company and the Company’s subsidiaries who remain in the employment of the Surviving Corporation and its subsidiaries (the “Continuing Employees”): (i) salary and incentive opportunities that are substantially comparable in the aggregate (including value attributable to equity-based compensation) to those provided to such employees during the 12-month period prior to the Effective Time and (ii) employee benefits that are substantially comparable in the aggregate to those provided to such employees by the Company and its subsidiaries during the 12-month period ending immediately prior to the Effective Time; provided, however, that neither Parent nor any of its subsidiaries shall have any obligation to provide equity or equity-based compensation to such employees. Because it is not a listed company in the United States, Parent does not anticipate providing any of the employees of the Company with equity-based compensation following the Effective Time. Instead, Parent anticipates adopting a cash-based incentive program to provide long-term incentives to such employees.

To the extent that any employee benefit plan of Parent or its subsidiaries is made available to any Continuing Employee, on or following the Effective Time, Parent will cause credit for all service with the Company and its subsidiaries prior to the Effective Time to be granted to such Continuing Employee (as well as service with any predecessor employer of the Company or any such subsidiary), to the extent such service was recognized by the Company or such subsidiary for similar or analogous purposes prior to the Effective Time (such service, “Pre-Closing Service”) for all purposes, including determining eligibility to participate, level of benefits, vesting and benefit accruals; provided, however, that such Pre-Closing Service will not be recognized if such recognition would result in any duplication of benefits for the same period of service, or if service of employees of the Company or any subsidiary other than the Continuing Employees is not so credited.

With respect to any welfare plan maintained by Parent or any of its subsidiaries in which any Continuing Employee commences to participate after the Effective Time, Parent will, and will cause the Surviving Corporation to, (i) waive all limitations as to preexisting conditions and exclusions with respect to participation and coverage requirements applicable to such employees to the extent such conditions and exclusions were satisfied or did not apply to such employees under the welfare plans of the Company and its subsidiaries prior to such commencement of participation and (ii) provide each Continuing Employee with credit for any co-payments and deductibles paid in the plan year of such commencement of participation in satisfying any analogous deductible or out-of-pocket maximum requirements to the extent applicable under any such plan.

In addition, the Company will use its reasonable best efforts to amend the trust agreement for its nonqualified deferred compensation plan to provide that the transactions contemplated by the Merger Agreement will not constitute a change in control under the trust agreement.

Item 4.   The Solicitation or Recommendation.

Recommendation of the Board of Directors.

At its meeting held on July 13, 2009, the Board of Directors unanimously (a) approved and declared advisable the Merger Agreement, Offer, Merger and the other transactions contemplated by the Merger Agreement, (b) determined that the terms of the Offer, Merger and other transactions contemplated by the Merger Agreement are fair to and in the best interests of the Company’s stockholders, and (c) recommended that the holders of Shares accept the Offer and tender their Shares pursuant to the Offer and, if required by applicable law, vote for the adoption of the Merger Agreement.

Accordingly, the Board of Directors unanimously recommends that holders of Shares accept the Offer, tender their Shares in the Offer and, if required by applicable law, adopt the Merger Agreement and thereby approve the Merger and the other transactions contemplated by the Merger Agreement.

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A copy of the letter to the Company’s stockholders communicating the Board’s recommendation dated July 23, 2009, and a joint press release, dated July 14, 2009, issued by the Company and Hisamitsu, announcing the Offer and Merger, are attached hereto as Exhibit (a)(3) and (a)(4), respectively, and are incorporated into this Item 4 by reference.

Background of the Offer and Merger.

As part of Noven’s publicly disclosed business strategy, from time to time the Company’s management and Board have considered and assessed various strategic alternatives and collaborations potentially available to the Company. These alternatives have included, among other things, a variety of strategies to grow and expand the Company’s business and operations through collaborative arrangements and agreements with third parties for the marketing and sale of its products and the development of its pipeline, as well as acquisitions, joint ventures and business combinations. As such, the Board meets regularly with members of management and outside advisors in order to conduct strategic planning and review sessions and keep the directors generally apprised of any ongoing discussions with third parties, and in order for the Board to give management direction and authorization with respect to these discussions and other potential business strategies.

Representatives of Hisamitsu and Noven have engaged in discussions from time to time with respect to an array of potential collaborations, including, among other things, contract manufacturing agreements, product development and license agreements and a broad product development and commercialization joint venture over approximately the last eight years. Over the course of these discussions, Hisamitsu had the opportunity to conduct a significant amount of preliminary due diligence with respect to the Company, focused primarily on the Company’s existing transdermal products and pipeline, and which also included tours of the Company’s manufacturing facilities, a limited review of the Company’s oral therapeutics business, and introductions to senior members of the Company’s management. In 2007, the companies entered into a confidentiality agreement as part of these discussions and negotiations, but no agreement, arrangement or understanding was reached by the companies during the time period covered by this confidentiality agreement.

In 2008, the companies entered into another confidentiality agreement, described in Item 3 above, as renewed discussions between the companies had progressed toward a potential strategic collaboration. Representatives of the Company and Hisamitsu were in contact intermittently throughout 2008 and the beginning of 2009 as they continued to discuss and negotiate a potential collaborative transaction; however, these discussions had been narrowed from the initial consideration of a broad range of potential collaborative projects to discussions regarding a manufacturing contract for a single product. At no time during the discussions which took place during this time period did Hisamitsu or Noven propose an acquisition of Noven by Hisamitsu.

On February 5, 2009, the Company’s management and Board met for a regularly scheduled strategic planning session and invited a financial consultant to this meeting to assist the Board and management in their review of the Company’s market position, forecasts projected by management and alternative scenarios for the Company over the next three to five years and to advise management and the Board regarding alternative strategies the Company might consider during this period. During this session, the Board, members of management and the financial consultant reviewed alternative forecast scenarios for the Company’s current products and pipeline. The Board also discussed and assessed the potential risks to the Company’s business, including the risk that the Company may not find a suitable solution to the peel force issue relating to its Daytrana product and the risk of a generic challenge to its products and the potential implications of any such challenge to the extension of Novogyne Pharmaceuticals (“Novogyne”), the Company’s joint venture with Novartis Pharmaceuticals Corporation (“Novartis”). They also reviewed a variety of strategic alternatives which might be available to the Company and discussed the potential benefits of pursuing acquisitions or business combinations and of continuing in its current structure on a stand-alone basis. Following these discussions, the Board concluded that the near-term risks facing the Company were significant and that the Company’s pipeline was predominantly early stage and any potential upside therefrom would not be realized for a number of years, leaving the Company vulnerable should any of these near-term risks be realized. Accordingly, the Board accepted management’s plan to take appropriate steps to address the financial implications of these risks by focusing on business development activities and new products. The Board also determined at that time that major acquisitions and business combinations did not seem likely to maximize value to stockholders and therefore directed management to continue to execute the Company’s current business strategy on a stand-alone basis rather than diverting time or resources to the investigation of potential acquisitions or business

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combinations. The Board also directed management, however, in consultation with the Chairman of the Board, to respond as appropriate to any unsolicited proposals received.

On March 25, 2009, Peter Brandt, the Company’s President and Chief Executive Officer, received a letter from Hirotaka Nakatomi, President and Chief Executive Officer of Hisamitsu, requesting a meeting to discuss an unspecified transaction proposal. Mr. Brandt and other members of management discussed the letter with Wayne P. Yetter, the non-executive Chairman of the Company’s Board, and Mr. Yetter determined that it was consistent with the Board’s strategic planning session in February for Mr. Brandt to accept the meeting invitation.

On March 31, 2009, Hisamitsu indicated that it would like a representative of Lazard Fréres K.K. (“Lazard”) to attend the meeting as its financial advisor and clarified that Hisamitsu wished to discuss a potential combination of the Company and Hisamitsu. Messrs. Brandt and Yetter agreed that, given this request, it was advisable to engage and consult with outside financial and legal advisors prior to the meeting. At this time, members of management selected Cravath, Swaine & Moore LLP (“Cravath”) as the Company’s legal advisor and J.P. Morgan Securities Inc. (“J.P. Morgan”) as the Company’s financial advisor, and engaged these firms to assist the Company in analyzing the letter from, and responding to, Hisamitsu.

On April 14, 2009, the meeting among representatives of each of the Company, Parent, Lazard and J.P. Morgan took place in New York. During this meeting, representatives of Parent gave a presentation to Noven’s management and delivered a letter from Mr. Nakatomi to Mr. Brandt containing a non-binding proposal for an acquisition of all the outstanding Shares of the Company at an offer price of $14.00 per Share in cash, subject to the execution of an exclusivity agreement and the satisfactory completion of due diligence. Mr. Nakatomi stated that Hisamitsu had sufficient cash on hand to complete the proposed acquisition and had established a credit line it could draw down if necessary. He also noted that if the transaction was consummated Hisamitsu intended to retain members of the Company’s current management and to expand each company’s current business into the other’s markets and diversify their respective product portfolios. The letter noted that the proposed offer price represented a 37.7% premium to the Company’s Share price of $10.17 on April 13, 2009, and a 41.1% premium to its one-month average price of $9.92. Mr. Nakatomi also explained his desire for Hisamitsu to commence due diligence by the end of April, to complete its due diligence in four weeks, and to execute a definitive agreement by the end of June. He proposed to structure the transaction as a cash tender offer followed by a second-step merger, which he believed could be completed by the end of July. The proposal also included a request for a 45-day exclusivity period and Mr. Nakatomi requested a response from Mr. Brandt regarding exclusivity that day or the following week. Mr. Brandt explained that the Company had not been exploring a sale at that time and that he would take Hisamitsu’s offer to the Board for consideration, after which time he would also respond to the request for an exclusivity agreement.

Following this meeting, representatives of each of Noven, Cravath and J.P. Morgan discussed with Mr. Yetter the proposal set forth in the letter from Mr. Nakatomi. Management then scheduled a special meeting of the Board to take place on April 15 for the purpose of informing the other directors of the receipt of the proposal from Hisamitsu and J.P. Morgan was instructed to begin an analysis of the Company on a stand-alone basis in consultation with management for presentation to the Board.

On April 15, 2009, a special telephonic meeting of the Board was held and all directors, as well as certain members of management and representatives from the Company’s legal and financial advisors, attended the meeting. During the meeting, Messrs. Brandt and Yetter informed the other directors that certain members of management and a representative of J.P. Morgan had met with representatives of Hisamitsu and Lazard in response to a recent inquiry from Hisamitsu and summarized the presentation given by Mr. Nakatomi, including the terms of the proposal received at the meeting. The Board briefly reviewed the history of the Company’s discussions and negotiations with Hisamitsu, Hisamitsu’s business, assets and technology, including its transdermal technology, and its perceived interest in entering U.S. markets. Mr. Brandt explained the timing that Mr. Nakatomi had suggested for the proposed transaction and that he had declined Mr. Nakatomi’s request to enter into an exclusivity agreement the day of the meeting, advising him that he would respond to that request by the end of the month after consulting with the other directors. He also briefly updated the directors with respect to recent developments at the Company and explained that management was revising the Company’s forecasts in light of these developments and would be working with J.P. Morgan on a Company valuation to assist in the Board’s consideration of the Hisamitsu proposal at an extended in-person meeting to be scheduled for the following week.

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On April 23, 2009, a special in-person meeting of the Board was held to discuss in detail the proposal from Hisamitsu, any other strategic opportunities available to the Company and the prospects of the Company on a stand-alone basis. Representatives from Cravath and J.P. Morgan also attended the meeting, as well as various members of Noven’s management team. At this meeting, the Board received presentations by members of management with respect to updated forecasts for the Company, and from J.P. Morgan with respect to its preliminary valuation of the Company. Messrs. Brandt and Yetter summarized the acquisition proposal in greater detail, commenting on Hisamitsu’s likely strategic purposes for pursuing an acquisition of the Company, and the Board considered and discussed the proposal at length, including management’s, Cravath’s and J.P. Morgan’s views on whether Hisamitsu would be likely to increase its proposed offer price. The directors also consulted with J.P. Morgan regarding its views with respect to Parent’s interest in an acquisition of the Company and other companies Hisamitsu would potentially be interested in acquiring, and J.P. Morgan noted that the representatives of Hisamitsu had indicated during the April 14, 2009 meeting that they were focused on the Company specifically, particularly because of its transdermal technology platform and the opportunity it presented for Hisamitsu to gain access to U.S. markets.

The Board then discussed the possibility of approaching other potential merger partners prior to or concurrently with responding to Hisamitsu’s offer, including the risks associated with doing so, such as the possibility of information leaks which might start marketplace rumors and cause Hisamitsu to rescind its offer, and of providing confidential technical and other business information to potential competitors. The directors also consulted with management and J.P. Morgan regarding their views on whether various types of companies, including specialty pharmaceutical, transdermal delivery and large pharmaceutical companies, might be interested in an acquisition of the Company. The Board discussed a number of potential counterparties and management advised the directors that, at that time, Parent was the only company likely to have a sincere interest in an acquisition of 100% of the Company, but that the Board might also consider Company A, as it had an interest in transdermal technology and had approached the Company in the past. In addition, the directors consulted with management and Cravath regarding whether Novartis should be contacted regarding either an acquisition of the Company or the implications of an acquisition by a third party on the Novogyne joint venture. Representatives of J.P. Morgan and management advised the directors that given, among other things, the Company’s weak short-term cash flow prospects and the competitive risks to the Company’s products, there would likely be a very limited number of strategic buyers, if any, with an interest in acquiring the Company, and that the interest of financial buyers was also likely to be low given current market conditions. The Board noted that, as Hisamitsu appeared to be focused on Noven’s transdermal technology platform and access to U.S. markets, it might be less concerned with the Company’s near-term risks than other potential acquirors.

The Board was also advised by management and Cravath that alerting Novartis to the possibility of a transaction at that time might disrupt the Novogyne joint venture and any negotiations with Hisamitsu if Novartis was not interested in pursuing an acquisition of the entire Company and/or did not approve of a change in ownership or control of its joint venture partner. The Board also considered Novartis’ ability to trigger the “buy/sell” provision in the Novogyne joint venture agreement at any time, which would force the Company to decide whether to sell its portion of the joint venture or to purchase Novartis’ portion in a relatively short time period. The Board also discussed and took into consideration the provisions of the Novogyne joint venture agreement that might be relevant to a change in control transaction. Based on these discussions and input from its advisors, the Board concluded that it was premature at that stage to conduct a market check for alternative acquirors.

After further evaluation of Hisamitsu’s proposal and management’s revised forecasts for the Company, the Board determined that the proposal did not present a sufficiently compelling value to persuade it to enter into exclusive negotiations with Hisamitsu at that time. The Board therefore directed management to convey to Parent that the proposal it submitted was not acceptable to the Board and to extend an invitation to Parent to a follow up meeting with management in order that they might present certain information not previously available to Parent that, in management’s judgment, would enable it to increase its offer price. In addition, if Hisamitsu was not willing to increase its offer price, the Board authorized management, in consultation with Mr. Yetter, to direct J.P. Morgan to contact Company A to inquire as to its potential interest in an acquisition of the Company.

On the evening of April 23, 2009, representatives of J.P. Morgan contacted Lazard to convey the directive delivered by the Board at the meeting earlier that day. The representatives from Lazard stated that they believed Hisamitsu would likely accept an invitation to such a meeting and asked for a written letter that could be delivered to

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Hisamitsu management with the information J.P. Morgan had conveyed, which was sent the following day. On April 27, 2009, J.P. Morgan received a letter from Lazard indicating that the Hisamitsu team would welcome the opportunity to attend the presentation described in J.P. Morgan’s letter and suggesting that the meeting take place over two days, beginning on May 12, 2009.

On May 12 and 13, 2009, representatives of Parent participated in a video conference with members of the Company’s senior management. Representatives of Lazard and J.P. Morgan were also present during the conference. During the conference, Noven management delivered a presentation addressing the sustainability and growth opportunities of the Company’s existing business, elements of the Company’s pipeline which had not previously been disclosed publicly, undisclosed next generation platform technology and intellectual property in development, opportunities to apply the Company’s technology to Hisamitsu’s product line and the Company’s cost structure, including public company costs. The presentation emphasized the Company’s historical performance, strategy, value-drivers, future opportunities for growth in each of the companies’ current markets, and potential synergies to be obtained from a combination of the companies. At the conclusion of the presentation, management informed Hisamitsu that the Company’s Board would be holding regularly scheduled meetings on May 20 and 21, 2009, and requested that any revised proposal be submitted prior to May 20 so that the Board could consider such proposal at these meetings.

On May 19, 2009, Mr. Brandt received a letter from Hisamitsu containing a revised proposal with an offer price of $15.50 per Share in cash, and otherwise subject to the same terms as those set forth in the letter containing the initial offer. The letter noted the premium of 44.3% to the Company’s May 18, 2009 closing Share price of $10.74, and the 49.4% premium to the Company’s one-month average Share price of $10.38, and conveyed Hisamitsu’s desire to proceed rapidly and exclusively in working toward a definitive agreement.

Representatives from Lazard contacted J.P. Morgan the next morning to confirm receipt of the revised offer letter and to inquire as to the sufficiency of the increased offer price. At the direction of management, J.P. Morgan informed Lazard that the Board would likely continue to be disappointed in the offer price and explained that the Board would be taking into account the valuation information and financial forecasts for the Company it had recently reviewed, as well as the optimism of management with respect to the Company’s current pipeline.

On May 20, 2009, at the Company’s Board meeting, members of management advised the Board of the receipt of the revised offer and the Board discussed, with input and advice from the Company’s legal and financial advisors, the terms thereof. Representatives of J.P. Morgan supplemented its prior valuation presentation to the Board to reflect updated management forecasts which were based on the latest information available to management. The Board reviewed the valuation materials and noted that the proposed offer price was above the mid-point of the Company valuation suggested by the analysis. The Board and management discussed the near-term regulatory and competitive risks to the Company, the various execution challenges facing the Company in maximizing value for stockholders from the Company’s pipeline and the potential long-term upside for the Company. The Board again consulted with members of management, J.P. Morgan and Cravath regarding the desirability of approaching other potential merger partners, including in particular Novartis and Company A. It was their continuing view that there were few potential buyers and it was unlikely that any would pay a higher price, considering the business risks the Company faced, including risks related to the Daytrana peel force issue, potential generic competition to existing products, the lack of new products that could be brought to market in the short-term, and the buy/sell provision in the Novogyne joint venture agreement. The Board weighed the risks associated with these actions against the potential for an increased offer price from Hisamitsu if the Board authorized management to grant exclusivity to Hisamitsu. As part of these discussions, J.P. Morgan presented its evaluation of the discussions and negotiations up to that point, and provided guidance with respect to potential response strategies, including the possibility of Hisamitsu increasing its offer price in return for a grant of exclusivity. Mr. Brandt also confirmed for the other directors that since he joined the Company, no third parties with which the Company’s management had periodic business discussions, other than Parent, had expressed an interest in acquiring the Company. The Board then discussed with its advisors the potential disruption of the Company’s business if a potential transaction with Parent were to be leaked or publicly announced, and the directors expressed a desire to shorten the time period during which the Company might be at risk in terms of market disruptions caused by any such publicity.

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Based on the foregoing discussions, the Board determined to proceed with negotiations with Parent without engaging in a market check, as doing so was unlikely to result in a proposal superior to Parent’s and created a significant risk of long-term disruption to the Company’s business if a transaction were not to occur. In addition, the Board discussed the strategic planning session that took place in February and again expressed concern about the possibility of adverse developments in the near-term with respect to certain of the Company’s key products as well as the Company’s ability to withstand any such adverse developments at a time when its pipeline was predominantly early stage. However, given the perceived strategic value and market penetration opportunities that would be available to Parent if the proposed Offer and Merger were consummated, as well as the degree of the potential upside to management’s forecast scenarios, the Board directed management to respond to Hisamitsu with a counter-proposal of $17.00 per Share and to indicate the Company’s willingness to enter into a shortened exclusivity agreement at that price. The Board concluded that the shortened time period would address both Hisamitsu’s desire to complete the transaction rapidly, and the Board’s concerns regarding the risk of an information leak regarding transaction negotiations, and the distraction of management if it appeared that an agreement would not be reached. The Board also authorized management and J.P. Morgan, if appropriate, to use the requested grant of exclusivity as additional leverage to cause Hisamitsu to increase its offer price. The Board further directed management to consult with Mr. Yetter if Hisamitsu responded to this counter-proposal with an offer in the range of $16.00-$17.00 per Share, and authorized Messrs. Yetter and Brandt to determine whether to permit Hisamitsu to commence due diligence on an exclusive basis after such consultation if an offer at or above $16.00 per Share was received. Mr. Brandt sent a letter to Mr. Nakatomi later that day proposing an offer price of $17.00 per Share.

On May 22, 2009, the Company held its 2009 annual meeting of stockholders in New York City. Effective following this meeting, Sidney Braginsky retired from the Company’s Board and Francois Nader was appointed to fill Mr. Braginsky’s vacancy.

Between May 20 and May 27, 2009, representatives of J.P. Morgan and Lazard had several calls and discussions regarding the Company’s valuation and the strong desire by Hisamitsu to move forward in negotiations on an exclusive basis. Throughout these discussions J.P. Morgan encouraged Lazard to persuade Hisamitsu to increase its offer price and return with a final revised bid in return for exclusivity in order to address the concerns of both companies and come to an agreement on preliminary transaction terms as rapidly as possible.

On May 27, 2009, Mr. Brandt received another letter from Mr. Nakatomi containing a revised offer price of $16.50 per Share in cash, again subject to the same terms and conditions as the previous offers, except the letter again stated that a 45-day exclusivity period was required in return for the increased offer price. The letter also stated that Parent would expect the terms of the definitive acquisition agreement, particularly the amount of the termination fee and other “deal protection” terms, to reflect the full valuation reflected by Parent’s proposed offer price. Mr. Brandt consulted with Mr. Yetter, other members of management and the Company’s financial and legal advisors in order to discuss an appropriate response to the revised offer, including whether to again seek a higher price from Hisamitsu; however, given the Board’s concern regarding timing, it was agreed that Mr. Brandt should respond with a letter to Mr. Nakatomi indicating that the Board had reservations regarding the price, but had authorized Hisamitsu to commence due diligence in order to move the process forward.

Mr. Brandt sent a letter to Mr. Nakatomi later that day and attached an executed 30-day exclusivity agreement to the letter, indicating that if the terms thereof were acceptable, Mr. Nakatomi should execute the letter agreement in turn, at which point Hisamitsu would be granted access to a populated electronic data room in order to commence its due diligence. Mr. Brandt also sent an email to the other Board members to notify them of the revised offer, 45-day exclusivity request, and of the letter he had sent to Hisamitsu in response, including the counter-proposal for a 30-day exclusivity period.

On June 3, 2009, the Company granted access to an electronic data room to various representatives of Parent and its outside advisors as the parties and their respective advisors negotiated the final terms of the exclusivity agreement and coordinated the execution thereof, and over the next several weeks, Hisamitsu conducted its due diligence review. Cravath also sent the first draft of the Merger Agreement to Debevoise & Plimpton LLP (“Debevoise”), U.S. legal counsel for Parent, for review. From June 3, 2009 through July 13, 2009, the management teams and legal and financial advisors of Parent and the Company had several negotiations regarding the terms of

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the Merger Agreement and related documents. During that period, a number of drafts of the Merger Agreement and related documentation were negotiated and exchanged between the parties.

On June 8, 2009, the executed Exclusivity Agreement, effective until July 1, 2009, was delivered by the parties, as further described under Item 3 above.

On June 17 and 18, 2009, several representatives of Hisamitsu and its advisors visited Miami, Florida to perform an in-person review of the Company’s facilities and hold discussions with Company personnel and management.

On June 22, 2009 a special telephonic meeting of the Board was held and all directors, as well as the Company’s financial and legal advisors and certain members of management, attended the meeting. During the meeting, the Board was updated regarding the progress of Hisamitsu’s diligence review, the status of negotiations between the companies with respect to the proposed transaction and of the meetings planned between the Company’s management and advisors with their respective counterparts at Hisamitsu. At that time, an executive session of the non-employee directors of the Board was held with representatives of Cravath, and Cravath explained that Debevoise had informed Cravath that satisfactory employment arrangements with senior management, particularly Messrs. Brandt and Eisenberg, were an important element of the proposed transaction. Following this session, the non-employee directors authorized management to engage separate legal counsel in order for certain members of management to commence discussions and, if requested by Hisamitsu, negotiations with Hisamitsu with respect to potential post-closing employment arrangements with the Surviving Corporation.

On the morning of June 25, 2009, representatives of Lazard contacted J.P. Morgan to convey the message that Hisamitsu was considering reducing its offer price by $0.50 per Share due to concerns about certain contingent liabilities and reservations regarding the actual amount of public company cost savings following the consummation of the proposed transactions. Later that evening, after consulting with management, Mr. Yetter and Cravath, and at the direction of management and Mr. Yetter, J.P. Morgan informed Lazard that the Board had been considering asking for an increase to the proposed offer price and that, therefore, any price reduction would be unacceptable to the Board. Later that day, after conveying J.P. Morgan’s response to Hisamitsu, Lazard again contacted J.P. Morgan and reaffirmed the previous $16.50 per share offer price, noting, however, that Hisamitsu would not consider any requests to increase this price.

During the period of time from May 26, 2009 to July 6, 2009, the trading price of Noven’s common stock increased from $10.80 on May 26 to $14.61 on July 6, with particularly heavy volume on June 26. Representatives of Hisamitsu expressed concern to Noven and Cravath that this increase, and other movements in the trading price of Noven’s common stock, including the decrease from the July 7 closing price of $14.36 per Share to the July 10 closing price of $13.27 per Share, may have been attributable, at least in part, to rumors relating to the existence of negotiations between Hisamitsu and Noven.

On July 7, 2009, a telephonic meeting of the Board was held and all directors, as well as members of management and the Company’s financial and legal advisors, participated. The agenda for the meeting included the recent increase in the Company’s stock trading price and potential reasons therefor, an update from the Company’s advisors regarding the transaction progress and strategies for any potential increase in offer price before entering into a definitive merger agreement. The directors also discussed the strategy and approach with respect to its negotiations of the Merger Agreement, indicating that, in light of the near-term risks to the Company with respect to the potential for generic challenges to the Company’s products and the related potential impact on the Novogyne joint venture, as well as the other concerns expressed by the directors at the strategic planning session in February, deal certainty was a priority in these negotiations. The directors agreed that they would be willing to give greater deal protection to Hisamitsu in return for deal certainty and potentially a higher offer price. The Board discussed again with management and J.P. Morgan whether there was likely to be any third party interested in acquiring the Company and again discussed with management and Cravath whether notifying Novartis of the negotiations with Hisamitsu was likely to lead to a disruption of those negotiations. The directors also discussed the unblinding to the Company of the results from the Phase II clinical trial of the Company’s Mesafem product under development, proposed to have another telephonic meeting after these results were available for review and assessment, and reviewed the range of risks facing the Company’s business at that time, including the risk of negative results from the Mesafem clinical trial, the ongoing risk of a generic challenge or competition to certain of its key products and

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other products, and the risk that it may not find a suitable solution to the peel force issue relating to its Daytrana product. J.P. Morgan also reviewed with the Board an analysis of the stock trading history of the Shares in relation to a composite index of other specialty pharmaceutical companies. This analysis indicated that the price of the Shares had increased more than 30% in the preceding six months, while the specialty pharmaceutical composite index was substantially unchanged during the same period. At the conclusion of the meeting, management reviewed for the Board factors that could have led to the increase in the Company’s stock price, including post-earnings release demand, the initiation of coverage with a “buy” recommendation by Caris & Company, the annual rebalancing of the Russell indices, technical and momentum buying, and purchases in advance of anticipated results from the Mesafem Phase II clinical trial. Representatives of J.P. Morgan also explained that such a stock price movement often indicates that there has been a leak into the marketplace of a proposed transaction but that, based upon the information that was available to it, J.P. Morgan was not able to confirm whether there had been any such leak involving the Company.

On July 7 and 8, 2009, the legal representatives and advisors of each of Noven and Hisamitsu met in person in New York to negotiate and come to a preliminary agreement on the terms of the Merger Agreement, subject to a few outstanding items, including the size of the break-up fee and circumstances under which it would be payable, whether to include a material adverse effect condition to the Offer and any exceptions to the definition thereof, and the treatment of the potential trigger of the “buy/sell” provision in the Novogyne joint venture agreement with Novartis.

On July 8 and 9, 2009, representatives of Parent met with Messrs. Brandt and Eisenberg to discuss retention and post-closing employment matters. During these meetings, Mr. Brandt indicated that, after spending a great deal of time considering his professional objectives, he had determined that remaining with Noven as a subsidiary of Parent rather than an independent public company was inconsistent with these objectives, and therefore he was not interested in remaining with the Surviving Corporation for anything other than a transition period following the consummation of the proposed transactions. He also indicated that Mr. Eisenberg would be an appropriate candidate to take his place as President and Chief Executive Officer. The representatives of Hisamitsu expressed disappointment with Mr. Brandt’s decision, however, they continued discussions with Mr. Eisenberg, noting that Mr. Brandt’s decision might cause Hisamitsu to withdraw its offer to purchase the Company or decrease its proposed offer price. On the second day of these meetings, the representatives of Hisamitsu agreed to work toward an agreement on terms of an employment agreement whereby Mr. Eisenberg would assume the roles of President and Chief Executive Officer of Noven following the Offer and Merger if Hisamitsu determined to proceed with the proposed transaction, and would expect to finalize such terms prior to any public announcement of the proposed transaction. The discussions between Mr. Eisenberg and representatives of Hisamitsu continued throughout the following weekend, with the parties substantially reaching an agreement on terms on Sunday afternoon, July 12, 2009.

On July 10, 2009, a telephonic meeting of the Board was held and members of management as well as representatives of J.P. Morgan and Cravath attended the meeting. The meeting began with a report from Joel Lippman, M.D., Vice President — Clinical Development & Chief Medical Officer of the Company, regarding the positive results from the Phase II clinical trial for Mesafem. Dr. Lippman explained that the results were better than expected and that the expectations for Phase III trials were good. Management then explained that they expected to announce the results the following Tuesday after the data received had been satisfactorily assessed and confirmed, and updated the Board regarding the post-closing employment discussions between Hisamitsu and Messrs. Brandt and Eisenberg, explaining that discussions were ongoing between Mr. Eisenberg and Hisamitsu and that Hisamitsu would decide on the following Monday whether to proceed with the transaction in light of Mr. Brandt’s decision. The directors then engaged in a lengthy discussion with management regarding the impact of the Mesafem results and other current business information that might affect management’s projections. In addition, the Board discussed with J.P. Morgan how the revised projections were likely to affect the final valuation analysis of the Company. Representatives from Cravath then explained to the Board that the only significant outstanding issue with respect to the merger agreement negotiations with Hisamitsu and Debevoise was regarding which party would bear the risk of a generic challenge to the Company’s products during the period of time between executing the Merger Agreement and consummating the Offer and Merger. The directors discussed this and other risks to the Company at length and concluded that, particularly in light of the Mesafem results, they were not prepared to bear

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this risk unless Hisamitsu were to increase its offer price. Based on this conclusion, the Board directed J.P. Morgan to speak with Lazard to again seek an increased offer price and increased deal certainty relating to the risk of a generic challenge.

On the evening of July 10, 2009, representatives of J.P. Morgan contacted Lazard and informed its representatives that the Board wanted to increase the proposed offer price based on the positive Mesafem Phase II results. J.P. Morgan also explained that deal certainty continued to be a key issue for the Board. In return, Lazard explained that it did not think Hisamitsu would accept any increase in the offer price, but that some flexibility on deal certainty might be possible. In addition, Dr. Lippman spoke with the Lazard representatives in order to provide a brief overview of the results of the clinical trial for Mesafem and to express his willingness to review the data in more detail with Hisamitsu at any time.

Over the course of the next several days a number of conversations took place between representatives of Noven and Hisamitsu with respect to the Company’s request for an increase to the offer price, Hisamitsu’s consideration of a decrease to its offer price, the advisors’ respective assessments regarding the value of the Company and the outstanding issue in the draft of the merger agreement relating to deal certainty, among other things. On July 12, 2009, Lazard contacted J.P. Morgan to convey the message from Hisamitsu that its offer price of $16.50 per Share was its best and final offer and that if the Company continued to seek a higher offer price Hisamitsu would discontinue any further discussions with respect to the proposed acquisition of the Company. However, the Lazard representatives indicated that Hisamitsu would accept the terms of the material adverse effect condition in the Merger Agreement proposed by the Company, shifting to Parent the risk of any generic challenge to certain of the Company’s key products or adverse development with respect to the resolution of the peel force specifications for the Company’s Daytrana product.

On July 13, 2009, a meeting of the Board was held to discuss the proposed transaction. All the members of the Board were present, as well as members of management and representatives of J.P. Morgan and Cravath. At the meeting, management presented revised forecasts based on the Mesafem Phase II results and the latest information available to management on other items affecting management’s projections, including updates regarding prospects for pipeline products, the status of negotiations with potential strategic partners, and other internal business and strategic matters. J.P. Morgan then provided an overview of the process to date and updated the Board and members of management with respect to recent conversations with Lazard on behalf of Hisamitsu, including the report from Lazard that Hisamitsu’s final offer price was $16.50 per Share, that it was likely to discontinue further conversations with the Company regarding the proposed transaction if the Board continued to seek an increase to this offer price, and that Hisamitsu had offered to accept the Company’s terms with respect to the deal certainty issue in the merger agreement and otherwise finalize the terms of the proposed transaction. J.P. Morgan then reviewed with the Board an analysis of the proposed transaction from a financial point of view, including an updated valuation analysis based on the revised forecasts it had received from management as well as updated market information and transaction assumptions, including the Company’s latest available balance sheet information. J.P. Morgan advised the Board that, based on this information and analysis and subject to review of definitive documentation, it would be prepared to provide a written fairness opinion to the Board to the effect that, as of that date and based upon and subject to the matters set forth in the opinion, the Offer Price to be paid to holders of Shares (other than Parent and its affiliates) in the Offer and the Merger, was fair, from a financial point of view, to those holders. J.P. Morgan also reviewed with the Board a sensitivity analysis that showed the potential positive and negative impact on the Company’s valuation if certain of the assumptions made by management in preparing the financial forecasts were changed to reflect a more optimistic or pessimistic set of assumptions also provided by management, including uncertainties with respect to the Company’s ability to resolve the ongoing Daytrana peel force issue and the continued threat of a generic challenge to the Company’s products, which challenge would also put at risk the Company’s ability to continue and potentially extend the Novogyne joint venture beyond 2014 and continue or extend its relationships with other strategic partners. The Board also received a presentation from Cravath regarding the terms of the Merger Agreement. In the course of its deliberations, the Board considered a number of factors, including those described more fully below under the heading “Reasons for the Recommendation of the Board of Directors.”

Following this discussion, the Board unanimously (a) approved and declared advisable the Merger Agreement, Offer, Merger and the other transactions contemplated by the Merger Agreement, (b) determined that the terms of the Offer, Merger and the other transactions contemplated by the Merger Agreement are fair to and in the best

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interests of the Company’s stockholders, and (c) recommended that the holders of Shares accept the Offer and tender their Shares pursuant to the Offer and, if required by applicable law, vote for the adoption of the Merger Agreement. In addition, the compensation committee of the Board approved certain employee benefit matters including, among other things, the amendment and restatement of Mr. Eisenberg’s employment agreement, as described under Item 3 above.

On the morning of July 14, 2009, the Company, Parent, Holdings and Purchaser executed and delivered the Merger Agreement and Hisamitsu and the Company issued a joint press release announcing the execution of the Merger Agreement.

On July 23, 2009, Purchaser commenced the Offer.

Reasons for the Recommendation of the Board of Directors.

In evaluating the Merger Agreement and the Offer, Merger and the other transactions contemplated by the Merger Agreement, the Board of Directors consulted with the Company’s senior management, legal counsel and financial advisor and, in recommending that the Company’s stockholders tender all of their Shares pursuant to the Offer and, if required by applicable law, vote their Shares in favor of the adoption of the Merger Agreement, considered the following factors:

•  Financial Condition and Prospects of the Company.  The Board considered the current and historical financial condition, results of operations, business and prospects of the Company as well as the Company’s financial plan and prospects if the Company were to remain an independent company and the potential impact on the trading price of its Shares. The Board discussed the Company’s intrinsic value reflected by J.P. Morgan’s sum of the parts discounted cash flow analysis, and current financial plan, including the risks associated with achieving and executing the Company’s business plan, the impact of general economic market trends on the Company’s sale and the general risks of market conditions that could reduce the Company’s Share price, as well as the other risks and uncertainties discussed in the Company’s public filings with the SEC.

•  Risk/Return Profile.  The Board considered the significant near-term risks facing the Company, including uncertainties with respect to its ability to resolve the ongoing Daytrana peel force issue and the continued threat of a generic challenge to its products, which challenge would also put at risk the Company’s ability to continue and potentially extend the Novogyne joint venture beyond 2014 and continue or extend its relationships with other strategic partners, among other things. The directors also considered the lack of any meaningful late-stage pipeline products which might enable the Company to endure the realization of one or more of the near-term risks to the Company, and the benefit of shifting these and other near and long-term risks from the Company’s stockholders to Parent. In addition, the Board considered the risks associated with the execution of the products in the Company’s pipeline, the risk inherent in the development of any new pharmaceutical product, and the current expectation that, even if these pipeline products were to be successfully executed, the Company and its stockholders would not likely see the upside from these products for a number of years, leaving the Company with weak cash flow and earnings for the period of 2010 through 2012.

•  Transaction Financial Terms.  The Board considered the relationship of the Offer Price to the current and historical market prices of the Company’s Shares and the fact that the Offer Price was to be paid in cash, which would provide stockholders with the opportunity for liquidity and to receive a significant premium over the current and recent prices of the Shares. The Board reviewed historical market prices, volatility and trading information with respect to the Shares, including the fact that the Offer Price represented a premium of 22% over the closing price per Share on the Nasdaq Global Select Market on July 13, 2009, the last trading day before the execution of the Merger Agreement, and a premium of 43% over the 90-day average Share trading price.

•  Certainty of Value.  The Board considered the form of consideration to be paid to the stockholders in the Offer and the Merger and the certainty of the value of such cash consideration compared to stock or other

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forms of consideration. The Board also considered Parent’s financial position and ability to pay the Offer Price without the need for any external financing.

•  Strategic Alternatives.  The Board considered several potential alternatives to the acquisition by Hisamitsu, including the possibility of continuing to operate the Company as an independent entity and combinations with other merger partners, and the desirability and perceived risks of these and other alternatives, as well as the range of potential benefits to the Company’s stockholders of each of these alternatives. The Board also considered the guidance from management and its legal and financial advisors to the effect that traditional pharmaceutical companies were not likely to be interested in acquiring the Company for its transdermal technology when they could more easily and cost effectively access this technology through a partnership arrangement for one or more targeted products, that the terms of the Novogyne joint venture made an acquisition by a “top ten” pharmaceutical company very unlikely, that generic transdermal companies were not likely to be interested in acquiring the Company because its operations would be outside their business plans, that Novartis was not likely to be interested in the current operations of the Company other than the Novogyne joint venture (and in any event, would not likely be deterred from submitting a competing bid once the transaction was announced), and that, as a result of the consideration of the foregoing, Parent was most likely the best potential merger partner for the Company and a transaction with Parent could create the greatest value for its stockholders. The Board also considered the course of negotiations between the Company and Parent, which had resulted in a price per Share, payable in cash, that was approximately 18% higher than the original offer price proposed by Hisamitsu, as well as the guidance from Lazard that the Offer Price was Parent’s best and final offer.

•  Timing of Completion.  The Board considered the anticipated timing of the consummation of the transactions contemplated by the Merger Agreement, and the structure of the transaction as a cash tender offer for all outstanding Shares, which should allow stockholders to receive the Offer Price in a relatively short time frame, followed by the Merger in which stockholders (other than the Company, Parent, Holdings and Purchaser) who do not validly exercise appraisal rights will receive the same consideration as received by those stockholders who tender their Shares in the Offer. The Board considered that the potential for closing in a relatively short timeframe could also reduce the amount of time in which the Company’s business would be subject to a number of near-team risks, particularly with respect to generic challenges and competition, considered by the Board.

•  Terms of the Merger Agreement.  The Board considered the provisions of the Merger Agreement, including the respective representations, warranties, covenants and termination rights of the parties, and, in particular, the fact that the risk of a generic challenge to the Company’s key products or any adverse development with respect to the ongoing Daytrana peel force solution was shifted to Parent in the exceptions to the material adverse change clause, and that the Board could terminate the Merger Agreement to accept a superior proposal under certain circumstances. The Board also considered the likelihood that other parties, particularly Novartis, would be willing and able to pay a termination fee if any such party had an interest in acquiring the Company.

•  Opinion of the Company’s Financial Advisor.  The Board considered J.P. Morgan’s opinion, dated July 14, 2009, to the effect that, as of that date and based upon and subject to the matters set forth in the opinion, the Offer Price to be paid to holders of Shares (other than Parent and its affiliates) in the Offer and Merger was fair, from a financial point of view, to those holders (the full text of the written opinion of J.P. Morgan is attached as Annex I to this Statement).

The Board also considered and discussed a number of risks, uncertainties and other countervailing factors in its deliberations relating to entering into the Merger Agreement and the transactions contemplated thereby, including:

•  Impact on the Company’s Shareholders.  The Board considered the fact that, subsequent to the completion of the Merger, the Company would no longer exist as an independent public company and that the nature of the transaction as a cash transaction would prevent the Company’s stockholders from participating in future earnings or growth of the Company and from benefiting from any appreciation in value of the combined company.

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•  Operating Covenants.  The Board considered the potential limitations on the Company’s pursuit of business opportunities due to pre-closing covenants in the Merger Agreement whereby the Company agreed that it will carry on its business in the ordinary course in substantially the same manner as previously conducted and, subject to specified exceptions, will not take a number of actions related to certain assets or the conduct of its business without the prior written consent of Parent.

•  Effect of Disruption or Failure to Complete Transaction.  The Board considered the amount of time it could take to complete the Offer and the Merger, including the risk that either Novartis or an unexpected bidder could potentially disrupt the transaction or that a dispute might arise regarding any term of the Merger Agreement or the Company’s joint venture agreement with Novartis, and the possibility that the transactions contemplated by the Merger Agreement, including the Offer and Merger, might not be consummated, and that if the Offer and Merger are not consummated, the Company’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the transactions, the Company will have incurred significant transaction costs and disclosed a significant amount of confidential proprietary information to a primary market competitor, and the perception of the Company’s continuing business could potentially result in a loss of business partners and employees.

•  Potential Conflicts of Interest.  The Board was aware of the potential conflicts of interest between the Company, on the one hand, and certain of the Company’s executive officers and directors, on the other hand, as a result of the transactions contemplated by the Offer and Merger, as described in Item 3 above.

•  Alternative Proposals.  The Board considered the fact that the Company had not solicited bids from other potential buyers or conducted a market check or auction process, and considered the risks to the Company’s business and negotiations with Parent inherent in such a broader process, including the risks of seeking a higher offer price from Parent in return for granting it an exclusivity period.

The Board believed that, overall, the potential benefits to the Company’s stockholders of entering into the Merger Agreement outweighed the contemplated risks and therefore would provide the maximum value to the Company’s stockholders.

The foregoing discussion of information and material factors considered by the Board of Directors is not intended to be exhaustive, but it does describe all material factors considered. In view of the variety of factors considered in connection with its evaluation of the Merger Agreement, the Offer and the Merger, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the factors summarized above in reaching its recommendation. In addition, each individual member of the Board applied his own personal business judgment to the process and may have given different weight to different factors. Except as specifically described above, the Board of Directors did not reach any collective view that any individual factor described above either supported or did not support the overall recommendation of the Board.

Opinion of the Company’s Financial Advisor.

Pursuant to an engagement letter dated April 23, 2009 (the “J.P. Morgan Engagement Letter”), the Company retained J.P. Morgan to act as its financial advisor in connection with a potential strategic transaction. On July 14, 2009, J.P. Morgan rendered its written opinion to the Board to the effect that, as of that date and based upon and subject to the matters set forth in J.P. Morgan’s opinion, the Offer Price to be paid to holders of Shares (other than Hisamitsu and its affiliates) in the Offer and the Merger (together, the “Transaction”) was fair, from a financial point of view, to those holders.

The full text of the written opinion of J.P. Morgan, dated July 14, 2009, which sets forth the assumptions made, matters considered and limits on the review undertaken by J.P. Morgan in rendering its opinion, is attached to this Statement as Annex I. The Company encourages you to read the opinion carefully in its entirety. J.P. Morgan’s written opinion was addressed to the Board, was directed only to the fairness, from a financial point of view, of the Offer Price to be paid to holders of Shares (other than Hisamitsu and its subsidiaries affiliates) in the Transaction, and does not constitute a recommendation to any Company stockholder as to whether such stockholder should tender Shares in the Offer or how such stockholder should vote with respect to the Transaction or any other matter.

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The issuance of J.P. Morgan’s opinion has been approved by a fairness opinion committee of J.P. Morgan. The summary of the opinion of J.P. Morgan set forth herein is qualified in its entirety by reference to the full text of the opinion.

In arriving at its opinion, J.P. Morgan, among other things:

•  reviewed the Merger Agreement;

•  reviewed certain publicly available business and financial information concerning the Company and the industries in which it operates;

•  compared the proposed financial terms of the Transaction with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration received for such companies;

•  compared the financial and operating performance of the Company with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Shares and certain publicly traded securities of such other companies;

•  reviewed certain internal financial analyses and forecasts prepared by the management of the Company relating to its business, which forecasts included certain favorable and unfavorable contingencies, and discussed with the management of the Company its views as to the likelihood of such contingencies; and

•  performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of the management and representatives of the Company and Hisamitsu with respect to certain aspects of the Transaction, and the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with it by the Company or otherwise reviewed by or for it, and J.P. Morgan did not independently verify (nor did it assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct, and was not provided with, any valuation or appraisal of any assets or liabilities, nor did it evaluate the solvency of the Company or Hisamitsu under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to it or derived therefrom, J.P. Morgan assumed that such analyses and forecasts had been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan has also assumed that the Transaction and the other transactions contemplated by the Merger Agreement will be consummated as described in the Merger Agreement. J.P. Morgan has also assumed that the representations and warranties made by the Company and Hisamitsu in the Merger Agreement and the related agreements are and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and has relied on the assessments made by advisors to the Company with respect to such issues. J.P. Morgan has further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or on the contemplated benefits of the Transaction. J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of its opinion. It should be understood that subsequent developments may affect J.P. Morgan’s opinion and that J.P. Morgan does not have any obligation to update, revise, or reaffirm its opinion. J.P. Morgan’s opinion was limited to the fairness, from a financial point of view, of the Offer Price to be paid to the holders of Shares (other than Hisamitsu and its affiliates) in the proposed Transaction and J.P. Morgan expressed no opinion as to the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transaction. Furthermore, J.P. Morgan expressed no opinion with respect to the

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amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the consideration to be received by the holders of Shares in the Transaction or with respect to the fairness of any such compensation.

J.P. Morgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of the Company or any other alternative transaction.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with providing its opinion. Some of the financial analyses summarized below include information presented in tabular format. In order to fully understand J.P. Morgan’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s financial analyses. All market data used by J.P. Morgan in its analyses was as of July 10, 2009.

Transaction Overview.

Based upon the closing price per Share of $13.27 on July 10, 2009, which was the last full trading day prior to J.P. Morgan’s presentation to the Board on July 13, 2009, and the Offer Price of $16.50 per Share, J.P. Morgan noted, solely for reference purposes, that the Offer Price represented:

•  a premium of 24.3% over the closing price per Share on July 10, 2009 of $13.27;

•  a premium of 26.0% over the average closing price per Share for the 1-month period ending July 10, 2009;

•  a premium of 43.8% over the average closing price per Share for the 3-month period ending July 10, 2009;

•  a premium of 55.5% over the average closing price per Share for the 6-month period ending July 10, 2009;

•  a premium of 11.4% over the highest closing price per Share for the 52-week period ending July 10, 2009.

J.P. Morgan noted that the Company’s firm value based on the Offer Price of $16.50 per Share was approximately $358 million, based on an equity value of approximately $428 million, less cash and cash equivalents of approximately $70 million. J.P. Morgan also noted that the Company’s firm value based on the closing price per Share of $13.27 as of July 10, 2009, was approximately $268 million, based on an equity value of approximately $338 million, less cash and cash equivalents of approximately $70 million.

Historical Share Price Analysis.

J.P. Morgan reviewed, solely for reference purposes, the price performance of the Shares during the 52-week period ending July 10, 2009. J.P. Morgan noted that the low and high trading prices per Share during that period ending on July 10, 2009 were $7.54 and $14.88, respectively, compared to the closing price per Share of $13.27 on July 10, 2009 and the Offer Price of $16.50 per Share.

Analyst Price Targets.

J.P. Morgan reviewed, solely for reference purposes, the price targets for the Shares published by certain equity research analysts during the period from March 5, 2009 to June 23, 2009, which ranged from $9.00 to $16.50 per Share, compared to the closing price per Share of $13.27 on July 10, 2009 and the Offer Price of $16.50 per Share.

Selected Public Companies Analysis.

Using publicly available information, J.P. Morgan compared selected financial data of the Company with similar data for selected publicly traded companies that J.P. Morgan deemed to be relevant. The companies selected by J.P. Morgan were:

•  Alkermes, Inc.;

•  Allergan, Inc.;

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•  Biovail Corporation;

•  Cephalon, Inc.;

•  Endo Pharmaceuticals Holdings, Inc.;

•  Forest Laboratories, Inc.;

•  King Pharmaceuticals, Inc.;

•  Medicis Pharmaceutical Corporation;

•  Sepracor, Inc.;

•  Shire PLC;

•  Valeant Pharmaceuticals International; and

•  Warner Chilcott Ltd.

None of the companies utilized in the analysis were identical or directly comparable to the Company. Accordingly, a complete analysis of the results of the following calculations cannot be limited to a quantitative review of such results and involves complex considerations and judgments concerning the differences in the financial and operating characteristics of the selected companies compared to the Company’s and other factors that could affect the public trading value of the comparable companies and the Company.

Using publicly available information, J.P. Morgan reviewed for each of these companies:

•  firm value, which means the market value of common stock plus indebtedness and the book value of any minority interest minus cash and cash equivalents, as a multiple of estimated earnings before interest, taxes, depreciations and amortization (“EBITDA”), for the fiscal year 2009, which is referred to below as “2009E FV/EBITDA;”

•  firm value as a multiple of estimated revenue for the fiscal year 2009, which is referred to below as “2009E FV/Revenue;” and

•  stock price as a multiple of estimated earnings per share for the fiscal year 2009, which is referred to below as “2009E P/E.”

Using the multiples for the five companies that were deemed most relevant based on their operating and financial characteristics (Endo Pharmaceuticals Holdings, Inc.; Forest Laboratories, Inc.; King Pharmaceuticals, Inc.; Medicis Pharmaceutical Corporation; and Sepracor, Inc.), this analysis showed the following:

Benchmark	High			Low
2009E FV/EBITDA		5.0	x		3.5	x
2009 FV/Revenue		1.50	x		1.08	x
2009 P/E		13.1	x		5.9	x

J.P. Morgan then selected the following reference ranges of multiples for purposes of calculating the Company’s equity value per Share: 4.0x-5.0x for the 2009E FV/EBITDA multiple, 1.0x-1.5x for the 2009E FV/Revenue multiple, and 7.0x-13.0x for the 2009E P/E multiple. These reference ranges were based on the ranges of multiples calculated in the chart above for comparable companies but adjusted to take into account differences between the Company and the comparable companies and such other factors as J.P. Morgan deemed appropriate. J.P. Morgan then calculated the Company’s firm value per Share implied by each of these reference ranges of multiples. This analysis indicated an equity value per Share ranging from: (a) approximately $10.83 to approximately $12.72, based on 2009E FV/EBITDA multiples, (b) approximately $9.40 to approximately $12.57, based on 2009E FV/Revenue multiples, and (c) approximately $7.72 to approximately $14.06, based on 2009E P/E multiples, compared in each case to the closing price per Share of $13.27 on July 10, 2009 and the Offer Price of $16.50 per Share.

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Discounted Cash Flow Analysis.

J.P. Morgan performed a discounted cash flow (“DCF”) analysis for the purpose of determining the implied fully diluted equity value per Share using financial forecasts prepared by Company management. The DCF analysis was prepared by valuing the Company on a “sum of the parts” basis as the sum of the DCF values of the following four segments:

•  Transdermals (which consists of the Company’s transdermal marketed products, royalties, and identified and currently unidentified future pipeline transdermal products);

•  Therapeutics (which consists of the Company’s therapeutic drug sales and marketing operations);

•  Novogyne (which consists of the Company’s interest in a joint venture between the Company and Novartis); and

•  Corporate (which consists of the Company’s unallocated overhead expenses and other costs).

J.P. Morgan analyzed the unlevered free cash flows that each of the segments (or each product or product line, in the case of the Therapeutics business) is expected to generate during the forecast period provided by Company management. J.P. Morgan then calculated an implied range of terminal values for each business segment (or product or product line, in the case of the Therapeutics business), using a range of perpetuity growth rate or terminal revenue multiples. The unlevered free cash flows and the range of terminal values were then discounted to present value using a range of discount rates. For the Novogyne business and those products in the Therapeutics business having projected revenues over a finite period, J.P. Morgan valued the long-term projected cash flows provided by management on a present value basis through the projected end of the joint venture and product life cycles.

The forecast period, range of perpetuity growth rates and range of discount rates for each business segment (or product or product line, in the case of the Therapeutics business) were as follows:

	Range		Range of
	of Forecast		Perpetuity		Range of
Business Segment	Periods		Growth Rates		Discount Rates
Transdermals		2009-2018		2.0% - 4.0%		10% - 14%
Therapeutics		2009-2035		N/A		15% - 20%
Novogyne		2009-2024		N/A		12% - 15%
Corporate		2009-2018		2.0% - 4.0%		10% - 14%

For different products and product lines in the Therapeutics business, J.P. Morgan applied terminal revenue multiples of between 1.0x and 1.25x, reflecting divestiture assumptions based on management’s guidance, based upon forecast periods for those products and product lines that fell within the range of years indicated in the table above.

This analysis indicated an equity value per Share ranging from approximately $14.61 to $17.15, with a midpoint valuation of $15.86, compared to the closing price per Share of $13.27 on July 10, 2009 and the Offer Price of $16.50 per Share.

J.P. Morgan also performed a DCF analysis by applying discount rates ranging from 15% to 20% to each of the Company’s four segments, and by both including and excluding the potential value associated with future unidentified products in the Transdermals business. This analysis indicated an equity value per Share ranging from approximately $15.22 to $19.08, with a midpoint valuation of $16.97 including the potential value associated with future unidentified products in the Transdermals business, and a value per Share ranging from approximately $14.42 to $17.58, with a midpoint valuation of $15.88 excluding the potential value associated with future unidentified products in the Transdermals business, in each case compared to the closing price per Share of $13.27 on July 10, 2009 and the Offer Price of $16.50 per Share.

Selected Transactions Analysis.

J.P. Morgan compared the proposed financial terms of the Transaction with the publicly available financial terms of certain transactions involving companies J.P. Morgan considered potentially relevant and the consideration

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received for such companies. However, J.P. Morgan did not calculate an implied equity value per Share based upon such comparisons because J.P. Morgan concluded that none of the companies involved in such transactions were sufficiently comparable to the Company, and that none of such other transactions were sufficiently comparable to the Transaction to justify taking them into account in its analysis of the value of the Company or the fairness of the Offer Price.

General.

The summary set forth above does not purport to be a complete description of the analyses or data utilized by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the summary set forth above and its analyses must be considered as a whole and that selecting portions thereof, without considering all of its analyses, could create an incomplete view of the processes underlying its analyses and opinion. J.P. Morgan based its analyses on assumptions that it deemed reasonable, including assumptions concerning general business and economic conditions and industry-specific factors. The other principal assumptions upon which J.P. Morgan based its analyses are set forth above under the description of each analysis. J.P. Morgan’s analyses are not necessarily indicative of actual values or actual future results that might be achieved, which values may be higher or lower than those indicated. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold.

As a part of their investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. J.P. Morgan was selected to act as the Company’s financial advisor with respect to the Transaction on the basis of J.P. Morgan’s experience and its familiarity with the industry in which the Company operates.

For a description of the terms of J.P. Morgan’s engagement as the Company’s financial advisor, see the discussion set forth in Item 5 below.

Intent to Tender.

To the knowledge of the Company after making reasonable inquiry, all the Company’s executive officers, directors, subsidiaries and affiliates which own Shares of the Company currently intend to tender or cause to be tendered all Shares held of record or beneficially owned by such person or entity pursuant to the Offer and, if necessary, to vote such Shares in favor of adoption of the Merger Agreement. The foregoing does not include any Shares over which, or with respect to which, any such executive officer, director, subsidiary or affiliate acts in a fiduciary or representative capacity or is subject to the instructions of a third party with respect to such tender.

Item 5.   Persons/Assets Retained, Employed, Compensated or Used.

Pursuant to the J.P. Morgan Engagement letter, the Company has agreed to pay J.P. Morgan a fee, based upon a percentage of the aggregate value of the Offer, in the amount of approximately $6.845 million, of which $2 million was paid at the time J.P. Morgan delivered its opinion to the Board and the balance of which is payable only if the Transaction is consummated. In addition, the Company also agreed to reimburse J.P. Morgan for all reasonable out-of-pocket expenses reasonably incurred by J.P. Morgan under the J.P. Morgan Engagement Letter, including the fees and disbursements of its legal counsel. The Company also agreed to indemnify J.P. Morgan and related parties against certain liabilities arising out of its engagement.

During the two years preceding the date of J.P. Morgan’s written opinion, neither J.P. Morgan nor its affiliates have had any other significant financial advisory or other significant commercial or investment banking relationships with the Company or Hisamitsu. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities of the Company or Hisamitsu for their own accounts or for the accounts of their customers and, accordingly, they may at any time hold long or short positions in those securities.

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Additional information pertaining to the retention of J.P. Morgan by the Company is set forth in Item 4 under the heading “Opinion of the Company’s Financial Advisor” and is incorporated by reference into this Item 5.

In addition, pursuant to the terms of the Merger Agreement, Parent and the Company will each pay half of the fees and costs incurred pursuant to the engagement by either party of an information agent, depositary, and financial printer in connection with the Offer.

Except as described above, neither the Company nor any person acting on its behalf has employed, retained or compensated any other person to make solicitations or recommendations to the Company’s stockholders on its behalf concerning the Offer or the Merger except that such solicitations or recommendations may be made by directors or officers of the Company, for which services no additional consideration will be paid.

Item 6.   Interest in Securities of the Subject Company.

Other than in the ordinary course of business in connection with the Company’s employee and director equity compensation plans, no transactions in the Shares have been effected during the last 60 days by the Company or, to the knowledge of the Company, by any executive officer, director, affiliate or subsidiary of the Company.

Item 7.   Purposes of the Transaction and Plans or Proposals.

Except as set forth in this Statement: (a) the Company is not undertaking or engaged in any negotiations in response to the Offer which relate to (i) a tender offer for or other acquisition of the Company’s securities by the Company, any of its subsidiaries or any other person, (ii) an extraordinary transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (iii) any purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries, or (iv) any material change in the present divided rate or policy, or indebtedness or capitalization, of the Company; and (b) there are no transactions, Board resolutions, agreements in principle or signed contracts that have been entered into in response to the Offer that relate to one or more of the matters referred to in clause (a) of this Item 7.

Item 8.   Additional Information.

Short-Form Merger.

Under Section 253 of the DGCL, if the Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, Purchaser will be able to effect the Merger after consummation of the Offer as a short form merger without a vote of the Company’s stockholders.

Top-Up Option.

Pursuant to the terms of the Merger Agreement, the Company granted Purchaser an irrevocable option to purchase (the “Top-Up Option”), at a price per Share equal to the Offer Price, the lowest number of Shares that, when added to the number of Shares owned by Purchaser, Holdings and Parent at the time of such exercise, shall constitute one more Share than 90% of the Shares then outstanding. The Top-Up Option is only exercisable once Parent, Holdings and Purchaser own at least 85% of the Shares then outstanding and may only be exercised after the expiration of the Offer and any subsequent offering period.

Delaware Anti-Takeover Statute.

As a Delaware corporation, the Company is subject to Section 203 of the DGCL (“Section 203”). In general, Section 203 would prevent an “interested stockholder” (generally defined as a person beneficially owning 15% or more of a corporation’s voting stock) from engaging in a “business combination” (as defined in Section 203) with a Delaware corporation for three years following the time that person became an interested stockholder unless: (a) before that person became an interested stockholder, the board of directors of the corporation approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination, (b) upon consummation of the transaction which resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding, for purposes of determining the number of shares of

26

outstanding stock, those shares held by directors who are also officers and by employee stock plans that do not allow plan participants to determine confidentially whether to tender shares), or (c) at or subsequent to such time as the transaction in which that person became an interested stockholder, the business combination is (x) approved by the board of directors of the corporation and (y) authorized at a meeting of stockholders by the affirmative vote of the holders of at least 662/3% of the outstanding voting stock of the corporation not owned by the interested stockholder. In accordance with the provisions of Section 203, the Board of Directors has approved the Merger Agreement, as described in Item 4 above, and, therefore, the restrictions of Section 203 are inapplicable to the Offer and the Merger and the transactions contemplated under the Merger Agreement.

Appraisal Rights.

Holders of Shares do not have appraisal rights as a result of the Offer. However, if the Merger is consummated, each holder of Shares (that did not tender such Shares in the Offer) at the Effective Time who has neither voted in favor of the Merger nor consented thereto in writing, and who otherwise complies with the applicable statutory procedures under Section 262 of the DGCL (“Section 262”), will be entitled to receive a judicial determination of the fair value of the holder’s Shares (exclusive of any element of value arising from the accomplishment or expectation of such merger or similar business combination) (“Appraisal Shares”), and to receive payment of such fair value in cash, together with a fair rate of interest, if any, for Shares held by such holder. Any such judicial determination of the fair value of the Shares could be based upon considerations other than or in addition to the price paid in the Offer and the market value of the Shares. stockholders should recognize that the value so determined could be higher or lower than the price per Share paid pursuant to the Offer. Moreover, the Company may argue in an appraisal proceeding that, for purposes of such a proceeding, the fair value of the Shares is less than the price paid in the Offer.

If any holder of Shares who demands appraisal under Section 262 fails to perfect, or effectively withdraws or loses his, her, or its rights to appraisal as provided in the DGCL, the Shares of such stockholder will be converted into the right to receive the Offer Price in accordance with the Merger Agreement. A stockholder may withdraw a demand for appraisal by delivering to the Company a written withdrawal of the demand for appraisal and acceptance of the Merger. Failure to follow the steps required by Section 262 for perfecting appraisal rights may result in the loss of such rights.

At the Effective Time, all Appraisal Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of Appraisal Shares shall cease to have any rights with respect thereto, except the rights provided under Section 262. Notwithstanding the foregoing, if any such holder fails to perfect or otherwise waives, withdraws or loses the right to appraisal under Section 262, or a court of competent jurisdiction determines that such holder is not entitled to the relief provided by Section 262, then such Appraisal Shares will be deemed to have been converted at the Effective Time into, and to have become, the right to receive the Offer Price. Pursuant to the Merger Agreement, the Company will be required to serve prompt notice to Parent of any demands for appraisal of any Shares, and Parent will have the opportunity to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company will be prohibited from, without the prior written consent of Parent, making any payment with respect to, or settle or offer to settle, any such demands, or agreeing to do any of the foregoing.

The foregoing summary of the right of stockholders seeking appraisal rights under Delaware law does not purport to be a complete statement of the procedures to be followed by stockholders desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to Section 262. The perfection of appraisal rights requires strict adherence to the applicable provisions of the DGCL. If a stockholder withdraws or loses the right to appraisal, such stockholder will only be entitled to receive the Offer Price.

The Rights Agreement Amendment.

In connection with and prior to the execution and delivery of the Merger Agreement, the Company amended the Rights Agreement in order to make various provisions of the Rights Agreement inapplicable to the transactions contemplated by the Merger Agreement, including the Offer and the Merger.

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The foregoing summary of this amendment to the Rights Agreement is qualified in its entirety by reference to Amendment No. 2 to the Rights Agreement filed as Exhibit (e)(9) hereto, which is incorporated into this Item 8 by reference.

Regulatory Approvals.

Antitrust Laws of the United States.  The Offer and the Merger are subject to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), which provides that certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the U.S. Department of Justice (the “DOJ”) and Federal Trade Commission (the “FTC”) and certain waiting period requirements have been satisfied.

In connection with the purchase of Shares, on July 27, 2009, Parent is expected to file pursuant to the HSR Act a Notification and Report Form for Certain Mergers and Acquisitions with the DOJ and the FTC. The Company is also expected to file a Notification and Report Form under the HSR Act on that date. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th day after Parent’s form was received by the DOJ and FTC, unless early termination of the waiting period is granted. Parent and the Company have each requested early termination of the waiting period applicable to the Offer, but there can be no assurance that such early termination will be granted. In addition, the DOJ or the FTC may extend the waiting period by requesting additional information or documentary material from Parent or the Company. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the tenth day after substantial compliance by Parent with such request. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the DOJ or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay the transaction while such negotiations continue. Purchaser is not required to accept for payment Shares tendered pursuant to the Offer unless and until the waiting period requirements imposed by the HSR Act with respect to the Offer have been satisfied.

Private parties, as well as state governments, may also bring legal action under the Antitrust Laws under certain circumstances. Based upon an examination of information provided by Parent relating to the businesses in which Parent and its subsidiaries are engaged, the Company believes that the acquisition of Shares by Purchaser will not violate the Antitrust Laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by Purchaser on antitrust grounds will not be made or, if such a challenge is made, of the result of such challenge. As used in this Statement, “Antitrust Laws” shall mean and include the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other federal and state statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.

Antitrust Laws of Countries and Jurisdictions Other Than the United States.  Parent is a company formed under the laws of Japan, and Parent and its subsidiaries conduct business primarily in countries and jurisdictions other than the United States. Parent has informed the Company that it does not believe that the acquisition of the Shares pursuant to the Offer or the Merger will violate the laws of those countries and jurisdictions or require the filing of information with, or the obtaining of the approval or consent of, governmental authorities in such countries and jurisdictions. Nonetheless, in connection with the acquisition of the Shares pursuant to the Offer or the Merger, it may be that the laws of certain of those foreign countries and jurisdictions will require the filing of information with, or the obtaining of the approval or consent of, governmental authorities in such countries and jurisdictions. Furthermore, the governments in such countries and jurisdictions might attempt to impose additional conditions on the Company’s operations conducted in such countries and jurisdictions as a result of the acquisition of the Shares pursuant to the Offer or the Merger. If such approvals or consents are found to be required, the parties intend to make the appropriate filings and applications. In the event such a filing or application is made for the requisite foreign approvals or consents, there can be no assurance that such approvals or consents will be granted and, if such approvals or consents are received, there can be no assurance as to the date of such approvals or consents. In

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addition, there can be no assurance that the Company will be able to, or that Parent, Holdings or the Purchaser will, satisfy or comply with such laws.

Other than as described in this Statement, none of the Company, Parent, Holdings or Purchaser are aware of any approval or other action by any governmental, administrative or regulatory agency or authority that would be required for the acquisition or ownership of Shares pursuant to the Offer. Should any such approval or other action be required, each of the Company, Parent, Holdings and Purchaser expect such approval or other action would be sought or taken.

Annual and Quarterly Reports.

For additional information regarding the business and financial results of the Company, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (the “10-K”) and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (the “10-Q”).

Certain Legal Proceedings.

On July 15, 2009, a plaintiff filed a purported stockholder class action complaint in the Court of Chancery of the State of Delaware. The complaint, captioned IBEW Local Union 98 v. Noven Pharmaceuticals, Inc. et. al. (the “IBEW Complaint”), names as defendants the members of the Board of Directors, as well as Noven and Hisamitsu. The plaintiff claims that Noven’s directors breached their fiduciary duties to Noven’s stockholders, and further claims that Hisamitsu participated in or aided and abetted the purported breach of fiduciary duty. In support of the plaintiff’s claims, the complaint alleges that the proposed transaction between Noven and Hisamitsu involves an unfair price, an inadequate sales process and unreasonable deal protection devices, among other things. The complaint seeks to enjoin the transaction and attorneys’ and other fees and costs, in addition to seeking other relief.

A second plaintiff filed a purported stockholder class action complaint on July 15, 2009 in the Eleventh Judicial Circuit of Florida. The complaint, captioned Murphy v. Noven Pharmaceuticals, Inc., et. al., names as defendants Noven and each of its Board members and asserts similar claims and requests for relief as those asserted in the IBEW Complaint. On July 16, 2009, a third plaintiff filed a purported stockholder class action complaint relating to the Offer. The complaint, captioned Louisiana Municipal Police Employees Retirement System v. Noven Pharmaceuticals, Inc. et. al., and filed in the Court of Chancery of the State of Delaware names as defendants the members of the Board of Directors as well as Noven and Hisamitsu, and asserts claims and requests relief identical to the IBEW Complaint. The Company believes that the allegations set forth in all three of these complaints lack merit and will contest them vigorously.

Cautionary Note Regarding Forward-Looking Statements.

Certain statements contained in, or incorporated by reference into, this Statement, other than purely historical information, including estimates, forecasts, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “believes,” plans,” “anticipates,” “projects,” “estimates,” “expects,” “intends,” “strategy,” “future,” “opportunity,” “may,” “will,” “should,” “could,” “potential,” or similar expressions. Such forward-looking statements include the ability of the Company, Purchaser, Holdings and Parent to complete the transactions contemplated by the Merger Agreement, including the parties’ ability to satisfy the conditions set forth in the Merger Agreement and the possibility of any termination of the Merger Agreement.

The forward-looking statements contained in this Statement are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Actual results may differ materially from current expectations based on a number of factors affecting the Company’s business, including, among other things, the expected timetable for completing the proposed transaction, the risk of uncertainty in connection with a strategic alternative process, overall economic and market conditions, changes in reimbursement levels established by governmental and third-party payors; commercial success of the Company’s licensees, changing competitive markets, clinical trial data and regulatory

29

conditions, changes in the credit markets, customer and physician preferences; the Company’s ability to protect its patent position, and the effectiveness of advertising and other promotional campaigns. Detailed discussions of these and other risks and uncertainties that could cause actual results and events to differ materially from the forward-looking statements contained in this Statement are included from time to time in the Company’s SEC reports and filings, including the 10-K and 10-Q. The reader is cautioned not to unduly rely on these forward-looking statements. The Company expressly disclaims any intent or obligation to update or revise these forward-looking statements except as required by law.

Item 9.   Exhibits.

Exhibit
Number		Document
	(a)(1)	Offer to Purchase, dated July 23, 2009.*†
	(a)(2)	Letter of Transmittal.*†
	(a)(3)	Letter to Stockholders of the Company, dated July 23, 2009.*
	(a)(4)	Joint Press Release issued by the Company and Parent, dated July 14, 2009 (incorporated herein by reference to the Schedule 14D-9 filed by the Company with the SEC on July 14, 2009).
	(a)(5)	Opinion of J.P. Morgan Securities Inc., dated July 14, 2009 (included as Annex I to this Statement).
	(e)(1)	Agreement and Plan of Merger among the Company, Parent, Holdings and Purchaser, dated as of July 14, 2009 (incorporated herein by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by the Company with the SEC on July 15, 2009).
	(e)(2)	Relevant portions of the Proxy Statement filed by the Company with the SEC on April 9, 2009.
	(e)(3)	Form of Indemnification Agreement for Directors and Officers (incorporated herein by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 29, 1999).
	(e)(4)	Confidentiality Agreement between the Company and Parent, dated June 25, 2008.
	(e)(5)	Exclusivity Agreement between the Company and Parent, dated June 4, 2009.
	(e)(6)	Amended and Restated Form of Employment Agreement (Change of Control), between the Company and each of Michael D. Price, Steven M. Dinh, Richard P. Gilbert, Joel S. Lippman and Anthony Venditti (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2009).
	(e)(7)	Amended Employment Agreement between the Company and Peter Brandt, dated April 29, 2008.
	(e)(8)	Amended and Restated Employment Agreement between the Company and Jeffrey Eisenberg, dated July 14, 2009 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 15, 2009).
	(e)(9)	Amendment No. 2 to Rights Agreement by and between the Company and American Stock Transfer & Trust Company, LLC, dated as of July 14, 2009 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 15, 2009).

*	Included in the materials mailed to the Company’s stockholders.
†	Incorporated herein by reference to the Schedule TO filed by Hisamitsu with the SEC on July 23, 2009.

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SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct.

NOVEN PHARMACEUTICALS, INC.

By:  /s/ Peter Brandt

Name:     Peter Brandt

Title:  President and Chief Executive Officer

Dated: July 23, 2009

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ANNEX I

July 14, 2009

The Board of Directors

Noven Pharmaceuticals, Inc.

11960 South West 144^th Street

Miami, FL 33186

Members of the Board of Directors:

You have requested our opinion as to the fairness, from a financial point of view, to the holders of common stock, par value $0.0001 per share (the “Company Common Stock”), of Noven Pharmaceuticals, Inc. (the “Company”) of the consideration to be paid to such holders in the proposed Tender Offer and Merger (each as defined below) pursuant to an Agreement and Plan of Merger (the “Agreement”), among the Company, Hisamitsu Pharmaceutical Co., Inc. (the “Acquiror”), Hisamitsu U.S., Inc., a wholly-owned subsidiary of Acquiror (“Holdings”), and Northstar Merger Sub, Inc., a wholly-owned subsidiary of Holdings (“Acquisition Sub”). Pursuant to the Agreement, the Acquiror will cause Acquisition Sub to commence a tender offer for all the shares of the Company Common Stock (the “Tender Offer”) at a price for each share equal to $16.50 (the “Consideration”) payable in cash. The Agreement further provides that, following completion of the Tender Offer, Acquisition Sub will be merged with and into the Company (the “Merger”) and each outstanding share of Company Common Stock, other than any shares owned by the Company, Acquiror, Holdings or Acquisition Sub or by any subsidiary of the Company or Acquiror (other than Acquisition Sub) and other than Appraisal Shares (as defined in the Agreement), will be converted into the right to receive an amount equal to the Consideration in cash. The Tender Offer and Merger, together and not separately, are referred to herein as the “Transaction”.

In arriving at our opinion, we have (i) reviewed the Agreement; (ii) reviewed certain publicly available business and financial information concerning the Company and the industries in which it operates; (iii) compared the proposed financial terms of the Transaction with the publicly available financial terms of certain transactions involving companies we deemed relevant and the consideration received for such companies; (iv) compared the financial and operating performance of the Company with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market prices of the Company Common Stock and certain publicly traded securities of such other companies; (v) reviewed certain internal financial analyses and forecasts prepared by the management of the Company relating to its business, which forecasts included certain favorable and unfavorable contingencies, and discussed with the management of the Company its views as to the likelihood of such contingencies; and (vi) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.

In addition, we have held discussions with certain members of the management and representatives of the Company and the Acquiror with respect to certain aspects of the Transaction, and the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, and certain other matters we believed necessary or appropriate to our inquiry.

In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Company or otherwise reviewed by or for us, and we have not independently verified (nor have we assumed responsibility or liability for independently verifying) any such information or its accuracy or completeness. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Company or the Acquiror under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to us or derived therefrom, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to

I-1

the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. We express no view as to such analyses or forecasts or the assumptions on which they were based. We have also assumed that the Transaction and the other transactions contemplated by the Agreement will be consummated as described in the Agreement. We have also assumed that the representations and warranties made by the Company and the Acquiror in the Agreement and the related agreements are and will be true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or on the contemplated benefits of the Transaction.

Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, of the Consideration to be paid to the holders of the Company Common Stock (other than the Acquiror and its affiliates) in the proposed Transaction and we express no opinion as to the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Consideration to be received by the holders of the Company Common Stock in the Transaction or with respect to the fairness of any such compensation.

We note that we were not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of the Company or any other alternative transaction.

We have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a portion of which is payable in connection with the delivery of this opinion and a substantial portion of which will become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. Please be advised that during the two years preceding the date of this letter, neither we nor our affiliates have had any other significant financial advisory or other significant commercial or investment banking relationships with the Company or the Acquiror. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities of the Company or the Acquiror for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities.

On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the consideration to be paid to the holders of the Company Common Stock (other than the Acquiror and its affiliates) in the proposed Transaction is fair, from a financial point of view, to such holders.

The issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities Inc. This letter is provided to the Board of Directors of the Company in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any shareholder of the Company as to whether such shareholder should tender its shares into the Tender Offer or how such shareholder should vote with respect to the Transaction or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. Notwithstanding the foregoing, this opinion may be reproduced in full in any tender offer solicitation / recommendation statement on Schedule 14D-9 and any proxy or information statement filed with the Securities and Exchange Commission or mailed or otherwise disseminated to shareholders of the Company but may not otherwise be disclosed publicly in any manner without our prior written approval.

Very truly yours,

J.P. MORGAN SECURITIES INC.

I-2

EX-99.(A)(3)

Exhibit (a)(3)

July 23, 2009

Dear Stockholder:

We are pleased to inform you that on July 14, 2009, Noven Pharmaceuticals, Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Hisamitsu Pharmaceutical Co., Inc. (“Hisamitsu”), Northstar Holding, Inc., a wholly owned subsidiary of Hisamitsu (“Holdings”), and Northstar Merger Sub, Inc., a wholly owned subsidiary of Holdings (“Purchaser”), pursuant to which Purchaser is commencing an Offer (the “Offer”) to purchase all the outstanding shares of the Company’s common stock for $16.50 per share in cash, without interest thereon and less any required withholding taxes (the “Offer Price”).

The Offer is scheduled to expire on August 19, 2009 at 12:01 a.m., New York City time, unless extended in accordance with the terms of the Merger Agreement.

If successful, the Offer will be followed by the merger of Purchaser with and into the Company, with the Company continuing as the surviving corporation in the merger and an indirect wholly owned subsidiary of Hisamitsu. At the effective time of the merger, all shares of the Company’s common stock, other than shares owned by Hisamitsu, Holdings, Purchaser or the Company, or by stockholders who have properly perfected their statutory appraisal rights, will be converted into the right to receive the Offer Price.

The board of directors of the Company has unanimously adopted resolutions (i) approving and declaring advisable the Merger Agreement, the Offer, the merger and the other transactions contemplated by the Merger Agreement, (ii) determining that the terms of the Offer, merger and the other transactions contemplated by the Merger Agreement are fair to and in the best interests of the Company’s stockholders, (iii) recommending that the holders of the Company’s common stock accept the Offer and tender their shares in the Offer, and (iv) if required by applicable law, recommending that the Company’s stockholders adopt the Merger Agreement. Accordingly, the board of directors of the Company unanimously recommends that the Company’s stockholders accept the Offer, tender their shares in the Offer and, if required by applicable law, vote their shares in favor of adoption of the Merger Agreement and thereby approve the merger and the other transactions contemplated by the Merger Agreement.

In arriving at its recommendation, the board of directors of the Company gave careful consideration to the interests of the Company’s stockholders and all other factors required or permitted by applicable law to be considered by the directors. Those factors are discussed in the enclosed solicitation/recommendation statement on Schedule 14D-9.

Also enclosed are the Purchaser’s offer to purchase, a letter of transmittal with instructions as to how to tender shares in the Offer, and other related documents setting forth the terms and conditions of the Offer. We urge you to carefully read the enclosed solicitation/recommendation statement on Schedule 14D-9 and related materials in their entirety.

Sincerely,

Peter Brandt

President & Chief Executive Officer

EX-99.(E)(2)

EXHIBIT (e)(2)

Relevant portions of the Proxy Statement filed by the Company with the SEC on April 9, 2009

Related Party Transactions

The Board has adopted a policy and procedures for the review and approval of transactions in which Noven and its directors, executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest and whether Noven should enter into the applicable transaction. The policy covers any related party transaction that meets the minimum threshold for disclosure in Noven’s proxy statement under the relevant SEC rules. The Audit Committee is responsible for reviewing and, if appropriate, approving or ratifying any related party transactions.

In determining whether to approve, disapprove or ratify a related party transaction, the Audit Committee will take into account, among other factors it deems appropriate, (i) whether the transaction is on terms no less favorable to Noven than terms that would otherwise be generally available to Noven if the transaction was entered into under the same or similar circumstances with a party unaffiliated with Noven and (ii) the extent of the interest of the related party in the transaction.

Set forth below is a description of certain transactions between Noven and Mr. Phillip M. Satow, a current Noven director and a nominee for director at the 2009 Annual Meeting of Stockholders.

On August 14, 2007 (the “Closing Date”), Noven acquired JDS Pharmaceuticals, LLC (now known as “Noven Therapeutics”), which was a privately-held specialty pharmaceutical company founded by Phillip Satow and his son Michael Satow. In connection with Noven’s acquisition of this company, Noven entered into a Non-Competition Agreement and a Consulting Agreement with Phillip Satow and a Non-Competition and Employment Agreement with Michael Satow. As described in more detail below, the Consulting Agreement with Phillip Satow expired in August 2008 and the employment term of the Non-Competition and Employment Agreement with Michael Satow expired in February 2008.

The Consulting Agreement (the “Consulting Agreement”) with Phillip Satow commenced in August 2007 and expired in August 2008. Under the Consulting Agreement, Mr. Satow agreed to provide such consulting services with respect to Noven Therapeutics’ business as requested by Noven. Mr. Satow was paid a consulting fee of $250 per hour of services rendered and be reimbursed for the necessary and reasonable expenses he incurred in the performance of his services. The total fees paid to Mr. Satow under the Consulting Agreement in 2008 were $50,500.

Pursuant to the Non-Competition and Employment Agreement (the “Employment Agreement”), dated August 2007, with Michael Satow, Noven Therapeutics employed Michael Satow for a period of six months, from the Closing Date until February 2008 (the “Retention Period”), at the same rate of base salary as in effect immediately prior to the Closing Date, which was $265,200 per year. Mr. Satow, who ceased to be a Noven Therapeutics employee at the end of the Retention Period, was paid the following additional amounts under the Employment Agreement for his continued employment through the Retention Period: (i) an annual bonus for Noven Therapeutics’ 2007 fiscal year of $63,000; and (ii) a lump sum payment of $132,600 (together, the “Bonus Payments”). Under the Employment Agreement, Mr. Satow also received a lump sum cash payment of $265,200.

Each of Phillip Satow and Michael Satow continue to be bound by certain non-competition obligations to Noven that continue in effect through August 2010 for Phillip Satow and through August 2009 for Michael Satow. The Non-Competition Agreement (the “Non-Competition Agreement”), dated August 14, 2007, with Phillip Satow restricts his ability, during the three-year period which commenced on the Closing Date, to become “associated with” (as such term is defined in the Non-Competition Agreement) any business that is engaged in the acquisition, manufacture, development or sale of pharmaceutical or biotechnology products that compete with any Noven Therapeutics products that are sold or are under active development. In accordance with the Non-Competition Agreement, Mr. Satow received on the Closing Date stock-settled stock appreciation rights (“SSARs”) with respect to 44,297 shares of Noven common stock, which reflected an aggregate Black-Scholes value equal to $265,200. All

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such SSARs fully vested upon grant and are exercisable at an exercise price of $16.67 per share for a period of seven years from the grant date.

The foregoing descriptions of the Non-Competition Agreement, the Consulting Agreement and the Employment Agreement are qualified in their entirety by reference to the full text of such agreements, which Noven previously filed as exhibits to its reports filed with the SEC.

Director Compensation

The following table provides information on Noven’s compensation and reimbursement practices for non-employee directors. Directors who are employed by Noven do not receive any additional compensation for their Board activities and are not included in this table.

Director Compensation in 2008

									Change in
									Pension
									Value
							Non-		and Non-
							Equity		Qualified
	Fees						Incentive		Deferred
	Earned or		Stock		Option		Plan		Compen-		All Other
	Paid in		Awards		Awards		Compen-		sation		Compen-
Name	Cash		(1)(2)		(2)(3)		sation		Earnings		sation		Total
Sidney Braginsky	$	33,000	$	118,750	$	0	$	0	$	0	$	0	$	151,750
John G. Clarkson		39,750		118,750		0		0		0		0		158,500
Donald A. Denkhaus		43,500		118,750		0		0		0		0		162,250
Pedro P. Granadillo		46,500		118,750		0		0		0		0		165,250
Phillip M. Satow(4)		24,750		93,750		0		0		0		0		118,500
Robert G. Savage		41,250		118,750		0		0		0		0		160,000
Wayne P. Yetter		90,233		118,750		0		0		0		0		208,983

(1)

Represents the dollar amount recognized for financial statement reporting purposes for the year ended December 31, 2008 in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“FAS 123(R)”). Each non-employee director received a restricted stock award upon his re-election to the Board at the 2008 Annual Meeting. The grant date fair value of the restricted stock award computed in accordance with FAS 123(R) for each director was $125,000. Such awards vest over a one-year period in four equal quarterly installments.

(2)

Set forth in the table below are the aggregate number of stock awards and aggregate number of shares of common stock underlying options held by each non-employee director as of December 31, 2008.

			Shares of
			Common Stock
			Underlying
	Outstanding		Outstanding
Name	Stock Awards		Option Awards
Sidney Braginsky		20,219		37,500
John G. Clarkson		20,219		15,000
Donald A. Denkhaus		20,219		30,000
Pedro P. Granadillo		20,219		22,500
Phillip M. Satow		19,119		0
Robert G. Savage		20,219		30,000
Wayne P. Yetter		20,219		40,000

(3) No stock options were granted to the non-employee directors in 2008 as compensation for serving on Noven’s Board.

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(4) Does not include amounts paid to Mr. Satow under his Consulting Agreement in 2008, which are described in “Related Party Transactions” beginning on page 13.

Noven uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board. In setting director compensation, Noven considers the significant amount of time that directors expend in fulfilling their duties to Noven as well as the skill-level required by Noven of members of the Board. The Board sets director compensation based on the recommendations of the Nominating and Corporate Governance Committee and Compensation Committee.

Cash Compensation Paid to Board Members

Each non-employee director receives an annual cash retainer of $20,000. For his services as Noven’s Non-Executive Chairman of the Board, Mr. Yetter receives an annual retainer of $50,000. Following a review of benchmark data prepared by PM&P and in recognition of the increased workload for those directors serving as committee chairs, the Board decided, effective May 2009, to increase by $5,000 the annual retainers for the chairs of the standing committees resulting in the amounts set forth below:

Committee	Annual Retainer to Chair
Audit	$	15,000
Compensation	$	10,000
Nominating and Corporate Governance	$	10,000

The cash retainers are paid following the annual meeting of stockholders on a quarterly basis in advance. Non-employee directors receive attendance fees of $1,500 for each Board and committee meeting attended in person and $750 for each Board and committee meeting attended by telephone. Noven reimburses directors for their expenses incurred related to their Board membership.

Equity Compensation Paid to Board Members

Under Noven’s current director compensation program, each non-employee director is granted restricted stock valued at $150,000 upon election to the Board and then receives annual grants of restricted stock valued at $125,000 upon re-election to the Board at Noven’s annual meeting. Following a review of benchmark data prepared by PM&P, and in light of the significant responsibilities associated with the role of Noven’s non-executive Chairman of the Board, the Board increased the value of the annual restricted stock grant for the position of non-executive Chairman from $125,000 to $155,000 effective May 2009. The Board may increase or decrease the value of the awards from time to time based on such factors as the Board deems relevant. The number of shares of restricted stock granted will be determined based on the market price of Noven’s common stock on the date of grant.

Deferred Compensation Program

Directors can defer receipt of their fees and their restricted stock grants by participating in Noven’s non-qualified deferred compensation plan. A more complete description of the plan is provided below on page 36 under “Non-qualified Deferred Compensation in 2008.”

Executive Compensation

Compensation Discussion and Analysis

This section discusses Noven’s compensation policies and programs applicable to the eight executive officers named in the Summary Compensation Table on page 31 (collectively, these individuals are referred to as the “named executive officers”). Under its charter, the Compensation Committee is responsible for the review and determination of compensation for Noven’s executive officers. No discussion or analysis of the compensation determinations made by the Compensation Committee with respect to Mr. Mantelle are included in this section because he ceased to be an “executive officer” (as such term is defined in the regulations of the SEC) in 2008 in connection with the hiring of Mr. Dinh to serve as Noven’s Vice President and Chief Scientific Officer.

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Compensation Philosophy and Objectives

The core objectives of Noven’s compensation programs are to secure and retain the services of high quality executives and to provide compensation to Noven’s executives that is commensurate and aligned with company performance and long-term stockholder value.

Noven seeks to achieve these objectives through three principal compensation programs. Each of these programs has a different purpose and is intended to reward achievement of different goals.

Program	Purpose
Base Salary and Benefits	Recruit and retain key employees
Annual Incentive Plan	Reward the achievement of selected annual financial and non-financial goals
Long-term Incentive Pay	Enhance long-term stockholder value by aligning the interests of executives with those of stockholders

These compensation programs are designed to reward achievement of annual and long-term objectives. Achievement of annual objectives is rewarded through the annual incentive plan, while long-term incentive pay in the form of equity grants is intended to link a significant portion of compensation to long-term stock price appreciation realized by Noven’s stockholders.

Pay Levels and Mix

Pay levels are generally established with reference to Noven’s Peer Companies (as described below) as follows:

Program	Targeted Level
Base Salary	Median to Peer Companies
Annual Incentive Award	Median to Peer Companies
Long-term Incentive Pay	75th Percentile to Peer Companies

Together, these target pay levels are designed to result in total target compensation (base salary, the annual incentive award and value at grant of the equity award) opportunities falling between the median and the 75th percentile of the Peer Companies. Noven’s target compensation levels have been selected to attract the talent needed to: maintain and advance Noven’s position as a leading transdermal drug delivery company; advance the operations of Novogyne Pharmaceuticals, Noven’s joint venture with Novartis; and advance the operations of Noven Therapeutics, Noven’s specialty pharmaceutical unit.

Noven’s target pay levels reflect its philosophy that a significant percentage of an executive officer’s total compensation should be tied to performance, and therefore be at risk. Noven believes that individuals with greater roles and responsibilities associated with achieving Noven’s performance targets (such as the CEO) should bear a greater proportion of the risk that those goals may not be achieved and receive a greater proportion of the reward if those goals are met or surpassed.

In designing Noven’s executive compensation programs, the Compensation Committee recognizes that incentive compensation programs such as Noven’s Annual Incentive Plan (“AIP”) and stock-settled stock appreciation rights (“SSARs”) have the inherent but unintended potential for creating incentives for executive officers to take unnecessary or excessive risks in order to trigger payments under such programs. The Compensation Committee believes that Noven’s compensation programs strike an appropriate balance between incentive and non-incentive compensation and that Noven’s incentive programs likewise reflect an appropriate balance between short-term and long-term incentives and between cash and equity payments. Based in part on an enterprise-wide risk assessment reviewed by Noven’s Board in February 2009, the Compensation Committee believes that Noven’s compensation programs are appropriate given Noven’s business and related circumstances and do not encourage unnecessary or excessive risk-taking by executive officers.

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Benchmarking

The Compensation Committee has retained a compensation consultant every other year since 2001 to assist in the benchmarking process. In 2007, the Compensation Committee engaged Pearl Meyer & Partners (“PM&P”) to conduct an independent review of Noven’s executive compensation programs. As part of this engagement, PM&P reviewed the list of companies used by Noven for benchmarking purposes. Based on this review, the Compensation Committee selected the following 21 companies as Noven’s peer companies in 2007:

Adams Respiratory Therapeutics*	Enzon Pharmaceuticals	Nektar Therapeutics
Albany Molecular Research	Intermune	Pharmion*
Bentley Pharmaceuticals*	Ligand Pharmaceutical	Salix Pharmaceuticals
Biomarin Pharmaceutical	Martek Biosciences	Savient Pharmaceuticals
Bradley Pharmaceuticals*	Matrixx Initiatives	Sciele Pharma*
Cubist Pharmaceuticals	Myriad Genetics	Techne
Digene*	Nabi Biopharmaceuticals	Vertex Pharmaceuticals

*  Removed from list after 2007 because information is no longer available due primarily to acquisitions.

These companies, which are pharmaceutical-related companies, were chosen primarily on the basis of revenues. To give effect to Noven’s 49% interest in Novogyne (Noven’s joint venture with Novartis, the net revenues of which are not included in Noven’s financial results), Noven’s revenues, for benchmarking purposes, are combined with 49% of the revenues of Novogyne. These peer companies’ revenues ranged from 50% to 200% of Noven’s revenues as determined above. Companies for which information is no longer available (due primarily to acquisitions) are shown with an asterisk in the table above and have been removed from the list of peer companies. Since not all compensation data is made publicly available by the companies listed in the table, Noven also uses published and private pay surveys for analysis of executive pay at comparably-sized pharmaceutical companies in the benchmarking process. While the Compensation Committee relied on the data points produced in these surveys, it did not predicate its compensation decisions on the specific companies that participated in such surveys. In this report, these companies and those listed in the table above are collectively referred to as Noven’s “Peer Companies.”

Base Salary

Noven targets base salaries for its executive officers generally based on the median base salary of similarly situated officers at the Peer Companies. Salary levels are typically determined annually at the Compensation Committee’s November meeting, as well as upon appointment, promotion or other change in job responsibilities. Each executive officer’s base salary is determined by the Compensation Committee, in consultation with our CEO, based on the executive officer’s particular qualifications, skills and experience, the expected roles and responsibilities of the position, market data prepared by PM&P and the level of compensation required to attract and retain the executive officer. In determining 2009 base salaries for the named executive officers, the Compensation Committee reviewed the results of seven salary budget surveys conducted by third-party compensation sources indicating that the surveyed companies expected to increase executive salaries by 3.9% to 4.1% in 2009.

Based on the foregoing, the Compensation Committee has approved the following base salaries, effective January 1, 2009, for the current named executive officers:

•  Peter Brandt — Mr. Brandt’s base salary for 2008 was determined as a result of the arms-length negotiation of his employment agreement, dated April 29, 2008, the material terms of which are described beginning on page 27 below. The factors that the Compensation Committee considered in its decision to approve Mr. Brandt’s 2008 base salary (as well as the other components of his compensation) included an assessment of his qualifications, skills and experience, market data and the level of compensation required to attract and retain Mr. Brandt. In November 2008, the Compensation Committee awarded Mr. Brandt a 5% merit increase in recognition of his performance toward achievement of a range of pre-defined objectives addressing issues faced by Noven in 2008, which merit increase was pro-rated based on the number of days Mr. Brandt was employed by Noven in 2008. Accordingly, the Compensation Committee granted Mr. Brandt a 2009 base salary increase of 3.3% to $674,375.

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•  Jeffrey F. Eisenberg — In November 2008, the Compensation Committee granted Mr. Eisenberg a 2009 base salary increase of 4.1% to $380,000 to recognize his efforts in advancing Noven’s strategic objectives.

•  Michael D. Price — In November 2008, the Compensation Committee increased Mr. Price’s 2009 base salary by $39,000, or 13.9% to $325,000, which is composed of a $25,000 adjustment to align his base salary with the median salary for chief financial officers based on the Peer Company data and a $14,000 or 4.5% merit increase to recognize his performance in 2008.

•  Richard P. Gilbert — In November 2008, the Compensation Committee granted Mr. Gilbert a 2009 base salary increase of 5.0% to $273,000 to recognize his 2008 performance.

•  Steven M. Dinh — Mr. Dinh’s 2008 base salary was determined upon joining Noven as a result of the arms-length negotiation in connection with Mr. Dinh’s recruitment and offer of employment. In November 2008, the Compensation Committee awarded Mr. Dinh a 4.0% merit increase in recognition of his performance in 2008, which merit increase was pro-rated based on the number of days Mr. Dinh was employed by Noven in 2008. Accordingly, the Compensation Committee granted Mr. Dinh a 2009 base salary increase of 2.3% to $312,117.

•  Joel S. Lippman, M.D. — Dr. Lippman’s 2008 base salary was determined upon joining Noven as a result of the arms-length negotiation in connection with Dr. Lippman’s recruitment and offer of employment. In November 2008, the Compensation Committee awarded Dr. Lippman a 4.3% merit increase in recognition of his performance in 2008, which merit increase was pro-rated based on the number of days Dr. Lippman was employed by Noven in 2008. Accordingly, the Compensation Committee granted Dr. Lippman a 2009 base salary increase of 2.2% to $332,000.

Annual Incentive Plan

Noven’s annual incentive plan, or AIP, is intended to motivate executives by recognizing and rewarding annual corporate and individual performance. The Compensation Committee believes that performance-based annual incentives, in the form of cash incentives, should represent a meaningful component of Noven’s executive compensation program.

While the basic framework of the AIP has not changed significantly over the past several years, the Compensation Committee annually reevaluates the parameters of the program based on Noven’s then-current circumstances, as well as the performance and/or goals that the Compensation Committee deems critical for the success of the Company.

All of the named executive officers other than Mr. Brandt participated in the 2008 AIP. As discussed below, the 2008 annual incentive for Mr. Brandt, who joined Noven in April 2008, was determined under a separate plan — the 2008 CEO Incentive Plan — designed to qualify as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

Determination of Awards under the 2008 AIP for the NEOs other than Mr. Brandt

The determination of awards under the 2008 AIP for the named executive officers was based on two primary factors:

•  Financial Performance.  Noven’s 2008 financial performance compared to pre-established financial measures.

•  Individual Performance Objectives.  An executive officer’s performance in meeting his or her “individual performance objectives.”

Under the 2008 AIP, Noven’s financial performance established the size of a potential award. To the extent that Noven’s actual financial performance was equal to, greater than or less than Noven’s financial performance targets described below, then an executive’s annual incentive award would be equal to, greater than or less than his or her target award. However, one-half of this award (as adjusted for financial performance) was subject to the executive officer’s performance in achieving his or her individual performance objectives. An executive officer’s failure to

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achieve his or her individual performance objectives at 100% resulted in a corresponding reduction in one-half of the executive officer’s award under the 2008 AIP.

The Compensation Committee selected target incentive bonus awards as fixed percentages of base salaries for the named executive officers. The 2008 target AIP awards were set between 45% and 50% of base salary for each of the named executive officers participating in the 2008 AIP. In determining the target AIP awards for the named executive officers, the Compensation Committee considered market data, including the 2007 benchmarking study, which indicated that these target awards approximated the median for similarly situated executives at the Peer Companies.

The financial measures selected by the Compensation Committee for the 2008 AIP were:

•  Revenues.  Total combined net revenues of Noven and Novogyne adjusted to exclude Noven’s total product revenues from sales to Novogyne.

•  Pre-Tax Income.  Noven’s pre-tax income adjusted to exclude clinical expenses.

For the revenue measure, the Compensation Committee added Novogyne revenues to the calculation because Noven is responsible for the sales and marketing function of the joint venture. Each measure was weighted equally for purposes of AIP calculations.

The revenue and pre-tax income target matrix approved for the 2008 AIP are summarized as follows:

Revenue						Pre-Tax Income
Performance						Performance
Achieved			Award			Achieved			Award
(% of Target)			(% of Target)			(% of Target)			(% of Target)
	< 85	%		0	%		< 80	%		0	%
	85	%		50	%		80	%		50	%
	92.5	%		75	%		90	%		75	%
	100	%		100	%		100	%		100	%
	120	%		182	%		120	%		120	%
	141	%		265	%		140	%		180	%

The Compensation Committee established the financial performance targets for the 2008 AIP in the first quarter of 2008 based on its assessment of the expected difficulty of management achieving the performance targets in 2008. There was no limit on the maximum percentage payout for either the pre-tax income or revenue measures.

Revenue and pre-tax income in 2008 (as adjusted in the manner described above) were $248.1 million and $35.5 million, respectively. Based on Noven’s reported financial results, Noven’s adjusted financial performance for 2008 would have resulted in an award equal to 108.7% of an individual’s target award under the 2008 AIP, calculated as follows:

Revenues						Pre-Tax Income
Performance			Award			Performance			Award
Achieved			(% of Target)			Achieved			(% of Target)
	103.8	%		110.1	%		107.2	%		107.2	%

Consistent with prior years, the 2008 AIP gave the Compensation Committee the discretion to increase or decrease performance goals and target awards to reflect changed circumstances. For the 2008 AIP, the Compensation Committee reviewed certain non-recurring and unusual events affecting Noven’s 2008 financial performance. Based on this review, the Compensation Committee excluded several items from the calculation of pre-tax income under the 2008 AIP that were not contemplated when the 2008 AIP was adopted in the first quarter of the year. The net effect of excluding such items resulted in the reduction of the financial performance portion of the award from 108.7% to 104.1%. Following further review of Noven’s performance in 2008 and upon the recommendation of Noven’s management, the Compensation Committee decided to further exercise its negative discretion under the 2008 AIP and reduced the financial performance portion of the award to 100%.

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For the non-financial portion of the award under the 2008 AIP, each of the named executive officer’s performance was assessed in meeting his or her individual performance objectives based on a combination of objective standards and subjective assessments of performance. Participating named executive officers achieved their individual performance objectives and the portion of their incentive awards under the 2008 AIP applicable to individual performance objectives were accordingly paid at target.

The amounts paid to each of the named executive officers participating in the 2008 AIP are set forth in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table on page 31.

Determination of 2008 Bonus for Mr. Brandt

As noted above, Mr. Brandt’s bonus for 2008 was determined under the 2008 CEO Incentive Plan. Mr. Brandt joined Noven in April 2008 and, in order to comply with Section 162(m) of the Code, the financial measures (revenues and pre-tax income calculated in the same manner as the 2008 AIP) under the 2008 CEO Incentive Plan are based on Noven’s financial results for the nine months ended December 31, 2008. The 2008 CEO Incentive Plan allocates 70% of his award based on Noven’s financial performance and 30% on individual performance objectives. The other terms and conditions of the 2008 CEO Incentive Plan are substantially similar to the terms of the 2008 AIP applicable to the other named executive officers. In accordance with the terms of Mr. Brandt’s employment agreement (see discussion below), Mr. Brandt’s target award under the 2008 CEO Incentive Plan was 75% of his base salary based on the number of days Mr. Brandt was employed by Noven in 2008.

Based on Noven’s reported financial results, Noven’s adjusted financial performance for the nine months ended December 31, 2008 would have resulted in an award equal to 114.3% of Mr. Brandt’s target award under the 2008 CEO Incentive Plan, calculated as follows:

Revenues						Pre-Tax Income
Performance			Award			Performance			Award
Achieved			(% of Target)			Achieved			(% of Target)
	105.8	%		115.5	%		113.1	%		113.1	%

The Compensation Committee exercised its discretion under the 2008 CEO Incentive Plan and reduced the financial performance portion of the award to 100% in the same manner as described above for the 2008 AIP for the other named executive officers. The rationale for this decision was that the Compensation Committee believed that the assessment of financial performance under the two annual incentive plans should be the same. The Compensation Committee determined that Mr. Brandt achieved all of his individual performance objectives for 2008. The amounts paid to Mr. Brandt under the 2008 CEO Incentive Plan are set forth in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table on page 31.

In recognition of Mr. Brandt’s performance in 2008, the Compensation Committee determined in February 2009 that Mr. Brandt should receive a supplemental incentive payment of $218,750. In lieu of a cash award, the Compensation Committee decided to pay such award in the form of an immediately exercisable SSAR because it is more performance-based than a cash award. Accordingly, Mr. Brandt was granted a SSAR on February 4, 2009 to purchase 62,712 shares of common stock at an exercise price of $9.47 per share, the closing price on the date of grant. Among other reasons, the Compensation Committee selected a SSARs award instead of a cash award in order for this award to qualify as “performance-based compensation” under Section 162(m) of the Code.

2009 Annual Incentive Plan

The Compensation Committee has approved an annual incentive plan for 2009. The financial measures selected by the Compensation Committee for the 2009 AIP are:

•  Revenues.  Total combined net revenues of Noven and Novogyne adjusted to exclude Noven’s total product revenues from sales to Novogyne.

•  Pre-Tax Income.  Noven’s pre-tax income. The Compensation Committee decided to treat clinical expenses in the same manner as all other expenses and accordingly, clinical expenses are not excluded from the calculation of pre-tax income under the 2009 AIP.

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The percentage amounts of the performance matrix (award amounts based on performance) for the 2009 AIP were adjusted based on the Compensation Committee’s assessment of the difficulty in achieving the 2009 financial targets. Based on the potential for competitive harm to Noven, the specific dollar values of the financial targets under the 2009 AIP are not disclosed. Although no assurance can be given, the Compensation Committee believes that it is reasonably likely (although not certain or assured) that Noven will meet the minimum level of performance to trigger some incentive plan payment (i.e., at levels greater than or equal to 50% of target) under the 2009 AIP. The Compensation Committee further believes that achievement of the 2009 AIP’s financial target performance criteria is substantially uncertain and represents an appropriate challenge for Noven and its executive management team.

The 2009 individual targets for cash incentives as a percentage of base salary for the named executive officers are unchanged from the 2008 levels discussed above. The 2009 AIP allocates 60% of an executive’s 2009 AIP award based on Noven’s financial performance and 40% based on individual performance objectives. In order to incentivize individual performance independent of Noven’s financial performance, an executive may receive an award based on individual performance under the 2009 AIP whether or not minimum corporate financial performance thresholds have been met.

Long-Term Incentive Pay

Long-term incentive pay in the form of equity grants is intended to relate a significant portion of compensation for the named executive officers to long-term stock price appreciation realized by Noven’s stockholders.

Starting in 2006, the Compensation Committee began granting SSARs in lieu of stock options. A SSAR entitles the holder to receive upon exercise the shares of common stock, on a net after-tax basis, equal in value to the amount by which the underlying stock has appreciated since the right was granted. While SSARs offer participants a similar economic benefit as stock options, the Compensation Committee believes SSARs provide additional benefits to Noven, including reduced share dilution over the long term.

2008 Annual Grant of SSARs

The determination of annual equity grants to the named executive officers in 2008 was made with reference to ranges established as part of the 2007 executive compensation study conducted by PM&P, the executive’s level of responsibility and the recommendation at the time of Mr. Brandt (other than for his award). The Compensation Committee targeted long-term incentive grants at the market 75th percentile based on Noven’s philosophy of having significant incentives in place that provide value based on increases in shareholder value. The combination of market median cash compensation (salary and annual incentive opportunities) and 75th percentile equity opportunities provides total compensation between the median and market 75th percentiles.

The following table shows the grant date fair value (using the Black-Scholes pricing model) and the number of shares of common stock underlying the SSARs granted to the named executive officers as part of the 2008 annual grant:

	Grant Date		Number
Executive	Fair Value		of Shares
Peter Brandt*	$	985,703		188,471
Jeffrey F. Eisenberg	$	375,000		71,702
Michael D. Price	$	350,000		66,922
Richard P. Gilbert	$	350,000		66,922
Steven M. Dinh*	$	201,833		39,038
Joel S. Lippman, M.D.*	$	175,000		33,461

*  As discussed below, Messrs. Brandt and Dinh and Dr. Lippman also received equity grants in 2008 upon joining Noven. The annual grants of SSARs to these executive officers in November 2008 were reduced pro-rata based on the number of days they were employed by Noven in 2008 — and therefore are less than what they otherwise would have received had they been employed by Noven for the entire year in 2008.

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Under the 1999 Plan, the exercise price of SSARs (and stock options) may not be less than the closing price of Noven’s common stock on the date of grant.

Employment Agreement — Mr. Brandt

Noven’s insider trading policy prohibits hedging or monetization transactions, such as zero-cost collars and forward sale contracts. Noven’s policies do not include share-retention or equity ownership requirements for its executive officers. A 2007 review of the Peer Companies indicated that only four of the 21 Peer Companies had share-retention or equity ownership guidelines for executive officers. Nonetheless, the Compensation Committee continues to monitor evolving practices in this area and intends to review whether to implement share-retention guidelines as part of the 2009 compensation study to be conducted by PM&P.

Noven’s current form of equity award agreements contains clawback provisions. Under these provisions, executives who violate any non-competition, confidentiality or other obligation owed to Noven will forfeit any outstanding award as of the date of the violation and will have to return any gains realized in the twelve months prior to such violation. These provisions serve to protect Noven’s intellectual property and business enterprise and help ensure that executives act in the best interests of Noven and its stockholders.

2008 New Hire Equity Grants

In order to attract and incentivize new hires, initial equity grants are typically larger than annual grants. In addition to the annual grant discussed above, Messrs. Brandt and Dinh and Dr. Lippman received the following equity awards in 2008 in connection with their respective appointments:

	SSARs				Restricted Stock
	Grant Date		Number		Grant Date		Number
Executive	Fair Value		of Shares		Fair Value		of Shares
Peter Brandt	$	1,300,000		311,529	$	2,275,000		250,000
Steven M. Dinh	$	300,000		53,107		n/a		n/a
Joel S. Lippman, M.D.	$	400,000		78,520		n/a		n/a

A discussion of the equity awards granted to Mr. Brandt upon joining Noven is included below in the discussion of his employment agreement. The SSARs granted to Mr. Dinh and Dr. Lippman upon joining Noven were determined as a result of the arms-length negotiation between Noven and each of the executive officers in connection with each such executive officer’s recruitment and offer of employment.

Benefits

Benefits for the executive officers are established based upon an assessment of competitive market factors and, to a lesser extent, a determination of what is needed to attract and retain talent. Except as described herein, executive officers are generally entitled to the same health, welfare and retirement benefits provided to all of our employees. In addition, Noven reimburses the following costs for executive officers: airline club membership, certain financial planning services, executive physical examinations and communication equipment and monthly usage fees.

On April 29, 2008, Noven entered into an employment agreement with Mr. Brandt as President and Chief Executive Officer. The initial two-year term of the agreement expires on April 28, 2010 and will continue for consecutive one-year terms unless the agreement is terminated by either party under certain conditions. Mr. Brandt’s annual base salary under the employment agreement was set at $650,000 for 2008, subject to further increases at the discretion of the Board. Mr. Brandt’s annual target incentive bonus under Noven’s annual incentive plan during the term will be at least 75% of his base salary. Under his agreement, Mr. Brandt receives a non-accountable automobile expense allowance of $850 per month and is entitled to participate in all incentive, savings and retirement plans, as well as welfare benefit plans that are available to Noven’s executive officers.

In connection with his employment agreement, Mr. Brandt was granted the equity awards described above under the caption “2008 New Hire Equity Grants.” As with Mr. Dinh and Dr. Lippman, the new hire equity grants to Mr. Brandt were the result of an arms-length negotiation between Noven and Mr. Brandt in connection with Mr. Brandt’s recruitment and offer of employment. For Mr. Brandt, the Compensation Committee selected a

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combination of SSARs, time-vested restricted stock and performance-based restricted stock for Mr. Brandt’s new hire equity grants in order to meet several incentive objectives.

•  Mr. Brandt was granted SSARs to acquire 311,529 shares of common stock, which vest in four annual installments over four years. The Compensation Committee included SSARs in Mr. Brandt’s new hire equity package in order to align his interests with those of Noven’s stockholders.

•  Mr. Brandt was granted 100,000 shares of restricted stock, of which 50,000 shares were immediately vested and the remaining 50,000 shares vest annually in three annual installments over three years. The Compensation Committee included such restricted stock in Mr. Brandt’s new hire equity package because of its enhanced retention value.

•  Mr. Brandt was also granted 150,000 shares of performance-based restricted stock that vest as follows: (i) 50,000 shares upon Noven attaining annual pre-tax income over $50 million; (ii) 50,000 shares upon Noven attaining annual pre-tax income over $75 million; and (iii) 50,000 shares upon Noven attaining annual pre-tax income over $100 million. The Compensation Committee selected these performance goals based on its belief that achievement of these goals would result in significant value to Noven and its stockholders. In 2008, Noven’s pre-tax income was $32.8 million. These 150,000 shares of restricted stock are intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code.

If, prior to a “change in control”, the employment agreement is terminated by Noven “without cause” or by Mr. Brandt for “good reason” (as such terms are defined in the employment agreement), then Mr. Brandt is entitled to: (i) a severance payment in an amount equal to 18 months of his then-base salary, payable at such time as his salary would have otherwise been payable; (ii) a pro-rated award (based on the date of termination) under Noven’s annual incentive plan based on his target incentive percentage; and (iii) immediate vesting of the SSARs awarded to him on April 29, 2008 and up to a total of 50,000 shares of the restricted stock that vests on the first, second and third anniversary of the employment agreement. If Noven declines to renew the employment agreement, Mr. Brandt is not entitled to a cash severance payment, but would be entitled to receive the benefits described in (ii) and (iii) of this paragraph.

If, following a “change of control”, Mr. Brandt is terminated for any reason other than death, disability or for “cause”, or he terminates the employment agreement for “good reason” (as defined in the employment agreement), or if Noven declines to renew the employment agreement for at least the two-year period following the change of control, then Mr. Brandt is entitled to a severance payment equal to two times his “annual base salary” and “highest annual bonus” (as defined in the employment agreement). The employment agreement also provides that he is entitled to continue to participate in Noven’s welfare benefit plans for the full two-year period following the change of control. In the event that any payments made in connection with a change of control would be subjected to the excise tax imposed by Section 4999 of the Code, Noven would be required to “gross-up” Mr. Brandt’s compensation for all federal, state and local income and excise taxes and any penalties and interest thereon.

Compensation to Mr. Eisenberg as Interim Chief Executive Officer

In January 2008, Noven appointed Mr. Eisenberg as Executive Vice President and Interim Chief Executive Officer. Prior to then, Mr. Eisenberg had been serving as Senior Vice President — Strategic Alliances. Since the appointment of Mr. Brandt as Noven’s Chief Executive Officer in April 2008, Mr. Eisenberg has served as Noven’s Executive Vice President. In connection with his appointment as Interim Chief Executive Officer, Noven entered into a letter agreement with Mr. Eisenberg which provided him:

•  an additional $33,334 per month in base salary for the period from January 2, 2008 until April 29, 2008, the date of the appointment of Mr. Brandt as the permanent Chief Executive Officer; and

•  a restricted stock award of 7,342 shares of Noven common stock, which had a market value of $100,000 on the date of grant (based on a per share grant value of $13.62), and which vests over a two year period in eight quarterly installments beginning on March 31, 2008.

Mr. Eisenberg’s cash compensation (base salary as increased by the amounts noted above plus his full year annual incentive opportunity) was designed to provide him, for his services as Interim Chief Executive Officer, with

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a total cash compensation package similar to the market median for a Peer Company chief executive officer, as determined in the market comparison performed during 2007 by PM&P. The Compensation Committee decided to include a restricted stock grant to provide a retention incentive for Mr. Eisenberg in the event that he did not become the permanent Chief Executive Officer, as his continued services as Executive Vice President were considered to be critical to Noven’s future success. The Compensation Committee decided on the amount of the restricted stock award based on the assumption that Mr. Eisenberg’s term as Interim Chief Executive Officer would be less than six months and that Mr. Eisenberg should receive an award that constitutes a significant percentage of his regular grant of SSARs. The Compensation Committee chose restricted stock as the instrument because it provides a greater retention incentive than do SSARs.

The letter agreement with Mr. Eisenberg also provides for severance in the event that, prior to December 31, 2009, he is terminated without “cause” or resigns for “good reason” (as such terms are defined in the letter agreement), in which event he would receive (i) severance equal to one year of his then-current salary, (ii) an amount equal to his target award under the AIP in effect during the applicable fiscal year of the date of termination or resignation, (iii) immediate vesting of the restricted stock outstanding at the date of such termination or resignation, and (iv) an extension of the exercise period for then vested options or SSARs from 90 days to 12 months after the date of such termination or resignation. The severance benefits resulted from the negotiation of Mr. Eisenberg’s letter agreement and were deemed appropriate by the Compensation Committee.

Post-Employment Payments to Mr. Strauss

Effective January 2, 2008, Robert C. Strauss retired from his roles as the President, Chief Executive Officer, director and Chairman of Noven. In connection with his retirement, Noven and Mr. Strauss entered into a separation agreement, which provided for certain separation payments, equity grants and the extension of certain vesting periods for stock options and SSARs vested as of the date of his separation from Noven. All of these amounts were recognized and accrued in 2007 for financial reporting purposes and are reported herein in the Summary Compensation Table for 2007.

Change of Control Arrangements

Noven has separately entered into change of control employment agreements with its executive officers (other than Mr. Brandt). These agreements, which are more fully described beginning on page 42 of this Proxy Statement, become effective if a change of control occurs during the three-year period that commences on the execution of the agreement. The change of control employment agreements are intended to further the interests of Noven’s stockholders by providing for continuity of management in the event of a change of control of Noven. In November 2008, the Compensation Committee renewed these agreements for the named executive officers, which had the effect of extending the three-year term of those agreements to November 2011. The renewed agreements also contain amendments designed to comply with Section 409A of the Code.

In the event that any payments made in connection with a change of control under the change of control employment agreements for the named executive officers would be subject to the excise tax imposed by Section 4999 of the Code, Noven would be required to “gross-up” the officer’s compensation for all federal, state and local income and excise taxes and any penalties and interest thereon.

Awards (including SSARs and stock options) granted under the 1999 Plan vest immediately upon a “change of control”. The definition of a “change of control” under these awards is substantially the same as the definition of “change of control” described on page 43 with respect to the change of control employment agreements.

Internal Revenue Code Limits on Deductibility of Compensation

Section 162(m) of the Code generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any fiscal year to the corporation’s chief executive officer and three other most highly compensated executive officers as of the end of any fiscal year. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met.

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The Compensation Committee believes that it is generally in Noven’s best interest to attempt to structure performance-based compensation, including stock option/SSARs grants or performance-based restricted stock or restricted stock unit awards and annual incentive awards, to executive officers who may be subject to Section 162(m) in a manner that satisfies the statute’s requirements. However, the Compensation Committee recognizes the need to retain flexibility to make compensation decisions that may not meet Section 162(m) standards when necessary to enable the Company to meet its overall objectives, even if the Company may not deduct all of the compensation for tax purposes. Accordingly, the Compensation Committee may approve compensation arrangements for certain officers that are not fully deductible. Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, no assurance can be given, notwithstanding Noven’s efforts, that compensation intended by the Compensation Committee to satisfy the requirements for deductibility under Section 162(m) will in fact do so. All of the executive compensation payments in 2008 were deductible under Section 162(m).

Compensation Committee Report

Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate other of our filings, including this Proxy Statement, in whole or in part, the Report of the Compensation Committee below shall not be incorporated by reference into any such filings. This report shall also not be deemed to be “soliciting material,” or to have been “filed” with the Securities and Exchange Commission or subject to Regulation 14A under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 thereof.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Compensation Committee
John G. Clarkson, M.D., Chairperson
Pedro P. Granadillo
Robert G. Savage

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Summary Compensation Table

The table below and the accompanying footnotes include information regarding 2008, 2007 and 2006 compensation for each of the named executive officers. Other tables in this Proxy Statement provide additional detail on specific types of compensation.

													Change in
													Pension
											Non-		Value and
											Equity		Non-
											Incentive		Qualified
											Plan		Deferred		All Other
							Stock		Option		Compen-		Compen-		Compen-
Name and Principal					Bonus		Awards		Awards		sation		sation		sation
Position	Year		Salary		(1)		(2)(3)		(2)(3)		(4)		Earnings		(5)		Total
Peter Brandt		2008	$	422,500	$	0	$	863,446	$	416,092	$	365,625	$	0	$	15,538	$	2,083,201
President & CEO		2007		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Robert C. Strauss(6)		2008		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Former President, CEO &		2007		611,251		0		681,000		1,214,492		334,813		0		1,103,212		3,944,768
Chairman		2006		587,741		66,121		0		554,231		245,129		0		21,857		1,475,079
Jeffrey F. Eisenberg		2008		483,524		0		50,000		290,354		182,500		0		22,217		1,028,595
Executive Vice President &		2007		314,810		0		0		265,577		151,051		0		21,252		752,740
Former Interim CEO		2006		302,702		24,902		0		223,116		92,319		0		20,758		663,797
Michael D. Price		2008		286,000		0		0		107,843		128,700		0		48,517		571,060
Vice President & Chief		2007		27,500		10,000		N/A		12,500		0		0		11,772		51,772
Financial Officer		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Richard P. Gilbert(7)		2008		248,777		0		0		162,158		117,000		0		20,725		548,660
Vice President —		2007		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Operations		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Steven M. Dinh(8)		2008		167,750		15,000		0		40,011		80,058		0		80,020		382,839
Vice President & Chief		2007		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Scientific Officer		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Joel S. Lippman, M.D.(8)		2008		143,750		50,000		0		42,068		73,125		0		10,257		319,200
Vice President — Clinical		2007		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Development & Chief		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Medical Officer
Juan A. Mantelle(9)		2008		287,080		0		0		237,541		114,832		0		19,769		659,222
Vice President & Chief		2007		278,718		0		0		247,974		111,753		0		19,173		657,618
Technical Officer		2006		267,998		20,917		0		210,144		77,543		0		18,407		595,009

(1)	2008 amounts are comprised of sign-on bonuses paid to Mr. Dinh and Dr. Lippman.
(2)	Represents the dollar amount recognized for financial statement reporting purposes for each fiscal year, in accordance with FAS 123(R), of equity grants made pursuant to the 1999 Plan. Pursuant to the rules of the Securities and Exchange Commission (“SEC”), the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Assumptions used in the calculation of these amounts are included in footnote 2 to Noven’s audited consolidated financial statements for the year ended December 31, 2008 included in Noven’s Annual Report on Form 10-K filed with the SEC on March 13, 2009.
(3)	The grant date fair value of the equity incentive grants made to the named executive officers in 2008 is set forth in the “Grant of Plan-Based Awards in 2008” table below.
(4)	Represents cash awards made under Noven’s formula-based annual incentive plans. Noven’s 2008 AIP and 2008 CEO Incentive Plan are more fully described in “Compensation Discussion and Analysis” which begins on page 17.

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(5) Items included under “All Other Compensation” for 2008 for each named executive officer are set forth in the table below:

			401(k)
			Matching		Auto		Life		Other
Name	Relocation		Contributions		Allowance		Insurance		Perquisites		Total
P. Brandt	$	0	$	2,776	$	6,669	$	602	$	5,491	$	15,538
R. Strauss		0		0		0		0		0		0
J. Eisenberg		0		7,208		7,200		517		7,292		22,217
M. Price		31,705		6,930		7,200		440		2,242		48,517
R. Gilbert		0		7,352		7,200		368		5,805		20,725
S. Dinh		70,397		2,128		3,877		216		3,402		80,020
J. Lippman		0		1,511		3,185		460		5,101		10,257
J. Mantelle		0		6,746		7,200		408		5,415		19,769

These items include: (i) relocation payments; (ii) matching contributions made by Noven under its 401(k) Employee Savings Plan (a plan providing for broad-based employee participation), including a “401(k) restoration match” under Noven’s Deferred Compensation Plan; (iii) a non-accountable auto allowance; (iv) insurance premiums paid by Noven for life insurance for the benefit of the named executive officers; and (v) the following additional perquisites: airline club membership, financial planning services, physical examinations, and communication equipment and related usage fees. The value of these perquisites is calculated based on their incremental cost to Noven, which is determined based on the actual cost of providing these perquisites.

(6)	Mr. Strauss retired from his roles as President, Chief Executive Officer, director and Chairman of Noven, effective on January 2, 2008. All of Mr. Strauss’ separation compensation was recognized in 2007 for financial statement reporting purposes.
(7)	Mr. Gilbert was appointed as an executive officer of Noven, effective on June 5, 2008.
(8)	Mr. Dinh, who joined Noven on June 4, 2008, received a $15,000 sign-on bonus on his date of hire and $70,397 in relocation benefits. Dr. Lippman, who joined Noven on July 14, 2008, received a $50,000 sign-on bonus on his date of hire.
(9)	Upon the appointment of Mr. Dinh on June 4, 2008, Mr. Mantelle was no longer deemed to be an executive officer of Noven.

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Grants of Plan-Based Awards in 2008

																All Other
																Stock Awards
																and
																Option/SSAR		Exercise
																Awards:		or Base		Grant Date
				Estimated Possible Payouts						Estimated Future Payouts						Number of		Price of		Fair Value of
				Under Non-Equity Incentive						Under Equity Incentive						Securities		Option/		Stock and
				Plan Awards(1)						Plan Awards						Underlying		SSAR		Option/
								Maxi-		Thresh-				Maxi-		Options/		Awards		SSAR
	Grant			Threshold		Target		mum		old		Target		mum		SSARs(2)		(3)		Awards(4)
Name	Date			($)		($)		($)		(#)		(#)		(#)		(#)		($/Sh)		($)
Peter Brandt(5)		04/29/08	(6)														250,000		N/A	$	2,275,000
		04/29/08		$	182,813	$	365,625		N/A		0		0		0		311,529	$	9.10		1,300,000
		11/21/08															188,471		11.09		985,703
		02/04/09															62,712		9.47		218,750
Robert C. Strauss		N/A			N/A		N/A		N/A		0		0		0		0		N/A		N/A
Jeffrey F. Eisenberg		01/02/08	(6)		91,250		182,500		N/A		0		0		0		7,342		N/A		100,000
		11/18/08															71,702		11.09		375,000
Michael D. Price		11/18/08			64,350		128,700		N/A		0		0		0		66,922		11.09		350,000
Richard P. Gilbert		11/18/08			58,500		117,000		N/A		0		0		0		66,922		11.09		350,000
Steven M. Dinh(5)		06/04/08			40,029		80,058		N/A		0		0		0		53,107		11.84		300,000
		11/18/08															39,038		11.09		204,167
Joel S. Lippman(5)		07/14/08			36,563		73,125		N/A		0		0		0		78,520		10.86		400,000
		11/18/08															33,461		11.09		175,000
Juan A. Mantelle		11/18/08			57,416		114,832		N/A		0		0		0		38,241		11.09		200,000

(1)	Cash awards paid under Noven’s 2008 AIP and, with respect to Mr. Brandt, under the 2008 CEO Incentive Plan, are disclosed in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table on page 31. The “Estimated Possible Payouts” shown in the table above are based on the threshold (50% of target) and target amounts that the named executive officers were eligible to receive under this plan as described in the discussion of this plan found in “Compensation Discussion and Analysis” which begins on page 17. No maximum amount is provided because this plan does not limit the maximum potential payout.
(2)	Unless otherwise noted, represents the number of shares of Noven’s common stock underlying the SSAR awards granted to each named executive officer under the 1999 Plan. Except for Mr. Brandt’s February 4, 2009 SSAR award, which was immediately exercisable, each grant vests at a rate of 25% per year on the first four anniversaries of the grant date during the seven-year term of the grant.
(3)	Exercise price of each SSAR is the closing price of Noven’s common stock on the date of grant.
(4)	Represents the grant date fair value of each stock award and SSAR award calculated in accordance with FAS 123(R).
(5)	The threshold and target payouts under Non-Equity Incentive Plan Awards above are prorated based on the portion of the year in which Messrs. Brandt and Dinh and Dr. Lippman served Noven. The SSAR awards granted to Mr. Dinh and Dr. Lippman were also prorated based on the portion of 2008 in which each such named executive officer served Noven.
(6)	In connection with his employment agreement, Mr. Brandt was granted 250,000 shares of restricted stock, and in connection with Mr. Eisenberg’s appointment as Interim Chief Executive Officer, Mr. Eisenberg was granted 7,342 shares of restricted stock, each of which is more fully described in “Compensation Discussion and Analysis” which begins on page 17.

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Outstanding Equity Awards at 2008 Year-End

										Stock Awards
														Equity
														Incentive		Equity
														Plan		Incentive
														Awards		Plan Awards
	Option/SSAR Awards													Number of		Market or
	Number of		Number of									Market		Unearned		Payout Value
	Securities		Securities							Number of		Value of		Shares,		of Unearned
	Underlying		Underlying							Shares or		Shares or		Units or		Shares, Units
	Unexercised		Unexercised			Option/				Units of		Units of		Other		or Other
	Options/		Options/ SSARs			SSAR		Options/		Stock That		Stock That		Rights That		Rights That
	SSARs (#)		(#)			Exercise		SSAR		Have Not		Have Not		Have Not		Have Not
	Exercisable		Unexercisable			Price		Expiration		Vested		Vested		Vested		Vested
Name	(1)		(1)			($)		Date		(#)		($)		(#)		($)
Peter Brandt(3)											50,000	$	550,000		150,000	$	1,650,000
		0		188,471		$	11.09		11/20/2015
		0		311,529		$	9.10		4/28/2015
Robert C. Strauss(4)		20,360		0		$	22.83		12/31/2009		0	$	0		50,000	$	550,000
		53,704		0		$	13.68		12/31/2009
		100,000		0		$	22.60		12/31/2009
		80,000		0		$	10.45		12/31/2009
		120,000		0		$	13.11		9/4/2009
Jeffrey F. Eisenberg(5)		0		71,702		$	11.09		11/17/2015		3,671	$	40,381		0	$	0
		13,040		39,121		$	14.54		11/12/2014
		11,764		11,763		$	22.83		11/13/2013
		23,148		7,716	(2)	$	13.68		11/14/2012
		50,000		0		$	22.60		11/10/2011
		24,000		0		$	10.45		11/4/2010
		19,099		0		$	13.11		9/4/2009
Michael D. Price		0		66,922		$	11.09		11/17/2015		0	$	0		0	$	0
		15,625		46,875		$	13.93		11/18/2014
Richard P. Gilbert		0		66,922		$	11.09		11/17/2015		0	$	0		0	$	0
		7,452		22,354		$	14.54		11/12/2014
		9,954		9,954		$	22.83		11/13/2013
		17,393		5,798	(2)	$	13.68		11/14/2012
		30,000		0		$	16.35		12/5/2011
Steven M. Dinh(6)		0		39,038		$	11.09		11/17/2015		0	$	0		0	$	0
		0		53,107		$	11.84		6/3/2015
Joel S. Lippman(6)		0		33,461		$	11.09		11/17/2015		0	$	0		0	$	0
		0		78,520		$	10.86		7/13/2015
Juan A. Mantelle		0		38,241		$	11.09		11/17/2015		0	$	0		0	$	0
		7,452		22,354		$	14.54		11/12/2014
		11,764		11,763		$	22.83		11/13/2013
		15,432		7,716	(2)	$	13.68		11/14/2012
		50,000		0		$	22.60		11/10/2011
		20,001		0		$	10.45		11/4/2010
		10,000		0		$	13.11		9/4/2009

(1)	Unless otherwise indicated, all equity awards listed in these columns are SSAR awards, which vest at a rate of 25% per year on the first four anniversaries of the grant date during the seven-year term of the grant.
(2)	Grant of stock option awards.
(3)	In addition to the awards listed, the Compensation Committee determined in February 2009 that Mr. Brandt should receive a supplemental incentive payment of $218,750 for his services in 2008, which was paid in the form of an immediately exercisable SSAR as more fully described in “Compensation Discussion and Analysis” which begins on page 17.
(4)	Mr. Strauss retired from his roles as President, Chief Executive Officer, director and Chairman of Noven on January 2, 2008. In connection with his retirement, Noven and Mr. Strauss entered into a separation agreement, dated as of January 2, 2008, pursuant to which, among other things: (i) all of Mr. Strauss’ stock options and SSARs which were vested as of December 31, 2007 may be exercised on or before the earlier of December 31, 2009 or the expiration date set forth in the applicable award agreement; and (ii) all of Mr. Strauss’ stock options and SSARs which were not vested as of December 31, 2007 were forfeited and terminated. Additionally, in connection with Mr. Strauss’ retirement, Noven granted to Mr. Strauss under the 1999 Plan restricted stock units

17

	for 50,000 shares of Noven’s common stock, which restricted stock units will vest all at once on January 10, 2010, provided that Mr. Strauss does not violate certain non-competition, non-solicitation and confidentiality agreements.
(5)	Mr. Eisenberg was appointed Executive Vice President and Interim Chief Executive Officer of Noven, effective January 2, 2008. In connection with his appointment, Noven and Mr. Eisenberg entered into a letter agreement, dated as of January 2, 2008, pursuant to which, among other things, Noven granted to Mr. Eisenberg under the 1999 Plan restricted stock units for 7,342 shares of Noven’s common stock, which restricted stock units will vest in eight equal quarterly installments beginning on March 31, 2008. The letter agreement between Noven and Mr. Eisenberg is more fully described in “Compensation Discussion and Analysis” which begins on page 17.
(6)	Mr. Dinh joined Noven as its Vice President & Chief Scientific Officer on June 4, 2008 and Dr. Lippman joined Noven as its Vice President — Clinical Development & Chief Medical Officer on July 14, 2008.

Option Exercises and Stock Vested in 2008

	Option Awards				Stock Awards
	Number of				Number of
	Shares				Shares
	Acquired		Value Realized		Acquired		Value Realized
	on Exercise		on Exercise		on Vesting		on Vesting
Name	(#)		($)		(#)		($)(1)
Peter Brandt		0	$	0		50,000	$	455,000
Robert C. Strauss		0		0		0		0
Jeffrey F. Eisenberg		0		0		3,671		38,867
Michael D. Price		0		0		0		0
Richard P. Gilbert		0		0		0		0
Steven M. Dinh		0		0		0		0
Joel S. Lippman		0		0		0		0
Juan A. Mantelle		0		0		0		0

(1) Value realized is the amount equal to the closing market price of Noven’s common stock on a particular vesting date, multiplied by the number of shares vesting on such date.

Non-qualified Deferred Compensation in 2008

Noven has established a non-qualified deferred compensation plan available to members of the Board and a group of Noven’s officers selected by Noven’s Employee Benefits Committee. The plan permits participants to defer receipt of part of their current compensation to a later date as part of their personal retirement or financial planning. Participants may elect to defer, as applicable, portions of their director fees, base salary, bonus, long-term incentive plan awards, and/or restricted stock grants. Deferral elections are made annually and expire at the end of each plan year. Deferral elections are irrevocable once made. Benefit security for the plan is provided by a rabbi trust.

Deferrals are subject to minimum and maximum amount requirements, as defined in the plan. An employee participant that elects to participate in the plan in a given plan year must defer at least an aggregate amount of $4,000 from his or her base salary, bonus and/or long-term incentive plan awards; a director participant must defer at least $4,000 of his or her director fees. No minimum deferral is required for restricted stock grants, and a restricted stock recipient may defer up to 100% of a restricted stock grant. Deferring a grant of restricted stock does not alter the timetable for vesting of that grant. An employee participant may defer up to 75% of his or her salary and up to 100% of his or her bonus and/or long-term incentive plan awards; director participants may defer up to 100% of their director fees.

Commencing in 2007, participants became eligible to receive a “401(k) restoration match” that is intended to address reductions in the amount that participants receive in matching contributions under Noven’s 401(k)

18

Employee Savings Plan as a result of certain limits generally applicable to 401(k) plans. Contributions made by Noven under the deferred compensation plan in 2008 as a result of the 401(k) restoration match are noted in the table below.

Participants are at all times 100% vested in their deferral accounts. For cash deferrals, participants may elect one or more measurement funds selected by the Employee Benefits Committee (which are based on certain mutual funds) for the purpose of crediting or debiting additional amounts to a participant’s deferral account balance. Restricted stock deferrals are automatically allocated to a Noven stock unit measurement fund.

Amounts deferred may be paid out to participants in scheduled distributions, which may not be any sooner than two full plan years after the year to which the deferral election relates. A participant may also elect to receive a distribution if such participant experiences an unforeseeable financial emergency (as defined in the plan) or in the event of a change of control of Noven. Distributions may also be made upon a participant’s retirement, termination, disability or death.

Noven may terminate the plan at any time; however, upon termination, benefits would be paid as defined in the plan.

The following table sets forth the amounts deferred in 2008 under the non-qualified deferred compensation plan by the named executive officers.

	Executive		Registrant		Aggregate		Aggregate		Aggregate
	Contributions in		Contributions in		Earnings in 2008		Withdrawals/		Balance at
Name	2008(1)(2) ($)		2008 ($)		($)		Distributions ($)		12/31/08(3) ($)
Peter Brandt	$	0	$	1,070	$	0	$	0	$	1,070
Robert C. Strauss		0		0		0		0		0
Jeffrey F. Eisenberg		50,998		308		0		0		108,127
Michael D. Price		0		1,680		0		0		1,680
Richard P. Gilbert		70,921		563		0		0		112,643
Steven M. Dinh		0		0		0		0		0
Joel S. Lippman		0		0		0		0		0
Juan A. Mantelle		1,096		1,712		0		0		15,743

(1)	Messrs. Eisenberg, Gilbert and Mantelle were the only named executive officers who elected to defer compensation under the plan in 2008.
(2)	All amounts in this column are also reported as compensation for the applicable individual in the Summary Compensation Table.
(3)	The aggregate balance at December 31, 2008 includes the following contributions that are also reported as compensation in 2007 and 2006 in the Summary Compensation Table (i) for Mr. Eisenberg, $75,000 for 2007 and $30,000 for 2006, and (ii) for Mr. Mantelle, $5,908 for 2007 and $15,877 for 2006.

Additional Information About Change of Control and Termination Payments

Noven does not have a formal policy for severance or other related benefits upon the termination of any employee and, with the exception of severance payments that may be due to Mr. Brandt under his employment agreement and Mr. Eisenberg under his letter agreement (each as discussed in “Compensation Discussion and Analysis” beginning on page 17), none of the current named executive officers are entitled to a severance payment upon termination. Noven’s current general practice, which is at Noven’s sole discretion and subject to change at any time, is to provide an executive officer terminated other than for some form of cause with accrued salary and pro-rated bonus as of the date of termination, outplacement services for one year, a severance payment equal to the greater of the equivalent of the officer’s salary for one year or two weeks’ pay for every year of employment at Noven, and continuation of health care benefits through the severance period.

19

Noven does not have a retirement policy (other than the matching contributions made by Noven under its 401(k) Employee Savings Plan) and Noven’s named executive officers are not entitled to receive any special benefit upon retirement.

Noven has entered into change of control employment agreements with each of its current named executive officers (other than Mr. Brandt, who is provided change of control benefits under his employment agreement that are substantially the same as the benefits provided to the other named executive officers under the change of control employment agreements described below). These agreements are intended to further the interests of Noven’s stockholders by providing for continuity of management in the event of a change of control of Noven. The agreements become effective if a change of control occurs during the three-year period that commences on the execution of the agreement. In 2008, the Compensation Committee renewed these agreements for each current named executive officer, which had the effect of extending the three-year term to November 2011.

Under the change of control agreements, a change of control includes any of the following events:

•  the acquisition of 40% or more of Noven’s common stock by a person or group;

•  a change in the majority of the Board (other than a change approved by the incumbent Board);

•  approval by the stockholders of a reorganization, merger or consolidation and consummation thereof; or

•  approval by the stockholders of a liquidation or dissolution or sale of all or substantially all of the assets of Noven.

Exceptions are provided for certain transactions, including those where the existing stockholders of Noven maintain effective control.

Once the agreements become effective upon a change of control, they have a term of two years. Each agreement provides that a covered officer will have the position, responsibilities and authority at least commensurate with those held during the ninety days preceding the change of control. Each agreement also provides that the covered officer will be paid an annual base salary equal to the highest salary that officer received during the 12 months preceding the change of control; will be entitled to an annual bonus on the first anniversary of the change of control equal to the average annual bonus paid to that officer during the three years preceding the change of control; and will be entitled to continued participation in Noven’s benefit plans, fringe benefits, office support and staff, vacation, and expense reimbursement on the same basis as prior to the change of control, and in any case benefits that are no less favorable than those provided by Noven to “peer executives” (as defined in the agreements).

If, following a change of control, the officer is terminated for any reason other than death, disability or for “cause”, or such officer terminates his or her employment agreement for “good reason” (as defined in the agreements), then the officer is entitled to a severance payment equal to two times the officer’s “annual base salary” and “highest annual bonus” (as defined in the agreements). The agreements also provide that the officer is entitled to continue to participate in Noven’s welfare benefit plans for the full two-year period.

In the event that any payments made in connection with a change of control would be subjected to the excise tax imposed by Section 4999 of the Code, Noven will “gross-up” the officer’s compensation for all federal, state and local income and excise taxes and any penalties and interest thereon. The calculation of the excise tax in the tables above is based on a 280G excise tax rate of 20%, a statutory 35% federal income tax rate, and a 1.45% Medicare tax rate.

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EX-99.(E)(4)

EXHIBIT (e)(4)

June 25, 2008

Hisamitsu Pharmaceutical Co., Inc.

Marunouchi 1-11-1, Chiyoda-ku

Tokyo 100-6221, Japan

Attention:   Hirotaka Nakatomi

President & Chief Executive Officer

Dear Mr. Nakatomi:

In connection with the consideration of a possible negotiated transaction or transactions between Noven Pharmaceuticals, Inc. and Hisamitsu Pharmaceutical Co., Inc. (individually, a “Party”, and collectively, the “Parties”), including potential licensing transactions, joint ventures or other collaborations, each Party has requested or will request certain information from the other Party. As a condition to being furnished such information, each Party agrees to treat any information concerning the other Party which is furnished by or on behalf of the other Party (collectively, the “Evaluation Material”) in accordance with the provisions of this agreement.

Unless the context requires otherwise, references to a “Party” in this agreement are deemed to include the directors, officers, employees, advisors and agents of the Party, and each Party shall be responsible for any breach of this agreement by its directors, officers, employees, advisors and agents. For purposes of this agreement, the term “Owner” means the Party supplying Evaluation Material, and the term “Recipient” means the Party receiving Evaluation Material. The term “Evaluation Material” does not include information which (1) is or becomes generally available to the public other than as a result of a disclosure by the Recipient in violation of this agreement, (2) was in the possession of the Recipient prior to receipt thereof from the Owner provided that such information is not known by the Recipient to be the subject of another confidentiality agreement with or other obligation of secrecy to the Owner or another party, (3) becomes available to the Recipient on a non-confidential basis from a source other than the Owner, provided that such source is not bound by a confidentiality agreement with, or other obligation of secrecy to, the Owner or another party, or (4) is independently developed by the Recipient without use of any Evaluation Material of the Owner, as evidenced by the Recipient’s written records.

Each Party agrees that (1) it will use the Evaluation Material solely for the purposes of evaluating a possible negotiated transaction between the Parties (the “Purpose”) and for no other purpose, (2) it will maintain the Evaluation Material confidential, (3) it will not at any time or in any manner, directly or indirectly, disclose to any person any or all of the Evaluation Material, and (4) it will not disclose to any person either the fact that information has been provided under this agreement or that discussions or negotiations are taking or have taken place concerning the Purpose, or any terms, conditions or other facts with respect to any such discussions or negotiations or the status thereof.

Notwithstanding the foregoing, the Evaluation Material may be disclosed to a Party’s directors, officers, employees, advisors and agents who need to know such information for the Purpose; provided that such directors, officers, employees, advisors and agents shall be informed by the Party of the confidential nature of such information and the restrictions contained in this agreement and shall be directed to treat such information in accordance with the terms of this agreement. In addition, nothing contained in this agreement shall be deemed to prevent disclosure of the fact that the Evaluation Material has been made available to either Party, that discussions or negotiations are taking place concerning a possible transaction involving either Party, or any of the terms, conditions or other facts with respect thereto, including the status thereof, if, in the opinion of a Party’s legal counsel, such disclosure is required to be made by law, in connection with any filings made with the Securities and

Hisamitsu Pharmaceutical Co., Inc.

June 25, 2008

Page 2

Exchange Commission, or by the disclosure policies of the principle stock exchange on which such Party’s stock is traded, but in each such case, only after prior notice to and consultation with the other Party.

To secure the confidentiality of the Evaluation Material, the Recipient shall: (1) keep separate all the Evaluation Material and all information generated by the Recipient based thereon from other documents and records of the Recipient; (2) keep all documents and any other material relating to or incorporating any of the Evaluation Material at the usual place of business of the Recipient or at the place of business of a Recipient’s advisors used in connection with the Purpose except as specifically permitted in writing by the Owner; (3) take all reasonable precautions to maintain the confidentiality of the Evaluation Material; (4) make copies of the Evaluation Material only to the extent required for the Purpose by the Recipient; and (5) at the request of the Owner made at any time, deliver to the Owner, within 10 business days of such request, all Evaluation Material, including originals or copies thereof, that are in the possession of the Recipient, and destroy all notes, memoranda, extracts, reports or other writings that relate to or incorporate any part of the Evaluation Material prepared by the Recipient, except that one archival copy of written material to be kept confidential and segregated from Recipient’s regular files may be retained by Recipient’s legal counsel solely for purposes of verifying compliance with this Agreement.

In the event that either Party is requested or required in an investigation, legal proceeding or similar process to disclose any of the Evaluation Material, such Party shall provide the other Party with prompt written notice of any such request or requirement so that the other Party may seek a protective order or other appropriate remedy or waive compliance with the provisions of this agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver by the other Party, such Party is nonetheless, in the written opinion of counsel, legally compelled to disclose Evaluation Material, such Party may, without liability hereunder, disclose only that portion of the Evaluation Material which counsel advises that it is legally required to disclose, provided that such Party exercises its best efforts to preserve the confidentiality of the Evaluation Material, including, without limitation, by cooperating with the other Party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Evaluation Material.

Except as shall otherwise be agreed in writing in the future by the Parties: (1) the Owner does not make any representation or warranty as to the accuracy or completeness of the Evaluation Material disclosed by such Owner; and (2) the Owner shall not have any liability to the Recipient resulting from the use by the Recipient of the Evaluation Material.

Each Party agrees that for a period commencing on the date of this agreement and expiring on the earlier of: (i) two years from the date of this agreement; or (ii) the public announcement by Noven of a partnership or collaboration agreement entered into between the parties, neither it nor any of its affiliates (as defined in Rule 12b-2 promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) will, unless specifically invited in writing by the other Party, directly or indirectly, in any manner:

(a) acquire, offer or propose to acquire, solicit an offer to sell or agree to acquire, directly or indirectly, alone or in concert with others, by purchase or otherwise, any direct or indirect beneficial interest in any voting securities or direct or indirect rights, warrants or options to acquire, or securities convertible into or exchangeable for, any voting securities of the other Party or any of its affiliates;

(b) make, or in any way participate, directly or indirectly, alone or in concert with others, any “solicitation” of “proxies” to vote (as such terms are used in the proxy rules of the Securities and Exchange Commission promulgated pursuant to Section 14 of the Exchange Act) or seek to advise or influence in any manner whatsoever any person or entity with respect to the voting of any voting securities of the other Party or any of its affiliates;

(c) form, join or in any way participate in a “group” within the meaning of Section 13(d)(3) of the Exchange Act with respect to any voting securities of the other Party or any of its affiliates;

(d) acquire, offer to acquire or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, exchange or otherwise, (i) any of the assets, tangible and intangible, of the other Party or any of its

Hisamitsu Pharmaceutical Co., Inc.

June 25, 2008

Page 3

affiliates or (ii) direct or indirect rights, warrants or options to acquire any assets of the other Party or any of its affiliates, except for such assets as are then being offered for sale by the other Party or any of its affiliates;

(e) arrange, or in any way participate, directly or indirectly, in any financing for the purchase of any voting securities or securities convertible or exchangeable into or exercisable for any voting securities or assets of the other Party or any of its affiliates, except for such assets as are then being offered for sale by the other Party or any of its affiliates;

(f) otherwise act, alone or in concert with others, to seek to propose to the other Party or any of its affiliates or any of their respective stockholders any business combination, restructuring, recapitalization or similar transaction to or with the other Party or any of its affiliates or otherwise seek, alone or in concert with others, to control, change or influence the management, board of directors or policies of the other Party or any of its affiliates or nominate any person as a director of the other Party or any of its affiliates who is not nominated by the then incumbent directors or propose any matter to be voted upon by the shareholders of the other Party or any of its affiliates; or

(g) announce an intention to do, or enter into any agreement or understanding with others to do, any of the actions restricted or prohibited under clauses (a) through (f) of this paragraph.

Notwithstanding the preceding paragraph, either Party or any of its affiliates may purchase less than five percent of any class of securities of the other Party registered under Section 12 or 15 of the Exchange Act; provided that such percent limit shall apply collectively to any Party and its affiliates to the extent such Party and such affiliates are acting as a “group” within the meaning of Section 13(d)(3) of the Exchange Act.

Each Party agrees that for a period of three years following the date of this agreement it will not, directly or indirectly, employ, offer employment to, or participate in any discussions concerning employment with, any person who, as of the date of this agreement or at any time during the three years following the date of this agreement, is an employee of the other Party or any of its subsidiaries; provided that this paragraph shall not prohibit general solicitations of employment made in newspapers or other publications of broad circulation.

The Parties acknowledge and agree that any breach of this agreement by any Party will cause irreparable harm to the other Party for which monetary damages would be inadequate, and that, in addition to such other remedies that may be available, including recovery of damages, the injured Party shall be entitled to seek specific enforcement of the provisions hereof and injunctive relief.

The Parties acknowledge that they are aware and will advise their directors, officers, employees, advisors and agents who are informed as to the matters related to the Purpose, that the United States securities laws and Japanese unfair competition laws prohibit any person who has received from an issuer material non-public information concerning the issuer (which includes the existence of conversations regarding the Purpose) from purchasing or selling securities of such issuer or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.

This Agreement shall be governed by the laws of the State of New York, without regard to principles of conflict of law, may not be amended except pursuant to a writing signed by the Parties, and shall be binding on and inure to the benefit of the Parties and their successors and assigns.

Each Party understands and agrees that no contract or agreement providing for any transaction shall be deemed to exist between the Parties by virtue of this agreement or any written or oral expression with respect to any transaction unless and until a final definitive agreement is executed and delivered by the Parties.

Please confirm that the foregoing fully and accurately sets forth the agreement between the Parties by executing a counterpart hereof and returning it to the undersigned.

Very truly yours,

Hisamitsu Pharmaceutical Co., Inc.

June 25, 2008

Page 4

NOVEN PHARMACEUTICALS, INC.

By:  /s/  Peter Brandt

Peter Brandt

President & Chief Executive Officer

CONFIRMED AND AGREED:

HISAMITSU PHARMACEUTICAL CO., INC.

By:  /s/  Hirotaka Nakatomi

Hirotaka Nakatomi

President & Chief Executive Officer

EX-99.(E)(5)

EXHIBIT (e)(5)

STRICTLY CONFIDENTIAL

June 4, 2009

Hisamitsu Pharmaceutical Co., Inc.

1-11-1 Marunouchi

Chiyoda-ku, Tokyo 100-6221

Japan

Attention:  Mr. Hirotaka Nakatomi
  President and Chief Executive Officer

Dear Mr. Nakatomi:

In connection with a possible acquisition of Noven Pharmaceuticals, Inc. (the “Company”) by Hisamitsu Pharmaceutical Co., Inc. (“Hisamitsu”) or one of its subsidiaries (the “Acquisition”), and in recognition of the fact that Hisamitsu will be dedicating significant time, effort and resources in order to perform its due diligence and evaluate the proposed Acquisition, the Company and Hisamitsu hereby agree as follows:

During the period (the “Exclusivity Period”) beginning on the date hereof and ending at 5:00 p.m., New York City time, on July 1, 2009 (the “Termination Date”), the parties shall negotiate in good faith the terms of a definitive agreement in connection with the Acquisition. During the Exclusivity Period, the Company shall not, nor shall it permit any of its officers, directors, agents, advisors (including legal and financial advisers), representatives or affiliates to, (a) directly or indirectly solicit, initiate or knowingly encourage the submission of any Company Takeover Proposal (as defined below), (b) enter into any agreement or understanding with respect to any Company Takeover Proposal or (c) directly or indirectly participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or that could reasonably be expected to lead to, any Company Takeover Proposal; provided that nothing contained in this letter agreement shall prohibit or otherwise restrict (i) the Company’s investor relations activities conducted in the ordinary course of business, (ii) any action or activity relating to, or the ability of the Company to engage in discussions or negotiations regarding, employee and director equity compensation arrangements of the Company and (iii) any ordinary course action or activity relating to the administration of the Company’s insider trading policy.

As used herein, “Company Takeover Proposal” means any inquiry, proposal or offer from any person (other than Hisamitsu) or group relating to (a) any direct or indirect acquisition or purchase, in a single transaction or a series of transactions, of (i) 5% or more (based on the fair market value thereof, as determined by the board of directors of the Company) of the assets of the Company and its subsidiaries, taken as a whole, or (ii) 10% or more of the outstanding shares of any class of capital stock of the Company or (b) any tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution, binding share exchange or similar transaction involving the Company, any of its subsidiaries or Vivelle Ventures LLC. For the avoidance of doubt, “Company Takeover Proposal” shall not include an Offering Notice (as defined in the Limited Liability Company Operating Agreement dated as of May 1, 1999, by and between Novartis Pharmaceuticals Corporation and the Company (as amended from time to time, the “LLC Operating Agreement”)) or any inquiry, proposal or offer from Novartis Pharmaceuticals Corporation relating to the acquisition or purchase of the Company’s Interest (as defined

in the LLC Operating Agreement) or any discussions or negotiations with Novartis Pharmaceuticals Corporation regarding the foregoing.

During the Exclusivity Period, the Company hereby agrees that it will not serve upon Novartis Pharmaceuticals Corporation an Offering Notice without the prior written consent of Hisamitsu.

During the Exclusivity Period, so long as the parties remain engaged in discussions and negotiations regarding the Acquisition, the Company will provide Hisamitsu and its representatives with reasonable access, during regular business hours and upon reasonable prior notice, to the properties, facilities and personnel of the Company, its subsidiaries and Vivelle Ventures LLC and to all financial statements, contracts, books, records and other relevant information pertaining thereto, all as reasonably requested by Hisamitsu or any of its representatives in order to perform their due diligence investigation; provided that the Company may withhold access if it determines, in its sole discretion, that the withholding of such access is reasonably necessary to maintain a confidential transaction process.

This letter agreement shall automatically terminate on the Termination Date.

Each of the parties agrees that no contract, agreement or commitment with respect to the Acquisition or any other transaction shall exist or be deemed to exist by virtue of this letter agreement, any other written or oral expression with respect to the Acquisition, whether sent before, after or simultaneously with this letter agreement, or otherwise unless and until a definitive agreement related thereto has been duly executed and delivered.

Each of the parties agrees that monetary damages would not be a sufficient remedy for any breach of this letter agreement by the other party and that the non-breaching party shall be entitled to equitable relief, including an injunction or injunctions and specific performance, as a remedy for any such breach. Such remedy shall not be deemed to be the exclusive remedy for a breach by either party of this letter agreement but shall be in addition to all other remedies available at law or in equity.

During the Exclusivity Period, the Company shall promptly notify Hisamitsu orally and in writing of receipt by the Company of any Company Takeover Proposal or any inquiry with respect to any Company Takeover Proposal.

Each of the parties acknowledges and agrees that this letter agreement shall be treated as confidential in accordance with the terms and conditions of the Confidentiality Agreement dated June 25, 2008, between the parties.

This letter agreement may not be amended or any provision hereof waived or modified except by an instrument in writing signed by each of the parties hereto. This letter agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this letter agreement by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this letter agreement.

This letter agreement shall be governed and construed in accordance with the laws of the State of New York (without giving effect to the principles of conflict of laws thereof), and the parties hereto agree to submit to the exclusive jurisdiction of the courts thereof in connection with any dispute arising in connection with this letter agreement.

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Please confirm your agreement with the foregoing by signing and returning one copy of this letter to the undersigned, whereupon this letter agreement shall become a binding agreement between us and Hisamitsu.

Sincerely,

NOVEN PHARMACEUTICALS, INC.

By:  /s/  Peter Brandt

Name:     Peter Brandt

Title:  President and Chief Executive

Officer

AGREED AND ACKNOWLEDGED as of the date first written above.

HISAMITSU PHARMACEUTICAL CO., INC.

By:  /s/  Hirotaka Nakatomi

Name:     Hirotaka Nakatomi

Title:  President and Chief Executive

Officer

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EX-99.(E)(7)

Exhibit (e)(7)

     FIRST AMENDMENT TO

     EMPLOYMENT AGREEMENT

     WHEREAS, Noven Pharmaceuticals, Inc., a Delaware corporation (the “Company”) and Peter Brandt (the “Executive”) are parties to that certain Employment Agreement, dated as of April 29, 2008 (the “Agreement”).

     WHEREAS, Section 19 thereof provides that it is intended that the provisions of the Agreement be construed in a manner consistent with Internal Revenue Code Section 409A (“Section 409A”).

     WHEREAS, the Executive and the Company desire to amend the Agreement as provided herein to reflect such intent.

     WHEREAS, the Executive and the Company desire to amend the form of Waiver and Release attached to the Agreement as Exhibit C in order to clarify the intent thereof.

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the Executive and the Company hereby agree to amend the Agreement, effective April 29, 2008, as follows (the “Amendment”):

1.     Section 5.1 of the Agreement is hereby amended by adding the following to the end of the last paragraph thereof:

     “(such termination, an “Anticipatory Termination”).”

2.     Section 5.1 of the Agreement is hereby amended to include the following paragraph at the end of the last paragraph thereof:

“Notwithstanding anything herein to the contrary, in the event that the Executive’s employment terminates pursuant to this Section 5.1 in connection with a Change in Control that is not a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5) (a “409A Change in Control”) or pursuant to an Anticipatory Termination, the Executive shall receive the Separation Compensation in the amount and in the manner set forth in Section 4.1 hereof, and the Change in Control Severance Amount shall be reduced by the aggregate amount of the Separation Compensation and the Executive shall receive the Termination Pro Rata Bonus and not the bonus in paragraph b. above; provided, that, if clause (b) of the immediately preceding paragraph applies, the additional amounts in excess of the amount of the Separation Compensation will be paid within thirty (30) days after the Change in Control, and if such Change in Control is not a 409A Change in Control, no such additional amounts shall be paid.”

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     3.     The “subject” phrase in the first sentence of Section 4.1.b of the Agreement is hereby amended to read as follows:

“subject to the Executive’s execution (and non-revocation, if applicable) of the Company’s standard waiver and release in the form attached hereto as Exhibit C within 30 days after the date of termination,”.

     4.     Section 16 of the Agreement is hereby amended to add the following paragraph (e) to the end thereof:

“(e) Subject to any earlier time limits set forth in this Section 16, all payments and reimbursements to which the Executive is entitled under this Section 16 shall be paid to or on behalf of the Executive not later than the end of the taxable year of the Executive next following the taxable year of the Executive in which the Executive (or the Company, on the Executive’s behalf) remits the related taxes (or, in the event of an audit or litigation with respect to such tax liability, not later than the end of the taxable year of the Executive next following the taxable year of the Executive in which there is a final resolution of such audit or litigation (whether by reason of completion of the audit, entry of a final and non-appealable judgment, final settlement, or otherwise)).”

5.     The Waiver and Release that is attached to the Agreement as Exhibit C is hereby amended to add the following paragraph to the end of Section 4 thereof:

“Notwithstanding anything herein to the contrary, this Agreement and the waiver and release of claims set forth herein shall not apply to any rights, claims or damages based on (i) the Executive’s eligibility for indemnification or advancement of legal fees in accordance with applicable laws or pursuant to any agreement or plan or the certificate of incorporation or bylaws of the Company, (ii) coverage under any director or officer liability insurance policy with respect to any liability the Executive incurred as any employee, officer or director of the Company or any related entity or a fiduciary of any benefit plan of the Company or any related entity, or (iii) the Executive’s rights under Section 16 of the Employment Agreement between the Executive and the Company, dated as of April 29, 2008.”

     Except as specifically amended and modified by this Amendment, the Agreement and the attachments thereto shall remain in full force and effect.

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     If there is any conflict between the terms of the Agreement and this Amendment, the terms of this Amendment shall prevail.

     IN WITNESS WHEREOF, this Amendment has been executed by the parties as of the date first written above.

NOVEN PHARMACEUTICALS, INC.
by:	/s/ Jeff Mihm
	Name:	Jeff Mihm
	Title:	Vice President, General Counsel and Corporate Secretary

PETER BRANDT
 

/s/ Peter Brandt  

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