Noven says it may earn $25 million milestone by year end, posts $3.3 million second quarter net income

By Jennifer Lanning Drey

Eugene, Ore., Aug. 9 - Noven Pharmaceuticals, Inc. estimates it may be able to earn the first of three $25 million milestone payments expected from Shire plc for Daytrana before the end of the year, Robert C. Strauss, Noven's chief executive officer, said during a company conference call held Wednesday.

"Looking at early prescription data, Daytrana is off to a very good start," Strauss said.

Noven expects Daytrana to generate full year revenues in the $10 million range, he said.

The company reported total second quarter revenues of $17.5 million, compared to revenues of $11.8 million for the second quarter of 2005, according to a company news release.

Noven posted net income of $3.3 million, or $0.14 per diluted share, for the second quarter, compared to net income of $5.1 million, or $0.21 per diluted share, for the second quarter of 2005, according to the release.

Cash and short term investments at mid-year were $126 million, which includes a $50 million milestone payment from Shire for Noven's initial production and shipment of Daytrana.

Daytrana is a methylphenidate transdermal system for treatment of attention-deficit/hyperactivity disorder (ADHD) in children aged six to 12 years. The Food and Drug Administration approved Daytrana in April, and Noven shipped launch quantities of the drug in May and June.

Shire is now marketing the drug to physicians and parents as they select ADHD therapies before start of the school year.

"The launch timing was critical, and we geared production to meet that schedule. For a substantial period, production ran 24 hours a day, seven days a week," Strauss said.

The increased level of manufacturing resulted in significant costs, lower yields and other inefficiencies that contributed to a significantly low gross margin of 11% during for the second quarter, Strauss said.

However, the company believes gross margins will be in the 30% range for the second half of the year as manufacturing resumes its normal schedule, he said.

"We're still short of optimal levels, but we're much improved, and we expect improvement to continue," he said.

Pipeline advancements

Noven also said Wednesday that it expects to file an Investigational New Drug Application in the second half of the year for a transdermal amphetamine patch for treatment of ADHD that the company is also developing with Shire.

The collaboration is part of the Noven's strategy to broadly commercialize its Dot Matrix and other transdermal technologies, Strauss said.

Noven's pipeline also includes a patch for hypoactive sexual desire disorder, in development with P&G Pharmaceuticals, and undisclosed patches that are in development with Endo Pharmaceuticals, Strauss said.

The company has additional programs with undisclosed partners, he added.

Three of the undisclosed compounds could be commercialized between 2007 and 2009, Strauss said.

Noven, based in Miami, develops advanced transdermal drug delivery technologies and prescription transdermal products.

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