-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CF7wsvLVARXOcUjsTkUApldmcs2Pb8s5pAyUoCF9O4d4B+imafHwhnMRQGZjwfg6 HlMq+zPuAl6alJytbBMnzw== 0000950144-01-505423.txt : 20010813 0000950144-01-505423.hdr.sgml : 20010813 ACCESSION NUMBER: 0000950144-01-505423 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVEN PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000815838 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 592767632 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17254 FILM NUMBER: 1704783 BUSINESS ADDRESS: STREET 1: 11960 SW 144TH ST CITY: MIAMI STATE: FL ZIP: 33186 BUSINESS PHONE: 3052535099 MAIL ADDRESS: STREET 1: 11960 SW 144TH STREET CITY: MIAMI STATE: FL ZIP: 33185 10-Q 1 g70887e10-q.txt NOVEN PHARMACEUTICALS, INC 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2001 Commission file number 0-17254 NOVEN PHARMACEUTICALS, INC. --------------------------- (Exact name of registrant as specified in its charter) STATE OF DELAWARE 59-2767632 --------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 11960 S.W. 144TH STREET, MIAMI, FL 33186 ------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (305) 253-5099 ------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. CLASS OUTSTANDING AT JULY 31, 2001 - ------------------------------- ----------------------------- Common stock $.0001 par value 22,425,451 2 NOVEN PHARMACEUTICALS, INC. INDEX
PAGE NO. -------- PART I - FINANCIAL INFORMATION Item 1 - Condensed Financial Statements Condensed Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2000 3 Condensed Balance Sheets as of June 30, 2001 and December 31, 2000 4 Condensed Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 5 Notes to Unaudited Condensed Financial Statements 6 - 9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 15 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 15 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders 16 Item 6 - Exhibits and Reports on Form 8-K 16 SIGNATURES 17
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NOVEN PHARMACEUTICALS, INC. Condensed Statements of Operations Three and Six Months Ended June 30, (in thousands, except per share amounts) (unaudited)
THREE MONTHS SIX MONTHS -------------------- -------------------- 2001 2000 2001 2000 ------- ------- ------- ------- Revenues: Product sales $11,842 $10,335 $23,864 $19,791 License revenue 752 146 1,419 293 ------- ------- ------- ------- Total revenues 12,594 10.481 25,283 20,084 Expenses: Cost of products sold 5,894 4,512 10,710 9,023 Research and development 2,410 3,555 4,637 5,380 Marketing, general and administrative 3,176 2,307 5,836 4,389 ------- ------- ------- ------- Total expenses 11,480 10,374 21,183 18,792 ------- ------- ------- ------- Income from operations 1,114 107 4,100 1,292 Equity in earnings of Novogyne 3,137 3,253 3,732 3,730 Interest income, net 482 267 1,101 467 ------- ------- ------- ------- Income before income taxes 4,733 3,627 8,933 5,489 Provision for income taxes 1,510 153 3,043 188 ------- ------- ------- ------- Net income $ 3,223 $ 3,474 $ 5,890 $ 5,301 ======= ======= ======= ======= Basic earnings per share $ 0.14 $ 0.16 $ 0.26 $ 0.24 ======= ======= ======= ======= Diluted earnings per share $ 0.14 $ 0.15 $ 0.25 $ 0.23 ======= ======= ======= ======= Weighted average number of common shares outstanding: Basic 22,335 21,797 22,286 21,740 ======= ======= ======= ======= Diluted 23,561 22,895 23,585 22,862 ======= ======= ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 3 4 NOVEN PHARMACEUTICALS, INC. Condensed Balance Sheets (in thousands, except share data) (unaudited)
JUNE 30, 2001 DECEMBER 31, 2000 -------------- ----------------- ASSETS Current Assets: Cash and cash equivalents $ 42,060 $ 40,976 Accounts receivable (less allowance for doubtful accounts of $97 in 2001 and $121 in 2000) 4,996 5,677 Due from Novogyne 34,790 2,917 Inventories 5,614 6,098 Net deferred income tax asset 4,800 4,500 Prepaid and other current assets 442 495 --------- --------- 92,702 60,663 Property, plant and equipment, net 15,963 15,154 Other Assets: Investment in Novogyne 21,763 15,431 Net deferred income tax asset 10,345 10,700 Patent development costs, net 1,993 1,972 Deposits and other assets 1,209 111 --------- --------- $ 143,975 $ 104,031 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 4,125 $ 6,522 Notes payable - current portion 256 340 Due to Aventis Pharmaceuticals 30,000 -- Accrued compensation and related liabilities 1,995 2,504 Other accrued liabilities 3,482 1,903 Deferred license revenue - current portion 3,011 2,660 --------- --------- 42,869 13,929 Long-Term Liabilities: Notes payable 182 265 Deferred license revenue 26,290 24,560 --------- --------- 69,341 38,754 Commitments and contingencies Stockholders' Equity: Preferred stock - authorized 100,000 shares of $.01 par value; no shares issued or outstanding -- -- Common stock - authorized 80,000,000 shares, par value $.0001 per share; issued and outstanding 22,402,588 shares at June 30, 2001 and 22,177,598 at December 31, 2000 2 2 Additional paid-in capital 76,331 72,864 Accumulated deficit (1,699) (7,589) --------- --------- 74,634 65,277 --------- --------- $ 143,975 $ 104,031 ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 4 5 NOVEN PHARMACEUTICALS, INC. Condensed Statements of Cash Flows Six Months Ended June 30, (in thousands) (unaudited)
2001 2000 -------- -------- Cash flows from operating activities: Net income $ 5,890 $ 5,301 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 738 707 Amortization of patent costs 109 104 Deferred income tax provision 413 -- Recognition of deferred license revenue (1,419) (293) Equity in earnings of Novogyne (3,732) (3,730) Decrease (increase) in accounts receivable 681 (1,276) (Increase) decrease in due from Novogyne (1,873) 347 Decrease (increase) in inventories 484 (1,737) Decrease in prepaid and other current assets 53 33 (Increase) decrease in deposits and other assets (1,098) 160 (Decrease) increase in accounts payable (2,397) 448 (Decrease) increase in accrued compensation and related liabilities (509) 360 Increase (decrease) in other accrued liabilities 2,284 (135) Increase in deferred license revenue 3,500 -- -------- -------- Cash flows provided by operating activities 3,124 289 Cash flows from investing activities: Purchase of property, plant and equipment, net (1,547) (564) Investment in Novogyne (15,680) -- Distribution from Novogyne 13,080 2,228 Payments for patent development costs (130) (88) -------- -------- Cash flows (used in) provided by investing activities (4,277) 1,576 Cash flows from financing activities: Issuance of common stock 2,404 1,766 Payments on notes payable (167) (171) -------- -------- Cash flows provided by financing activities 2,237 1,595 -------- -------- Net increase in cash and cash equivalents 1,084 3,460 Cash and cash equivalents, beginning of period 40,976 15,338 -------- -------- Cash and cash equivalents, end of period $ 42,060 $ 18,798 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 5 6 NOVEN PHARMACEUTICALS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. Basis of Presentation: In management's opinion, the accompanying unaudited condensed financial statements of Noven Pharmaceuticals, Inc. ("Noven") contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of Noven as of June 30, 2001, and the results of its operations for the three and six months ended June 30, 2001 and 2000. The results of operations and cash flows for the six months ended June 30, 2001 are not necessarily indicative of the results of operations or cash flows which may be reported for the remainder of 2001. The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The unaudited condensed financial statements should be read in conjunction with the financial statements and the notes to the financial statements included in Noven's Annual Report on Form 10-K for the year ended December 31, 2000. The accounting policies followed for interim financial reporting are the same as those disclosed in Note 1 of the notes to the financial statements included in Noven's Annual Report on Form 10-K for the year ended December 31, 2000. Noven and Novartis Pharmaceuticals Corporation ("Novartis") entered into a joint venture, Vivelle Ventures LLC (d/b/a Novogyne Pharmaceuticals) ("Novogyne"), effective May 1, 1998, to market and sell women's healthcare products in the United States and Canada. These products include Noven's transdermal estrogen delivery systems marketed under the brand names Vivelle(R) and Vivelle-Dot(TM) and, effective March 30, 2001, Noven's transdermal combination estrogen/progestin delivery system marketed under the brand name Combipatch(TM). Noven accounts for its 49% investment in Novogyne under the equity method and reports its share of Novogyne's earnings as "Equity in earnings of Novogyne" on its Statements of Operations. Noven defers the recognition of 49% of its profit on products sold to Novogyne until the products are sold by Novogyne. 2. Inventories: The following are the major classes of inventories (in thousands): JUNE 30, DECEMBER 31, 2001 2000 -------- ------------ Finished goods $ 135 $ 319 Work in process 1,882 1,567 Raw materials 3,597 4,212 ------ ------ Total $5,614 $6,098 ====== ====== 6 7 3. Income Taxes: Noven accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Provisions for income taxes for the three and six months ended June 30, 2001 are based on the Federal statutory and state income tax rates. Provisions for income taxes for the three and six months ended June 30, 2000 reflect provisions for the Federal alternative minimum tax and state income taxes. 4. Cash Flow Information: Cash payments for income taxes were $0.9 million in 2001 and $0.3 million in 2000. Cash payments for interest were $21,000 in 2001 and $35,000 in 2000. In connection with the Combipatch(TM) transaction described in Note 5 below, in March 2001, Noven recorded a $40 million receivable from Novogyne and a $40 million payable to Aventis Pharmaceuticals, the United States pharmaceuticals business of Aventis Pharma AG ("Aventis"). In June 2001, Novogyne paid the first $10 million installment to Aventis. Accrued compensation and related liabilities for the year ended December 31, 1999 included bonuses for employees and officers of $0.8 million that were settled by issuance of 55,000 shares of common stock during the quarter ended March 31, 2000. Noven recorded a $1.1 million income tax benefit to additional paid-in capital for the six months ended June 30, 2001 derived from the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options. 5. License Agreements: On March 30, 2001, Novogyne acquired the exclusive United States marketing rights to Combipatch(TM) (estradiol/norethindrone acetate transdermal system) in a series of transactions involving Novogyne, Noven, Novartis and Aventis. Prior to the transaction, Aventis had been Noven's exclusive licensee for Combipatch(TM) in the United States. The transaction was structured as (a) a direct purchase by Novogyne from Aventis of certain assets for $25 million, which was paid at closing, (b) a grant-back by Aventis to Noven of certain intellectual property rights relating to Combipatch(TM), and (c) a simultaneous license by Noven to Novogyne of these intellectual property rights. The consideration payable by Noven to Aventis, and by Novogyne to Noven, is $40 million, due in four quarterly installments of $10 million each, payable beginning June 1, 2001. Novogyne agreed to indemnify Noven against Noven's obligation to Aventis. The first $10 million quarterly installment was paid by Novogyne to Aventis on June 1, 2001. As a consequence of the transaction and under the terms of Noven's existing license agreement with Aventis, Noven received $3.5 million from Aventis, which amount was deferred and recognized as license revenue over ten years beginning in the first quarter of 2001. In a related transaction, Novartis Pharma AG ("Novartis AG") acquired from Aventis the development and marketing rights to future generations of Noven's combination estrogen/progestin patch in all markets other than Japan, and Novogyne expects to sublicense the United States rights to these product improvements. If and when any future generation combination products are commercialized, Novogyne will pay a 7 8 royalty to Novartis AG on the United States sales of such products. Noven will manufacture Combipatch(TM) and any future combination products and will supply such products to Novogyne and to Novartis AG. In June 2001, Noven and Novartis entered into a development agreement relating to future generations of combination estrogen/progestin patch products. 6. Investment in Novogyne: Noven shares in the earnings of Novogyne according to an established formula after satisfaction of an annual preferred return of $6.1 million to Novartis. Novogyne produced sufficient income in the first quarters of 2000 and 2001 to meet Novartis' annual preferred return and for Noven to recognize earnings from Novogyne under the formula. Noven's share of Novogyne's earnings increases as Novogyne's product sales increase, subject to a cap of 49%. During the three and six months ended June 30, 2001 and 2000, Noven had the following transactions with Novogyne (in thousands):
THREE MONTHS SIX MONTHS -------------------- -------------------- 2001 2000 2001 2000 ------- ------- ------- ------- Revenue: Trade product $ 2,842 $ 3,202 $ 4,086 $ 7,637 Sample product and other 1,559 801 1,577 1,544 Royalty 950 904 1,766 1,696 ------- ------- ------- ------- $ 5,351 $ 4,907 $ 7,429 $10,877 ======= ======= ======= ======= Reimbursed Expenses: Services $ 4,000 $ 2,392 $ 6,954 $ 4,536 Product specific marketing 1,214 942 1,839 1,325 ------- ------- ------- ------- $ 5,214 $ 3,334 $ 8,793 $ 5,861 ======= ======= ======= =======
As of June 30, 2001 and December 31, 2000, Noven had amounts due from Novogyne of $34.8 million and $2.9 million, respectively, representing $30 million related to the license of Combipatch(TM) (see Note 5) for 2001 and the balance representing amounts due for products sold to and marketing expenses reimbursable by Novogyne. The unaudited condensed Statements of Operations of Novogyne for the three and six months ended June 30, 2001 and 2000 are as follows (in thousands):
THREE MONTHS SIX MONTHS -------------------- -------------------- 2001 2000 2001 2000 ------- ------- ------- ------- Revenues $20,852 $15,840 $34,720 $29,089 Cost of sales 3,887 2,598 6,074 4,713 Selling, general and administrative expenses 8,323 5,316 13,122 9,492 Amortization of intangible assets 1,541 -- 1,541 -- ------- ------- ------- ------- Income from operations 7,101 7,926 13,983 14,884 Interest income 64 286 623 640 ------- ------- ------- ------- Net income $ 7,165 $ 8,212 $14,606 $15,524 ======= ======= ======= =======
8 9 Subject to the approval of Novogyne's management committee, cash may be distributed to Novartis and Noven based upon a contractual formula. For the three and six months ended June 30, 2001, Noven received distributions of $2.9 million and $13.1 million, respectively, from Novogyne based on the results of operations for the year ended December 31, 2000 and the five months ended May 31, 2001. For the six months ended June 30, 2000, Noven received a cash distribution of $2.2 million from Novogyne based upon the results of operations for the year ended December 31, 1999. These amounts were recorded as reductions in the investment in Novogyne when received. In connection with the Combipatch(TM) transaction described in Note 5 above, for the three and six months ended June 30, 2001, Noven contributed $3.4 million and $15.7 million, respectively, to Novogyne. These amounts were recorded as increases in the investment in Novogyne when paid. 7. Recent Accounting Pronouncements: In June 2001, the Financial Accounting Standards Board approved the issuance of SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". These standards, which were issued in July 2001, establish accounting and reporting for business combinations. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001 to be accounted for using the purchase method of accounting. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment on an annual basis. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001; however, early adoption is permitted. Noven does not expect the adoption of these statements to have a material effect on its financial statements or disclosures. 8. Other: In September 2000, Noven entered into a Severance and Non-Competition Agreement with Steven Sablotsky, Co-Chairman of its Board of Directors. Pursuant to the agreement, Mr. Sablotsky's employment as an officer of Noven terminated on June 1, 2001. Noven paid Mr. Sablotsky $1.2 million on that date, which is being amortized over the period of his three-year non-competition agreement. In July 2001, Mr. Sablotsky resigned as a director of Noven. In June 2001, Noven's stockholders approved an increase in the number of authorized common shares from 40 million to 80 million. 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the financial statements, the related notes and management's discussion and analysis of financial condition and results of operations included in Noven's Annual Report on Form 10-K for the year ended December 31, 2000 and the financial statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q. Except for historical information contained herein, the matters discussed in this report are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about Noven's plans, objectives, expectations, estimates, strategies, product approvals and development plans, and anticipated financial results. These statements are typically identified by the use of terms such as "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "should," "will," and similar words. These statements are based on Noven's current expectations and beliefs concerning future events but are subject to risks and uncertainties that could cause actual results to differ materially from those expressed therein. In addition to the important factors described in Noven's Annual Report on Form 10-K, the following important factors, among others, could cause Noven's actual results to differ materially from those expressed in any forward-looking statements: Noven's dependence on strategic alliances and its relationships with its licensees, risks associated with clinical trials and product development, including any future generations of Noven's combination estrogen/progestin patch, the recent shortfall in international product orders expected to be received from Novartis, the ability of Novogyne to generate sufficient operating income to service the obligations owing to Aventis with respect to the Combipatch(TM) transaction, fluctuations in quarterly revenue and research and development expenses, the effect of changes in taxation, as well as economic, competitive, governmental and technological factors affecting Noven's operations, markets, products and prices. Noven does not undertake to update any of these forward-looking statements or to announce the results of any revisions to these forward-looking statements except as required by law. Substantially all of Noven's product sales were to its licensees, Novogyne, Novartis AG and Aventis. Revenues from product sales are recognized at the time of shipment. Certain license agreements provide for an adjustment to the price of the product based upon the licensee's actual sales price. Noven records such adjustments to revenues at the time that the information necessary to make the determination is received from the licensees. Royalty revenue consists of royalties payable by Novogyne and Novartis from sales of Vivelle(R) and Vivelle-Dot(TM) in the United States and Canada. Royalty revenue is recognized when earned and determinable and is included in product sales. License revenue consists of up-front, milestone and similar payments under license agreements and is recognized when earned under the terms of the applicable agreements. In most cases, license revenue will be deferred and recognized over time. Certain license agreements entitle Noven to minimum fees. Noven records revenue related to minimum fees at the time that supporting data is provided by the licensee. If the minimum fees are not determinable, Noven records these fees on a cash basis. These fees are included in product revenue. Revenues from product sales to licensees may fluctuate from quarter to quarter depending on various factors not in Noven's control, including but not limited to, the marketing efforts of each licensee, the inventory requirements 10 11 of each licensee, the impact of competitive products, the timing and scope of Estalis(R) and Estradot(TM) launches by Novartis AG, the product pricing of each licensee and the timing of certain royalty reconciliations and payments under Noven's license agreements. Noven shares in the earnings of Novogyne according to an established formula after satisfaction of an annual preferred return of $6.1 million to Novartis. In the first quarters of 2001 and 2000, Novartis' preferred return was satisfied. Noven reports its share of Novogyne's earnings as "Equity in earnings of Novogyne" on its Statements of Operations. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000 Total revenues for the six months ended June 30, 2001 were $25.3 million, an increase of $5.2 million, or 26%, over the same period in the prior year. The increase in revenues was primarily attributable to an increase in product sales of $4.1 million, or 21%, for the six months ended June 30, 2001 over the same period in the prior year. Product sales in the 2001 period included $1.4 million in minimum fee payments related to sales of Menorest(R) in certain European countries in 2000. The remaining $2.7 million of the increase in product sales was primarily attributable to higher sales of Estalis(R) outside of the United States and, to a lesser extent, sales of Combipatch(TM) in the United States. A decline in sales of Vivelle(R) and Vivelle-Dot(TM) to Novogyne due to planned inventory reductions at Novogyne partially offset the increased sales of Noven's other products. License revenue increased $1.1 million, or 384%, primarily due to the amortization of license fees received in connection with the license of Estradot(TM) to Novartis AG in the fourth quarter of 2000 and the license of Combipatch(TM) to Novogyne in the first quarter of 2001. Product orders from Novartis AG for international markets have, to date, been substantially less than anticipated. Noven expects that the failure to receive these expected orders will significantly affect revenue for the second half of 2001 and that total revenues for the full year 2001 will be only modestly higher than the $42.9 million in total revenues reported for 2000. Gross profit (product sales less cost of products sold) for the six months ended June 30, 2001 was $13.2 million (55% of product sales), compared to $10.8 million (54% of product sales) for the same period in the prior year. The increase in gross margin resulted from higher minimum fee payments and a decrease in the deferred profit related to sales of product to Novogyne. The decrease in deferred profit on sales to Novogyne resulted from a decline in Novogyne's inventory during the first six months of 2001. See Note 1 to Notes to Unaudited Condensed Financial Statements. The increase in gross margin was partially offset by an unfavorable product mix as Noven sold more product outside of the United States, while United States sales declined. Noven's foreign sales have a lower gross margin. Noven expects its gross margin percentage to be in the low 50 percent range for the full year 2001, primarily due to anticipated reductions in production volume in the second half of 2001 and to increased profit deferral related to expected sales of Combipatch(TM) to Novogyne. Research and development expenses decreased approximately $0.7 million, or 14%, for the six months ended June 30, 2001 compared to the same period in the prior year. The decrease was attributable primarily to the completion of certain clinical studies for Noven's methylphenidate transdermal delivery system, partially offset by increases related to additional personnel and related costs. Noven expects an increase in research and development expenses in the remainder of 2001, primarily related to additional clinical studies associated with Noven's methylphenidate transdermal delivery system. The future level of research and development expenditures will depend on, among other 11 12 things, the status of products under development and the outcome of clinical trials, strategic decisions by management, the consummation of new license agreements and Noven's liquidity. Further, such expenses may vary significantly from quarter to quarter depending on product development cycles and the timing of clinical studies. Marketing, general and administrative expenses increased approximately $1.4 million, or 33%, for the six months ended June 30, 2001 compared to the same period in the prior year. This increase was due primarily to higher outside consulting services related to the implementation of an enterprise resource planning system, consulting services related to improvements in production efficiency, and to higher legal fees related to the Combipatch(TM) transaction. For the six months ended June 30, 2001 and 2000, Noven reported equity in earnings of Novogyne of $3.7 million. Novogyne's revenue increased from $29.1 million for the six months ended June 30, 2000 to $34.7 million in the comparable 2001 period. This increase was attributable to increased sales of Vivelle-Dot(TM) and Combipatch(TM) (licensed in March 2001), partially offset by decreased sales of Vivelle(R). Novogyne's selling, general and administrative expenses increased from $9.5 million for the six months ended June 30, 2000 to $13.1 million in the comparable 2001 period, primarily due to expenses relating to the relaunch of the Combipatch(TM) product and to the expansion of the Novogyne sales force. Novogyne amortized $1.5 million related to the Combipatch(TM) acquisition cost during the six months ended June 30, 2001. For the first six months of 2001, Novogyne had net income of $14.6 million, compared to $15.5 million for the same period in the prior year. Interest income, net increased approximately $0.6 million, or 136%, for the six months ended June 30, 2001 compared to the same period in the prior year, primarily due to higher average balances in cash and cash equivalents. Noven's effective tax rate increased from 3.4% for the six months ended June 30, 2000 to 34.1% for the six months ended June 30, 2001. The provisions for income taxes for the six months ended June 30, 2001 are based on the Federal statutory and state income tax rates. The provisions for income taxes for the six months ended June 30, 2000 reflect provisions for the Federal alternative minimum tax and state income taxes. As of June 30, 2001, Noven had a net deferred tax asset of $15.1 million. Realization of this deferred tax asset depends upon Noven generating sufficient future taxable income. Although realization is not assured, management believes it is more likely than not that the deferred income tax asset will be realized based upon estimated future taxable income. Noven expects its effective tax rate to be between 34% and 36% for full year 2001. Net income for the six months ended June 30, 2001 was $5.9 million ($0.25 diluted earnings per share), compared to $5.3 million ($0.23 diluted earnings per share) for the same period in the prior year. Noven expects that diluted earnings per share for the full year 2001 will be $.40 to $.45 per share. THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000 Total revenues for the three months ended June 30, 2001 were $12.6 million, an increase of $2.1 million, or 20%, over the same period in the prior year. The increase in revenues was primarily attributable to an increase in product sales of $1.5 million, or 15%, for the three months ended June 30, 2001 over the same period in the prior year. This increase in product sales was primarily attributable to higher sales of Combipatch(TM) in the United States and, to a lesser extent, sales of Estalis(R) outside of the United States. A decline in sales of Vivelle(R) and Vivelle-Dot(TM) to Novogyne partially offset 12 13 the increased sales of Noven's other products. License revenue increased $0.6 million, or 415%, primarily due to the amortization of license fees received in connection with the license of Estradot(TM) to Novartis AG in the fourth quarter of 2000 and the license of Combipatch(TM) to Novogyne in the first quarter of 2001. Gross profit (product sales less cost of products sold) for the three months ended June 30, 2001 was $5.9 million (50% of product sales) compared to $5.8 million (56% of product sales) for the same period in the prior year. The decline in gross margin was attributable to product mix, as Noven sold more product outside of the United States, while United States sales remained flat. Noven's foreign sales have a lower gross margin. Research and development expenses decreased approximately $1.1 million, or 32%, for the three months ended June 30, 2001 compared to the same period in the prior year, attributable primarily to the completion of certain clinical studies for Noven's methylphenidate transdermal delivery system. Marketing, general and administrative expenses increased approximately $0.9 million, or 38%, for the three months ended June 30, 2001 compared to the same period in the prior year. This increase was primarily due to higher outside consulting services related to the implementation of an enterprise resource planning system and consulting services related to improvements in production efficiency. For the three months ended June 30, 2001 and 2000, Noven reported equity in earnings of Novogyne of $3.1 million and $3.3 million, respectively. Novogyne's revenue increased from $15.8 million in the three months ended June 30, 2000 to $20.9 million in the comparable 2001 period. This increase was attributable to increased sales of Vivelle-Dot(TM) and Combipatch(TM) (licensed in March 2001), partially offset by decreased sales of Vivelle(R). Novogyne's selling, general and administrative expenses increased from $5.3 million for the three months ended June 30, 2000 to $8.3 million in the comparable 2001 period, primarily due to expenses relating to the relaunch of the the Combipatch(TM) product and to the expansion of the Novogyne sales force. Novogyne amortized $1.5 million related to the Combipatch(TM) acquisition cost during the three months ended June 30, 2001. For the three months ended June 30, 2001, Novogyne had net income of $7.2 million, compared to $8.2 million for the same period in the prior year. Interest income, net increased approximately $0.2 million, or 80%, for the three months ended June 30, 2001 compared to the same period in the prior year, primarily due to higher average balances in cash and cash equivalents. Noven's effective tax rate increased from 4.2% for the three months ended June 30, 2000 to 31.9% for the three months ended June 30, 2001. The provisions for income taxes for the three months ended June 30, 2001 are based on the Federal statutory and state income tax rates. In addition, net deferred income tax assets are measured using the average graduated tax rate for the estimated amount of annual taxable income in the years that the liability is expected to be settled or the asset recovered. The effect of adjusting the expected tax rate related to the net deferred income tax assets is included in the provision for income taxes for the three months ended June 30, 2001. The provisions for income taxes for the three months ended June 30, 2000 reflect provisions for the Federal alternative minimum tax and state income taxes. Net income for the three months ended June 30, 2001 was $3.2 million ($0.14 diluted earnings per share), compared to $3.5 million ($0.15 diluted earnings per share) for the same period in the prior year. 13 14 LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2001 and December 31, 2000, Noven had $42.1 million and $41.0 million, respectively, in cash and cash equivalents. Working capital increased by $3.1 million from $46.7 million at December 31, 2000 to $49.8 million at June 30, 2001. Net cash of approximately $3.1 million was provided by operating activities during the first six months of 2001, compared to approximately $0.3 million provided by operating activities during the same period in the prior year. Net cash generated by operating activities primarily resulted from the receipt of a license fee in the amount of $3.5 million from Aventis in connection with the Combipatch(TM) license transaction. Changes in working capital and improved operating results accounted for most of the remaining fluctuation. Net cash of approximately $4.3 million was used in investing activities during the first six months of 2001, compared to approximately $1.6 million provided by investing activities during the same period of the prior year. During the six months ended June 30, 2001, Noven received distributions totaling $13.1 million from Novogyne. In connection with the Combipatch(TM) transaction, Noven contributed $15.7 million to Novogyne as its proportionate share of the payments to Aventis. During the six months ended June 30, 2001, Noven purchased $1.5 million in property, plant and equipment, net of which the most significant asset related to software for the enterprise resource system. Net cash of approximately $2.2 million was provided by financing activities during the first six months of 2001, compared to approximately $1.6 million provided by financing activities during the same period of the prior year, primarily resulting from an increase in cash received from the issuance of common stock in connection with the exercise of stock options. In December 2000, Noven entered into a secured revolving credit facility (the "Credit Facility") providing for borrowings of up to the lesser of $10 million or eligible accounts receivable. The Credit Facility will terminate in April 2002 and bears interest at LIBOR plus 1.50% (5.3% at June 30, 2001). At June 30, 2001, there were no amounts outstanding under the Credit Facility. Terms of the Credit Facility include, among other things, minimum net worth, revenue and operating results requirements, as well as compliance with certain financial ratios, measured on a quarterly basis. Noven's principal sources of short-term liquidity are existing cash, cash generated from product sales, fees and royalties under license agreements and borrowings under its Credit Facility. In November 2000, Noven entered into an exclusive license agreement with Novartis AG relating to Estradot(TM), pursuant to which Noven received an up-front license payment of $20 million and will receive an additional milestone payment upon registration by Novartis AG of the licensed product in certain European countries. There can be no assurance that Novartis AG's registration efforts will be successful, and therefore there can be no assurance that Noven will receive the additional milestone payment. Over the next year, Noven expects to invest up to $3 million in plant and equipment and software implementation costs to increase production capacity and to implement an enterprise resource planning system. Cash requirements for Federal and state income taxes are also expected to increase. Additionally, as part of the Combipatch(TM) transaction entered into in March 2001, the 14 15 consideration payable for certain intellectual property rights by Noven to Aventis, and by Novogyne to Noven, is $40 million, due in four quarterly installments of $10 million each, payable beginning June 1, 2001. Novogyne agreed to indemnify Noven against Noven's obligations to Aventis. The first $10 million quarterly installment was paid by Novogyne to Aventis on June 1, 2001. Noven expects that most of these installment payments will be funded from cash flows from Novogyne's operations. There can be no assurance that Novogyne will be able to generate sufficient income and cash flows from operations to meet these installment obligations. To the extent that Novogyne pays these obligations from cash generated by operations, the cash available for distribution to its members (including Noven) will be reduced correspondingly. If Novogyne's cash generated by operations is not sufficient to fund all or a portion of the remaining installments, Noven and Novartis may contribute additional capital to Novogyne. If Noven and Novartis elect not to contribute the necessary additional capital, Novogyne would be required to raise additional funds in order to meet its obligations, whether through the incurrence of indebtedness or otherwise. Noven believes that it will have sufficient cash available to meet its operating needs and anticipated short-term capital requirements, including any additional capital contributions to Novogyne. For the long term, Noven intends to utilize funds derived from the above sources, as well as funds generated through sales of products under development. Noven expects that such funds will be comprised of payments received pursuant to future licensing arrangements, as well as Noven's direct sales of its own products. Noven expects that its cash requirements will continue to increase, primarily to fund clinical studies for products under development and for plant and equipment to expand production capacity. There can be no assurance that Noven will successfully complete the development of such products, that Noven will obtain regulatory approval for any such products, that any approved product may be produced in commercial quantities, at reasonable costs, and be successfully marketed, or that Noven will successfully negotiate future licensing arrangements. To the extent that capital requirements exceed available capital, Noven will seek alternative sources of financing to fund its operations. In addition to the Credit Facility, alternative financing may be needed to fund further activities. No assurance can be given that alternative financing will be available, if at all, in a timely manner, or on favorable terms. If Noven is unable to obtain satisfactory alternative financing, Noven may be required to delay or reduce its proposed expenditures, including expenditures for research and development and plant and equipment, in order to meet its future cash requirements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Noven had no variable rate debt outstanding during the six months ended June 30, 2001. Therefore, changes in interest rates did not affect interest expense, earnings or cash flows in that period. Market risks relating to Noven's operations may result from changes in LIBOR interest rates if Noven borrows under its Credit Facility. Noven cannot predict market fluctuations in interest rates and their impact on any variable rate debt that Noven may have outstanding from time to time, nor can there be any assurance that fixed rate long-term debt will be available at favorable rates, if at all. 15 16 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Annual Meeting of Stockholders held on June 5, 2001. (i) Election of Directors FOR AGAINST ----------- ----------- Sidney Braginsky 19,076,966 103,709 John G. Clarkson, M.D. 18,944,326 236,349 Lawrence J. DuBow 19,081,811 98,864 Regina E. Herzlinger 19,081,536 99,139 Steven Sablotsky 14,899,321 4,281,354 Robert C. Strauss 14,886,662 4,294,013 (ii) The approval of an amendment to Noven's Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 40 million to 80 million was approved by an affirmative vote of 18,074,162 shares to a negative vote of 1,090,414 shares, with 16,099 shares abstaining. (iii) The ratification of the appointment of Deloitte & Touche LLP as Noven's independent certified public accountants for 2001 was approved by an affirmative vote of 18,995,587 shares to a negative vote of 167,761 shares, with 17,327 shares abstaining. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 3.1 Certificate of Amendment of Certificate of Incorporation, dated June 5, 2001. 10.1 Development Agreement, dated June 1, 2001, between Novartis Pharma AG and Noven Pharmaceuticals, Inc.* (b) REPORTS ON FORM 8-K On April 4, 2001, Noven filed a Current Report on Form 8-K relating to the acquisition of Combipatch(TM) by Novogyne and the results of Noven's preliminary analysis of the Phase III clinical study for its transdermal methylphenidate product. - --------------------------- * Noven agrees to furnish a copy of the exhibits and schedules to this agreement to the Securities and Exchange Commission upon request. 16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NOVEN PHARMACEUTICALS, INC. Date: AUGUST 10, 2001 By: /s/ JAMES B. MESSIRY -------------------- James B. Messiry Vice President and Chief Financial Officer 17 EX-3.1 3 g70887ex3-1.txt CERTIFICATE OF AMEND. OF CERT. OF INCORPORATION 1 EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF NOVEN PHARMACEUTICALS, INC. NOVEN PHARMACEUTICALS, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a duly called meeting of the Board of Directors of Noven Pharmaceuticals, Inc., resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and submitting it to the stockholders entitled to vote thereon for adoption at a meeting of stockholders. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered "Fourth" so that, as amended, said Article shall be and read as follows: The total number of shares of capital stock which the corporation shall have authority to issue is 80,100,000, of which 80,000,000 shall be common stock of $.0001 par value per share and of which 100,000 shall be preferred stock of $.01 par value per share. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is expressly authorized, in the resolution or any resolutions providing for the issue of any wholly unissued series of Preferred Stock, to fix, state and express the powers, rights, designations, preferences, qualifications, limitations and restrictions thereof, including, without limitation: the rate of dividends upon which and the times at which dividends on shares of such series shall be payable and the preferences, if any, which such dividends shall have relative to dividends on shares of any other class or any other series of stock of this corporation, whether such dividends shall be cumulative or non-cumulative, and if cumulative, the date or dates from which dividends on shares of such series shall be cumulative; the voting rights, if any, to be provided for shares of such series; the rights, if any, which the holders of shares of such series shall have in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation; the rights, if any, which the holders of shares of Page 1 of 3 2 such series shall have to convert such shares into or exchange such shares for shares of Common Stock of this Corporation and the terms and conditions, including price and rate of exchange of such conversion or exchange; the redemption (including sinking fund provisions), if any, of shares of such series; and such other powers, rights, designations, preferences, qualifications, limitations and restrictions as the Board of Directors may desire to so fix. The Board of Directors is also expressly authorized to fix the number of shares constituting such series and to increase or decrease the number of shares of any series prior to the issue of shares of that series and to decrease, but not increase, the number of shares of any series subsequent to the issue of shares of that series, but not below, the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. SECOND: That thereafter, pursuant to resolution of its Board of Directors, the amendment was submitted to the stockholders entitled to vote thereon for adoption at the annual meeting of stockholders with the required notice in accordance with Section 242 of the General Corporation Law of the State of Delaware and at which the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Noven Pharmaceuticals, Inc. caused this certificate to be signed by Robert C. Strauss, its President, Chief Executive Officer and Chairman of the Board and Jeffrey F. Eisenberg, its Secretary, this 11th day of June of 2001. /s/ Robert C. Strauss ---------------------------------------- ROBERT C. STRAUSS, President, Chief Executive Officer and Chairman /s/ Jeffrey F. Eisenberg ------------------------------------------ JEFFREY F. EISENBERG, Secretary Page 2 of 3 3 Sworn to and subscribed before me this 11th day of June, 2001. /s/ Verda M. Lacotera --------------------------------------- Verda M.Lacotera Page 3 of 3 EX-10.1 4 g70887ex10-1.txt DEVELOPMENT AGREEMENT 1 EXHIBIT 10.1 DEVELOPMENT AGREEMENT between NOVARTIS PHARMA AG and NOVEN PHARMACEUTICALS, INC. JUNE 1, 2001 2 DEVELOPMENT AGREEMENT THIS DEVELOPMENT AGREEMENT (this "AGREEMENT"), dated as of June 1, 2001, is by and between NOVARTIS PHARMA AG, a corporation organized under the laws of Switzerland with its principal office at Lichtstrasse 35, CH-4002 Basel, Switzerland ("NOVARTIS"), and NOVEN PHARMACEUTICALS, INC., a Delaware corporation with its principal office at 11960 S.W. 144th Street, Miami, Florida 33186 ("NOVEN") (Novartis and Noven are collectively referred to herein as the "PARTIES"). RECITALS WHEREAS, Rhone-Poulenc Rorer Pharmaceuticals, Inc. and Noven are parties to an Amended and Restated License Agreement dated as of September 30, 1999, as amended by Amendment No. 2 thereto effective as of March 28, 2001 (collectively, the "NOVEN LICENSE AGREEMENT"), pursuant to which Noven granted Rhone-Poulenc Rorer Pharmaceuticals, Inc. an exclusive right and license under Noven's Patent Rights and Noven's Technology (each as defined in the Noven License Agreement) to develop, use, sell or otherwise dispose of Licensed Products (as defined in the Noven License Agreement); WHEREAS, Rhone-Poulenc Rorer Pharmaceuticals, Inc. assigned the Noven License Agreement to RORER PHARMACEUTICAL PRODUCTS, INC, a Delaware corporation (hereinafter referred to as "AVENTIS") pursuant to an Assignment and Assumption Agreement dated September 30, 1999; WHEREAS, Novartis and Aventis have previously entered into a Sublicense Agreement (the "EXISTING NOVARTIS PHARMA SUBLICENSE AGREEMENT") dated as of September 30, 1999, pursuant to which Aventis granted to Novartis certain of its rights related to "licensed product" in the "territory" (each as defined in the Existing Novartis Pharma Sublicense Agreement); and WHEREAS, Novartis, Noven, Aventis and several of Aventis' affiliates have entered into a Sublicense Agreement (the "IMPROVEMENTS SUBLICENSE AGREEMENT") dated as of March 29, 2001, pursuant to which Aventis granted to Novartis a sublicense to all rights and benefits of Aventis and its Affiliates arising out of or under the Noven License Agreement in the Territory (as defined in the Noven License Agreement), including the right to develop Licensed Products; and WHEREAS, Novartis and Noven desire to develop Licensed Products and wish to establish the terms under which such development activity will be pursued, all on the terms and conditions contained in this Agreement; WHEREAS, if the development is successful and Novartis decides to market the products resulting therefrom, Novartis shall purchase and Noven shall supply at Novartis' request all of its, its Affiliates' and sublicencees' worldwide requirements of the Development Products (as defined hereinafter) from Noven under a supply agreement to be negotiated. 3 NOW, THEREFORE, in consideration of the mutual covenants and considerations set forth herein, the Parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS 1.1. DEFINITIONS. As used herein, the following capitalized terms shall have the following meanings: "AFFECTED PARTY" has the meaning set forth in Section 7.3 hereof. "AFFILIATE" means, when used with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with the subject Person. For purposes of this Agreement, "control" means the direct or indirect ownership of over 50% of the outstanding voting securities of a Person, or to control the management decisions of such Person. "AUTHORIZED REPRESENTATIVE" means, with respect to Noven, any Vice President, and with respect to Novartis, a Novartis representative responsible for product development co-signing with another Novartis representative. "CLAIMS" has the meaning set forth in Section 6.1(a) hereof. "COMBIPATCH PRODUCT" means the transdermal estrogen/progestin product which has been developed by Noven, solely or jointly with Aventis or its Affiliates, and is marketed and sold by Vivelle under the trademark CombiPatch(TM) in the United States. "CONFIDENTIAL INFORMATION" means all proprietary data, know-how and related information, including all regulatory approvals and related filings, applications and data, the content of any unpublished patent applications, operating methods and procedures, marketing, distribution and sales methods and systems, sales figures and other business information. "DEVELOPMENT PLAN" shall mean a program described in Exhibit B attached hereto, or as subsequently amended or modified by mutual agreement between Novartis and Noven, and any subsequent extension of any such program. "DEVELOPMENT PRODUCT" shall mean a Licensed Product described in Exhibit A attached hereto, which Exhibit A shall be amended or supplemented from time to time by mutual agreement between Novartis and Noven, as additional Licensed Products are added to this Agreement. "DEVELOPMENT TEAM" has the meaning set forth in Section 3.1 hereof. "DISCLOSING PARTY" has the meaning set forth in Section 5.1(a) hereof. "ESTALIS PRODUCT" means the product which is the Licensed Product as defined in the Existing Novartis Pharma Sublicense Agreement. 2 4 "FDA ACT" means the United States Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder, as amended from time to time. "GLP" means the Current Good Laboratory Practices as that term is defined by the FDA which are in force or hereafter adopted by the FDA in its applicable regulations promulgated or issued under the FDA Act, as amended from time to time. "GMP" means the Current Good Manufacturing Practices as that term is defined by the FDA which are in force or hereafter adopted by the FDA in its applicable regulations promulgated or issued under the FDA Act, as amended from time to time. "IND" means an Investigational New Drug Application as defined in the FDA Act, or an equivalent application in another country or group of countries. "LICENSED PRODUCT" means any Combination Product (as defined in the Noven License Agreement) to which Novartis has any rights in the Territory under the Noven License Agreement as amended other than the Estalis Product, including, without limitation, any improvements or modifications, or proposed improvements or modifications, to the CombiPatch Product or the Estalis Product. "LOSSES" has the meaning set forth in Section 6.1(a) hereof. "NDA" means a New Drug Application as defined in the FDA Act, or an equivalent application for Regulatory Approval in another country or group of countries. "NOVARTIS INDEMNITEES" has the meaning set forth in Section 6.1(b) hereof. "NOVEN INDEMNITEES" has the meaning set forth in Section 6.1(c) hereof. "NOVEN'S COSTS" shall mean the fully allocated costs including but not limited to the fully allocated cost of goods and services and manufacturing overhead directly related to the applicable Licensed Product, and an allocation of all administrative and general expenses of Noven directly related to the applicable Licensed Product. Noven's Costs shall be determined by generally accepted accounting principles, applied on a consistent basis. "PERSON" means any corporation, partnership, joint venture, other entity or natural person. "RECEIVING PARTY" has the meaning set forth in Section 5.1(a) hereof. "REGULATORY APPROVAL" means filing for and receipt of all governmental and regulatory registrations and approvals (including, but not limited to, approvals of all final labeling and pricing approvals of any Licensed Product) required for the marketing and sale of any Licensed Product in the Territory. "REGULATORY AUTHORITY" means the U.S. Food and Drug Administration, and any equivalent regulatory agency in any country in the Territory. "RELATED AGREEMENTS" means the Improvements Sublicense Agreement, the Noven License Agreement and the Purchaser Improvements Letter Agreement. 3 5 "TERRITORY" means the world, except Japan. "UNITED STATES" means the United States, its territories and possessions. "VIVELLE" means Vivelle Ventures LLC, a Delaware limited liability company and joint venture owned by Noven and Novartis Pharmaceuticals Corporation. 1.2. All capitalized terms used herein and not defined herein shall have the meanings given to such terms in the Improvements Sublicense Agreement. ARTICLE II DEVELOPMENT 2.1. MASTER AGREEMENT. (a) This Agreement shall serve as the master agreement under which Novartis and Noven will develop Development Products under Development Plans. Licensed Products to be developed hereunder shall be included in this Agreement by mutual agreement of the Parties, evidenced by the addition of such Development Products and Development Plans to Exhibits A and B hereto. No Development Product or Development Plan shall be deemed to be effective or accepted by either Party unless it has been signed by an Authorized Representative of each Party. (b) Subject to the terms and conditions of this Agreement, Novartis hereby requests that Noven develop, and Noven agrees to develop, the Development Products for chemical, toxicological, analytical, preclinical and clinical testing by Novartis, which shall, for each Development Product, meet the specifications described on Exhibit A attached hereto and made a part hereof. 2.2. NOVEN OBLIGATIONS. (a) Noven shall use commercially reasonable efforts, to perform the activities designated as Noven activities in each Development Plan within the time period set forth in such Development Plan. (b) Noven shall supply Novartis in a timely manner with all information in Noven's possession that is reasonably required by Novartis to complete and file an IND with any Regulatory Authority and to complete and file an NDA with any Regulatory Authority with respect to any Development Product. (c) Noven shall comply with all applicable federal, state and local laws, rules and regulations, including GLPs and GMPs, relating to Noven's activities to be performed hereunder. 4 6 2.3. NOVARTIS OBLIGATIONS. (a) Novartis shall use commercially reasonable efforts to perform such activities designated as Novartis activities in each Development Plan within the time periods, specifically set forth therefor in such Development Plan. (b) Novartis shall supply Noven in a timely manner with all information in Novartis' possession that is reasonably required by Noven to perform its obligations hereunder with respect to any Development Product. (c) Novartis shall comply with all applicable federal, state and local laws, rules and regulations, including GLPs and GMPs, relating to Novartis' activities to be performed hereunder. 2.4. MODIFICATION AND TERMINATION OF DEVELOPMENT PLAN. The parties understand that product development is a dynamic process that may require modifications from time to time. Since it is the desire and intention of the Parties to review development plans and goals, the parties may, by mutual agreement and acting through the Development Team, from time to time modify or amend the specifications for a Development Product or a Development Plan, described in Exhibits A and B, respectively, as circumstances and developments warrant. Novartis may also at any time terminate individual Development Plans without cause upon thirty (30) days prior written notice to Noven. 2.5. INITIAL REVIEW. At such time that Noven has developed a Development Product for initial review which Noven reasonably believes meets the requirements described in Exhibit A, Noven shall so notify Novartis and provide Novartis with access to data, raw data and a supply of the Development Product as set forth in Exhibit B for Novartis to perform, at its own expense, such confirming tests that Novartis may desire to perform. Novartis shall notify Noven as soon as reasonably practicable whether the Development Product meets the requirements described in Exhibit A. In the event that such tests fail to confirm that the Development Product meets the requirements described in Exhibit A, then the Development Team shall convene a meeting to discuss the applicable Development Plan, any required modifications to the Development Plan and any additional costs that may be incurred by Noven in continuing to develop the Development Product. 2.6. NO WARRANTY OF SUCCESS. Noven expressly disclaims any warranty that any Development Product will be developed successfully or that any Development Plan will be completed successfully. Novartis expressly acknowledges that product development is inherently risky and that, notwithstanding Noven's commercially reasonable efforts to develop any Development Product to meet Novartis' specifications, such development may not be successful. Novartis further acknowledges and agrees that its sole remedy in the event a Development Product is not developed successfully by Noven in accordance with Article 2.2 is to terminate the Development Plan with respect to such Development Product. 5 7 ARTICLE III DEVELOPMENT TEAM 3.1. ESTABLISHMENT AND PURPOSE. Each party will designate a number of employees who will collectively constitute the "Development Team" for each Development Product. The Development Team will work together in good faith to agree on a Development Plan for each Development Product that will permit Novartis to complete development of each Development Product pursuant to the terms of this Agreement and secure Regulatory Approval for each Development Product. Each Development Plan will set forth a proposed schedule for the completion of the various aspects of the technical development work required for each Development Product and for the filing of regulatory approval applications. 3.2. MEETINGS OF THE DEVELOPMENT TEAM. Unless otherwise agreed by the Parties, the Development Team shall hold meetings at least twice each year with the meeting site alternating between Novartis' headquarters and Noven's headquarters. Meetings can be held by tele- or videoconference. Meetings shall be co-chaired by the chief representatives of the Parties. At and between meetings of the Development Team, each Party shall keep the other fully and regularly informed as to its progress with its respective obligations. The Development Team shall also monitor the progress of the Development Plan against agreed milestones and shall report on delays in the conduct of the Development Plan which would materially affect Noven's ability to achieve such milestones and/or to timely and/or successfully complete the Development Plan within the agreed time schedules, and shall recommend whether corrective action is required. 3.3. DISPUTE RESOLUTION. In the event of any dispute between the parties as to any matter involving a Development Plan, the Parties shall first refer such dispute to the full Development Team for resolution. In the event the Development Team is unable to resolve the dispute after diligent effort within thirty (30) days, the matter shall then be resolved pursuant to the dispute resolution procedure set forth in Article 9.1. 3.4 QUARTERLY REPORTING. Noven shall provide quarterly reports to Novartis on the progress of the Development Plan. Wherever practicable such quarterly reports shall be submitted before a meeting of the Development Team takes place. Noven shall promptly notify the Novartis chief representative of the Development Team in the event Noven recognises stability or other problems arising out of the Development Plan that it considers will have a material effect on the progress and/or likelihood of success of the Development Plan. 3.5 ISSUANCE OF FINAL REPORT. Within thirty (30) days after the completion of a Development Plan, Noven shall submit to Novartis a draft final report setting forth the results of the Development Plan. Novartis shall have sixty (60) days within which to submit a written request for reasonable changes to be made to the draft report or require the Development Plan to be amended to allow for additional and reasonable development work to be conducted by the Parties. Within thirty (30) days of receiving Novartis' request for changes or after such additional development work has been conducted Noven shall prepare and deliver to Novartis a final report which shall take into account the changes requested by Novartis. 6 8 ARTICLE IV COMPENSATION 4.1 COST FOR DEVELOPMENT. For each Development Product, Novartis shall pay to Noven the amounts set forth in the applicable Development Plan, such amounts to be payable at the times set forth in such Development Plan. To the extent any change is made in a Development Plan or in the specifications for a Development Product requested by Novartis, the Parties shall mutually agree to the amount of any incremental fees to be payable to Noven for such additional work, and Noven shall not be required to commence any additional work until such fee is agreed upon. Such agreement shall be reflected in an amendment to the applicable Development Plan. All amounts payable by Novartis under a Development Plan shall be non-refundable. ARTICLE V OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS 5.1 For the avoidance of doubt, the Parties acknowledge that, unless otherwise expressly and specifically set forth herein, any Noven Patent Rights and/or Noven Technology (as each such term is defined in the Noven License Agreement) arising out of this Development Agreement are part of the Sublicensed Noven Intellectual Property (as defined in the Improvements Sublicense Agreement) and as such are governed by the Improvements Sublicense Agreement and are included in the sublicense grant to Novartis thereunder. ARTICLE VI CONFIDENTIALITY 6.1 CONFIDENTIALITY; PRESS RELEASES. (a) Pursuant to the terms hereof, from time to time during the term of this Agreement, each of Novartis and Noven and/or their respective Affiliates and sublicensees (in such capacity, the "Disclosing Party") have disclosed and will be disclosing to the other Party and/or its Affiliates (in such capacity, the "Receiving Party") certain Confidential Information of the Disclosing Party. The Receiving Party shall make no use of such Confidential Information except in the exercise of its rights and performance of its obligations set forth in this Agreement and the Related Agreements. The Receiving Party shall use the same efforts to keep secret, and prevent the disclosure to third parties of, Confidential Information of the Disclosing Party as it would use with respect to its own Confidential Information. Confidential Information disclosed by the Disclosing Party shall remain the sole and absolute property of the Disclosing Party, subject to the rights granted in this Agreement and the transactions contemplated herein. The above restrictions on the use and disclosure of Confidential Information shall not apply to any information which: (i) is already known to the Receiving Party at the time of disclosure by the Disclosing Party, as demonstrated by competent proof; (ii) is 7 9 or becomes generally available to the public other than through any act or omission of the Receiving Party in breach of this Agreement; (iii) is acquired by the Receiving Party from a third party who is not, directly or indirectly, under an obligation of confidentiality to the Disclosing Party with respect to same; or (iv) is developed independently by the Receiving Party without use, direct or indirect, of information that is required to be held confidential hereunder. In the event the Receiving Party is required: (i) by law, rule or regulation to disclose Confidential Information of the Disclosing Party to regulatory authorities to obtain and maintain regulatory approval for any Licensed Product; (ii) to disclose Confidential Information of the Disclosing Party to respond to a regulatory or governmental inquiry concerning any Licensed Product; or (iii) to disclose Confidential Information of the Disclosing Party in a judicial, administrative or arbitration proceeding to enforce such Party's rights under this Agreement, it may do so only if it: (A) provides the Disclosing Party with as much advance written notice as possible of the required disclosure; (B) cooperates with the Disclosing Party in any attempt to prevent or limit the disclosure; and (C) limits disclosure, if any, to the specific purpose at issue. (b) Notwithstanding the provisions of this Section 6.1, Novartis, its Affiliates and sublicensees, shall be permitted to disclose to their respective distributors, wholesalers and other direct customers such Confidential Information relating to Development Products as Novartis, its Affiliates and sublicensees, shall reasonably determine to be necessary or useful in order to effectively market and distribute any Development Product; provided that such entities undertake substantially the same confidentiality obligation as Novartis has with respect to Noven's Confidential Information. (c) Except as may be required by applicable laws, rules or regulations, including stock exchange rules, no Party will originate any publicity, press or news release, or other public announcement, written or oral, whether to the public press or otherwise, relating to this Agreement or the Related Agreements, the transactions contemplated hereby or thereby, without the prior written approval of the other Party. In the event disclosure of this Agreement or any of the Related Agreements, any of the terms and conditions of this Agreement or such Related Agreements, or any of the transactions contemplated by this Agreement or such Related Agreements, is required by applicable law, rules or regulations, then the Party required to so disclose such information shall, to the extent possible, provide to the other Party for its prior approval (such approval not to be unreasonably withheld or delayed) a written copy of such public announcement. When practicable, the disclosing Party will provide such copy to the other Party at least five (5) business days prior to disclosure. (d) Neither Party shall use the name of the other for marketing, advertising or promotional claims without the prior written consent of the other Party. 6.2. INJUNCTIVE RELIEF. Each of Noven and Novartis specifically recognizes that any breach by it of Section 5.1 may cause irreparable injury to the other Party, its Affiliates and sublicensees and that actual damages may be difficult to ascertain, and, in any event, may be inadequate. Accordingly (and without limiting the availability of legal or equitable, including injunctive, remedies under any other provisions of this Agreement), each of Noven and Novartis agrees that in the event of any such breach, notwithstanding the provisions of Section 8.1, the other Party shall be entitled to seek, by way of private litigation in the first instance, injunctive relief and such other legal and equitable remedies as may be available. 8 10 ARTICLE VII INDEMNIFICATION 7.1. INDEMNIFICATION. In order to distribute among themselves the responsibility for claims arising out of this Agreement, and except as otherwise specifically provided for herein, the Parties agree as follows: (a) Novartis shall defend, indemnify and hold Noven, its Affiliates, and each of their respective officers, directors, agents, employees and shareholders (collectively, "NOVEN INDEMNITEES") harmless, from and against, any and all losses, obligations, liabilities, penalties and damages (including but not limited to compensatory damages), costs and expenses (including reasonable attorneys' fees) (collectively, "LOSSES"), which the Noven Indemnitees may incur or suffer, and all deficiencies, actions (including, without limitation, any proceedings to establish insurance coverage), claims, suits, legal, administrative, arbitration, governmental or other proceedings or investigations, and judgments (collectively, "CLAIMS"), with which any of them may be faced arising out of: (i) any material inaccuracy in or material breach of any representation and warranty made by Novartis in this Agreement; (ii) any material breach by Novartis or any of its Affiliates or sublicensees, or material failure by any of them to comply with, any covenants or obligations of Novartis pursuant to this Agreement; (iii) the enforcement by the Noven Indemnitees of their rights under this Section 6.1(a); (iv) any gross negligence or willful misconduct by Novartis or its Affiliates in Novartis' performance pursuant to this Agreement; and (v) Novartis' material violation of any applicable law or regulation; provided, however, that Novartis shall not be liable hereunder to the extent such Losses arise from willful misconduct or gross negligence of the Noven Indemnitees. (b) Noven shall defend, indemnify and hold Novartis, its Affiliates and sublicensees, and each of their respective officers, directors, agents, employees and shareholders (collectively, "NOVARTIS INDEMNITEES") harmless, from and against, any and all Losses, which the Novartis Indemnitees may incur or suffer, and all Claims with which any of them may be faced arising out of (i) any material inaccuracy in or material breach of any representation and warranty made by Noven in this Agreement; (ii) any material breach by Noven of, or material failure by Noven to comply with, any of its covenants or obligations pursuant to this Agreement; (iii) the enforcement by the Novartis Indemnitees of their rights under this Section 6.1(b); (iv) any gross negligence or willful misconduct by Noven or any of its Affiliates or sublicensees in their performance pursuant to this Agreement; and (v) Noven's material violation of any law or regulation; PROVIDED, HOWEVER, that Noven shall not be liable hereunder to the extent such Losses arise from willful misconduct or gross negligence of the Novartis Indemnitees. (c) If any Claim arises as to which a right of indemnification provided in this Article VI applies, the Person seeking indemnification (the "indemnified party"), shall promptly notify the Party obligated under this Article VI to indemnify the indemnified party (the "indemnifying party") thereof in writing, and allow the indemnifying party and its insurers the opportunity to assume direction and control of the defense against such Claim, at its sole expense, including, without limitation, the settlement thereof at the sole option of the indemnifying party or its insurers; PROVIDED, HOWEVER, that the indemnifying party may not enter into any compromise or settlement without the prior written consent of the indemnified party unless such compromise or settlement includes as an unconditional term thereof the giving by each plaintiff or claimant to the indemnified party of a release from all liability in respect of such claim and only if such compromise or settlement does not include any admission of legal wrongdoing on the part of the indemnified party. The indemnified party shall fully cooperate with the indemnifying party and its 9 11 insurer in the disposition of any such matter and the indemnified party will have the right and option to participate in (but not control) the defense of any Claim as to which this Article VI applies, with separate counsel at its election and cost. If the indemnifying party fails or declines to assume the defense of any such Claim within thirty (30) days after notice thereof, the indemnified party may assume the defense thereof for the account and at the risk of the indemnifying party. The indemnifying party shall pay promptly to the indemnified party any Losses to which the indemnity under this Article VI applies, as incurred. ARTICLE VIII TERM AND TERMINATION; REMEDIES 8.1. TERM. The term of this Agreement shall commence on the date hereof and shall expire, unless sooner terminated as set forth herein, upon the expiration or termination of the licenses sublicensed by Novartis under the Improvements Sublicense Agreement. 8.2. TERMINATION FOR BANKRUPTCY. Either of Noven or Novartis may terminate this Agreement with immediate effect in the event that any proceeding under a bankruptcy, liquidation or similar statute, or any insolvency, receivership or dissolution proceeding is filed against the other Party, and such proceeding is not dismissed within sixty (60) days after the filing thereof. 8.3. TERMINATION FOR BREACH. If either of Novartis or Noven commits a material breach of this Agreement, or materially defaults in the performance or observance of any provision of this Agreement, and (i) such Party fails, within sixty (60) days after receipt of notice of the material breach from the Party affected by the breach or default (the "AFFECTED PARTY"), to remedy such breach or default or to have agreed to a plan for remedy of such breach or default and (ii) the Parties shall have exhausted the dispute resolution procedures provided in Article 8.1 without resolving their dispute regarding the material breach; PROVIDED that the time periods contemplated by the foregoing clauses (i) and (ii) may run concurrently and need not be sequential, the Affected Party may terminate this Agreement. 8.4. EFFECT OF TERMINATION. Rights and obligations set forth in Sections 5.1 (Confidentiality; Press Releases), 6.1 (Indemnification) and Article VIII (Miscellaneous) shall survive the termination of this Agreement, and otherwise, except as set forth in this Section 7.4, this Agreement shall become void and have no effect. 8.5. FORCE MAJEURE. The obligations of the Parties under this Agreement shall be subject to any delays or non-performance caused by: acts of God, earthquakes, fires or floods; explosions, sabotage, riots or accidents; regulatory, governmental or military action or inaction; strikes, lockouts or labor trouble; perils of the sea; failure or delay in performance by third parties, including suppliers and service providers; or any other cause beyond the reasonable control of either Party. The Party which is not performing its obligations under this Agreement as a result of any such event of force majeure will promptly notify the other Party thereof and shall use commercially reasonable efforts to resume compliance with this Agreement as soon as possible. 10 12 ARTICLE IX MISCELLANEOUS 9.1. DISPUTES. In the event of any controversy or claim arising out of, relating to or in connection with any provision of this Agreement, the Improvements Sublicense Agreement or the Noven License Agreement, or the rights or obligations of the Parties hereunder or thereunder, the Parties shall try to settle their differences amicably between themselves. Either Party may initiate such informal dispute resolution by sending written notice of the dispute to the other Party, and within ten (10) days after such notice appropriate representatives of the Parties shall meet for attempted resolution by good faith negotiations. If such representatives are unable to resolve promptly such disputed matter, it shall be referred to the Head of Development of Novartis Pharma AG and the Chief Executive Officer of Noven, as the case may be, or their respective designees, for discussion and resolution. If such personnel are unable to resolve such dispute within thirty (30) days of initiating such negotiations, the Parties agree first to try in good faith to settle the dispute by mediation in New York under the Commercial Mediation Rules of the American Arbitration Association, before resorting to litigation. 9.2. INDEPENDENT CONTRACTORS. In making and performing this Agreement, the Parties are acting and shall act as independent contractors. Nothing in this Agreement shall be deemed to create an agency, joint venture or partnership relationship between the Parties hereto. Neither Party shall have the authority to obligate the other Party in any respect, and neither Party shall hold itself out as having any such authority. All personnel of Noven shall be solely employees of Noven, as applicable and shall not represent themselves as employees of Novartis. All personnel of Novartis shall be solely employees of Novartis, as applicable and shall not represent themselves as employees of Noven. 9.3. ASSIGNMENT. Neither Noven nor Novartis shall have a right to assign this Agreement without the prior written consent of the other (which consent shall not be unreasonably withheld or delayed); PROVIDED, HOWEVER, that each of Noven and Novartis may assign this Agreement to any of its Affiliates without the prior written consent of the other; PROVIDED, FURTHER, that no such assignment of this Agreement shall relieve the assignor of any of its obligations or liabilities under this Agreement. Notwithstanding the foregoing, each of Noven and Novartis may assign this Agreement without the other's prior written consent in connection with the transfer or sale of all or substantially all of its assets or business or its merger or consolidation with another Person. 9.4. BINDING EFFECT; BENEFIT. This Agreement shall inure to the benefit of and be binding upon the Parties hereto, and their respective successors and permitted assigns. Nothing contained herein shall give to any other Person, other than Noven, any benefit or any legal or equitable right, remedy or claim. 9.5. AMENDMENT. This Agreement may only be modified, amended or supplemented by an instrument in writing executed by Noven and Novartis. 11 13 9.6. NO WAIVER. No term or provision hereof will be considered waived by any Party, and no breach excused by any Party, unless such waiver or consent is in writing signed on behalf of the Party against whom the waiver is asserted. No consent by any Party to, or waiver of, a breach by any Party, whether express or implied, will constitute a consent to, waiver of, or excuse of any other, different or subsequent breach by any other Party. 9.7. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be delivered personally or sent by facsimile transmission, air courier, or registered or certified mail, return receipt requested, addressed as follows: If to Novartis: Novartis Pharma AG Lichtstrasse 35 CH-4002 Basel, Switzerland Fax: ++41 61 324 6859 Attn: General Counsel With copies to: Novartis Pharma AG Lichtstrasse 35 CH-4002 Basel, Switzerland Fax: ++41 61 324 2100 Attn: Head BD & L If to Noven: Noven Pharmaceuticals, Inc. 11960 S.W. 144th Street Miami, Florida 33186 Fax: (305) 232-1836 Attn: Chief Executive Officer cc: General Counsel or to such other address as the Party to whom notice is to be given may have furnished to the other Parties in writing in accordance herewith. Any such communication shall be deemed to have been delivered (a) when delivered, if delivered personally, (b) when sent (with written confirmation received), if sent by facsimile transmission on a business day, (c) on the first business day after dispatch (with written confirmation received), if sent by facsimile transmission on a day other than a business day, (d) on the second business day after dispatch, if sent by air courier, and (e) on the fifth business day after mailing, if sent by mail. 9.8. COUNTERPARTS. This Agreement shall become binding when any one or more counterparts hereof, individually or taken together, shall bear the signatures of each of the Parties hereto. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against the Person whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument. Each Party may execute this 12 14 Agreement on a facsimile of the Agreement. In addition, facsimile signatures of authorized signatories of any Party shall be valid and binding and delivery of a facsimile signature by any Party shall constitute due execution and delivery of this Agreement. 9.9. INTERPRETATION. The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement is the product of negotiations between the Parties. In construing the terms hereof, no presumption shall operate in any Party's favor as a result of its counsel's role in drafting the terms or provisions hereof. 9.10. GOVERNING LAW. This Agreement and any claims, disputes or causes of action relating to or arising out of this Agreement shall be construed in accordance with and governed by the substantive laws of the State of New York, U.S.A. without giving effect to the conflict of laws principles thereof. 9.11. SEVERABILITY. If any provisions of this Agreement are determined to be invalid or unenforceable in any jurisdiction, such provisions shall be ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions hereof or affecting the validity or enforceability of any of such provisions of this Agreement in any other jurisdiction. The Parties will use their best efforts to substitute the invalid or unenforceable provision with a valid and enforceable one which conforms, as nearly as possible, with the original intent of the Parties. 9.12. ENTIRE AGREEMENT. This Agreement, including all exhibits and schedules and the Related Agreements, the Existing Novartis Pharma Sublicense Agreement and the Purchaser Sublicense Letter Agreement, embody the entire agreement and understanding between the Parties hereto with respect to the subject matter hereof and supersede all prior agreements, commitments, arrangements, negotiations or understandings, whether oral or written, between the Parties hereto and their respective Affiliates with respect thereto. There are no agreements, covenants or undertakings with respect to the subject matter of this Agreement and the Related Agreements other than those expressly set forth or referred to herein or in such other agreements, and no representations or warranties of any kind or nature whatsoever, express or implied, are made or shall be deemed to be made herein by the Parties hereto except those expressly made in this Agreement and the Related Agreements. 9.13 FURTHER ASSURANCES. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be reasonably necessary or appropriate in order to carry out the purposes and intent of this Agreement. 9.14 INCONSISTENCY. In the event of any inconsistency between the terms of this Agreement and the Improvements Sublicense Agreement, the terms of this Agreement shall prevail. 13 15 IN WITNESS WHEREOF, the Parties hereto have executed this Development Agreement as of date first above written. NOVARTIS PHARMA AG By: /s/ J. Brokatzky-Geiger --------------------------------------------- Name: J. Brokatzky-Geiger Title: Head of Worldwide Technical R&D By: /s/ J. Reinhardt --------------------------------------------- Name: Joerg Reinhardt Title: Global Head Pharma Development NOVEN PHARMACEUTICALS, INC. By: /s/ James B. Messiry --------------------------------------------- Name: James B. Messiry Title: Vice President and Chief Financial Officer 14 -----END PRIVACY-ENHANCED MESSAGE-----