8-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

Date of earliest event reported: August 14, 2007

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 incorporation or organization)	(I.R.S. Employer 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)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))

Explanatory Note

This Form 8-K/A is filed as an amendment (Amendment No. 1) to the Current Report on Form 8-K filed by Noven Pharmaceuticals, Inc. (“Noven”) with the Securities and Exchange Commission on August 14, 2007 (the “Original 8-K”), announcing the completion of its acquisition of JDS Pharmaceuticals, LLC (“JDS”). This Amendment No. 1 is being filed by Noven to provide the financial statements and pro forma financial information required by Item 9.01 of Form 8-K. The information previously reported in the Original 8-K is hereby incorporated by reference into this Form 8-K/A.

Item 9.01. Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.

Noven is filing herewith audited financial statements of JDS for the years ended December 31, 2006 and 2005 attached hereto as Exhibit 99.1 and incorporated herein by this reference.

Noven is filing herewith unaudited financial statements of JDS for the six months ended June 30, 2007 and 2006 attached hereto as Exhibit 99.2 and incorporated herein by this reference.

(b) Pro forma financial information.

Noven is filing herewith the unaudited pro forma financial information as of and for the six months ended June 30, 2007, and for the year ended December 31, 2006 attached hereto as Exhibit 99.3 and incorporated herein by this reference.

(d) Exhibits

Exhibit No.		Description
	23.1	Consent of BDO Seidman, LLP
	99.1	Audited financial statements of JDS Pharmaceuticals, LLC for the years ended December 31, 2006 and 2005
	99.2	Unaudited financial statements of JDS Pharmaceuticals, LLC for the six months ended June 30, 2007 and 2006
	99.3	Unaudited pro forma financial information pertaining to Noven’s acquisition of JDS Pharmaceuticals, LLC, including unaudited condensed combined financial statements as of and for the six months ended June 30, 2007, and for the year ended December 31, 2006.

Note regarding forward looking statements

Except for historical information contained herein, the information provided in this Form 8-K/A contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve substantial risks and uncertainties. Statements that are not historical facts, including statements which are preceded by, followed by, or that include, the words “believes,” “anticipates,” “plans,” “expects” or similar expressions and statements, are forward-looking statements. Noven’s estimated or anticipated future results, product performance or other non-historical facts are also forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. These forward-looking statements are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond Noven’s control. These risks and uncertainties include, among others, risks associated with the inherent uncertainty of financial projections, including the risk that although projections may be based on reasonable assumptions, if those underlying assumptions are wrong or do not occur as projected, actual results may vary materially from the forecasts. For additional information regarding these and other risks associated with Noven’s business, readers should refer to Noven’s Annual Report on Form 10-K for the year ended December 31, 2006 as well as other reports filed from time to time with the Securities and Exchange Commission. Unless required by law, Noven undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

2

SIGNATURE

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: October 29, 2007	By:	/s/ Diane M. Barrett
		Diane M. Barrett
		Vice President and Chief Financial Officer

3

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-120292, No. 333-64081 and No. 333-90835) and Form S-3 (No. 333-56293) of Noven Pharmaceuticals, Inc. of our report dated July 3, 2007 relating to the audited financial statements of JDS Pharmaceuticals, LLC, which appear in this Form 8-K/A of Noven Pharmaceuticals, Inc.

/s/ BDO Seidman, LLP

October 26, 2007

EX-99.1

EXHIBIT 99.1

FINANCIAL STATEMENTS OF BUSINESS ACQUIRED

The following financial statements for JDS Pharmaceuticals, L.L.C. (“JDS”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are presented in accordance with the requirements of Regulation S-X, Rule 3-05(b). JDS has a fiscal year end of December 31.

Noven Pharmaceuticals, Inc. (“Noven”) acquired JDS on August 14, 2007.

1

JDS Pharmaceuticals, L.L.C.

Consolidated Financial Statements
Years Ended December 31, 2006 and 2005

Independent auditors’ report	3
Consolidated financial statements:
Balance sheets	4
Statements of operations	5
Statements of members’ deficit	6
Statements of cash flows	7
Summary of business and significant accounting policies	8-11
Notes to consolidated financial statements	12-20

2

Independent Auditors’ Report

To the Members of
     JDS Pharmaceuticals, L.L.C.
New York, New York

We have audited the accompanying consolidated balance sheets of JDS Pharmaceuticals, L.L.C. (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, members’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JDS Pharmaceuticals, L.L.C. at December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As described in the summary of business and significant accounting policies to the financial statements, effective January 1, 2006, the Company adopted the fair value method of accounting provisions of Statement of Financial Accounting Standard No. 123 (revised 2004), “Share Based Payment.”

/s/ BDO Seidman LLP
July 3, 2007

3

JDS Pharmaceuticals, L.L.C.
Consolidated Balance Sheets
(dollars in thousands)

December 31,	2006			2005
Assets
Current:
Cash and cash equivalents	$	2,983		$	11,849
Accounts receivable, net of allowances		2,904			2,198
Inventories (Note 1)		1,927			512
Other current assets		1,129			817
Total current assets		8,943			15,376
Property and equipment, net (Note 2)		439			75
Intangible assets, net of amortization of $7,837 and $3,855 (Note 3)		22,562			26,399
Other (Note 4)		158			157
	$	32,102		$	42,007
Liabilities and Members’ Deficit
Current liabilities:
Accounts payable and accrued expenses (Note 10)	$	8,197		$	5,379
Current portion of long-term obligations (Note 5)		2,372			985
Total current liabilities		10,569			6,364
Long-term obligations, less current portion (Note 5)		9,323			11,284
Liability for stock-based compensation		82			—
Accreted unit option value (Note 7)		645			323
Units subject to mandatory redemption, net of unamortized deferred issuance costs of $161 and $293 for 2006 and 2005, respectively (Note 6)		47,536			36,378
Total liabilities		68,155			54,349
Commitments (Notes 3 and 8)
Members’ deficit (Note 7):
Common units, no par value, 79,999,999 units issued and outstanding		36			—
Accumulated deficit		(36,089	)		(12,342	)
Total members’ deficit		(36,053	)		(12,342	)
	$	32,102		$	42,007

See accompanying summary of business and significant accounting policies
and notes to consolidated financial statements.

4

JDS Pharmaceuticals, L.L.C.
Consolidated Statements of Operations
(dollars in thousands)

Year ended December 31,	2006			2005
Net revenues (Note 9)	$	20,357		$	14,703
Cost of products sold		3,611			3,018
Gross profit		16,746			11,685
Expenses:
Selling, distribution and administrative		21,684			8,715
Research and development		2,276			2,718
Accretion on unit options (Note 7)		321			243
Depreciation and amortization		4,081			2,947
Total expenses		28,362			14,623
Operating loss		(11,616	)		(2,938	)
Accretion on units subject to mandatory redemption (Note 6)		11,158			5,792
Accretion on long-term obligations (Note 5)		749			121
Interest expense		359			380
Interest income		(137	)		(110	)
Loss before income tax expense		(23,745	)		(9,121	)
Income tax expense		2			2
Net loss	$	(23,747	)	$	(9,123	)

See accompanying summary of business and significant accounting policies
and notes to consolidated financial statements.

5

JDS Pharmaceuticals, L.L.C.
Consolidated Statements of Members’ Deficit
(dollars in thousands)

Years ended December 31, 2006 and 2005
Balance, December 31, 2004	$	(3,219	)
Net loss		(9,123	)
Balance, December 31, 2005		(12,342	)
Net loss		(23,747	)
Balance, December 31, 2006	$	(36,089	)

See accompanying summary of business and significant accounting policies
and notes to consolidated financial statements.

6

JDS Pharmaceuticals, L.L.C.
Consolidated Statements of Cash Flows
(dollars in thousands)

Year ended December 31,	2006			2005
Cash flows from operating activities:
Net loss	$	(23,747	)	$	(9,123	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Accretion on units subject to mandatory redemption		11,026			5,701
Stock-based compensation		118			—
Accretion on unit options		321			243
Accretion of long-term obligations		749			121
Amortization of intangible assets		3,982			2,930
Amortization of debt issuance cost		132			91
Depreciation and amortization		99			18
Changes in operating assets and liabilities:
Accounts receivable		(706	)		(2,112	)
Inventories		(1,415	)		(92	)
Other assets		(313	)		(897	)
Accounts payable and accrued expenses		2,818			3,892
Income taxes payable		—			(24	)
Net cash provided by (used in) operating activities		(6,936	)		748
Cash flows from investing activities:
Acquisition of intangible assets, net of adjustment for 2005 intangible acquisition		(145	)		(8,583	)
Acquisition of property and equipment		(463	)		(60	)
Net cash used in investing activities		(608	)		(8,643	)
Cash flows from financing activities:
Principal payments of long-term obligations		(1,322	)		—
Issuance of units subject to mandatory redemption, net of issuance cost		—			14,434
Tax distributions		—			(78	)
Net cash provided by (used in) financing activities		(1,322	)		14,356
Net increase (decrease) in cash and cash equivalents		(8,866	)		6,461
Cash and cash equivalents, beginning of year		11,849			5,388
Cash and cash equivalents, end of year	$	2,983		$	11,849
Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	430		$	378
Noncash financing and investing activities:
Note issued for intangible assets		—			7,404

See accompanying summary of business and significant accounting policies
and notes to consolidated financial statements.

7

JDS Pharmaceuticals, L.L.C.

Summary of Business and Significant Accounting Policies
(dollars in thousands, except per unit data)

Organization and Operations

     JDS Pharmaceuticals, L.L.C. (the “Company”) is primarily engaged in the development, marketing, sales and distribution of branded pharmaceutical products. All the Company’s net revenues come from the sales of either Lithobid^®, for the treatment of bipolar disorder, which was purchased from Solvay Pharmaceutical, Inc. on August 24, 2004, or Pexeva^®, for the treatment of depression which was purchased from Synthon Pharmaceuticals, Inc. on November 1, 2005.

     The Company, a limited liability company, was formed under the laws of the State of Delaware on July 19, 2004.

     The consolidated financial statements include the accounts of JDS Pharmaceuticals, L.L.C. and its wholly-owned subsidiary, JDS Neuro, LLC, after elimination of intercompany transactions and balances.

Risks and Other Factors

     The Company’s operations are subject to certain risk factors and uncertainties such as competition from larger, more established pharmaceutical companies. Many of these competitors have substantially greater development capabilities and experience and manufacturing, marketing, financial and managerial resources. Any one or any combination of these factors could have a material impact on the Company’s financial position, results of operations or cash flows.

     Future operating performance and future ability to fund working capital needs will depend on the Company’s commercial success. Its future success depends upon maintaining its ability to compete in the research, development and commercialization of products and technologies in its areas of focus. Competition from other pharmaceutical companies is intense.

     The Company maintains certain cash balances at financial institutions that are Federally insured and the balances have exceeded Federally-insured limits.

Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     Significant estimates include recoverability of intangible assets, and sales allowances and returns which are determined based upon historical and current trends.

Cash Equivalents

     Cash equivalents consist of short-term and highly liquid investments (primarily money market accounts and overnight repurchase agreements with interest rates that are re-set daily).

Accounts Receivable

     The Company is subject to a concentration of credit risk with respect to its accounts receivable all of which are due from wholesalers, distributors, and chain drug stores in the health care and pharmaceuticals industries throughout the United States. The Company performs ongoing credit evaluations of its customers and monitors for potential uncollectible accounts. There have been no losses from uncollectible accounts through December 31, 2006.

8

JDS Pharmaceuticals, L.L.C.

Summary of Business and Significant Accounting Policies
(dollars in thousands, except per unit data)

Inventories

     Inventories are stated at the lower of cost or market value with cost determined on the first-in, first-out basis.

Property and Equipment

     Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided using the straight-line method over their estimated useful lives of three years or the life of the lease.

Intangible Assets

     Intangible assets are stated at cost less accumulated amortization. Amortization is provided by the either by straight-line method or the pattern in which the economic benefit is expected to be realized for product rights and straight-line for other intangible assets.

Long-Lived Assets

     Long-lived assets, such as intangible assets, equipment and certain sundry assets, are evaluated for impairment periodically or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When any such impairment exists, the related assets will be written down to fair value.

Revenue Recognition

     Revenues are recorded from product sales when title and risk of ownership have been transferred to the customer, typically upon delivery to the customer. Provisions for estimated sales allowances, returns, rebates and other pricing adjustments are accrued at the time revenues are recognized as a direct reduction of such revenue. The accruals are estimated based on available information regarding the portion of sales on which rebates and discounts can be earned, adjusted as appropriate for specific known events, and the prevailing contractual discount rates. Provisions are reflected either as a direct reduction to accounts receivable or, to the extent that they are due to entities other than customers, as accrued expenses. Adjustments to estimates, which have not been material, are recorded when customer credits are issued or payments are made to third parties.

Shipping and Handling Costs

     Presently, the Company does not charge its customers for shipping and handling costs. The amounts of such costs are included in cost of sales.

Research and Development

     The Company’s research and development consists of expenses incurred in developing and testing its product candidates. These expenses consist primarily of fees paid to contract research organizations and other third parties to assist the Company in managing, monitoring and analyzing its clinical trials, clinical trial costs paid to sites and investigators’ salaries, costs of non-clinical studies, costs of contract manufacturing services, costs of material used in clinical trials and non-clinical studies, fees paid to third parties for development candidates or drug delivery or formulation technologies that the Company has licensed and related personnel expenses. Research and development costs are expensed as incurred. For products that have not been approved by the FDA, inventory used in clinical trials is expensed at the time of production and recorded as research and development expense.

9

JDS Pharmaceuticals, L.L.C.

Summary of Business and Significant Accounting Policies
(dollars in thousands, except per unit data)

Income Taxes

     The Company is not subject to Federal or state income taxes, but is subject to state filing fees and New York City unincorporated business tax, which represent the income tax expense in the periods presented. The members are required to report their respective shares of the Company’s income, deductions and credits in their income tax returns.

     Deferred income taxes have not been recorded since they have an immaterial effect on the financial statements.

Unit-Based Payments

     Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payments”, which requires share-based payment awards exchanged for employee service to be measured at fair value and expensed in the statement of operations over the requisite employee service period (vesting period). Prior to January 1, 2006, the Company accounted for employee related unit compensation under the principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and its associated interpretations. The Company recognized compensation expense equivalent to the excess of fair value over the exercise price at the date of grant.

     SFAS No. 123(R) requires companies to record compensation expense for stock options measured at fair value, on the date of grant, using an option-pricing model. The fair value of the Company’s stock options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized under SFAS No. 123.

     The Company adopted the prospective transition method provided for under SFAS No. 123(R) and, accordingly, did not restate prior period amounts. Under the prospective method, entities continue to account for non-vested awards outstanding at the date of adoption of SFAS No. 123(R) in the same manner as they had been accounted for prior to adoption for financial statement recognition purposes. All awards granted, modified or settled after the date of adoption will be accounted for using the measurement, recognition and attribution provisions of SFAS No. 123(R). Stock-based compensation expense for all equity awards granted after January 1, 2006 is based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). Stock-based compensation expense includes an estimate for forfeitures and is recognized over the expected term of the award on a straight-line basis upon adoption of SFAS No. 123(R). As a result of adopting SFAS No. 123(R), the Company recorded, as a component of employee expenses, a charge of $118 and allocated $90 to selling, distribution and administration, $19 to research and development and $9 to cost of products sold.

     The fair value of these awards was estimated using the Black-Scholes valuation model with the following weighted-average assumptions for the year ended December 31, 2006:

Risk-free interest rate		4.82	%
Dividend yield		—
Expected volatility		55.5	%
Expected term in years	2 years
Fair value of stock options	$	.23

10

JDS Pharmaceuticals, L.L.C.

Summary of Business and Significant Accounting Policies
(dollars in thousands, except per unit data)

The risk-free interest rate is based on the U.S. Treasury zero-coupon yield with a maturity that approximates the expected term of the option. There is no expected dividend yield. The Company’s expected volatility is determined annually using a basket of peer company historical volatility rates until such time its stock history is equal to its contractual terms. The expected term is based on management’s expectations.

Units Subject to Mandatory Redemption

     In May 2003, the Financial Accounting Standards Board issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. This statement affects the classification, measurement and disclosure requirements of certain freestanding financial instruments, including mandatorily redeemable units. The Company adopted SFAS No. 150 which required the presentation of units subject to mandatory redemption in liabilities and accretion on units subject to mandatory redemption on a separate line (similar to interest expense) in the statement of operations.

Fair Value of Financial Instruments

     The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities. It is not practical to determine the fair value of the Company’s debt or redeemable preferred units.

Segment Reporting

     The Company manages its operations and reports as a single operating segment, consisting of principally the developing, selling and distributing various branded pharmaceuticals products. All products are sold within the United States.

Advertising Expense

     The Company expenses the cost of advertising as the expense is incurred. For the years ended December 31, 2006 and 2005, the expense totaled $744 and $164, respectively.

New Accounting Pronouncements

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, and accordingly, does not require any new fair value measurements. SFAS No. 157 is effective for the Company in 2008. The Company is currently reviewing the provisions of SFAS No. 157, but does not expect it to have a material impact on its financial statements.

     In July 2006, the FASB released FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. This statement is effective for fiscal years beginning after December 15, 2006. The Company believes that the adoption of FIN 48 will not have a material impact on its results of operations and financial position.

11

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

1. Inventories

     At December 31, 2006 and 2005, inventories consist of the following:

December 31,	2006		2005
Finished goods	$	1,056	$	512
Raw materials		871		—
Total	$	1,927	$	512

2. Property and Equipment

     At December 31, 2006 and 2005, property and equipment consist of the following:

December 31,	2006		2005
Computer hardware and software	$	90	$	52
Office furniture		190		9
Leasehold improvements		277		36
Total property and equipment		557		97
Less:  Accumulated depreciation and amortization		118		22
Net property and equipment	$	439	$	75

12

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

3. Intangible Assets

     At December 31, 2006 and 2005 property rights and other intangibles consist of the following:

December 31, 2006

	Amortization period and	Gross carrying		Accumulated
	method	amount		amortization		Net
Product rights — Pexeva (a)	12 years, straight line	$	16,972	$	1,636	$	15,336
Product rights —	8 years, based upon the
Lithobid (b)	pattern in which the
	economic benefits are
	expected to be realized		12,851		6,188		6,663
Other (c)	15 years, straight line		576		13		563
		$	30,399	$	7,837	$	22,562

December 31, 2005

	Amortization period and	Gross carrying		Accumulated
	method	amount		amortization		Net
Product rights — Pexeva (a)	12 years, straight line	$	16,827	$	233	$	16,594
Product rights —	8 years, based upon the
Lithobid (b)	pattern in which the
	economic benefits are
	expected to be realized		12,851		3,609		9,242
Other (c)	15 years, straight line		576		13		563
		$	30,254	$	3,855	$	26,399

(a) Product Rights — Pexeva

     In November 2005, the Company entered into an asset purchase agreement with Synthon Pharmaceuticals, Inc. (“Synthon”) for the purchase of Pexeva, a selective serotonin reuptake inhibitor (“SSRI”) for treatment of depression, obsessive/compulsive disorder, and/or panic disorder.

     In this transaction, the Company purchased certain assets related to Pexeva including: the New Drug Application, intellectual property including patents, trademarks and certain finished goods inventory. Pursuant to the agreement, the purchase price was adjusted for finished goods inventory held by customers. Additionally, the agreement provided that Synthon would be responsible for any product returns, chargebacks and rebates that arise from sales that arose prior to the closing of the transaction.

     The purchase of Pexeva included a cash payment at the time of closing and an obligation to make certain future fixed payments and certain contingent payments.

13

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

     The cash payment at the time of closing and future fixed payment obligations were as follows:

	Acquisition date
	Assets		Payment
Product rights — Pexeva	$	16,972	$	—
Finished goods and samples		702		—
Cash paid at closing		—		10,019
Fixed milestone payments (see Note 5)		—		3,091
Other minimum guaranteed payments (see Note 5)		—		4,313
Other		—		251
Total	$	17,674	$	17,674

Additionally, the Company is committed to make the following contingent payments:

• Payments of $1,000 if net sales during the calendar year 2007 and/or 2008 equal or exceed $7,000 but are less than $8,000; or payments of $2,000 if net sales during the calendar year 2007 and/or 2008 exceed $8,000.

• Payments of $1,250 with respect to each of the first two calendar years from 2007 through 2017, inclusive, as to which annual net sales equal or exceed $10,000.

• A $5,000 payment with respect to the first calendar year from November 1, 2005 through and including 2017, as to which annual net sale equal or exceed $30,000.

• As part of the purchase price in addition to the amounts set forth above, the Company is committed to pay $0.075 (“Additional Fee”) for each tablet of Pexeva or any product containing paroxetine mesylate as an active ingredient that is sold for commercial distribution by the Company during the period from closing to the earlier of expiration date of a certain patent (June 10, 2017) or such earlier date as there has been a judicial finding of invalidity. The Additional Fee shall be paid quarterly with 45 days of the end of the quarter to which each payment relates.

     In the event that Additional Fee payments for a calendar year are less than $350, the Company shall pay Synthon the difference between the total Additional Fee paid and with respect to such calendar year and the $350.

     In the event the Additional Fee payments for any calendar year are in excess of $350, the excess shall be applied to reduce the annual minimum Additional Fee obligation of the next (and subsequent) calendar years until such entire excess has been so applied.

14

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

The total payments of Additional Fees shall equal at least the Additional Fee Aggregate Minimum (as defined below). The Additional Fee Aggregate Minimum shall be equal to $10,000, provided however, if the Additional Fee period ends prior to the expiration of a certain patent (currently 2017), the Additional Fee Aggregate Minimum shall be adjusted to equal $10,000 multiplied by a fraction, the numerator of which is the number of months in the Additional Fee period and the denominator of which shall be the number of months from closing until June 10, 2017. In the event payments of Additional Fee are less than the Additional Fee Aggregate Minimum, the Company shall pay the difference between the total Additional Fee paid and the additional Fee Aggregate Minimum within 45 days of the end of the Additional Fee period. The Company reserves the right to prepay the amount of any Additional Fee Aggregate Minimum remaining at any time on or after the purchase of Pexeva. Any prepayment will be discounted at a rate of 9.75% from June 10, 2017 to the date of the prepayment and will constitute payment in full for this obligation so that no further additional fee would be required.

(b) Product Rights — Lithobid

     In August 2004, the Company entered into an asset purchase agreement with Solvay Pharmaceuticals, Inc. (“Solvay”) for the purchase of Lithobid, a leading brand of twice daily lithium carbonate indicated for the treatment of bipolar disorder.

     In this transaction, the Company purchased certain assets related to Lithobid including: the New Drug Application, intellectual property including trademarks and certain finished goods inventory. Pursuant to the agreement, the purchase price was adjusted for the amount of net profits earned by Solvay from sales of Lithobid from July 1, 2004 to August 24, 2004 and certain assumed liabilities associated with sales allowances due customers for finished goods inventory held by customers. Additionally, the agreement provided that Solvay would be responsible for any product returns, chargebacks and rebates that arise from sales that arose prior to the closing of the transaction and sales allowances as of various defined dates.

     The cost of this acquisition and methods of payment were as follows:

	Acquisition date
	Assets		Payment
Product rights — Lithobid	$	12,851	$	—
Inventory (finished goods)		486		—
Rights to the net profit earned on sales of Lithobid from July 1, 2004 to August 24, 2004		983		—
Cash paid at closing		—		10,000
Promissory note payable (see Note 5)		—		4,743
Other receivable		487		—
Other		—		64
Total	$	14,807	$	14,807

     In connection with the acquisition, the Company raised certain matters with Solvay regarding the excessive level of inventory held by customers at the date of the transaction. This matter was resolved in 2005 by Solvay being financial responsible for certain additional chargebacks and

15

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

rebates transactions through various new defined dates. This resulted in the Company recording in 2005 a reduction in the product rights assigned to Lithobid of $840.

     In connection with the acquisition of the product rights to Lithobid, the Company entered into a manufacturing and supply agreement with Solvay to manufacture and supply Lithobid for up to five years, subject to certain limitations.

(c) Other

     In 2004, the Company purchased certain U.S. and international patents, other intellectual property and a contract related to a developed product currently being registered in one European market. The Company may be obligated in the future periods to pay additional amounts of up to $ 4,000, subject to the achievement of certain product milestones, as defined.

     In connection with this acquisition, the Company also entered into an exclusive supply agreement with another party.

     Amortization of product rights and other intangibles for the year ended December 31, 2006 and 2005 amounted to $3,982 and $2,930, respectively. Annual amortization expense for the calendar years 2007 through 2011 is expected to be $3,471, $2,444, $2,444, $2,444 and $2,444, respectively.

4. Restricted Cash

     Included in Other Assets at December 31, 2006 is $158 of restricted cash that serves as collateral for a letter of credit that the Company has with a lessor.

5. Long-Term Obligations

     At December 31, 2006 and 2005 long-term obligations consist of the following:

December 31,	2006		2005
Promissory note (a)	$	3,755	$	4,743
Fixed milestone obligations (b)		3,462		3,142
Other minimum guaranteed payments (c)		4,478		4,384
Total obligations		11,695		12,269
Less: Current portion of obligations		2,372		985
Net long-term obligations	$	9,323	$	11,284

(a) Promissory Note

     On August 24, 2004, the Company executed a $4,743 promissory note and security agreement with Solvay in connection with the acquisition of the product rights related to Lithobid (see Note 3). The interest rate on the promissory note is at eight (8%) percent per annum, payable quarterly through July 1, 2006. Equal monthly payments of principal amounting to approximately $197, together with interest, began on August 1, 2006 and continue on the first day of each month thereafter through July 1, 2008.

     The Company granted Solvay a continuing and first priority security interest in all of the Company’s right, title and interest in the purchased assets, as defined in the agreement, as well as all products and proceeds whether now existing or acquired in the future.

(b) Fixed Milestone Payments

     On November 1, 2005, the Company in its asset purchase agreement of Pexeva (see Note 3) committed to make two $2,000 payments, one each on December 31, 2007 and December 31, 2008.

16

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

As each of these fixed milestone payments were noninterest bearing, the Company has recorded its obligations to make these fixed milestone payments at the discounted value of these obligations ($3,091) and is accreting interest on these payments, at a constant rate of 9.75%, between November 1, 2005 and the date they are due.

(c) Other Minimum Guaranteed Payments

     On November 1, 2005, the Company in its asset purchase agreement of Pexeva (see Note 3) committed to make an Additional Fee Aggregate Minimum payments between closing and June 10, 2017 of $10,000. As the Additional Fee Aggregate Minimum payments are noninterest bearing, the Company has recorded its fixed obligation to make minimum annual Additional Fee payments of $350 between closing and 2017 and a final payment of $6,150 in 2017 at the discounted value of these obligations ($4,313) and is accreting interest on these payments, at a constant rate of 9.75%, between November 1, 2005 and the date they are due.

6. Financing

     On August 24, 2004, the Company received $15,000 for the sale of 15,000,000 preferred units, 50,000,000 common units and 29,999,999 hurdle units and on October 31, 2005, the Company received $14,463 for the sale of 14,462,809 preferred units. As of December 31, 2006, the Company has additional funding commitments from investors of $32,537, of which $19,540 relates to the acquisition of new products and $12,997 relates to operations. The commitments terminate in August 2009 or upon redemption in full of all of the outstanding preferred units.

     Hurdle units will be eligible to share in distributions made to holders of common units upon achieving certain hurdles of increase in the distributions to the Company’s common unitholders. With the exception of tax distributions, distributions per common unit in excess of $1.00 triggers participation of certain hurdle unitholders along with common unitholders pro rata in the excess distribution. The remaining hurdle units require excesses of per common units starting from $1.94 up to $5.06. Hurdle units will be treated as common units upon an initial public offering.

     The redemption date for the preferred units is July 31, 2011 or the occurrence of a change of control or an initial public offering. After the first anniversary of the issuance date, the Company may redeem any or all of the preferred units by a cash payment to the holders. In the event of the liquidation of the Company, the holder of the preferred units is entitled to a preferential liquidation distribution of $1.00 per share in addition to all accrued and unpaid preferential dividends. The holder of the preferred units is entitled to receive cumulative preferential dividends at a compounding rate per annum of 30.0%.

     The cash raised in the transactions were ascribed to the preferred units (based upon the estimated fair value of the preferred and common units) and classified as units subject to mandatory redemption in the Company’s balance sheet as per SFAS No. 150. Accretion on units subject to mandatory redemption is presented similar to interest expense in the statement of operations.

     In connection with the two offerings, the Company incurred certain expenditures (totaling $415) and accounted for such expenditures as offsets to units subject to mandatory redemption. Such expenditures are amortized over two or three years representing the expected life of preferred units. The amortization of expenditures increases accretion on units subject to mandatory redemption.

7. Unit-Based Payment Transactions

     Under the unit incentive plan (the “Plan”), employees, directors and persons designated by the Board of Managers may be granted options that allow for the purchase of shares of Common Phantom Units, Restricted

17

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

Common Units and Preferred Phantom Units (collectively the “Units”). In 2004, a total of 5,000,000 Common Phantom Units, as reduced by the number of Restricted Common Units issued and outstanding, and 750,000 of Preferred Phantom Units were authorized for issuance under the Plan. In 2005, a total of an additional 4,873,250 Common Phantom Units were authorized for issuance under the Plan. Upon certain occurrences, the Units shall terminate and the participants shall be entitled to purchase the number of newly issued units. Under the Plan, there are 2,380,174 common units available for grants at December 31, 2006 and all authorized preferred units have been granted.

     The Plan is administered by an appointed Compensation Committee or the Board of Managers if none appointed which determines the terms and conditions of each option granted, consistent with the terms of the Plan. No units shall be granted under the Plan after August 25, 2014.

     The Common Phantom Units are redeemable for cash upon a liquidity event, as defined. These units are remeasured to fair value at each balance sheet date and the resulting change in the fair value will be recorded to operating expenses. Through December 31, 2005, there was no fair value for these units. In 2006, the fair value was $82, which was expensed.

     During the year ended December 31, 2006 and 2005, the Company granted the right to purchase 2,616,739 and 2,313,250 common units, respectively, with an average exercise price of $-0-. These common unit options are vesting over 12 to 48 months, but vest earlier upon a liquidity event, as defined.

     The total expense related to unvested Restricted Common Units was $118 at December 31, 2006, which will be expensed over the next two years.

     During the period from July 19, 2004 (inception) to December 31, 2004, the Company granted the right to purchase 4,557,826 common units with an average exercise price of $-0-. These common unit options are vesting over 24 to 48 months except 1,268,116 units that were vested at the grant date. Included in common unit option grants were 50,000 units issued to a consultant with a minimal fair value, thus no expense was recorded.

     During the period from July 19, 2004 (inception) to December 31, 2006, the Company also granted to employees the right to purchase 750,000 preferred units with an average exercise price of $1.00. These preferred unit options vest over 36 to 48 months except 237,500 units that were vested at the grant date. The preferred unit options essentially give rise to accretion on unit options (similar to stock appreciation rights) computed at a compounding rate per annum of 30.0% over the product of number of units granted and exercise price. The resulting expense is recorded to accretion on unit options in the statement of operations with a corresponding credit to accreted unit options value in the balance sheet. During the years ended December 31, 2006 and 2005, the Company recorded accretion on unit options of $322 and $243, respectively.

18

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

     The following table summarizes activity under the Company’s plans from January 1, 2005 to December 31, 2006:

	Preferred
	Phantom units		Restricted common and Phantom common units
			Units available
			for grants			Outstanding
						Total units						Phantom
						subject to			Restricted			common
	Outstanding		Total			outstanding units			common units			units
Outstanding at January 1, 2005		750,000		442,174			4,557,826			4,347,826			210,000
Shares authorized through Plan Amendment		—		4,873,250			—			—			—
Options granted		—		(2,313,250	)		2,313,250			2,273,250			40,000
Outstanding at December 31, 2005		750,000		3,002,174			6,871,076			6,621,076			250,000
Options granted		—		(2,616,739	)		2,616,739			1,791,739			825,000
Options forfeited		—		1,994,739			(1,994,739	)		(1,944,739	)		(50,000	)
Outstanding at December 31, 2006		750,000		2,380,174			7,493,076			6,468,076			1,025,000

     The following table summarizes information about units outstanding at December 31, 2006 and 2005:

	Units outstanding								Units exercisable
					Weighted
					average		Weighted				Weighted
	Range of				remaining		average				average
	exercise		Number		contractual		exercise		Number		exercise
Type	price		outstanding		life (years)		price		exercisable		price
December 31, 2006:
Common	$- to $.01			7,493,076		8.0	$- to $.01			4,896,492	$- to $.01
Preferred	$	1.00		750,000		7.7	$	1.00		614,236	$	1.00
December 31, 2005:
Common	$- to $.01			6,871,076		8.7	$- to $.01			2,974,623	$- to $.01
Preferred	$	1.00		750,000		8.7	$	1.00		452,778	$	1.00

8. Lease and Employment Commitments

     The Company leases office space under a noncancellable operating lease, which expires in September 2010. Total rent expense was $419 and $115 for the years ended December 31, 2006 and 2005 respectively. The lease requires the Company to maintain a letter of credit as security of $158, which is collateralized by cash (Note 4). At December 31, 2006, future minimum lease payments under all noncancellable operating leases consisted of approximately $384 in 2007, $403 in 2008, $418 in 2009, and $320 in 2010.

     At August 25, 2004, the Company entered into two employment contracts for a three-year period with a total compensation of $500 per year. The Company committed to pay $320 in 2007.

19

JDS Pharmaceuticals, L.L.C.

Notes to Consolidated Financial Statements
(dollars in thousands, except per unit data)

9. Customer Concentrations

     Sales to three customers individually exceeded 10% and, in the aggregate, accounted for approximately 89% of total net revenue for the years ended December 31, 2006 and 2005.

10. Accounts Payable and Accrued Expenses

     Accounts payable and accrued expenses consisted of the following at December 31, 2006 and 2005:

December 31,	2006		2005
Accounts payable trade	$	2,870	$	2,382
Accrued medicaid and managed care rebates		2,559		1,592
Other		2,768		1,405
	$	8,197	$	5,379

11. Employee Benefits

     In 2006, the Company initiated a profit sharing plan which qualifies under Section 401(k) of the Internal Revenue Code of 1986 (the “401(k) Profit Sharing Plan”). All employees are eligible on the first of the month following their date of hire and meet requirements, as defined. The 401(k) Profit Sharing Plan allows employees to invest up to the IRS maximum amount (determined annually) at their option. The Company may make matching contributions equal to a discretionary percentage, to be determined by the Company of the participant’s contribution. The Company has provided for contributions of $108 for the year ended December 31, 2006.

12. Subsequent Events

     On April 16, 2007, the Company received $7,000 for the sale of 7,000,000 preferred units on the same approximate terms as its earlier preferred unit sales (see Note 7). The proceeds will be used to finance future operations and the transactions noted in the next and last paragraphs.

     On April 26, 2007, the Company signed and closed a Development, License and Supply Agreement with Banner Pharmacaps Inc. This agreement licensed a product on file with the FDA as well as rights to the future development of an additional product in return for a $2,000 payment at inception and certain milestones payments upon FDA approval and or achievement of development milestones and royalties on future sales.

     On May 4, 2007 the Company entered into an Amended and Restated Promissory Note and Security Agreement with Solvay Pharmaceuticals, Inc (“Amended Note”) (see Note 5). The amended note provides that effective April 1, 2007, the outstanding balance on the note of $3,162 was to be repaid in equal monthly principal amounts of $93 over a remaining term of 34 month to January 2010. The original interest on the note of 8% remained the same.

     On May 22, 2007, the Company signed an Asset Purchase Agreement with Smithkline Beecham Corporation for the acquisition of a trademark and certain NDA and INDs. This transaction closed on July 2, 2007 and the Company paid $1,000 in cash at closing.

20

EX-99.2

EXHIBIT 99.2

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF JDS

The following information was derived from JDS Pharmaceuticals L.L.C.’s (“JDS”) unaudited financial statements for the six months ended June 30, 2007 and 2006 prepared by JDS’s management.

In the opinion of JDS’s management, this unaudited interim period information reflects all adjustments, consisting only of normal and recurring adjustments necessary for a fair presentation of the results of operations for the six months ended June 30, 2007 and 2006, and financial condition as of June 30, 2007. Results for the interim periods should not be considered indicative of results for any other period or for the year. This information is only a summary. The unaudited interim period financial information was not reviewed, by BDO Seidman, LLP or any other auditor. The unaudited interim period financial information should be read along with JDS’s historical audited financial statements and related notes in Exhibit 99.1.

1

JDS PHARMACEUTICALS, L.L.C.
Condensed Consolidated Balance Sheet
(dollars in thousands)
(unaudited)

	June 30,
	2007
Assets
Current assets:
Cash and cash equivalents	$	2,829
Accounts receivable, net of allowances		2,737
Inventories		1,840
Other current assets		629
		8,035
Property and equipment, net		386
Other Assets:
Intangible assets, net of amortization of $9,827		22,681
Other		163
		22,844
	$	31,265
Liabilities and Members’ Deficit
Current liabilities:
Accounts payable and accrued expenses	$	14,359
Current portion of long-term obligations		3,021
		17,380
Long-term liabilities:
Long-term obligations, less current portion		8,089
Liability for stock-based compensation		279
Accreted unit option value		833
Units subject to mandatory redemption, net of unamortized deferred issuance costs of $80		61,635
		88,216
Commitments
Members’ deficit:
Common units, no par value, 79,999,999 units issued and outstanding		75
Accumulated deficit		(57,026	)
		(56,951	)
	$	31,265

The accompanying notes are an integral part of these statements.

2

JDS PHARMACEUTICALS, L.L.C.
Condensed Consolidated Statements of Operations
Six Months Ended June 30,
(dollars in thousands)
(unaudited)

	2007			2006
Revenues:
Net revenues	$	12,581		$	9,468
Expenses:
Cost of products sold		1,505			1,908
Selling, distribution and administrative		12,171			11,345
Research and development		10,024			654
Accretion on unit options		188			145
Depreciation and amortization		2,057			2,027
Total expenses		25,945			16,079
Loss from operations		(13,364	)		(6,611	)
Accretion on units subject to mandatory redemption		7,099			5,129
Accretion on long-term obligations		390			370
Interest expense, net		90			102
Loss before income taxes		(20,943	)		(12,212	)
Income tax (benefit) expense		(6	)		11
Net loss	$	(20,937	)	$	(12,223	)

The accompanying notes are an integral part of these statements.

3

JDS PHARMACEUTICALS, L.L.C.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30,
(dollars in thousands)
(unaudited)

	2007			2006
Cash flows from operating activities:
Net loss	$	(20,937	)	$	(12,223	)
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:
Accretion on units subject to mandatory redemption		7,018			5,067
Stock-based compensation		236			93
Accretion on unit options		188			145
Accretion of long-term obligations		390			370
Amortization of intangible assets		1,990			1,993
Amortization of debt issuance cost		81			62
Depreciation and amortization		67			34
Changes in operating assets and liabilities:
Decrease in accounts receivable, net		167			70
Decrease (increase) in inventories		87			(1,327	)
Decrease (increase) in other assets		495			(105	)
Increase in accounts payable and accrued expenses		6,162			1,036
Cash flows used in operating activities		(4,056	)		(4,785	)
Cash flows from investing activities:
Purchases of intangible assets		(2,109	)		—
Purchase of property and equipment		(14	)		(442	)
Cash flows used in investing activities		(2,123	)		(442	)
Cash flows from financing activities:
Issuance of units subject to mandatory redemption		7,000			—
Repayment of long-term obligations		(975	)		—
Cash flows provided by financing activities		6,025			—
Net decrease in cash and cash equivalents		(154	)		(5,227	)
Cash and cash equivalents, beginning of period		2,983			11,849
Cash and cash equivalents, end of period	$	2,829		$	6,622
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	132		$	188
Cash paid during the period for taxes		(6	)		11

The accompanying notes are an integral part of these statements.

4

JDS PHARMACEUTICALS, L.L.C.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Operations:

     JDS Pharmaceuticals, L.L.C. (“JDS”) is primarily engaged in the development, marketing, sales and distribution of branded pharmaceutical products. All of JDS’s net revenues come from the sales of either Lithobid^®, for the treatment of bipolar disorder, which was purchased from Solvay Pharmaceutical, Inc. on August 24, 2004, or Pexeva^®, for the treatment of depression which was purchased from Synthon Pharmaceuticals, Inc. on November 1, 2005.

     JDS, a limited liability company, was formed under the laws of the State of Delaware on July 19, 2004.

     The consolidated financial statements include the accounts of JDS Pharmaceuticals, L.L.C. and its wholly-owned subsidiary, JDS Neuro, LLC after elimination of intercompany transactions and balances.

2. Basis of Presentation:

     In the opinion of JDS’s management, the accompanying unaudited condensed consolidated financial statements of JDS contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly, in all material respects, the consolidated financial position of JDS, the consolidated results of its operations, and its cash flows for the periods presented. JDS’s business is subject to numerous risks and uncertainties. Accordingly, the results of operations and cash flows for the periods presented are not, and should not be construed as, necessarily indicative of the results of operations or cash flows which may be reported for the remainder of 2007 or for the periods thereafter.

     The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for inclusion in an SEC filing by an acquiring public entity. 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 audited financial statements and the notes to the financial statements included in Exhibit 99.1. The accounting policies followed for interim financial reporting are the same as those disclosed in Summary of Business and Significant Accounting Policies of the notes to the financial statements included in Exhibit 99.1. The unaudited interim period financial information was not reviewed by BDO Seidman, LLP, or any other auditor.

3. Recent Accounting Pronouncements:

     In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115” (“SFAS 159”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value and applies to all entities, including not-for-

5

profit organizations. Most of the provisions of this statement apply only to entities that elect the fair value option. However, the amendment to FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” applies to all entities with available-for-sale and trading securities. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, “Fair Value Measurements.” JDS is currently assessing the impact of adopting SFAS 159 and the impact it may have on JDS’s results of operations and financial condition.

4. Inventories:

     Inventories consist of the following (amounts in thousands):

	June 30, 2007
	(unaudited)
Finished goods	$	1,343
Raw materials		497
Total	$	1,840

5. Financing:

     On April 16, 2007, JDS received $7 million for the sale of 7,000,000 preferred units on the same approximate terms as its earlier preferred unit sales. The proceeds will be used to finance future operations and acquire intangible assets.

6. Acquisition of Intangible Assets:

     On April 26, 2007, JDS signed and closed a Development, License and Supply Agreement with Banner Pharmacaps Inc. This agreement licensed a product on file with the Food and Drug Administration (“FDA”) as well as rights to the future development of an additional product in return for a $2 million payment at inception and certain milestones payments upon FDA approval and or achievement of development milestones and royalties on future sales.

     On May 22, 2007, JDS signed an Asset Purchase Agreement with SmithKline Beecham Corporation for the acquisition of a trademark and certain New Drug Application (“NDA”) and Investigational New Drug Application (“IND”). This transaction closed on July 2, 2007 and JDS paid $1 million in cash at closing.

7. Long Term Obligation:

     On May 4, 2007 JDS entered into an Amended and Restated Promissory Note and Security Agreement with Solvay Pharmaceuticals, Inc (“Amended Note”). The Amended Note provides that effective April 1, 2007, the outstanding balance on the note of $3.2 million was to be repaid in equal monthly principal amounts of $93,000 over a remaining term of 34 months to January 2010. The original interest on the note of 8% remained the same.

6

8. Employee Stock Plan:

     Effective January 1, 2006, JDS adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payments”, which requires share-based payment awards exchanged for employee service to be measured at fair value and expensed in the statement of operations over the requisite employee service period (vesting period). Prior to January 1, 2006, JDS accounted for employee related unit compensation under the principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and its associated interpretations. JDS recognized compensation expense equivalent to the excess of fair value over the exercise price at the date of grant.

     SFAS No. 123(R) requires companies to record compensation expense for stock options measured at fair value, on the date of grant, using an option-pricing model. The fair value of JDS’s stock options is determined using the Black-Scholes valuation model, which is consistent with JDS’s valuation techniques previously utilized under SFAS No. 123.

     JDS adopted the prospective transition method provided for under the SFAS No. 123(R) and, accordingly, did not restate prior period amounts. Under the prospective method, entities continue to account for non-vested awards outstanding at the date of adoption of SFAS 123(R) in the same manner as they had been accounted for prior to adoption for financial statement recognition purposes. All awards granted, modified or settled after the date of adoption will be accounted for using the measurement, recognition and attribution provisions of SFAS No. 123(R). Stock-based compensation expense for all equity awards granted after January 1, 2006 is based on the grant date fair value estimate in accordance with the provisions of SFAS No. 123(R). Stock-based compensation expense includes an estimate for forfeitures and is recognized over the expected term of the award on a straight-line basis upon adoption of SFAS No. 123(R).

     The assumptions used to value the options for the six months ended June 30, 2007 and 2006 were as follows:

	2007			2006
Risk-free interest rate		4.82	%		4.82	%
Dividend yield		—			—
Expected volatility		55.5	%		55.5	%
Expected term in years	2 years			2.5 years
Fair value of stock options	$	.79		$	.13

The risk-free interest rate is based on the U.S. Treasury zero-coupon yield with a maturity that approximates the expected term of the option. There is no expected dividend yield. JDS’s expected volatility is determined annually using a basket of peer company historical volatility rates until such time its stock history is equal to its contractual terms. The expected term is based on management’s expectations.

7

The stock-based compensation recognized in JDS’s statements of operations for the six months ended June 30, 2007 and 2006 was as follows (in thousands):

	2007		2006
Selling, distribution and administration	$	195	$	69
Research and development	$	22	$	14
Cost of products sold	$	19	$	10
	$	236	$	93

     Under the unit incentive plan (the “Plan”), employees, directors and persons designated by the Board of Managers may be granted options that allow for the purchase of shares of Common Phantom Units, Restricted Common Units and Preferred Phantom Units (collectively the “Units”).

     The following table summarizes activity under JDS’s plans from January 1, 2007 to June 30, 2007:

	Preferred
	Phantom
	units		Restricted common and Phantom common units
			Units available
			for grants			Outstanding
						Total units
						subject to			Restricted		Phantom
						Outstanding			common		common
	Outstanding		Total			units			units		units
Outstanding at December 31, 2006		750,000		2,380,174			7,493,076			6,468,076		1,025,000
Options granted		—		(292,500	)		292,500			0		292,500
Options forfeited		—		96,667			(96,667	)		—		(96,667	)
Outstanding at June 30, 2007		750,000		2,184,341			7,688,909			6,468,076		1,220,833

     The following table summarizes information about units outstanding at June 30, 2007:

Units outstanding

Units exercisable

Weighted

average

Weighted

Weighted

Range of

remaining

average

average

Exercise

Number

contractual

exercise

Number

exercise

Type

price

outstanding

life (yrs)

price

exercisable

price

Common

$.0 to .01

7,688,909

7.4

$- to $.01

5,590,866

$- to $.01

Preferred

$

1.00

750,000

7.1

$

1.00

694,965

$

1.00

8

9. Subsequent Event — Acquisition by Noven Pharmaceuticals, Inc.:

     On August 14, 2007, in accordance with the terms of the Agreement and Plan of Merger, dated July 9, 2007 (the “Merger Agreement”), among Noven Pharmaceuticals, Inc. (“Noven”), Noven Acquisition, LLC, a Delaware limited liability company and an indirect wholly-owned subsidiary of Noven (“Merger Sub”), JDS, and Satow Associates, LLC, solely in its capacity as representative of the equity holders of JDS (the “Member Representative”), Noven completed its acquisition of JDS pursuant to a merger in which Merger Sub merged with and into JDS (the “Merger”), with JDS continuing as the surviving company and as an indirect wholly-owned subsidiary of Noven following the Merger.

     The purchase price for the acquisition was $125 million cash paid at closing to the holders of the outstanding interests of JDS, subject to certain working capital adjustments (the “Merger Consideration”), plus the assumption of approximately $10 million in net non-contingent liabilities. A portion of the Merger Consideration in an amount equal to $10 million was placed in an escrow account with Wells Fargo Bank, N.A., as an escrow agent, from the effective time of the Merger until December 31, 2008 to satisfy post-closing indemnity claims by Noven in connection with the Merger Agreement as well as certain expenses incurred by the Member Representative. The Merger Consideration, which Noven funded from cash and short-term investments, was paid to the Member Representative for the benefit of holders of outstanding interests in JDS prior to the Merger.

9

EX-99.3

EXHIBIT 99.3

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL INFORMATION

     The accompanying unaudited pro forma combined condensed consolidated financial statements present financial information from the Noven Pharmaceuticals, Inc. (“Noven”) and JDS Pharmaceuticals, LLC (“JDS”) unaudited pro forma combined condensed consolidated statements of operations for the year ended December 31, 2006 and for the six months ended June 30, 2007.

     The unaudited pro forma combined condensed consolidated balance sheet as of June 30, 2007 is based on the historical balance sheets of Noven and JDS as of that date, and gives effect to the transaction as if it occurred on that date.

     The unaudited pro forma combined condensed consolidated statements of operations for the year ended December 31, 2006 and for the six months ended June 30, 2007 are based on the historical statements of operations of Noven and JDS as of those dates. These statements are presented as if Noven’s acquisition of JDS had occurred on January 1, 2006.

     The unaudited pro forma combined condensed consolidated financial information is based on estimates and assumptions, which are preliminary and subject to change, as set forth in the notes to such statements and which are provided for information purposes only. This information is not necessarily indicative of the financial position or operating results that would have been achieved had Noven’s acquisition of JDS been consummated as of the dates indicated, nor is it necessarily indicative of future financial position or operating results. This information should be read in conjunction with the historical financial statements and related notes of Noven and those of JDS, included in Exhibits 99.1 and 99.2.

1

NOVEN PHARMACEUTICALS, INC. AND SUBSIDIARIES
Combined Condensed Consolidated Balance Sheets
As of June 30, 2007
(in thousands)
(unaudited)

	Historical						Pro Forma
	Noven			JDS			Adjustments				Combined
Assets
Current Assets:
Cash and cash equivalents	$	5,403		$	2,829		$	—		C	$	8,232
Short-term investments available-for-sale, at fair value		181,256			—			(125,000	)	I		56,256
Accounts and trade receivable, net of allowances		3,545			2,737			—		C		6,282
Milestone payment receivable — Shire		25,000			—			—				25,000
Accounts receivable — Novogyne, net		6,074			—			—				6,074
Inventories		9,564			1,840			—		C		11,404
Net deferred income tax asset, current portion		6,900			—			1,448		K		8,348
Prepaid income taxes		7,565			—			—				7,565
Prepaid and other current assets		3,240			629			(189	)	C,Q		3,680
		248,547			8,035			(123,741	)			132,841
Property, plant and equipment, net		36,211			386			—		C		36,597
Other Assets:
Investment in Novogyne		22,006			—			—				22,006
Net deferred income tax asset		12,469			—			36,289		K		48,758
Goodwill		—			—			14,239		E		14,239
Intangible assets, net of amortization		2,396			22,681			(22,681	)	A		40,943
								37,790		A
								530		A
								227		A
Deposits and other assets		1,768			163			(1,241	)	C,F		690
		38,639			22,844			65,153				126,636
	$	323,397		$	31,265		$	(58,588	)		$	296,074
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	4,690		$	14,359		$	4,359		C,F	$	23,408
Capital lease obligation — current portion		126			—			—				126
Accrued compensation and related liabilities		4,376			—			820		P		6,233
								1,037		R
Other accrued liabilities		4,743			—			530		A		5,273
Current portion of long-term obligations		—			3,021			3,711		L		6,961
								(3,021	)	L
								3,250		M
Deferred rent credit		89			—			—				89
Deferred contract revenues		728			—			—				728
Deferred license revenues — current portion		19,342			—			—				19,342
		34,094			17,380			10,686				62,160
Long-Term Liabilities:
Capital lease obligation		204			—			—				204
Long-term obligations, less current portion		—			8,089			8,250		M		8,250
								(8,089	)	L
Deferred license revenues		87,343			—			—				87,343
Deferred contract revenues		6,875			—			—				6,875
Liability for stock-based compensation		—			279			(279	)	H		—
Accreted unit option value		—			833			(833	)	H		—
Units subject to mandatory redemption, net of unamortized deferred issuance costs of $80		—			61,635			(61,635	)	H		—
Other liabilities		1,165			—			—				1,165
		129,681			88,216			(51,900	)			165,997
Commitments and Contingencies
Stockholders’ Equity/Members’ deficit:
Common stock/units		2			75			(75	)	H		2
Additional paid-in capital		114,871			—			—				114,871
Retained earnings (accumulated deficit)		78,843			(57,026	)		57,026		H		15,204
								(100,150	)	J
								37,737		K
								(189	)	Q
								(1,037	)	R
Common stock held in trust		(500	)		—			—				(500	)
Deferred compensation obligation		500			—			—				500
		193,716			(56,951	)		(6,688	)			130,077
	$	323,397		$	31,265		$	(58,588	)		$	296,074

The accompanying notes are an integral part of these statements.

2

NOVEN PHARMACEUTICALS, INC. AND SUBSIDIARIES
Combined Condensed Consolidated Statements of Operations
For the Year Ended December 31, 2006
(in thousands, except per share amounts)
(unaudited)

	Historical						Pro Forma
	Noven			JDS			Adjustments				Combined
Revenues:
Product revenues — Novogyne:
Product sales	$	19,714		$	—		$	—			$	19,714
Royalties		6,845			—			—				6,845
Total product revenues — Novogyne		26,559			—			—				26,559
Product revenues — third parties		21,767			20,357			(651	)	O		41,473
Total product revenues		48,326			20,357			(651	)			68,032
Contract and license revenues:
Contract		1,966			—			—				1,966
License		10,397			—			—				10,397
Contract and license revenues		12,363			—			—				12,363
Net revenues		60,689			20,357			(651	)			80,395
Expenses:
Cost of products sold — Novogyne		14,102			—			—				14,102
Cost of products sold — third parties		22,406			3,611			2,745		B		29,342
								(9	)	S
								119		S
								470		O
Total cost of products sold		36,508			3,611			3,325				43,444
Research and development		11,454			2,276			(19	)	S		13,836
								125		S
Selling, general and administrative		21,701			21,684			227		G		43,337
								386		D
								(651	)	O
								156		A
								38		Q
								(90	)	S
								356		S
								(470	)	O
Accretion on unit options		—			321			(321	)	H		—
Depreciation and amortization		—			4,081			(4,081	)	B		—
Total expenses		69,663			31,973			(1,019	)			100,617
Loss from operations		(8,974	)		(11,616	)		368				(20,222	)
Equity in earnings of Novogyne		28,632			—			—				28,632
Accretion on units subject to mandatory redemption		—			11,158			(11,158	)	H		—
Accretion on long-term obligations		—			749			(749	)	L		—
Interest income (expense), net		4,272			(222	)		(4,725	)	I		(675	)
Income (loss) before income taxes		23,930			(23,745	)		7,550				7,735
Provision (benefit) for income taxes		7,942			2			(5,377	)	N		2,567
Net income (loss)	$	15,988		$	(23,747	)	$	12,927			$	5,168
Basic earnings per share	$	0.67									$	0.22
Diluted earnings per share	$	0.66									$	0.21
Weighted average number of common shares outstanding:
Basic		23,807										23,807
Diluted		24,252										24,252

The accompanying notes are an integral part of these statements.

3

NOVEN PHARMACEUTICALS, INC. AND SUBSIDIARIES
Combined Condensed Consolidated Statements of Operations
For the Six Months Ended June 30, 2007
(in thousands, except per share amounts)
(unaudited)

	Historical						Pro Forma
	Noven			JDS			Adjustments				Combined
Revenues:
Product revenues — Novogyne:
Product sales	$	10,173		$	—		$	—			$	10,173
Royalties		3,664			—			—				3,664
Total product revenues — Novogyne		13,837			—			—				13,837
Product revenues — third parties		16,831			12,581			(324	)	O		29,088
Total product revenues		30,668			12,581			(324	)			42,925
Contract and license revenues:
Contract		(101	)		—			—				(101	)
License		7,587			—			—				7,587
Contract and license revenues		7,486			—			—				7,486
Net revenues		38,154			12,581			(324	)			50,411
Expenses:
Cost of products sold — Novogyne		6,244			—			—				6,244
Cost of products sold — third parties		11,997			1,505			1,889		B		15,669
								(19	)	S
								59		S
								238		O
Total cost of products sold		18,241			1,505			2,167				21,913
Research and development		6,651			10,024			(22	)	S		16,716
								63		S
Selling, general and administrative		11,130			12,171			136		G		23,130
								244		D
								(324	)	O
								78		A
								(50	)	Q
								(195	)	S
								178		S
								(238	)	O
Accretion on unit options		—			188			(188	)	H		—
Depreciation and amortization		—			2,057			(2,057	)	B		—
Total expenses		36,022			25,945			(208	)			61,759
Income (loss) from operations		2,132			(13,364	)		(116	)			(11,348	)
Equity in earnings of Novogyne		14,077			—			—				14,077
Accretion on units subject to mandatory redemption		—			7,099			(7,099	)	H		—
Accretion on long-term obligations		—			390			(390	)	L		—
Interest income (expense), net		3,445			(90	)		(2,475	)	I		880
Income (loss) before income taxes		19,654			(20,943	)		4,898				3,609
Provision (benefit) for income taxes		7,042			(6	)		(5,743	)	N		1,293
Net income (loss)	$	12,612		$	(20,937	)	$	10,641			$	2,316
Basic earnings per share	$	0.51									$	0.09
Diluted earnings per share	$	0.50									$	0.09
Weighted average number of common shares outstanding:
Basic		24,785										24,785
Diluted		25,381										25,381

The accompanying notes are an integral part of these statements.

4

Description of Transaction and Basis of Presentation:

     On August 14, 2007, in accordance with the terms of the Agreement and Plan of Merger, dated July 9, 2007 (the “Merger Agreement”), among Noven, Noven Acquisition, LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Noven (“Merger Sub”), JDS, and Satow Associates, LLC, solely in its capacity as representative of the equity holders of JDS (the “Member Representative”), Noven completed its acquisition of JDS pursuant to a merger in which Merger Sub merged with and into JDS (the “Merger”), with JDS continuing as the surviving company and as an indirect wholly owned subsidiary of Noven following the Merger.

     The purchase price for the acquisition was $125.0 million cash paid at closing to the holders of the outstanding equity interest of JDS, subject to certain working capital adjustments (the “Merger Consideration”). A portion of the Merger Consideration in an amount equal to $10.0 million was placed in an escrow account from the effective time of the Merger until December 31, 2008 to satisfy post-closing indemnity claims by Noven in connection with the Merger Agreement as well as certain expenses incurred by the Member Representative. The Merger Consideration, which Noven funded from the sale of short-term investments, was paid to the Member Representative for the benefit of holders of outstanding equity interests of JDS prior to the Merger.

     The acquisition of JDS has been accounted for using the purchase method in accordance with Statement of Financial Accounting Standards No. 141 Business Combinations (“SFAS No. 141”). Under the purchase method of accounting, the assets and liabilities of JDS are recorded as of the completion of the acquisition at their fair values. The financial statements and reported results of operations of Noven issued after the completion of the acquisition will reflect these fair values with respect to JDS, but will not be restated retroactively to reflect the historical financial position or results of operations of JDS.

Preliminary Allocation of Purchase Price:

     The allocation of the purchase price included within these unaudited pro forma combined consolidated financial statements is based upon the preliminary valuation of tangible and intangible assets acquired and liabilities assumed. The purchase price allocation is based upon a purchase price of approximately $131.1 million, as set forth in the following table (in thousands):

Cash paid to JDS shareholders	$	125,000
Estimated Noven transaction costs and other		6,130
Total purchase price	$	131,130

5

     Noven has assessed the fair value of the acquired tangible and intangible assets and assumed liabilities of JDS and the related business integration plans, based on management’s preliminary estimate of their respective fair values as of the date of the Merger. The total purchase price allocation is as follows (in thousands):

In-process research and development	$	100,150
Identifiable intangible assets		38,547
Goodwill		14,239
Current assets acquired		8,035
Long-term other assets acquired		549
Current liabilities assumed		(15,179	)
Long-term obligations assumed		(3,711	)
Contingent milestones long-term obligations assumed		(11,500	)
Total purchase price	$	131,130

Valuation of In-Process Research and Development (“IPR&D”) Intellectual Property

     IPR&D is defined by Financial Accounting Standards Board’s (FASB) Interpretation No. 4, “Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method”, (“FIN 4”) as being a development project that has been initiated and achieved material progress but (i) has not yet reached technological feasibility or has not yet reached the appropriate regulatory approval; (ii) has no alternative future use; and (iii) the fair value is estimable with reasonable certainty. As required by FIN 4, the portion of the purchase price allocated to IPR&D will be immediately expensed immediately following the completion of the Merger.

     A project-by-project valuation using the guidance in SFAS No. 141 and the American Institute of Certified Public Accountants Practice Aid “Assets Acquired in a Business Combination to Be Used In Research and Development Activities: A Focus on Software, Electronic Devices and Pharmaceutical Industries” has been performed to determine the fair value of JDS’s research and development projects that were in-process, but not yet completed as at the completion of the Merger.

     The fair value of the IPR&D has been determined by the income approach using the multi-period excess earnings method. The value of the projects has been based on the present value of probability adjusted incremental cash flows, after the deduction of contributory asset charges for other assets employed (including fixed assets, the assembled workforce and working capital). The probability weightings used to determine the IPR&D cash flows ranged from 80% to 90%. The discount rate used to determine the present value of IPR&D cash flows was 23%.

     The forecast of future cash flows required various assumptions to be made including:

• revenue that is likely to result from the IPR&D projects, including estimated number of units to be sold, estimated selling prices, estimated market penetration, estimated market share, year-over-year growth rates over the product life cycles and estimated sales allowances;

• cost of sales for the potential product using historical data, industry data or other sources of market data;

• sales and marketing expenses using historical data, industry data or other market data;

• general and administrative expenses; and

• research and development expenses.

6

     In addition, Noven considered the following in determining the fair value of IPR&D:

• the project’s stage of completion;

• the costs incurred to date;

• the projected costs to complete the IPR&D projects;

• the contribution, if any, of the acquired identifiable intangible assets;

• the projected launch date of the products under development;

• the estimated life of the products under development; and

• the probability of success of launching a commercially viable product.

     To the extent that an IPR&D project is expected to utilize the acquired identified intangible assets, the value of the IPR&D project has been reduced to reflect this utilization.

Valuation of Identifiable Intangible Assets

     Identifiable Intangible Assets relate to (i) intellectual property rights (including technical processes and institutional understanding associated with JDS’s products approved by the United States Food and Drug Administration; (ii) favorable lease intangible asset; and (iii) non-competition agreements with two JDS executives.

     The fair value of the intellectual property rights (including technical processes and institutional understanding) associated with JDS’s products approved by the United States Food and Drug Administration has been determined by the income approach using the multi-period excess earnings method. Using the multi-period excess earnings method, the approved products’ intellectual property fair value has been based on the present value of the incremental after-tax cash flows attributable to the asset, after the deduction of contributory asset charges for other assets employed (including fixed assets, the assembled workforce and working capital). The forecast of future cash flows for approved products requires various assumptions as discussed in Valuation of IPR&D Intellectual Property above.

     The valuations of IPR&D intellectual property and identifiable intangible assets are based on information available at the time of the acquisition and the expectations and assumptions that (i) have been deemed reasonable by Noven’s management, and (ii) would be available to and made by a market participant. No assurance can be given that the underlying assumptions or events associated with such assets will occur as projected. For these reasons, among others, the actual cash flows may vary materially from forecasted future cash flows.

Adjustments to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements

     Adjustments included in the unaudited pro forma combined condensed consolidated balance sheets and unaudited pro forma combined condensed consolidated statements of operations are summarized as follows:

A.	To record the estimated valuation of identifiable intangible assets acquired and to eliminate JDS’s historical intangible assets.
	The identifiable intangible assets acquired are attributable to the following categories (dollar amounts in thousands):

			Asset life
	Fair Value		in years
Intellectual Property — approved products
Pexeva	$	33,040		10
Lithobid		4,750		6
		37,790
Non-competition agreements		530		2 - 3
Favorable lease intangible asset		227	10 months
	$	38,547

7

	The asset lives for approved products represent the period over which management believes the asset will contribute to the future cash flows of Noven, based on the estimated product life cycle.
	Noven entered into non-competition agreements with two JDS executives in connection with the Merger. The amounts paid will be amortized over the two to three year period of the non-competition agreement.
	In accordance with SFAS No. 141, the fair value of a favorable lease contract is to be recorded as an intangible asset and amortized over the remaining term of the lease or the period of favorable benefit, whichever is shorter. JDS’s favorable lease is being amortized over a period of approximately 10 months, the period of expected favorable benefit.
B.	To record amortization expense for identifiable intangible assets related to intellectual property using an average estimated useful life of 6 - 10 years, and to eliminate JDS’s historical amortization expense.
C.	To record the estimated fair value of tangible assets acquired and liabilities assumed, including cash, accounts receivable, inventory and fixed assets.
D.	To record additional depreciation expense for the year ended December 31, 2006 and for the six months ended June 30, 2007, resulting from the fixed asset fair value adjustments. The fixed assets are being depreciated over 10 months.
E.	To record goodwill related to the acquisition. Goodwill represents the excess of the total preliminary consideration over identifiable tangible and intangible assets acquired (including IPR&D), net of liabilities assumed.
F.	To record the accrual of $4.4 million of Noven transaction costs not paid as of June 30, 2007. As of June 30, 2007, Noven had paid approximately $1.2 million for transaction costs, which were included in deposits and other assets. The transaction costs of $5.6 million, which are included in the purchase price, include, but are not limited to, fees for financial advisors, accountants and attorneys and other costs directly related to the Merger.
G.	To record additional lease expense for the year ended December 31, 2006 and for the six months ended June 30, 2007, resulting from the favorable lease intangible asset. The favorable lease intangible asset is being amortized over 10 months.
H.	To eliminate JDS’s historical stockholders’ equity accounts, units subject to mandatory redemption, unit option values and liabilities for stock-based compensation and the related accretion.
I.	To adjust short-term investments and interst income as the acquisition of JDS was funded through the sale of Noven’s short-term investments.
J.	To record the estimated fair value of IPR&D acquired in the Merger. Because this expense is directly attributable to the acquisition and will not have a continuing impact, it is not reflected in the pro forma combined condensed consolidated statement of operations. However, this item will be immediately recorded as an expense in Noven’s financial statements as of the completion of the Merger.

8

K. These adjustments reflect the recognition of deferred tax assets for the temporary differences arising in connection with identifiable intangible assets for technology recognized in respect of the approved products and IPR&D products, goodwill, contingent sales milestones assumed and other items. A summary of the adjustments is shown below (in thousands):

	Total			Current		Long-term
Identifiable IPR&D products	$	37,737			—	$	37,737
Goodwill		(2,801	)		—		(2,801	)
Identifiable intangible assets — approved products		(1,756	)		—		(1,756	)
Contingent sales milestones assumed		4,333			1,224		3,109
Other		224			224		—
	$	37,737		$	1,448	$	36,289

L. To eliminate approximately $6.5 million of JDS’s long-term obligations were paid at the closing of the Merger by JDS shareholders. Noven assumed the remaining JDS long-term obligation. In accordance with SFAS No. 141 and EITF Issue No. 98-1, “Valuation of Debt Assumed in a Purchase Business Combination”, the remaining JDS long-term obligation in the amount of $4.6 million has been valued at its fair value of $3.7 million, being the present value of the estimated future cash flows at the date of acquisition. This long-term obligation was paid in full ($3.7 million) by Noven by October 2007.

M. Noven assumed approximately $11.5 million in contingent sales milestones related to JDS’s acquisition of Pexeva. As of the acquisition date, Noven determined that it was probable that these contingent sales milestones would be paid. Therefore, in accordance with SFAS No. 141, the contingent sales milestones were recorded as liabilities.

N. As a limited liability company, JDS was not subject to Federal or state income taxes. JDS’s members were required to report their respective percentage of JDS’s income, deductions and credits in their income tax returns. Noven is subject to Federal and state income taxes. This adjustment reflects the income tax effects of JDS’s loss and the pro forma adjustments at Noven’s applicable statutory income tax rates.

O. Certain reclassifications have been made to the historical presentation of JDS’s financial statements to conform to Noven’s statement of operations presentation.

P. To record the estimated cost of relocating certain JDS employees to Noven’s headquarters as governed by EITF Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination”.

Q. Certain conforming changes in accounting principles have been made to the historical presentation of JDS’s financial statements to conform to Noven’s accounting policies.

R. Noven expects to pay approximately $1.0 million in retention bonuses to JDS employees. Because this expense will not have a continuing impact, it is not reflected in the pro forma combined condensed consolidated statement of operations. However, this item will be recorded as an expense in Noven’s financial statements over the applicable employee’s service period.

S. To eliminate JDS’s stock-based compensation expense and to record Noven’s estimated stock-based compensation expense related to JDS employees.

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