-----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, R1ixeAh59YkKcMnh6HVONrmdfFGRR3BwRZVZPEpJblD4/xxJPyUseUcmwDjPk7ed hs71TBSxxUkTjbO/oz6Q3A== 0000950144-99-010262.txt : 19990817 0000950144-99-010262.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950144-99-010262 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: SEC FILE NUMBER: 000-17254 FILM NUMBER: 99690408 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 NOVEN PHARMACEUTICALS, INC. FORM 10-Q 06/30/99 1 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, 1999 Commission file number 0-17254 NOVEN PHARMACEUTICALS, INC. 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 30, 1999 ----------------------------- ---------------------------- Common stock $.0001 par value 21,515,530 2 NOVEN PHARMACEUTICALS, INC. INDEX
Page No. -------- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Statements of Operations for the Three and Six Months Ended June 30, 1999 and 1998 3 Balance Sheets as of June 30, 1999 and December 31, 1998 4 Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998 5 Notes to Financial Statements 6 - 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 12 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 12 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders 12 Item 5 - Other Information 13 Item 6 - Exhibits and Reports on Form 8-K 13 SIGNATURES 14
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NOVEN PHARMACEUTICALS, INC. Statements of Operations Three and Six Months Ended June 30, (in thousands, except per share amounts) (unaudited)
Three Months Six Months ---------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Revenues: Product sales $ 7,437 $ 6,338 $ 14,857 $ 8,827 License revenue 56 56 113 115 -------- -------- -------- -------- Total revenues 7,493 6,394 14,970 8,942 Expenses: Cost of products sold 3,361 3,195 6,605 4,227 Research and development 1,485 1,981 3,142 3,982 Marketing, general and administrative 1,743 2,861 3,647 5,843 -------- -------- -------- -------- Total operating costs and expenses 6,589 8,037 13,394 14,052 -------- -------- -------- -------- Income (loss) from operations 904 (1,643) 1,576 (5,110) Interest income, net 64 86 116 276 -------- -------- -------- -------- Net income (loss) before income taxes 968 (1,557) 1,692 (4,834) Income taxes 9 -- 18 -- -------- -------- -------- -------- Net income (loss) $ 959 $ (1,557) $ 1,674 $ (4,834) ======== ======== ======== ======== Basic and diluted income (loss) per share $ 0.05 $ (0.08) $ 0.08 $ (0.24) ======== ======== ======== ======== Basic weighted average of common stock 21,460 20,605 21,496 20,541 ======== ======== ======== ======== Diluted weighted average of common stock 21,638 20,605 21,673 20,541 ======== ======== ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 3 4 NOVEN PHARMACEUTICALS, INC. Balance Sheets (in thousands, except share data)
June 30, 1999 December 31, 1998 (UNAUDITED) (AUDITED) -------- -------- ASSETS Current Assets: Cash and cash equivalents $ 7,293 $ 5,573 Accounts receivable (less allowance for doubtful accounts of $168 in 1999 and $268 in 1998) 4,201 3,044 Due from Vivelle Ventures LLC 3,284 3,489 Inventories 2,934 2,733 Prepaid and other current assets 350 421 -------- -------- 18,062 15,260 Property, Plant and Equipment: Property, plant and equipment, at cost 20,887 20,376 Less: accumulated depreciation and amortization 5,544 4,859 -------- -------- 15,343 15,517 Other Assets: Investment in Vivelle Ventures LLC 6,878 7,500 Patent development costs, net 1,816 1,765 Deposits and other assets 421 114 -------- -------- 9,115 9,379 -------- -------- $ 42,520 $ 40,156 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 3,785 $ 4,954 Notes payable 424 179 Accrued compensation and related liabilities 1,072 913 Other accrued liabilities 484 141 -------- -------- 5,765 6,187 Long Term Liabilities: Deferred license revenue 5,531 5,644 Notes payable 815 -- -------- -------- 6,346 5,644 Stockholders' Equity: Preferred stock - authorized 100,000 shares of $.01 par value; no shares issued or outstanding -- -- Common stock - authorized 40,000,000 shares, par value $.0001 per share; issued and outstanding 21,482,270 shares at June 30, 1999 and 21,482,423 at December 31, 1998 2 2 Additional paid-in capital 66,416 66,669 Accumulated deficit (36,009) (37,683) Treasury stock, 97,100 shares, at cost -- (663) -------- -------- 30,409 28,325 -------- -------- $ 42,520 $ 40,156 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 4 5 NOVEN PHARMACEUTICALS, INC. Statements of Cash Flows Six Months Ended June 30, (in thousands) (unaudited)
1999 1998 -------- -------- Cash flows from operating activities: Net income (loss) $ 1,674 $ (4,834) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 685 496 Amortization of patent costs 104 104 (Increase) in inventories (201) (134) Decrease (increase) in prepaid and other current assets 71 (64) (Increase) in accounts receivable (1,157) (2,479) Decrease in due from Vivelle Ventures LLC 205 -- (Decrease) increase in accounts payable (1,169) 947 Increase in accrued compensation and other accrued liabilities 831 698 (Decrease) in deferred license revenue (113) (113) (Increase) in deposits and other assets (307) (404) -------- -------- Cash flows provided by (used in) operating activities 623 (5,783) Cash flows from investing activities: Investment in Vivelle Ventures LLC -- (7,500) Distribution from Vivelle Ventures LLC 622 -- Maturity of securities, net -- 5,880 Purchase of fixed assets (511) (497) Payments for patent development costs (155) (130) -------- -------- Cash (used in) investing activities (44) (2,247) Cash flows from financing activities: Notes payable 1,060 -- Sale of common stock 81 2,500 -------- -------- Cash flows provided by financing activities 1,141 2,500 -------- -------- Net increase (decrease) in cash and cash equivalents 1,720 (5,530) Cash and cash equivalents - beginning of period 5,573 11,268 -------- -------- Cash and cash equivalents - end of period $ 7,293 $ 5,738 ======== ========
The accrued 1998 bonuses for employees and officers of $329 were settled by issuance of common stock. Cash payments for interest were $9.3 in 1999; no interest payments were made in prior year. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 5 6 NOVEN PHARMACEUTICALS, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. Basis of presentation In management's opinion, the accompanying unaudited 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, 1999, and the results of its operations for the three and six months ended June 30, 1999 and 1998. The results of operations and cash flows for the six months ended June 30, 1999 are not necessarily indicative of the results of operations or cash flows which may be reported for the remainder of 1999. The accompanying 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 generally accepted accounting principles have been condensed or omitted. The 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, 1998. 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, 1998. Certain amounts presented in the financial statements for prior periods have been reclassified to the current period's presentation. 2. Inventories: The following are the major classes of inventory (in thousands): June 30, December 31, 1999 1998 ------ ------ Finished goods $1,055 $ 685 Work in process 199 337 Raw materials 1,680 1,711 ------- ------ Total $2,934 $2,733 ======= ====== 3. Income Taxes: Income taxes for the three and six months ended June 30, 1999 is a provision for the alternative minimum tax. 6 7 4. Investment in Vivelle Ventures LLC: Noven shares in the income of Vivelle Ventures LLC d/b/a Novogyne Pharmaceuticals (the "Joint Venture") according to an established formula after an annual preferred return of $6.1 million to Novartis Pharmaceuticals Corporation ("Novartis"). Noven's share of income increases as product sales increase, subject to a cap of 50%. The Joint Venture did not produce sufficient income in the six months ended June 30, 1999 under the established formula for Noven to recognize income from the Joint Venture. During the six months ended June 30, 1999 Noven sold $4.1 million of products to, and earned $1.3 million in royalties from, the Joint Venture and was reimbursed for $6.5 million of sales and marketing expenses incurred on behalf of the Joint Venture. As of June 30, 1999 Noven's receivable from the Joint Venture was $3.3 million, representing products sold to and marketing expenses reimbursable from the Joint Venture. All intercompany balances are generally paid by the 15th day of the following month. Subject to the approval of the Joint Venture's management committee, cash may be distributed quarterly to Novartis and Noven based upon a contractual formula. In April 1999, Noven received a cash distribution of $622,000 from the Joint Venture based upon the results of operations for the year ended December 31, 1998. This distribution was recorded as a return of capital in the second quarter of 1999. 5. Notes Payable: In May 1999, Noven entered into a Master Finance Lease Agreement (the "Master Lease") with SunTrust Bank, Miami for a maximum principal amount of $1 million with a base lease term of three or four years depending upon the equipment type. The Master Lease contains certain financial covenants. Transactions under the Master Lease have been accounted for as financial arrangements. Under the Master Lease, Noven has entered into one lease in the amount of $624,000 with an expiration date of May 2003. 6. Stockholders' Equity: In January 1999, Noven issued approximately 62,000 shares of its common stock to certain officers and employees as a bonus for their performance during 1998. The value of the shares issued was based upon market price at the time of grant. The bonus amount was recognized as compensation expense in 1998. In April 1999, Noven retired 97,100 shares of treasury stock valued at $663,000. 7 8 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, 1998 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 below are forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors affecting Noven's operations, markets, products and prices, and other factors. These factors, which are discussed elsewhere in this report and in the documents filed by Noven with the Securities and Exchange Commission ("SEC"), may cause Noven's results to differ materially from the forward looking statements made in this report or otherwise made by or on behalf of Noven. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998 Total revenues for the six months ended June 30, 1999 were $15.0 million, an increase of $6.0 million, or 67%, over the same period in the prior year. This increase in revenues was primarily attributable to the launch of Vivelle-Dot(TM) by Vivelle Ventures LLC (the "Joint Venture") in May 1999, which resulted in higher sales of the Vivelle family of products, and sales of CombiPatch(TM), which was launched in the U.S. by Rhone-Poulenc Rorer, Inc. ("RPR") in September 1998. Royalties are included in product sales. Because substantially all of Noven's product sales are to its licensees, Noven expects that its product sales may fluctuate from quarter to quarter depending on various factors not in Noven's control, including, but not limited to, the inventory requirements of each licensee. Gross profit for the six months ended June 30, 1999 was $8.3 million (56% of product sales), compared to $4.6 million (52% of product sales) for the same period in the prior year . The increase in gross margins resulted primarily from a shift in product mix and an increase in manufacturing efficiency. Research and development expenses decreased approximately $0.8 million, or 21%, for the six months ended June 30, 1999, compared to the same period in the prior year . This decrease was attributable to fewer clinical studies in the first half of 1999 as a result of completion of studies relating to Vivelle-Dot(TM). The future level of research and development expenditures will depend on, among other 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. Marketing, general and administrative expenses decreased approximately $2.2 million, or 38%, for the six months ended June 30, 1999 from the same period in the prior year . This decrease was primarily due to lower sales and marketing expenses associated with Dentipatch(R). 8 9 Interest income, net decreased approximately $0.2 million, or 58%, for the six months ended June 30, 1999 compared to the same period in 1998, primarily due to lower average balances in cash and cash equivalents and an increase in debt associated with a Master Lease facility entered into in May 1999. Income taxes for the six months ended June 30, 1999 is a provision for the alternative minimum tax. THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998 Total revenues for the three months ended June 30, 1999 were $7.5 million, an increase of $1.1 million, or 17%, over the same period in the prior year. This increase in revenues was primarily attributable to the launch of Vivelle-Dot(TM) in May 1999, which resulted in higher sales of the Vivelle family of products, and sales of CombiPatch(TM), which was launched in the U.S. by RPR in September 1998. Gross profit for the three months ended June 30, 1999 was $4.1 million (55% of product sales), compared to $3.1 million (50% of product sales) for the same period in the prior year. The increase in gross margins resulted primarily from a shift in product mix and an increase in manufacturing efficiency. Research and development expenses decreased approximately $0.5 million, or 25%, for the three months ended June 30, 1999 compared to the same period in the prior year. This decrease was attributable to fewer clinical studies in the first half of 1999, as a result of completion of studies relating to Vivelle-Dot(TM). Marketing, general and administrative expenses decreased approximately $1.1 million, or 39%, for the three months ended June 30, 1999 compared to the same period in the prior year. This decrease was primarily due to lower sales and marketing expenses associated with Dentipatch(R) and, to a lesser extent, lower administrative costs. Interest income, net decreased approximately $22,000, or 26%, for the three months ended June 30, 1999 compared to the same period in 1998, primarily due to lower average balances in cash and cash equivalents and an increase in debt associated with a Master Lease facility entered into in May 1999. Income taxes for the three months ended June 30, 1999 is a provision for the alternative minimum tax. 9 10 LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1999 and December 31, 1998, Noven had $7.3 million and $5.6 million, respectively, in cash and cash equivalents. Net cash of approximately $0.6 million was provided by operating activities during the first six months of 1999, compared to approximately $5.8 million used in operating activities during the same period in the prior year. The increase in cash provided by operating activities was primarily the result of improved operating income, offset by an increase in accounts receivable and a reduction in accounts payable. The higher accounts receivable is a direct result of higher sales of the Vivelle family of products and sales of CombiPatch(TM). Net cash of approximately $44,000 was used in investing activities during the first six months of 1999, compared to approximately $2.2 million used in investing activities during the same period of the prior year. The difference in cash flows was primarily attributable to the investment in the Joint Venture, offset by the maturity of securities in the 1998 period. Net cash used in investing activities during 1999 resulted from the purchase of fixed assets and payment of patent development costs, partially offset by a cash distribution from the Joint Venture. Net cash of approximately $1.1 million was provided by financing activities during the first six months of 1999, compared to approximately $2.5 million provided by financing activities during the same period of the prior year. The difference in cash flows was primarily attributable to higher than normal sales of common stock in 1998 as a result of the exercise of certain warrants, partially offset by the increase in notes payable in 1999. In May 1999, Noven entered into a Master Lease with SunTrust Bank, Miami for a maximum principal amount of $1.1 million with a lease term of three or four years depending upon the equipment type. The Master Lease contains certain financial covenants. Transactions under the Master Lease have been accounted for as financial arrangements. Under the Master Lease, Noven has entered into one lease in the amount of $624,000 with an expiration date of May 2003. Noven's principal sources of short term liquidity are existing cash and cash generated from product sales, royalties under license agreements and distributions from the Joint Venture, which Noven believes will be sufficient to meet its operating needs and anticipated capital requirements over the short term. For the long term, Noven intends to utilize funds derived from these 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. There can be no assurance that Noven will successfully complete the development of products under development, that Noven will obtain regulatory approval for any such products, or that any approved product may be produced in commercial quantities, at reasonable costs, and be successfully marketed. To the extent that capital requirements exceed available capital, Noven will need to seek alternative sources of financing to fund its operations. Other than the Master Lease, Noven has no credit facility and no assurance can be given that alternative financing will be available, if at all, in a timely manner, 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, or sell assets in order to meet its future obligations. 10 11 Year 2000 Compliance Noven believes that its Year 2000 project is proceeding on schedule. The project is addressing potential problems in certain computer programs and embedded chips, which represent the calendar year with only the last two digits. There is a risk that, with respect to the change in calendar year from 1999 to 2000, some programs or chips could interpret "00" as "2000", "1900", or some other input. The project addresses issues in critical business areas related to information technology ("IT") systems, such as computer equipment and software, as well as non-IT systems, such as communication systems, alarm and security systems, manufacturing and distribution equipment and control systems, and laboratory testing and environmental control equipment and systems. STATUS Noven initiated its Year 2000 project in early 1998 and engaged an independent consulting company to assist in coordinating its Year 2000 project. The initial inventory, assessment and prioritization and planning phases were completed by May 1998. Noven has completed the testing and remediation of its IT and non-IT systems. None of Noven's other IT projects have been materially delayed or impacted by the Year 2000 Project. The book value of computers, software and equipment that will need to be written off as a result of not being Year 2000 compliant is immaterial. Noven has commenced efforts to determine the extent to which it may be affected by Year 2000 issues of third parties, including suppliers, customers, service providers and certain agencies and regulatory organizations. Noven has been reviewing and continues to review with its critical suppliers and major customers the status of their Year 2000 readiness. Some third parties have either declined to provide the requested information or have limited the scope of their assurances. Noven has established a plan for the continued monitoring of critical business partners during 1999. COSTS The estimated total cost of the Year 2000 project is $250,000. As of June 30, 1999, Noven had incurred costs of approximately $175,000 related to this project. The project is being funded by cash on hand and from internally generated funds, which Noven expects to be adequate to complete the project. RISKS Noven believes that failure to correct a material Year 2000 problem could result in an interruption in, or failure of, certain normal business activities or operations. Noven is unable to determine at this time whether the results of any Year 2000 readiness issues will have an impact on Noven's results of operations, liquidity or financial condition. The Year 2000 project is expected to significantly reduce Noven's level of uncertainty about Year 2000 problems, including the Year 2000 compliance and readiness of its material third parties. Noven believes that its programs for Year 2000 readiness will significantly improve its ability to deal with its own Year 2000 readiness issues and those of material third parties. A contingency plan has not been developed for dealing with the most reasonably likely worst case scenario, and such scenario has not yet been clearly identified. Noven currently plans to complete such analysis and develop and implement any necessary contingency plans by December 31, 1999. 11 12 Such plans will not, however, guarantee that no material adverse effects will occur. The costs of Noven's Year 2000 project and the dates on which Noven believes it will complete the various phases of this project are based upon management's best estimates, which were derived using numerous assumptions regarding future events, including the continued availability of certain resources, third-party remediation plans and other factors. There can be no assurance that these estimates will prove to be accurate, and actual results could differ materially from those currently anticipated. Specific factors that could cause such material differences include, but are not limited to, the availability and cost of personnel trained in Year 2000 issues, the ability to identify, assess, remediate and test all relevant computer code and embedded technology, the performance of new systems and equipment, the reduction of productivity pending completion of employee training and similar uncertainties. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Noven does not believe that it has material exposure to market rate risk. Noven has no material debt obligations. Noven may, however, require additional financing to fund future obligations and no assurance can be given that the terms of future sources of financing will not expose Noven to material market rate risk. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Annual Meeting of Stockholders held on June 8, 1999. (i) Election of Directors FOR AGAINST ---------- ------- Sheldon H. Becher 15,270,659 213,324 Sidney Braginsky 15,270,259 213,724 Rodolfo C. Bryce 15,270,059 213,924 Lawrence J. DuBow 15,270,259 213,724 Mitchell Goldberg 15,270,659 213,324 Steven Sablotsky 15,270,659 213,324 Robert C. Strauss 15,270,259 213,724 (ii) The ratification of the appointment of Deloitte & Touche LLP as the independent certified public accountants for 1999 was approved by an affirmative vote of 15,331,083 shares to a negative vote of 133,529 shares, with 19,371 shares abstaining. (iii) The proposal to approve the Noven Pharmaceuticals, Inc. Long-Term Incentive Plan was approved by an affirmative vote of 14,053,781 shares to a negative vote of 1,379,261 shares, with 50,941 shares abstaining. 12 13 ITEM 5. OTHER INFORMATION In August 1999, Noven's Board of Directors amended the Noven Pharmaceuticals, Inc. 1992 Stock Option Plan and the Noven Pharmaceuticals, Inc. 1997 Stock Option Plan to conform the change in control provisions of such plans to the comparable provisions of the Noven Pharmaceuticals, Inc. 1999 Long-Term Incentive Plan, which was approved by Noven's shareholders in June 1999. The amendments will affect outstanding options under the 1992 and 1997 plans, and the Board believes that the amendments will enhance the incentive and retention value of the plans. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 10.1 Amendment to Noven Pharmaceuticals, Inc. 1992 Stock Option Plan 10.2 Amendment to Noven Pharmaceuticals, Inc. 1997 Stock Option Plan 27 Financial Data Schedule (b) REPORTS OF FORM 8-K No reports on Form 8-K were filed by the Registrant during the three months ended June 30, 1999. 13 14 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 13, 1999 By: /s/ James B. Messiry --------------- ----------------------- James B. Messiry Vice President and Chief Financial Officer 14 15 EXHIBITS 10.1 Amendment to Noven Pharmaceuticals, Inc. 1992 Stock Option Plan 10.2 Amendment to Noven Pharmaceuticals, Inc. 1997 Stock Option Plan 27 Financial Data Schedule 15 EX-10.1 2 AMENDMENT TO 1992 STOCK OPTION PLAN 1 EXHIBIT 10.1 AMENDMENT TO STOCK OPTION PLAN This Amendment to the Noven Pharmaceuticals, Inc. 1992 Stock Option Plan (the "Plan") is dated as of this 4th day of August, 1999. WHEREAS, the Board of Directors of Noven Pharmaceuticals, Inc. ("Noven") has determined that it is in the best interests of Noven and its shareholders to amend the change in control provisions of the 1992 Plan. NOW, THEREFORE, the Plan shall be amended as follows: 1. All capitalized terms used in this Amendment shall have the meanings ascribed to them in the Plan, unless otherwise specifically provided. 2. Sections IX(b) and (c) of the Plan are deleted in their entirety and replaced by the following: (b) In the event of a Change in Control (as defined below), (i) all Options then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable, and (ii) in the case of a Change in Control involving a merger of, or consolidation involving, the Company in which the Company is (A) not the surviving corporation (the "SURVIVING ENTITY") or (B) becomes a wholly owned subsidiary of the Surviving Entity or any parent thereof, each outstanding Option granted under the Plan and not exercised (a "PREDECESSOR OPTION") will be converted into an option (a "SUBSTITUTE OPTION") to acquire common stock of the Surviving Entity or its parent, which Substitute Option will have substantially the same terms and conditions as the Predecessor Option, with appropriate adjustments as to the number and kind of shares and exercise prices. A "Change in Control" of the Company shall be deemed to have occurred when: (a) any person, entity or group (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any person or entity organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan), alone or together with its affiliates and associates (collectively, an 2 "ACQUIRING PERSON"), shall become the Beneficial Owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 40 percent or more of the then outstanding shares of Common Stock or the combined voting power of the Company, (b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors, and any new director (other than a director who is a representative or nominee of an Acquiring Person) whose election by the Board of Directors or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (collectively, the "CONTINUING DIRECTORS"), cease for any reason to constitute a majority of the Board of Directors, (c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the Surviving Entity (as defined in Section IX(b) hereof) or any parent of such Surviving Entity) at least a majority of the combined voting power of the Company, such Surviving Entity or the parent of such Surviving Entity outstanding immediately after such merger or consolidation, or (d) the shareholders of the Company approve a plan of reorganization (other than a reorganization under the United States Bankruptcy Code) or complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; PROVIDED, HOWEVER, that a Change in Control shall not be deemed to have occurred in the event of (i) a sale or conveyance in which the Company continues as a holding company of an entity or entities that conduct all or 2 3 substantially all of the business or businesses formerly conducted by the Company, or (ii) any transaction undertaken for the purpose of incorporating the Company under the laws of another jurisdiction, if such transaction does not materially affect the beneficial ownership of the Company's capital stock. 3. Notwithstanding the foregoing, if the Corporation enters into a transaction which is intended to be accounted for using the pooling-of-interests method of accounting, but it is determined by the Board that the amendments effected hereby would preclude such treatment, then the Board may modify (to the minimum extent required) or revoke (if necessary) such amendments to the extent that the Board determines that such modification or revocation is necessary to enable the transaction to qualify for pooling-of-interests accounting. 4. Except as specifically provided herein, the terms and provisions of the Plan shall remain in full force and effect and unchanged. 3 EX-10.2 3 AMENDMENT TO 1997 STOCK OPTION PLAN 1 EXHIBIT 10.2 AMENDMENT TO STOCK OPTION PLAN This Amendment to the Noven Pharmaceuticals, Inc. 1997 Stock Option Plan (the "Plan") is dated as of this 4th day of August, 1999. WHEREAS, the Board of Directors of Noven Pharmaceuticals, Inc. ("Noven") has determined that it is in the best interests of Noven and its shareholders to amend the change in control provisions of the 1997 Plan. NOW, THEREFORE, the Plan shall be amended as follows: 1. All capitalized terms used in this Amendment shall have the meanings ascribed to them in the Plan, unless otherwise specifically provided. 2. Section 17(c) of the Plan is deleted in its entirety and replaced by the following: (c) In the event of a Change in Control (as defined below), (i) all Options then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable, and (ii) in the case of a Change in Control involving a merger of, or consolidation involving, the Company in which the Company is (A) not the surviving corporation (the "SURVIVING ENTITY") or (B) becomes a wholly owned subsidiary of the Surviving Entity or any parent thereof, each outstanding Option granted under the Plan and not exercised (a "PREDECESSOR OPTION") will be converted into an option (a "SUBSTITUTE OPTION") to acquire common stock of the Surviving Entity or its parent, which Substitute Option will have substantially the same terms and conditions as the Predecessor Option, with appropriate adjustments as to the number and kind of shares and exercise prices. A "Change in Control" of the Company shall be deemed to have occurred when: (a) any person, entity or group (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any person or entity organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan), alone or together with its affiliates and associates (collectively, an 2 "ACQUIRING PERSON"), shall become the Beneficial Owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 40 percent or more of the then outstanding shares of Common Stock or the combined voting power of the Company, (b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors, and any new director (other than a director who is a representative or nominee of an Acquiring Person) whose election by the Board of Directors or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (collectively, the "CONTINUING DIRECTORS"), cease for any reason to constitute a majority of the Board of Directors, (c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the Surviving Entity or any parent of such Surviving Entity) at least a majority of the combined voting power of the Company, such Surviving Entity or the parent of such Surviving Entity outstanding immediately after such merger or consolidation, or (d) the shareholders of the Company approve a plan of reorganization (other than a reorganization under the United States Bankruptcy Code) or complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; PROVIDED, HOWEVER, that a Change in Control shall not be deemed to have occurred in the event of (i) a sale or conveyance in which the Company continues as a holding company of an entity or entities that conduct all or substantially all of the business or businesses formerly conducted by the Company, or 2 3 (ii) any transaction undertaken for the purpose of incorporating the Company under the laws of another jurisdiction, if such transaction does not materially affect the beneficial ownership of the Company's capital stock. 3. Notwithstanding the foregoing, if the Corporation enters into a transaction which is intended to be accounted for using the pooling-of-interests method of accounting, but it is determined by the Board that the amendments effected hereby would preclude such treatment, then the Board may modify (to the minimum extent required) or revoke (if necessary) such amendments to the extent that the Board determines that such modification or revocation is necessary to enable the transaction to qualify for pooling-of-interests accounting. 4. Except as specifically provided herein, the terms and provisions of the Plan shall remain in full force and effect and unchanged. 3 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY UNAUDITED FINANCIAL INFORMATION EXTRACTED FROM NOVEN PHARMACEUTICALS, INC. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1999 DEC-31-1998 JUN-30-1999 7,293 0 4,369 168 2,934 18,062 20,887 5,544 42,520 5,765 0 0 0 2 30,407 42,520 14,857 14,970 6,605 13,394 0 0 9 1,692 18 1,674 0 0 0 1,674 .08 .08
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