##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
    NOVEN PHARMACEUTICALS, INC.
  STATE OF DELAWARE
    
    59-2767632(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
  
   
  x o
   Large accelerated filer o
    
    Accelerated filer x
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o x
  Class
    
    Outstanding at July 31, 2008Common stock $.0001 par value
    
    24,895,185




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##### 



NOVEN PHARMACEUTICALS, INC.
  Page No.PART I  FINANCIAL INFORMATIONItem 1 - Unaudited Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2008 and 2007
    
    
    4Condensed Consolidated Statement of Changes in Stockholders Equity and
Comprehensive Income for the Six Months Ended June 30, 2008
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3 - Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 4 - Controls and Procedures
    
    
    44PART II  OTHER INFORMATIONItem 1 - Legal Proceedings
    
    
    45Item 1A - Risk Factors
    
    
    45Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 4 - Submission of Matters to a Vote of Security Holders
    
    
    46Item 5 - Other Information
    
    
    47Item 6 - Exhibits
    
    
    47SIGNATURES
    
    
    48EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
   
 Cautionary Factors
 Trademark Information ® ®   ® ® ® ® ® ®
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 NOVEN PHARMACEUTICALS, INC. AND SUBSIDIARIES
 June 30,
    
    
    December 31,2008
    
    
    2007AssetsCurrent Assets:Cash and cash equivalents
    
    $
    35,405
    
    
    $
    13,973Short-term investments available-for-sale, at fair value
    
    
    
    
    
    
    21,565Accounts receivable (less allowances of $264 at 2008
and $252 at 2007)
    
    
    8,302
    
    
    
    6,956Milestone payment receivable  Shire
    
    
    25,000
    
    
    
    Accounts receivable  Novogyne, net
    
    
    6,592
    
    
    
    8,683Inventories
    
    
    16,278
    
    
    
    12,136Net deferred income tax asset, current portion
    
    
    8,786
    
    
    
    7,614Prepaid income taxes
    
    
    3,596
    
    
    
    4,925Prepaid and other current assets
    
    
    4,358
    
    
    
    5,251108,317
    
    
    
    81,103Non-current Assets:Property, plant and equipment, net
    
    
    35,415
    
    
    
    36,213Investments in auction rate securities
    
    
    17,510
    
    
    
    32,835Investment in Novogyne
    
    
    25,959
    
    
    
    24,310Net deferred income tax asset, non-current portion
    
    
    63,827
    
    
    
    58,053Intangible assets, net
    
    
    37,190
    
    
    
    38,773Goodwill
    
    
    14,407
    
    
    
    14,734Deposits and other non-current assets
    
    
    972
    
    
    
    677195,280
    
    
    
    205,595$
    303,597
    
    
    $
    286,698Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    6,809
    
    
    $
    8,399Accrued compensation and related liabilities
    
    
    5,440
    
    
    
    9,801Other accrued liabilities
    
    
    17,193
    
    
    
    15,270Current portion of long-term obligations
    
    
    3,416
    
    
    
    3,421Deferred license and contract revenues, current portion
    
    
    26,252
    
    
    
    20,18859,110
    
    
    
    57,079Non-current Liabilities:Long-term obligations, less current portion
    
    
    5,095
    
    
    
    8,438Deferred license and contract revenues, non-current portion
    
    
    94,991
    
    
    
    85,056Other non-current liabilities
    
    
    1,165
    
    
    
    1,831101,251
    
    
    
    95,325Total Liabilities
    
    
    160,361
    
    
    
    152,404Commitments and Contingencies (Note 14)Stockholders Equity:Preferred stock  authorized 100,000 shares par value $.01 per
share; no shares issued or outstanding
    
    
    
    
    
    
    Common stock  authorized 80,000,000 shares, par value
$.0001 per share; 25,217,530 and 24,881,867
issued at June 30, 2008 and December 31, 2007
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    120,916
    
    
    
    118,561Retained earnings
    
    
    27,957
    
    
    
    20,855Accumulated other comprehensive loss
    
    
    (515
    )
    
    
    Treasury stock, at cost - 322,345 shares at June 30, 2008
and December 31, 2007
    
    
    (5,124
    )
    
    
    (5,124
    )Common stock held in trust
    
    
    (1,256
    )
    
    
    (950
    )Deferred compensation obligation
    
    
    1,256
    
    
    
    950143,236
    
    
    
    134,294$
    303,597
    
    
    $
    286,698
 The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
 3




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##### Table of Contents



NOVEN PHARMACEUTICALS, INC. AND SUBSIDIARIES
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Product revenues  Novogyne:Product sales, net
    
    $
    5,553
    
    
    $
    4,804
    
    
    $
    7,984
    
    
    $
    10,173Royalties
    
    
    2,349
    
    
    
    1,899
    
    
    
    4,529
    
    
    
    3,664Total net product revenues  Novogyne
    
    
    7,902
    
    
    
    6,703
    
    
    
    12,513
    
    
    
    13,837Product revenues, net  third parties
    
    
    11,641
    
    
    
    8,359
    
    
    
    23,226
    
    
    
    16,831Total net product revenues
    
    
    19,543
    
    
    
    15,062
    
    
    
    35,739
    
    
    
    30,668License and
contract revenues
    
    
    5,060
    
    
    
    3,777
    
    
    
    10,346
    
    
    
    7,486Total net revenues
    
    
    24,603
    
    
    
    18,839
    
    
    
    46,085
    
    
    
    38,154Costs and Expenses:Cost of products sold  Novogyne
    
    
    3,463
    
    
    
    3,285
    
    
    
    6,789
    
    
    
    6,244Cost of products sold  third parties
    
    
    9,320
    
    
    
    6,029
    
    
    
    17,303
    
    
    
    11,997Total cost of products sold
    
    
    12,783
    
    
    
    9,314
    
    
    
    24,092
    
    
    
    18,241Research and development
    
    
    3,293
    
    
    
    3,185
    
    
    
    6,612
    
    
    
    6,651Selling and marketing
    
    
    5,336
    
    
    
    221
    
    
    
    10,159
    
    
    
    461General and
administrative
    
    
    8,906
    
    
    
    5,488
    
    
    
    15,928
    
    
    
    10,669Total costs and expenses
    
    
    30,318
    
    
    
    18,208
    
    
    
    56,791
    
    
    
    36,022Income (loss) from operations
    
    
    (5,715
    )
    
    
    631
    
    
    
    (10,706
    )
    
    
    2,132Equity in earnings of Novogyne
    
    
    12,429
    
    
    
    9,174
    
    
    
    20,696
    
    
    
    14,077Interest income, net
    
    
    500
    
    
    
    1,813
    
    
    
    1,122
    
    
    
    3,445Income before income taxes
    
    
    7,214
    
    
    
    11,618
    
    
    
    11,112
    
    
    
    19,654Provision for income taxes
    
    
    2,704
    
    
    
    4,042
    
    
    
    4,010
    
    
    
    7,042Net income
    
    $
    4,510
    
    
    $
    7,576
    
    
    $
    7,102
    
    
    $
    12,612Basic earnings per share
    
    $
    0.18
    
    
    $
    0.31
    
    
    $
    0.29
    
    
    $
    0.51Diluted earnings per share
    
    $
    0.18
    
    
    $
    0.30
    
    
    $
    0.29
    
    
    $
    0.50Weighted average number of common shares
outstanding:Basic
    
    
    24,603
    
    
    
    24,832
    
    
    
    24,582
    
    
    
    24,785Diluted
    
    
    24,754
    
    
    
    25,379
    
    
    
    24,710
    
    
    
    25,381
 The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
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NOVEN PHARMACEUTICALS, INC. AND SUBSIDIARIES
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    Other
    
    
    TotalBalance at December 31, 2007
    
    
    24,560
    
    
    $
    2
    
    
    $
    118,561
    
    
    $
    20,855
    
    
    $
    
    
    
    $
    (5,124
    )
    
    $
    
    
    
    $
    134,294Issuance of shares pursuant to employee
equity plan
    
    
    1
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Stock-based compensation expense and
issuance of shares to officers and
outside directors
    
    
    334
    
    
    
    
    
    
    
    2,345
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,345Common stock held in trust
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (306
    )
    
    
    (306
    )Deferred compensation obligation
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306
    
    
    
    306Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,102Other comprehensive income:Unrealized loss on investments in auction
rate securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (515
    )
    
    
    
    
    
    
    
    
    
    
    (515
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,587Balance at June 30, 2008
    
    
    24,895
    
    
    $
    2
    
    
    $
    120,916
    
    
    $
    27,957
    
    
    $
    (515
    )
    
    $
    (5,124
    )
    
    $
    
    
    
    $
    143,236
 The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
 5




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NOVEN PHARMACEUTICALS, INC. AND SUBSIDIARIES
 Six Months ended June 30,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    7,102
    
    
    $
    12,612Adjustments to reconcile net income to net cash flows
(used in) provided by operating activities:Depreciation, amortization and certain other noncash items
    
    
    4,568
    
    
    
    2,539Inventory write-offs
    
    
    3,871
    
    
    
    682Stock-based compensation expense
    
    
    2,345
    
    
    
    1,976Income tax benefits on exercise of stock options
    
    
    
    
    
    
    462Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    (392
    )Deferred income tax benefit
    
    
    (6,946
    )
    
    
    (6,661
    )Recognition of deferred license and contract revenues
    
    
    (10,346
    )
    
    
    (7,486
    )Equity in earnings of Novogyne
    
    
    (20,696
    )
    
    
    (14,077
    )Distributions from Novogyne
    
    
    17,247
    
    
    
    10,975Changes in operating assets and liabilities:(Increase) decrease in accounts receivable  trade, net
    
    
    (1,346
    )
    
    
    1,493Increase in milestone payment receivable  Shire
    
    
    (25,000
    )
    
    
    Decrease in accounts receivable  Novogyne, net
    
    
    2,091
    
    
    
    1,619Increase in inventories
    
    
    (8,013
    )
    
    
    (1,595
    )Decrease in prepaid income taxes
    
    
    3,129
    
    
    
    243Decrease (increase) in prepaid and other current assets
    
    
    113
    
    
    
    (830
    )Increase in deposits and other assets
    
    
    (176
    )
    
    
    Decrease in accounts payable and accrued expenses
    
    
    (1,897
    )
    
    
    (494
    )Decrease in accrued compensation and related liabilities
    
    
    (4,324
    )
    
    
    (932
    )Increase in other accrued liabilities
    
    
    1,923
    
    
    
    2,128Increase in deferred license and contract revenues
    
    
    26,345
    
    
    
    30,975Increase in other liabilities
    
    
    97
    
    
    
    342Cash flows (used in) provided by operating activities
    
    
    (9,913
    )
    
    
    33,579Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (1,205
    )
    
    
    (1,421
    )Payments for intangible assets
    
    
    (152
    )
    
    
    (348
    )Payments for deferred acquisition costs
    
    
    
    
    
    
    (1,241
    )Purchase of company-owned life insurance
    
    
    (335
    )
    
    
    (260
    )Purchases of investments
    
    
    (62,800
    )
    
    
    (767,769
    )Proceeds from sale of investments
    
    
    99,175
    
    
    
    730,864Cash flows provided by (used in) investing activities
    
    
    34,683
    
    
    
    (40,175
    )Cash flows from financing activities:Issuance of common stock from exercise of stock options
    
    
    10
    
    
    
    2,521Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    392Payments of long-term obligations
    
    
    (3,348
    )
    
    
    (58
    )Cash flows (used in) provided by financing activities
    
    
    (3,338
    )
    
    
    2,855Net increase in cash and cash equivalents
    
    
    21,432
    
    
    
    (3,741
    )Cash and cash equivalents, beginning of period
    
    
    13,973
    
    
    
    9,144Cash and cash equivalents, end of period
    
    $
    35,405
    
    
    $
    5,403
 The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
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NOVEN PHARMACEUTICALS, INC.  Notes to Unaudited Condensed Consolidated Financial Statements
 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:
  ® ®
   
  7




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2. RECENT ACCOUNTING PRONOUNCEMENTS:
    3. CASH FLOW INFORMATION:
 Income Tax and Interest Payments
  Non-cash Operating Activities
  Non-cash Investing Activities
  8




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##### Table of Contents



4. INVESTMENTS AVAILABLE-FOR-SALE:
    5. FAIR VALUE MEASUREMENTS:
  (i)
    
    Level 1  observable inputs such as quoted prices in active markets;(ii)
    
    Level 2  inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and(iii)
    
    Level 3  unobservable inputs for which there is little or no market data,
which require the reporting entity to develop its own assumptions.
  9




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Balance at December 31, 2007
    
    $
    54,400Purchases of investments
    
    
    550Sales of investments at par
    
    
    (36,925
    )Unrealized losses recorded as other comprehensive loss
    
    
    (515
    )Balance at June 30, 2008
    
    $
    17,510
 6. INVENTORIES:
  June 30,
    
    
    December 31,2008
    
    
    2007Finished goods
    
    $
    4,105
    
    
    $
    3,171Work in process
    
    
    2,903
    
    
    
    1,532Raw materials
    
    
    9,270
    
    
    
    7,433Total
    
    $
    16,278
    
    
    $
    12,136
 ®
 ® ®
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7. GOODWILL AND INTANGIBLE ASSETS:



    
    As part of the JDS acquisition, a portion of the purchase price was placed in escrow
to be distributed upon final determination of the amount of net working capital purchased
by Noven. During the three months ended June 30, 2008, Noven reached a final agreement
with the JDS sellers on the net working capital, which agreement resulted in a $1.1
million payment to Noven from the escrow account (which was paid subsequent to June 30,
2008). As a result of the working capital adjustment, Noven
adjusted the amount due from escrow by $1.0 million during the six months ended June 30,
2008 and recorded a corresponding increase of $1.0 million to goodwill.
    
    Also as part of the JDS acquisition, Noven recognized a favorable lease asset related
to office space in New York and a liability for employee relocation costs, based on a
tentative determination that Noven would exit the New York location by May 2008. During
the three months ended June 30, 2008, management decided to retain the New York office
space through its remaining contractual term and to not require relocation of the
remaining personnel based in New York. As a result of these decisions, Noven revised the
value of the acquired favorable lease asset and reversed the unused relocation liability,
resulting in a $1.3 million reduction in goodwill.




Gross Carrying
    
    Accumulated
    
    Net
    
    Amortization PeriodAmount
    
    Amortization
    
    Carrying Amount
    
    (years)As of June 30, 2008Patent development costs
    
    $
    4,694
    
    
    $
    (2,814
    )
    
    $
    
    1,880

    
    
    7 - 13Acquired product intangibles
    
    
    37,790
    
    
    
    (3,361
    )
    

    
    
    34,429

    
    
    10Non-competition agreements
    
    
    530
    
    
    
    (193
    )
    
    
    
    337

    
    
    2 - 3Favorable lease
    
    
    790
    
    
    
    (246
    )
    
    
    
    544

    
    2$
    43,804
    
    
    $
    (6,614
    )
    
    $
    
    37,190As of December 31, 2007Patent development costs
    
    $
    4,542
    
    
    $
    (2,573
    )
    
    $
    
    1,969

    
    
    8 - 14Acquired product intangibles
    
    
    37,790
    
    
    
    (1,549
    )
    
    
    
    36,241

    
    
    10Non-competition agreements
    
    
    530
    
    
    
    (82
    )
    
    
    
    448

    
    
    2 - 3Favorable lease
    
    
    227
    
    
    
    (112
    )
    
    
    
    115

    
    10 months$
    43,089
    
    
    $
    (4,316
    )
    
    $
    
    38,773


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Remainder
    
    
    Years Ending December 31,of 2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013Cost of goods sold:Intellectual property
    
    $
    2,053
    
    
    $
    4,032
    
    
    $
    3,985
    
    
    $
    3,924
    
    
    $
    3,908
    
    
    $
    3,847General and administrative:Non-compete and
favorable
lease agreements
    
    
    231
    
    
    
    413
    
    
    
    237
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    2,284
    
    
    $
    4,445
    
    
    $
    4,222
    
    
    $
    3,924
    
    
    $
    3,908
    
    
    $
    3,847
 8. OTHER ACCRUED LIABILITIES:
  June 30, 2008
    
    
    December 31, 2007Income taxes payable
    
    $
    5,437
    
    
    $
    2,414Accrued Medicaid and other rebates
    
    
    2,834
    
    
    
    4,065Accrued market withdrawal costs
    
    
    1,950
    
    
    
    3,300Allowance for product returns
    
    
    2,416
    
    
    
    1,875Other accrued liabilities
    
    
    4,556
    
    
    
    3,616Total other accrued liabilities
    
    $
    17,193
    
    
    $
    15,270
 9. EQUITY PLANS:
  12




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WeightedAverageGrant-DateShares
    
    
    Fair ValueNonvested at
December 31, 2007
    
    
    6
    
    
    $
    22.86Granted
    
    
    328
    
    
    
    9.90Vested
    
    
    (76
    )
    
    
    11.15Nonvested at
June 30, 2008
    
    
    258
    
    
    $
    9.86
    2008
    
    
    2007Volatility
    
    
    50.5
    %
    
    
    45.8
    %Risk free interest rate
    
    
    3.22
    %
    
    
    4.59
    %Expected life (years)
    
    
    4.8
    
    
    
    5.0Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
 13




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Selling and marketing
    
    $
    169
    
    
    $
    111
    
    
    $
    323
    
    
    $
    222General and administrative
    
    
    1,159
    
    
    
    628
    
    
    
    1,627
    
    
    
    1,256Research and development
    
    
    85
    
    
    
    127
    
    
    
    176
    
    
    
    254Total cost of products sold
    
    
    74
    
    
    
    122
    
    
    
    219
    
    
    
    244$
    1,487
    
    
    $
    988
    
    
    $
    2,345
    
    
    $
    1,976Tax benefit recognized
related to
compensation expense
    
    $
    511
    
    
    $
    302
    
    
    $
    804
    
    
    $
    661
    WeightedWeighted
    
    
    
    
    
    
    AverageAverage
    
    
    Aggregate
    
    
    RemainingOptions/
    
    
    Exercise
    
    
    Intrinsic
    
    
    ContractualSSARs
    
    
    Price
    
    
    Value
    
    
    TermOutstanding at
December 31, 2007
    
    
    3,511
    
    
    $
    16.83Granted
    
    
    476
    
    
    
    9.87Exercised
    
    
    (1
    )
    
    
    10.89
    
    
    $
    3Canceled and expired
    
    
    (329
    )
    
    
    18.73Outstanding at
June 30, 2008
    
    
    3,657
    
    
    $
    15.94
    
    
    $
    581
    
    
    
    4.1Outstanding and exercisable
at end of the period
    
    
    2,062
    
    
    $
    17.30
    
    
    $
    185
    
    
    
    2.7
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10. INCOME TAXES:
     15




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##### Table of Contents



11. CONTRACT AND LICENSE AGREEMENTS:
  ® ® ® ®
  ® ® ®
 ®
 12. INVESTMENT IN VIVELLE VENTURES LLC (d/b/a NOVOGYNE):
  16




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Three Months
    
    
    Six Months2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Product sales
    
    $
    5,553
    
    
    $
    4,804
    
    
    $
    7,984
    
    
    $
    10,173Royalties
    
    
    2,349
    
    
    
    1,899
    
    
    
    4,529
    
    
    
    3,664$
    7,902
    
    
    $
    6,703
    
    
    $
    12,513
    
    
    $
    13,837Reimbursed expenses
    
    $
    7,381
    
    
    $
    7,021
    
    
    $
    14,653
    
    
    $
    14,106
   Three Months
    
    
    Six Months2008
    
    
    2007
    
    
    2008
    
    
    2007Gross revenues
    
    $
    50,054
    
    
    $
    42,915
    
    
    $
    95,348
    
    
    $
    80,208Sales allowances
    
    
    5,702
    
    
    
    6,837
    
    
    
    11,555
    
    
    
    10,999Sales return allowances
    
    
    585
    
    
    
    (60
    )
    
    
    500
    
    
    
    (9
    )Sales allowances and returns
    
    
    6,287
    
    
    
    6,777
    
    
    
    12,055
    
    
    
    10,990Net revenues
    
    
    43,767
    
    
    
    36,138
    
    
    
    83,293
    
    
    
    69,218Cost of sales
    
    
    8,788
    
    
    
    7,795
    
    
    
    16,596
    
    
    
    14,842Selling, general and
administrative expenses
    
    
    9,798
    
    
    
    9,579
    
    
    
    18,810
    
    
    
    19,712Income from operations
    
    
    25,181
    
    
    
    18,764
    
    
    
    47,887
    
    
    
    34,664Interest income
    
    
    174
    
    
    
    165
    
    
    
    441
    
    
    
    497Net income
    
    $
    25,355
    
    
    $
    18,929
    
    
    $
    48,328
    
    
    $
    35,161Novens equity in earnings of Novogyne
    
    $
    12,429
    
    
    $
    9,174
    
    
    $
    20,696
    
    
    $
    14,077
  Investment in Novogyne, beginning of period
    
    $
    24,310Equity in earnings of Novogyne
    
    
    20,696Cash distributions from Novogyne
    
    
    (17,247
    )Deemed distribution by Novogyne for state
income tax payment
    
    
    (1,800
    )Investment in Novogyne, end of period
    
    $
    25,959
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13. SHARE REPURCHASE PROGRAM:
  14. COMMITMENTS AND CONTINGENCIES:
    ® ® ® ®
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® ® ® ®
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15. SEGMENT AND CUSTOMER DATA:
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands):Noven Transdermals:Product revenues
    
    $
    12,968
    
    
    $
    15,062
    
    
    $
    23,459
    
    
    $
    30,668License and contract revenues
    
    
    5,060
    
    
    
    3,777
    
    
    
    10,346
    
    
    
    7,486Net revenues
    
    
    18,028
    
    
    
    18,839
    
    
    
    33,805
    
    
    
    38,154Cost of products sold
    
    
    (10,761
    )
    
    
    (9,314
    )
    
    
    (20,034
    )
    
    
    (18,241
    )Research and development
    
    
    (2,436
    )
    
    
    (3,185
    )
    
    
    (4,814
    )
    
    
    (6,651
    )Selling and marketing
    
    
    (213
    )
    
    
    (221
    )
    
    
    (407
    )
    
    
    (461
    )Equity in earnings of Novogyne
    
    
    12,429
    
    
    
    9,174
    
    
    
    20,696
    
    
    
    14,077Segment contribution
    
    
    17,047
    
    
    
    15,293
    
    
    
    29,246
    
    
    
    26,878Noven Therapeutics:Product revenues
    
    
    6,575
    
    
    
    
    
    
    
    12,280
    
    
    
    Cost of products sold
    
    
    (2,022
    )
    
    
    
    
    
    
    (4,058
    )
    
    
    Research and development
    
    
    (857
    )
    
    
    
    
    
    
    (1,798
    )
    
    
    Selling and marketing
    
    
    (5,123
    )
    
    
    
    
    
    
    (9,752
    )
    
    
    Segment contribution
    
    
    (1,427
    )
    
    
    
    
    
    
    (3,328
    )
    
    
    Unallocated income (expense):General and administrative
    
    
    (8,906
    )
    
    
    (5,488
    )
    
    
    (15,928
    )
    
    
    (10,669
    )Interest income, net
    
    
    500
    
    
    
    1,813
    
    
    
    1,122
    
    
    
    3,445Income before income taxes
    
    $
    7,214
    
    
    $
    11,618
    
    
    $
    11,112
    
    
    $
    19,654
  June 30,
    
    
    December 31,2008
    
    
    2007Noven Transdermals
    
    $
    113,295
    
    
    $
    83,912Noven Therapeutics
    
    
    55,848
    
    
    
    57,893Assets not allocated to segments
    
    
    134,454
    
    
    
    144,893Total Assets
    
    $
    303,597
    
    
    $
    286,698
 16. SUBSEQUENT EVENT  NEW CREDIT FACILITY
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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  
    
    An executive summary of our consolidated results of operations for the 2008 Quarter;
    
    An overview of Noven and our Novogyne joint venture;
    
    An overview of Noven Therapeutics;
    
    A review of certain items that may affect the historical or future comparability of our consolidated results of operations;
    
    An analysis of our consolidated results of operations and our liquidity and capital resources;
    
    An outlook that includes our current financial guidance;
    
    A discussion of how we apply our critical accounting estimates; and
    
    A discussion of recently-issued accounting standards.
  Executive Summary
 The following Executive Summary is qualified in its entirety by the more detailed discussion
and analysis of our financial condition and results of operations appearing in this Item 2 as well
as in our consolidated financial statements and related notes included in this Form 10-Q .
 ®
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®
 ®
  ® ® ® ®
   ®
 Overview of Noven and our Novogyne Joint Venture
  ® ®
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Overview of Noven Therapeutics
   ® ®
 Certain Items that May Affect Historical or Future Comparability
  Acquisition of JDS Pharmaceuticals, LLC in 2007
  25




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Remainder
    
    
    Years Ending December 31,of 2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013Cost of goods sold:Intellectual property
    
    $
    2,053
    
    
    $
    4,032
    
    
    $
    3,985
    
    
    $
    3,924
    
    
    $
    3,908
    
    
    $
    3,847General and administrative:Non-compete and
favorable
lease agreements
    
    
    231
    
    
    
    413
    
    
    
    237
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    2,284
    
    
    $
    4,445
    
    
    $
    4,222
    
    
    $
    3,924
    
    
    $
    3,908
    
    
    $
    3,847
  Daytrana ®
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®
 Results of Operations
  
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Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands):Noven Transdermals:Product revenues
    
    $
    12,968
    
    
    $
    15,062
    
    
    $
    23,459
    
    
    $
    30,668License and contract revenues
    
    
    5,060
    
    
    
    3,777
    
    
    
    10,346
    
    
    
    7,486Net revenues
    
    
    18,028
    
    
    
    18,839
    
    
    
    33,805
    
    
    
    38,154Cost of products sold
    
    
    (10,761
    )
    
    
    (9,314
    )
    
    
    (20,034
    )
    
    
    (18,241
    )Research and development
    
    
    (2,436
    )
    
    
    (3,185
    )
    
    
    (4,814
    )
    
    
    (6,651
    )Selling and marketing
    
    
    (213
    )
    
    
    (221
    )
    
    
    (407
    )
    
    
    (461
    )Equity in earnings of Novogyne
    
    
    12,429
    
    
    
    9,174
    
    
    
    20,696
    
    
    
    14,077Segment contribution
    
    
    17,047
    
    
    
    15,293
    
    
    
    29,246
    
    
    
    26,878Noven Therapeutics:Product revenues
    
    
    6,575
    
    
    
    
    
    
    
    12,280
    
    
    
    Cost of products sold
    
    
    (2,022
    )
    
    
    
    
    
    
    (4,058
    )
    
    
    Research and development
    
    
    (857
    )
    
    
    
    
    
    
    (1,798
    )
    
    
    Selling and marketing
    
    
    (5,123
    )
    
    
    
    
    
    
    (9,752
    )
    
    
    Segment contribution
    
    
    (1,427
    )
    
    
    
    
    
    
    (3,328
    )
    
    
    Unallocated income (expense):General and administrative
    
    
    (8,906
    )
    
    
    (5,488
    )
    
    
    (15,928
    )
    
    
    (10,669
    )Interest income, net
    
    
    500
    
    
    
    1,813
    
    
    
    1,122
    
    
    
    3,445Income before income taxes
    
    $
    7,214
    
    
    $
    11,618
    
    
    $
    11,112
    
    
    $
    19,654
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Three and Six months ended June 30, 2008 compared to the Three and Six months ended June 30, 2007
 Revenues
  Three Months
    
    
    
    
    
    
    Six MonthsEnded June 30,
    
    
    
    
    
    
    Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % ChangeNoven TransdermalsNovogyne:Product sales
    
    $
    5,553
    
    
    $
    4,804
    
    
    
    16
    %
    
    $
    7,984
    
    
    $
    10,173
    
    
    
    -22
    %Royalties
    
    
    2,349
    
    
    
    1,899
    
    
    
    24
    %
    
    
    4,529
    
    
    
    3,664
    
    
    
    24
    %Product revenues  Novogyne
    
    
    7,902
    
    
    
    6,703
    
    
    
    18
    %
    
    
    12,513
    
    
    
    13,837
    
    
    
    -10
    %Third Parties:Product sales
    
    
    4,978
    
    
    
    8,271
    
    
    
    -40
    %
    
    
    10,779
    
    
    
    16,684
    
    
    
    -35
    %Royalties
    
    
    88
    
    
    
    88
    
    
    
    0
    %
    
    
    167
    
    
    
    147
    
    
    
    14
    %Product revenues  third
parties
    
    
    5,066
    
    
    
    8,359
    
    
    
    -39
    %
    
    
    10,946
    
    
    
    16,831
    
    
    
    -35
    %Total product revenues
    
    
    12,968
    
    
    
    15,062
    
    
    
    -14
    %
    
    
    23,459
    
    
    
    30,668
    
    
    
    -24
    %License and contract revenues
    
    
    5,060
    
    
    
    3,777
    
    
    
    34
    %
    
    
    10,346
    
    
    
    7,486
    
    
    
    38
    %Total Transdermals
    
    
    18,028
    
    
    
    18,839
    
    
    
    -4
    %
    
    
    33,805
    
    
    
    38,154
    
    
    
    -11
    %Noven TherapeuticsThird Parties:Product sales
    
    
    6,575
    
    
    
    
    
    
    
    N/A
    
    
    
    12,280
    
    
    
    
    
    
    
    N/ANet Revenues
    
    $
    24,603
    
    
    $
    18,839
    
    
    
    31
    %
    
    $
    46,085
    
    
    $
    38,154
    
    
    
    21
    %
 Net Revenues
 ® ® ®
 ® ®
 Product Revenues  Novogyne
 ® ® ® ®
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® ®
 ® ® ®
 Product Revenues  Third Parties
 ® ® ® ® ® ®
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License and Contract Revenues
  ®
 ®
 Gross to Net Revenues
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofgross
    
    
    
    
    
    
    gross
    
    
    
    
    
    
    gross
    
    
    
    
    
    
    gross2008
    
    
    revenues
    
    
    2007
    
    
    revenues
    
    
    2008
    
    
    revenues
    
    
    2007
    
    
    revenuesNoven Transdermals:Gross revenues
    
    $
    18,386
    
    
    
    100
    %
    
    $
    18,898
    
    
    
    100
    %
    
    $
    34,399
    
    
    
    100
    %
    
    $
    38,213
    
    
    
    100
    %Sales returns allowances
    
    
    358
    
    
    
    2
    %
    
    
    59
    
    
    
    0
    %
    
    
    594
    
    
    
    2
    %
    
    
    59
    
    
    
    0
    %Net revenues
    
    $
    18,028
    
    
    
    98
    %
    
    $
    18,839
    
    
    
    100
    %
    
    $
    33,805
    
    
    
    98
    %
    
    $
    38,154
    
    
    
    100
    %Noven Therapeutics:Gross revenues
    
    $
    10,133
    
    
    
    100
    %
    
    
    
    
    
    
    
    
    
    $
    19,641
    
    
    
    100
    %Cash discounts
    
    
    193
    
    
    
    2
    %
    
    
    
    
    
    
    
    
    
    
    385
    
    
    
    2
    %Medicaid, Medicare & State
program rebates and
credits including
redemption offers
    
    
    1,289
    
    
    
    13
    %
    
    
    
    
    
    
    
    
    
    
    3,578
    
    
    
    18
    %Chargebacks
    
    
    365
    
    
    
    4
    %
    
    
    
    
    
    
    
    
    
    
    632
    
    
    
    3
    %Wholesaler fees
    
    
    608
    
    
    
    6
    %
    
    
    
    
    
    
    
    
    
    
    1,202
    
    
    
    6
    %Sales returns
    
    
    1,103
    
    
    
    11
    %
    
    
    
    
    
    
    
    
    
    
    1,564
    
    
    
    8
    %Sales and returns allowances
    
    
    3,558
    
    
    
    35
    %
    
    
    
    
    
    
    
    
    
    
    7,361
    
    
    
    37
    %Net revenues
    
    $
    6,575
    
    
    
    65
    %
    
    
    
    
    
    
    
    
    
    $
    12,280
    
    
    
    63
    %
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Gross Margin:
 ® ® ®
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Noven TransdermalsNovogyne:Product revenues
    
    $
    7,902
    
    
    
    
    
    
    $
    6,703
    
    
    
    
    
    
    $
    12,513
    
    
    
    
    
    
    $
    13,837Cost of products sold
    
    
    3,463
    
    
    
    
    
    
    
    3,285
    
    
    
    
    
    
    
    6,789
    
    
    
    
    
    
    
    6,244Gross profit
    
    
    4,439
    
    
    
    56
    %
    
    
    3,418
    
    
    
    51
    %
    
    
    5,724
    
    
    
    46
    %
    
    
    7,593
    
    
    
    55
    %Third parties:Product revenues
    
    
    5,066
    
    
    
    
    
    
    
    8,359
    
    
    
    
    
    
    
    10,946
    
    
    
    
    
    
    
    16,831Cost of products sold
    
    
    7,298
    
    
    
    
    
    
    
    6,029
    
    
    
    
    
    
    
    13,245
    
    
    
    
    
    
    
    11,997Gross profit (loss)
    
    
    (2,232
    )
    
    
    -44
    %
    
    
    2,330
    
    
    
    28
    %
    
    
    (2,299
    )
    
    
    -21
    %
    
    
    4,834
    
    
    
    29
    %Total Noven Transdermals:Product revenues
    
    
    12,968
    
    
    
    
    
    
    
    15,062
    
    
    
    
    
    
    
    23,459
    
    
    
    
    
    
    
    30,668Cost of products sold
    
    
    10,761
    
    
    
    
    
    
    
    9,314
    
    
    
    
    
    
    
    20,034
    
    
    
    
    
    
    
    18,241Gross profit
    
    
    2,207
    
    
    
    17
    %
    
    
    5,748
    
    
    
    38
    %
    
    
    3,425
    
    
    
    15
    %
    
    
    12,427
    
    
    
    41
    %Noven TherapeuticsProduct revenues
    
    
    6,575
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,280
    
    
    
    
    
    
    
    Cost of products sold
    
    
    2,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,058
    
    
    
    
    
    
    
    Gross profit
    
    
    4,553
    
    
    
    69
    %
    
    
    
    
    
    
    
    
    
    
    8,222
    
    
    
    67
    %
    
    
    
    
    
    
    Total CompanyProduct revenues
    
    
    19,543
    
    
    
    
    
    
    
    15,062
    
    
    
    
    
    
    
    35,739
    
    
    
    
    
    
    
    30,668Cost of products sold
    
    
    12,783
    
    
    
    
    
    
    
    9,314
    
    
    
    
    
    
    
    24,092
    
    
    
    
    
    
    
    18,241Gross profit
    
    $
    6,760
    
    
    
    35
    %
    
    $
    5,748
    
    
    
    38
    %
    
    $
    11,647
    
    
    
    33
    %
    
    $
    12,427
    
    
    
    41
    %
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 ® ® ® ® ® ® ® ®
 ®
  33




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##### Table of Contents



Operating Expenses
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % ChangeResearch and
development
    
    $
    3,293
    
    
    $
    3,185
    
    
    
    3
    %
    
    $
    6,612
    
    
    $
    6,651
    
    
    
    -1
    %Selling and marketing
    
    
    5,336
    
    
    
    221
    
    
    
    N/M
    
    
    
    10,159
    
    
    
    461
    
    
    
    N/MGeneral and
administrative
    
    
    8,906
    
    
    
    5,488
    
    
    
    62
    %
    
    
    15,928
    
    
    
    10,669
    
    
    
    49
    %
 N/M  Not Meaningful
 Research and Development
  Selling and Marketing
  General and Administrative
 ®
 ®
 34




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##### Table of Contents



Other Income and Expenses
 Interest Income
  Income Taxes
  Equity in Earnings of Novogyne
  35




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % ChangeGross revenues
    
    $
    50,054
    
    
    $
    42,915
    
    
    
    17
    %
    
    $
    95,348
    
    
    $
    80,208
    
    
    
    19
    %Sales allowances
    
    
    5,702
    
    
    
    6,837
    
    
    
    -17
    %
    
    
    11,555
    
    
    
    10,999
    
    
    
    5
    %Sales returns allowances
    
    
    585
    
    
    
    (60
    )
    
    
    N/M
    
    
    
    500
    
    
    
    (9
    )
    
    
    N/MSales and returns allowances
    
    
    6,287
    
    
    
    6,777
    
    
    
    -7
    %
    
    
    12,055
    
    
    
    10,990
    
    
    
    10
    %Net revenues
    
    
    43,767
    
    
    
    36,138
    
    
    
    21
    %
    
    
    83,293
    
    
    
    69,218
    
    
    
    20
    %Cost of sales
    
    
    8,788
    
    
    
    7,795
    
    
    
    13
    %
    
    
    16,596
    
    
    
    14,842
    
    
    
    12
    %Gross profit
    
    
    34,979
    
    
    
    28,343
    
    
    
    23
    %
    
    
    66,697
    
    
    
    54,376
    
    
    
    23
    %Gross margin percentage
    
    
    80
    %
    
    
    78
    %
    
    
    
    
    
    
    80
    %
    
    
    79
    %
    
    
    Selling, general and
administrative expenses
    
    
    9,798
    
    
    
    9,579
    
    
    
    2
    %
    
    
    18,810
    
    
    
    19,712
    
    
    
    -5
    %Income from operations
    
    
    25,181
    
    
    
    18,764
    
    
    
    34
    %
    
    
    47,887
    
    
    
    34,664
    
    
    
    38
    %Interest income
    
    
    174
    
    
    
    165
    
    
    
    5
    %
    
    
    441
    
    
    
    497
    
    
    
    -11
    %Net income
    
    $
    25,355
    
    
    $
    18,929
    
    
    
    34
    %
    
    $
    48,328
    
    
    $
    35,161
    
    
    
    37
    %Novens equity in earnings of Novogyne
    
    $
    12,429
    
    
    $
    9,174
    
    
    
    35
    %
    
    $
    20,696
    
    
    $
    14,077
    
    
    
    47
    %
 N/M  Not Meaningful
 Novogyne Net Revenues
  ® ® ® ® ®
 ® ® ® ® ®
  36




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Sales returns allowances included in net revenues
    
    $
    585
    
    
    $
    (60
    )
    
    $
    500
    
    
    $
    (9
    )Actual returns primarily for expiring product
    
    
    (889
    )
    
    
    (645
    )
    
    
    (1,499
    )
    
    
    (1,474
    )Change in allowances for returns primarily for expiring product
    
    $
    (304
    )
    
    $
    (705
    )
    
    $
    (999
    )
    
    $
    (1,483
    )
 ® ®
 Novogyne Gross Margin
 ®
 Novogyne Selling, General and Administrative Expenses
   37




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##### Table of Contents



Liquidity and Capital Resources
  June 30, 2008
    
    
    December 31, 2007Cash and cash equivalents
    
    $
    35,405
    
    
    $
    13,973Short-term investments
    
    
    
    
    
    
    21,565Working capital
    
    
    49,207
    
    
    
    24,024
  2008
    
    
    2007Cash flows:Operating activities
    
    $
    (9,913
    )
    
    $
    33,579Investing activities
    
    
    34,683
    
    
    
    (40,175
    )Financing activities
    
    
    (3,338
    )
    
    
    2,855Net cash flow
    
    $
    21,432
    
    
    $
    (3,741
    )
 Operating Activities
 ®
  Investing Activities
    38




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##### Table of Contents



Financing Activities
  Short-Term and Long-Term Liquidity
   ® ®
 ® ®
 ®
 
 39




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##### Table of Contents



Balance at December 31, 2007
    
    $
    54,400Purchases of investments
    
    
    550Sales of investments at par
    
    
    (36,925
    )Unrealized losses recorded as other comprehensive loss
    
    
    (515
    )Balance at June 30, 2008
    
    $
    17,510
   ®
   40




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##### Table of Contents



Aggregate Contractual Obligations
  Critical Accounting Estimates
  Recent Accounting Pronouncements
  41




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##### Table of Contents



Outlook
  
    
    acquisitions of products, companies, or technologies or other transactions;
    
    changes in Novens or Novogynes accounting or accounting principles or any of the
estimates or judgments underlying our critical accounting policies;
    
    regulatory or technological developments;
    
    changes in the supply of, demand for, or distribution of our products (including any
changes resulting from competitive products, product recalls/withdrawals, or new study
results);
    
    negative actions with respect to our applications for methylphenidate quota or other
disruptions in supplies of raw materials;
    
    adverse actions by the FDA in connection with the January 2008 warning letter or
otherwise;
    
    changes in our business relationships/collaborations; or
    
    changes in the economy or the health care sector generally.
   Net Revenues. ® ®   ® ®
 Gross Margin. ®
 Research and Development Expense.
 42




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##### Table of Contents



Selling, General and Administrative Expense. 
 Equity in Earnings of Novogyne.
 Interest Income.
 
 Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
  43




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##### Table of Contents



Item 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  Certificates
  44




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
 ® ® ®
 ®
  
 Item 1A.
    
    Risk Factors
  45




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##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number ofShares
    
    
    ApproximatePurchased as
    
    
    Dollar ValuePart of
    
    
    That May YetTotal Number of
    
    
    Average Price
    
    
    Publicly
    
    
    be PurchasedShares
    
    
    Paid
    
    
    Announced
    
    
    under thePurchased
    
    
    Per Share
    
    
    Program
    
    
    Program(1)April 1, 2008 to
April 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    19,876,238May 1, 2008 to
May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,876,238June 1, 2008 to
June 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,876,238Totals
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    19,876,238
 
 (1)
    
    In September 2007, we announced a stock repurchase program authorizing the repurchase of
up to $25.0 million of our common stock. During the third quarter of 2007, we repurchased
322,345 shares of our common stock at an aggregate price of approximately $5.1 million.
There is no expiration date specified for this program. 
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  1.
    
    Election of the Board of Directors:
 For
    
    
    WithheldSidney Braginsky
    
    
    16,224,775
    
    
    
    5,037,645Peter Brandt
    
    
    21,110,943
    
    
    
    151,477John G. Clarkson, M.D.
    
    
    16,970,502
    
    
    
    4,291,918Donald A. Denkhaus
    
    
    16,986,592
    
    
    
    4,275,828Pedro P. Granadillo
    
    
    16,989,442
    
    
    
    4,272,978Phillip M. Satow
    
    
    20,301,501
    
    
    
    960,919Robert G. Savage
    
    
    20,173,025
    
    
    
    1,089,395Wayne P. Yetter
    
    
    16,715,657
    
    
    
    4,546,763
 2.
    
    Proposal to ratify and approve the appointment of Deloitte & Touche LLP as
Novens independent registered public accounting firm for 2008:
 For
    
    Against
    
    Abstained
    
    Broker Non-Vote21,116,342
    
    120,537
    
    25,538
    
    0
 46




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##### Table of Contents



Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
 10.1
    
    Amended and Restated Restricted Stock Agreement between Peter Brandt and Noven
Pharmaceuticals, Inc., dated May 28, 2008 (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K of Noven Pharmaceuticals, Inc. filed on June 2, 2008).10.2
    
    Employment Agreement between Peter Brandt and Noven Pharmaceuticals, Inc.,
dated April 29, 2008 (incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K of Noven Pharmaceuticals, Inc. filed on May 5, 2008).10.3
    
    Restricted Stock Agreement between Peter Brandt and Noven Pharmaceuticals,
Inc., dated April 29, 2008 (incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K of Noven Pharmaceuticals, Inc. filed on May 5, 2008).10.4
    
    Stock Appreciation Rights Agreement between Peter Brandt and Noven
Pharmaceuticals, Inc., dated April 29, 2008 (incorporated by reference to Exhibit 10.3
to the Current Report on Form 8-K of Noven Pharmaceuticals, Inc. filed on May 5, 2008).10.5
    
    Letter Agreement between W. Neil Jones and Noven Pharmaceuticals, Inc., dated
April 29, 2008 (incorporated by reference to Exhibit 10.4 to the Current Report on Form
8-K of Noven Pharmaceuticals, Inc. filed on May 5, 2008).31.1
    
    Certification of Peter Brandt, President and Chief Executive Officer, pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    Certification of Michael D. Price, Vice President and Chief Financial
Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Peter Brandt, President and Chief Executive Officer, pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.*32.2
    
    Certification of Michael D. Price, Vice President and Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
 
 *
    
    Pursuant to Item 601(b)(32) of Regulation S-K, this exhibit is furnished rather than filed
with this Form 10-Q. 47




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##### Table of Contents



Signatures
  NOVEN PHARMACEUTICALS, INC.Date: August 7, 2008
    By:
    /s/ Michael D. PriceMichael D. PriceVice President and
Chief Financial Officer 48