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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number 000-49730

DOV PHARMACEUTICAL, INC.
(Exact Name of Registrant as Specified in its Charter)

Continental Plaza
433 Hackensack Avenue
Hackensack, New Jersey 07601

(Address of principal executive office)

(201) 968-0980
(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 ý    No o

        On November 14, 2002, there were outstanding 14,414,038 shares of our common stock, par value $0.0001 per share, and 354,643 shares of series B nonvoting preferred stock, par value $1.00 per share, which shares are convertible at any time upon the vote of the holders of 75% or more of such shares outstanding into 574,521 shares of our common stock.

DOV PHARMACEUTICAL, INC.
Form 10-Q
For the Quarter Ended September 30, 2002
Table of Contents

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Special Note Regarding Forward-Looking Statements

        This Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act, including statements regarding our expectations with respect to the progress of and level of expenses for our clinical trial programs. You can also identify forward-looking statements by the following words: "may," "will," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" or the negative of these terms or other comparable terminology. We caution you that forward-looking statements are inherently uncertain and are simply point-in-time estimates based on a combination of facts and factors currently known by us about which we cannot be certain or even relatively certain. Actual results or events will surely differ and may differ materially from our forward-looking statements as a result of many factors, some of which we may not be able to predict or may not be within our control. Such factors may also materially adversely affect our ability to achieve our objectives and to successfully develop and commercialize our product candidates, including our ability to:

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demonstrate the safety and efficacy of product candidates at each stage of development;



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meet our development schedule for our product candidates, including with respect to clinical trial initiation, enrollment and completion;



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meet applicable regulatory standards and receive required regulatory approvals on our anticipated time schedule or at all;



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meet obligations and required milestones under our license and other agreements;



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obtain substantial additional funds;



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obtain and maintain all necessary patents or licenses; and



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produce drug candidates in commercial quantities at reasonable costs and compete successfully against other products and companies.

        You should refer to the "Part II—Other Information" section of this report under the subheading "Item 5. Other Information—Risk Factors and Factors Affecting Forward-Looking Statements" for a detailed discussion of some of the factors that may cause our actual results to differ materially from our forward-looking statements. You should also refer to the risks discussed in our other filings with the Securities and Exchange Commission, including those contained in our final prospectus dated April 24, 2002. We qualify all our forward-looking statements by these cautionary statements. There may also be other factors that may materially affect our forward-looking statements and our future results. As a result of the foregoing, readers should not place undue reliance on our forward-looking statements. We do not undertake any obligation and do not intend to update any forward-looking statement.

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PART I—FINANCIAL INFORMATION

ITEM I. Financial Statements

DOV PHARMACEUTICAL, INC.
BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

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DOV PHARMACEUTICAL, INC.
STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements.

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DOV PHARMACEUTICAL, INC.
STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.

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DOV PHARMACEUTICAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS

1.    The Company

Organization

        DOV Pharmaceutical, Inc. (the "Company") was incorporated in May 1995 under the laws of the State of New Jersey and reincorporated in Delaware in November 2000.

        The Company is a biopharmaceutical company focused on the discovery, in-licensing, development and commercialization of novel drug candidates for central nervous system, cardiovascular and urological disorders. The Company has five product candidates in clinical trials targeting insomnia, anxiety disorders, pain, depression and angina and hypertension. The Company has established strategic alliances with select partners to access their unique technologies and their commercialization capabilities. The Company operates principally in the United States but it also conducts clinical studies in Europe.

2.    Significant Accounting Policies

Basis of Presentation

        The financial statements are presented on the basis of accounting principles that are generally accepted in the United States for interim financial information and in accordance with the instructions of the Securities and Exchange Commission ("SEC") on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented.

        The results of operations for the interim periods shown in this report are not necessarily indicative of results expected for the full year. The financial statements should be read in conjunction with the audited financial statements and notes for the year ended December 31, 2001, included in our Registration Statement on Form S-1 filed with the SEC, as amended through its effective date of April 24, 2002.

        The Company and Elan Corporation, plc ("Elan") entered into a transaction to form DOV (Bermuda), Ltd. f/k/a DOV Newco, Ltd. a Bermuda exempted limited company ("DOV Bermuda"). While the Company owns 80.1% of the outstanding capital stock of DOV Bermuda and Elan owns 19.9%, through its wholly-owned subsidiary Elan Pharmaceuticals Investments II, Ltd., Elan has retained significant minority rights that are considered "participating rights" as defined in the Emerging Issues Task Force Consensus No. 96-16 "Investor's Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights." Accordingly, the Company does not consolidate the financial statements of DOV Bermuda, but instead accounts for its investment in DOV Bermuda under the equity method of accounting.

        The Company records its 80.1% interest in the loss in DOV Bermuda as research and development expense for the portion of the research and development expense incurred by the Company on behalf of DOV Bermuda and as Loss in Investment in DOV Bermuda for the Company's 80.1% interest in the remaining loss of DOV Bermuda.

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Use of Estimates

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported assets, liabilities, revenues, earnings, financial position and various disclosures. Actual results could differ from those estimates.

Deferred Charges

        Deferred charges are issuance costs for the convertible exchangeable promissory note and the convertible promissory note and are being amortized over the six-year term of the instruments, ending in January 2005.

Net Loss Per Share

        Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The Company has excluded the shares issuable on conversion of the convertible exchangeable promissory note, the convertible promissory note, convertible preferred stock, outstanding options and warrants to purchase common stock from the calculation of diluted net loss per share, as such securities are antidilutive for all periods presented.

Comprehensive Loss

Concentration of Credit Risk

        Cash and cash equivalents are invested in deposits with significant financial institutions. The Company has not experienced any losses on its deposits of cash and cash equivalents. Management believes that the financial institutions are financially sound and, accordingly, minimal credit risk exists. Approximately $12.0 million of the Company's cash balance was uncollateralized at September 30, 2002.

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Recent Accounting Pronouncements

        In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121. SFAS No. 144 further refines the requirements of SFAS No. 121 that requires companies to recognize an impairment loss if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows and measure an impairment loss as the difference between the carrying amount and fair value of the asset. In addition, SFAS No. 144 provides guidance on accounting and disclosure issues surrounding long-lived assets to be disposed of by sale. The Company adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not have any impact on the Company's financial statements.

        SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. This Statement nullifies Emerging Issues Task Force (EITF) 94-3, Liability Recognition for Certain Employees Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in an Restructuring)which permitted recognition of a liability for an exit cost a the date of an entity's commitment to an exit plan. The Statement is effective as of January 1, 2003. If the Company is to record restructuring charges subsequent to January 1, 2003, such charges will be recorded in accordance with SFAS No. 146.

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3. Research and Development Expense

        Research and development costs are expensed when incurred and include allocations for payroll and related costs and other corporate overhead. Certain research and development expenses incurred on behalf of DOV Bermuda are billed to DOV Bermuda under a joint development and operating agreement. Payments received from DOV Bermuda that reflect Elan's 19.9% interest in the work performed by the Company for DOV Bermuda are recorded as a reduction in research and development expense. Certain expenses from prior periods have been reclassified to conform to the current period presentation.

        The following represents a detail of amounts included in research and development expense:

4. DOV Bermuda

        The unaudited summarized results of operations of DOV Bermuda for the third quarter and the nine months ended September 30, 2002, and the respective periods in 2001, are as follows:

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        The following represents a reconciliation of the total loss of DOV Bermuda included in the Company's statements of operations:

5. Marketable Securities

        At September 30, 2002, the Company held securities, classified as available-for-sale, with a market value of $9.9 million. These securities consist primarily of corporate debt securities and government and federal agency bonds. The Company also had short-term investments in municipal bonds, money market, negotiable certificates of deposits, and auction rate paper, with maturity dates of three months or less when purchased, as a component of cash and cash equivalents, of $30.2 million. The Company's primary interest rate exposure results from changes in short-term interest rates. The Company does not purchase financial instruments for trading or speculative purposes.

6. Stockholder Rights Plan

        On October 8, 2002, the Company implemented a Stockholder Rights Plan under which the Board of Directors declared a dividend distribution of one preferred stock purchase right for each outstanding share of DOV Pharmaceutical's common stock and 1.62 preferred stock purchase rights for each outstanding share of DOV Series B Preferred Stock to stockholders of record as of the close of business on October 9, 2002. Initially, these rights will not be exercisable and will trade with the shares of the Company's common stock and Series B Preferred Stock. Under the Stockholder Rights Plan, the rights generally will become exercisable if a person becomes an "acquiring person" by acquiring 15% or more of the common stock of the Company or if a person commences a tender offer that could result in that person owning 15% or more of the common stock of the Company. If a person becomes an "acquiring person," each holder of a right (other than the acquiring person) would be entitled to purchase, at the then-current exercise price, such number of shares of preferred stock that are equivalent to shares of the Company's common stock having a value of twice the exercise price of the right. If the Company is acquired in a merger or other business combination transaction after any such event, each holder of a right would then be entitled to purchase, at the then-current exercise price, shares of the acquiring company's common stock having a value of twice the exercise price of the right.

7. Stock Split

        On March 8, 2002, the Company's board of directors declared a 1.62 for 1 stock split of the Company's common stock paid in the form of a dividend. In order to effect the split with regard to the series B preferred stock, the Company's board of directors approved an amendment to the Company's

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certificate of incorporation to provide for an adjustment in the conversion ratio of the series B preferred stock to reflect the split. The amendment was approved by the stockholders of the Company, including the holders of the series B preferred stock voting as a separate class. The split was effective on April 5, 2002. All share data give effect to such split as if the split had occurred on January 1, 2001.

8. Initial Public Offering

        On April 30, 2002, the Company completed an initial public offering of 5,000,000 shares of common stock at $13.00 per share, raising proceeds for the Company of approximately $59.0 million, net of underwriting discounts and offering expenses. Upon completion of the initial public offering, all outstanding shares of the Company's series C and series D redeemable convertible preferred stock automatically converted on a 1.62 for 1 basis into an aggregate of 4,519,800 shares of common stock.

9. Recent Litigation Developments

        From April 29, 2002, a number of class action lawsuits were filed naming as defendants the Company, certain of the Company's officers and directors and certain of the underwriters in the Company's April 25, 2002 initial public offering of 5,000,000 shares of its common stock. The lawsuits were filed in the United States District Court for the Southern District of New York and the United States District Court for the District of New Jersey. The complaints that have been served allege violations of Sections 11, 12 and 15 of the Securities Act of 1933 as well as Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission, based upon the Company's alleged failure to disclose the filing of a revised registration statement and prospectus for the Company's initial public offering reflecting changes to the 1999 financial statements of the Company's joint venture with Elan Corporation, plc, DOV (Bermuda), Ltd. These class actions were brought on behalf of purchasers of the Company's common stock in or traceable to the Company's initial public offering and sought money damages or rescission. On July 29, 2002, Judge Robert W. Sweet consolidated before him the lawsuits filed in the Southern District of New York and appointed lead plaintiffs and approved the selection of counsel for the lead plaintiffs. On August 16, 2002 Judge Sweet consolidated before him the lawsuits filed in the United States District Court for the District Court of New Jersey with the lawsuits filed in the Southern District. The deadline for the filing of a consolidated complaint has not yet expired. Defendants' time to respond has been extended pending the filing of a consolidated complaint. We believe that we have meritorious defenses to the claims alleged in the class actions and we intend to vigorously defend against the claims. However, litigation is inherently uncertain and we cannot give assurances as to the ultimate outcome or effect of these actions. If the plaintiffs in these actions were to prevail, such an outcome could have a material adverse effect on our financial condition, results of operations and liquidity.

        In connection with the securities class action lawsuits described above, the Company's providers of primary and excess liability insurance for directors and officers, D&O, have asserted that the policy binders they issued in connection with the Company's initial public offering are not effective because, among other reasons, the carriers claim that they never approved the documentation provided with policy application, including the Final Registration Statement, and the carriers claim that such approval is a prerequisite to their policy's effectiveness.

        The Company strongly disagrees with their positions, has advised the carriers that the Company intends to hold them to their original binder terms as the Company vigorously pursues resolution of these matters, and has initiated arbitration against the primary D&O carrier. The Company cannot provide any assurance that a satisfactory resolution of these matters will be achieved or that litigation will not ensue. Pending resolution, the Company will incur expenses, including attorneys' fees, in attempting to resolve the coverage disputes. These expenses may be significant and, as a result, may

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materially and adversely affect the Company's results of operations. In addition, the Company's inability to obtain coverage as provided in the Company's original binders could adversely affect the Company's financial condition, results of operations and liquidity, since expenses incurred in defending the class actions may not be reimbursable by the insurers and any losses in respect of the class action lawsuits may be borne solely by the Company. The Company has reached an agreement with the excess D&O carrier that for claims other than the securities class action lawsuits described above, the excess D&O policy will remain in place, effective for losses in excess of $10.3 million. If the arbitration award determines there is no primary D&O coverage, the Company will be responsible for losses, if any, up to $10.3 million, normally covered by such insurance for director and officer reimbursement. If the Company and its officers and directors are not covered by primary D&O insurance, the Company's ability to recruit and retain officers and directors may be adversely affected. The Company cannot assure you that replacement primary D&O coverage will be available or, if it is, will be available on financial terms comparable to those offered by the original primary carrier that has denied coverage. Further, if replacement coverage is secured, it will not cover previously-initiated class or related class actions arising out of the Company's initial public offering and may contain other exceptions and coverage restrictions not found in the primary carrier's original policy binder.

10. Contingencies

Biovail Matters

        Until recently, Andrx Pharmaceuticals, Inc., Andrx, and Biovail Corporation were involved in litigation relating to the DOV diltiazem patent in the United Stated District Court for the Southern District of Florida. This litigation was instituted following the license of the DOV diltiazem patent to Biovail and Biovail's subsequent listing of that patent in the FDA's "Orange Book" as claiming its branded drug Tiazac under approved new drug application, or NDA, 20-401. This listing had the effect of preventing FDA approval of Andrx's abbreviated new drug application, or ANDA, for a generic version of Tiazac for up to 30 months. Among other things, Biovail claimed that Andrx's generic version of Tiazac infringed the DOV diltiazem patent. Andrx, among other things, claimed that its generic version of Tiazac did not infringe the DOV diltiazem patent, that the DOV diltiazem patent is invalid and that the Company's license agreement with Biovail is invalid as an unreasonable restraint of trade in violation of antitrust laws. The Company was not a party to that litigation, and made no attempt to join in the litigation.

        In April 2002, Biovail withdrew its Orange Book listing described above. Also in April 2002, Biovail dismissed with prejudice its claim that Andrx's generic version of Tiazac would infringe the DOV diltiazem patent, thereby barring Biovail from reasserting the same claim in the future. The federal court in Florida also ordered that Andrx's claims of non-infringement and invalidity were moot. Subsequently, as part of an overall settlement with Biovail, Andrx dropped its claims that the patent and license agreement with Biovail are invalid. As reported, pursuant to the Biovail-Andrx settlement, Biovail and Andrx agreed (a) to file a stipulation of dismissal with prejudice of all pending claims, (b) to enter into mutual releases of any unasserted claims relating to Biovail's Cardizem CD and Tiazac and Andrx's generic versions of those products and (c) that Biovail will permit Andrx to manufacture and market, Taztia, Andrx's generic version of Tiazac, free of any patent infringement claims Biovail may have or acquire.

        The Company's license agreement with Biovail gives Biovail the exclusive right to enforce the DOV diltiazem patent against others, including the exclusive right to sue others for past, present and future infringements of the DOV diltiazem patent. The Company is contractually obligated under certain circumstances to reimburse Biovail for legal fees and disbursements incurred in connection with such patent enforcement, up to a maximum of $1.5 million. On July 10, 2002, Biovail, citing this contractual provision, asserted that the Company is responsible for the reimbursement of aggregate

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legal expenses of approximately $1.3 million that Biovail allegedly incurred to enforce the DOV diltiazem patent against Andrx. The Company believes that it is not obligated to reimburse Biovail for these expenses. Among other reasons, the Company believes that Biovail's actions in listing the DOV diltiazem patent in the Orange Book were taken in major part to secure a stay of FDA approval of Andrx's generic drug, rather than to enforce the DOV diltiazem patent. Further, Biovail's litigation with Andrx involved many issues, including violation of antitrust laws, unrelated to the DOV diltiazem patent or its validity. As noted above, Biovail withdrew its Orange Book listing, Andrx and Biovail filed a stipulation of dismissal of the patent infringement action against Andrx with respect to the DOV diltiazem patent and, as noted below, the FTC announced a complaint against Biovail founded on the alleged illegality of the Orange Book filing. The Company responded to Biovail's July claim, rejecting it on both procedural and substantive grounds. The Company also responded to Biovail's subsequent assertion that failure to pay its legal fees will constitute a material breach of the license agreement entitling Biovail to legal remedies including rescission. The Company believes that any such dispute is subject to mandatory arbitration and that the sole remedy for any award of legal fees is an offset against royalties, if any. The Company has also submitted its own contractual claim for legal fees and disbursements of $422,677 against Biovail resulting from license agreement misrepresentations and the Orange Book filing. Nonetheless, the Company may be responsible for a portion of Biovail's legal expenses with regard to litigating Biovail's claim that Andrx's generic drug infringes the DOV diltiazem patent and may fail to recover the Company's legal expenses. As of September 30, 2002, no provision for the reimbursement of these costs is included in the Company's financial statements.

Federal Trade Commission Investigation

        Related to the Andrx/Biovail litigation, in March 2001, following a request for investigation by Andrx, the Federal Trade Commission, or FTC, notified the Company that it was conducting a nonpublic investigation to determine whether Biovail or any other person was engaged in unfair methods of competition in violation of the Federal Trade Commission Act, and that the primary focus was the legality of Biovail's January 2001 Orange Book listing of the DOV diltiazem patent. The FTC letter sought information related to the Biovail license agreement. The Company has cooperated with the FTC in its requests.

        On April 23, 2002, the FTC announced a complaint against Biovail and a proposed consent order with Biovail to settle the antitrust investigation. The proposed consent order requires Biovail to return to the Company the exclusive license to manufacture and sell any extended release formulation of diltiazem using the DOV diltiazem patent in the Tiazac field, defined as a drug product approved by the FDA for sale pursuant to NDA 20-401, or that is described in any ANDA for which approval is sought by referencing NDA 20-401. On July 18, 2002, the license agreement was amended to return to the Company, without payment, all license rights, exclusive and non-exclusive, to practice the diltiazem patent in the Tiazac field. The amendment has the effect of precluding Biovail from using the DOV diltiazem patent in the Tiazac field, while, at the same time, maintaining the agreement between the Company and Biovail to develop, manufacture and market a new drug approved for sale under an NDA other than Biovail's existing NDA 20-401. The Company believes this amendment fully reflects the intention of the parties to the license agreement. The effect of this change in the license agreement means that the Company is entitled, but not required, to grant an exclusive or a non-exclusive license to other persons for the manufacture and sale of an extended release formulation of diltiazem that is described in any ANDA for which approval is sought by referencing Biovail's NDA 20-401. The Company continues to have the right to receive royalties from any licensee who manufactures and sells an extended release formulation of diltiazem using the DOV diltiazem patent. The FTC has approved the license agreement amendment, and the proposed consent order between the FTC and Biovail has been declared final.

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Elan Matter

        Under the terms of the Company's joint venture agreements with Elan, Elan's consent is required with respect to certain transactions entered into by the Company. In the event that the Company does not obtain Elan's consent when it is required, Elan has the right to terminate the license agreement with Nascime Limited, a 100% owned subsidiary of DOV Bermuda. In January 2001, the Company entered into a license, research and development agreement with Biovail, which is a named technological competitor of Elan under Elan's license agreement with Nascime. The Company does not believe that Elan's consent to the Biovail agreement was required and the Company does not believe that Elan is entitled to terminate its license agreement with Nascime as a result of the Company entering into the Biovail license agreement without Elan's consent. Nonetheless, the Company sought consent from Elan, which Elan refused to grant. While Elan has neither asserted that its consent was required, nor objected to the Company entering into the Biovail license agreement or threatened to terminate its license agreement with Nascime, it has stated that it reserves its rights with respect to this issue. It is not feasible to predict what the outcome would be if Elan were to seek to terminate its agreement based on the Company's failure to obtain its consent. The Elan license with Nascime is material to the Company and if the license were to be terminated, it could have a material adverse impact on the Company's financial position and results of operations.

        On July 31, 2002, Elan Corporation, plc, the Company's partner in the DOV Bermuda joint venture, announced a recovery plan that includes the divestiture of businesses, assets and products that are no longer core to Elan. If Elan should determine that it no longer wishes to fund the joint venture, the Company intends to assess its options, including self-funding of Elan's portion of the joint venture or entering into substitute collaborative arrangements. Whatever the outcome of the foregoing, the Company is committed to pursuing the development of these product candidates on the present schedule.

ITEM 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations

        You should read the following discussion of our results of operations and financial condition together with our unaudited financial statements and related notes contained elsewhere in this report. References to "we," "us," and"our" refer to DOV Pharmaceutical, Inc.

Overview

        We are focused on the discovery, in-licensing, development and commercialization of novel drug candidates for the treatment of central nervous system, cardiovascular and urological disorders. In 1998, we licensed four of our product candidates from Wyeth-Ayerst: indiplon, for the treatment of insomnia, bicifadine, for the treatment of pain, ocinaplon, for the treatment of anxiety, and DOV 216,303, for the treatment of depression. We sublicensed indiplon to Neurocrine in 1998 in exchange for the right to receive payments upon the achievement of certain clinical development milestones and royalties based on product sales, if any. We are developing bicifadine and ocinaplon through DOV (Bermuda), Ltd., or DOV Bermuda, our joint venture with Elan. DOV diltiazem is being developed through our collaboration with Biovail, which we entered into in January 2001.

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        Since our inception, we have incurred significant operating losses and we expect to do so for the foreseeable future. As of September 30, 2002, we had an accumulated deficit of $34.1 million. We have depended upon equity and debt financings and license fee and milestone payments from our collaborative partners and licensees to fund our research and product development programs and expect to do so for the foreseeable future.

        We have a limited history of operations and anticipate that our quarterly results of operations will fluctuate for several reasons, including the timing and extent of our research and development efforts, the timing and extent of our adding new employees and infrastructure, the timing of milestone, license fee and royalty payments and the timing and outcome of regulatory approvals.

        Our revenue has consisted primarily of license fees and milestone payments from our collaborative partners and licensees. We record revenue on an accrual basis when amounts are considered collectible. Revenues received in advance of performance obligations, or in cases where we have a continuing obligation to perform services, are deferred and amortized over the performance period, which we estimate to be the development period. Revenues from milestone payments that represent the culmination of a separate earnings process are recorded when the milestone is achieved. Contract revenues are recorded as the services are performed. License and milestone revenue are typically not consistent or recurring in nature. Our revenue has fluctuated from year-to-year and quarter-to-quarter and this will likely continue.

        Our operating expenses consist primarily of royalty expense, costs associated with research and development and general and administrative costs associated with our operations. Royalty expense consists of milestone payments accrued under our license agreement with Wyeth-Ayerst. Research and development expense consists primarily of compensation and other related costs of our personnel dedicated to research and development activities, as well as outside professional fees related to clinical trials and preclinical studies. Research and development expense also includes our expenses related to development activities of DOV Bermuda. General and administrative expense consists primarily of the costs of our senior management, finance and administrative staff, business insurance and professional fees. Expansion of our operations and costs associated with being a public reporting entity will increase our general and administrative expense.

        We expect our research and development expenses to increase substantially in the foreseeable future. We expect that a large percentage of our research and development expenses will be incurred in support of our clinical trial programs for bicifadine, ocinaplon and DOV 216,303, as well as our product candidates in our preclinical program if they progress into clinical trials.

        In January 1999, we entered into a joint venture with Elan. As part of the transaction, we formed DOV Bermuda to develop controlled release formulations of ocinaplon and bicifadine. While we own 80.1% of the outstanding common stock of DOV Bermuda, Elan has retained significant minority investor rights that are treated as "participating rights" as defined in Emerging Issues Task Force Consensus, or EITF, No. 96-16 "Investor's Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights." Therefore, we do not consolidate the financial statements of DOV Bermuda, but instead account for our investment in DOV Bermuda under the equity method of accounting. We record our 80.1% interest in the loss in DOV Bermuda as research and development expense for the portion of the research and development expense incurred by us on behalf of DOV Bermuda and as Loss in Investment in DOV Bermuda for our 80.1% interest in the remaining loss of DOV Bermuda.

        On July 31, 2002, Elan Corporation, plc, our partner in the DOV Bermuda joint venture, announced a recovery plan that includes the divestiture of businesses, assets and products that are no longer core to Elan. If Elan should determine that it no longer wishes to fund the joint venture, we intend to assess our options, including self-funding of Elan's portion of the joint venture or entering

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into substitute collaborative arrangements. Whatever the outcome of the foregoing, we are committed to pursuing the development of these product candidates on the present schedule.

Results of Operations

Three Months Ended September 30, 2002 and 2001

        Revenue.    Our revenue was $504,000 for the third quarter 2002, as compared to $714,000 for the comparable period last year. In each of the third quarters of 2002 and 2001, our revenue was comprised primarily of $495,000and $625,000, respectively, in amortization of the $7.5 million fee we received on signing of the license, research and development agreement for our collaboration with Biovail in January 2001. The upfront payment has been deferred and is being amortized to revenue when earned over the estimated research and development period. During 2001 this period was estimated to be 36 months. As of July 1, 2002, we have revised this estimate to be approximately 41 months and, accordingly, the amortization of the remaining balance beginning July 1, 2002 reflects this revised time period. This adjustment to the estimate for the development period was made as a result of unexpected results obtained in a Phase I pharmacokinetic study in which we discovered that a high fat meal, proximate to dosing, retarded the bioavailability of the immediate release component of the diltiazem formulation under development. Together with Biovail, we have made the decision to conduct an additional Phase I pharmacokinetic study in order to evaluate strategies to overcome this food effect. This additional study has delayed the initiation of the Phase III clinical trial by several months and thereby extended our total development timeline.

        Research and Development Expense.    Research and development expense increased $1.3 million to $2.6 million for the third quarter 2002 from $1.4 million for the comparable period in 2001. Approximately $429,000 of the increase in research and development expense was attributable to increased costs associated with the Phase II clinical trials and toxicology studies for ocinaplon and bicifadine and $349,000 was primarily attributable to increased costs for clinical trials and toxicology studies for our other compounds. Approximately $555,000 of the increase related to increased bonuses of $100,000, increased costs associated with additional personnel of $76,000 and severance for two employees of $312,000.

        General and Administrative Expense.    General and administrative expense increased $472,000 to $808,000 in the third quarter 2002 from $336,000 for the comparable period in 2001. The increase was primarily attributable to increased payroll costs of $169,000, increased office and related expenses of $164,000 and increased professional fees of $138,000. The increase in payroll costs was primarily attributable to increased non-cash compensation expense of $104,000, and increased salaries and bonuses of $39,000 as we expanded our operations. The increase in office and related expenses was primarily related to an increase in directors and officers' liability insurance premiums of $116,000. The increase in professional fees is primarily related to increased legal expenses related to our dispute with our directors and officers' liability carriers of $97,000, and an increase in accounting related expenses of $43,000 offset by a decrease in non-cash compensation to outside consultants of $33,000.

        Loss in Investment in DOV Bermuda.    Loss in investment in DOV Bermuda decreased $135,000 to $150,000 in the third quarter 2002 from $285,000 in the comparable period in 2001. The decrease resulted primarily from decreased costs associated with the formulation development work for ocinaplon and bicifadine performed by Elan.

        Interest Income.    Interest income increased $235,000 to $319,000 in the third quarter 2002 from $84,000 in the comparable period in 2001. The increase was due to higher balances of cash and cash equivalents in the third quarter 2002 resulting from the $59.0 million of net proceeds received from our initial public offering, offset by lower average interest rate yields in the third quarter of 2002.

17

        Interest Expense.    Interest expense decreased $119,000 to $263,000 in the third quarter 2002 from $382,000 in the comparable period in 2001 primarily attributable to our convertible exchangeable promissory note and convertible line of credit with Elan in the third quarter of 2002, and $382,000 in the comparable period in 2001. This decrease was due to the impact of higher outstanding balances on the convertible exchangeable promissory note and the convertible line of credit offset with a decrease in the additional interest discussed below. Both the Elan convertible exchangeable promissory note and convertible line of credit contain interest that will, at Elan's option, be paid either in cash or our common stock. In accordance with EITF 00-27, we evaluate this conversion feature each time interest is accrued on the notes. This feature resulted in additional interest expense of $7,000 for the third quarter of 2002, a decrease of $142,000 from the third quarter of 2001, due primarily to the decrease in the fair value of our common stock. To the extent the value of our common stock is at or above $3.98 per share with respect to the convertible exchangeable promissory note or $3.41 per share with respect to the convertible line of credit, we will continue to incur additional interest expense each time interest is accrued on the particular note.

        Other Income (Expense), net.    We had $422,000 of other income, net in the third quarter of 2002. We did not record any other income, net in the comparable period in 2001. In the third quarter 2002, other income, net consisted primarily of an increase of $683,000 in value of the warrants to acquire Neurocrine common stock, which we earned in 2001 upon the achievement of a certain milestone, offset by the increase in our liability to Wyeth-Ayerst of $239,000 associated with the warrants. This resulted in an overall net income of $444,000 associated with these warrants.

Nine Months Ended September 30, 2002 and 2001

        Revenue.    Revenue increased $92,000 to $1.8 million for the nine months ended September 30, 2002 from $1.7 million for the comparable period in 2001. The increase was primarily attributable to an additional month of amortization of the $7.5 million fee we received upon signing the license, research and development agreement for our collaboration with Biovail in January 2001 of $78,000, net of the impact of reduced amortization of the fee referred to below. The upfront payment has been deferred and is being amortized to revenue when earned over the estimated research and development period. During 2001 this period was estimated to be 36 months. As of July 1, 2002, we have revised this estimate to be approximately 41 months and, accordingly, the amortization of the remaining balance as of June 30, 2002 reflects this revised time period. This adjustment to the estimate for the development period was made as a result of unexpected results obtained in a recent Phase I pharmacokinetic study in which we discovered that a high fat meal, proximate to dosing, retarded the bioavailability of the immediate release component of the diltiazem formulation under development. Together with Biovail, we have made the decision to conduct an additional Phase I pharmacokinetic study in order to evaluate strategies to overcome this food effect. This additional study has delayed the initiation of the Phase III clinical trial by several months and thereby extended our total development timeline.

        Research and Development Expense.    Research and development expense increased $3.5 million to $7.2 million for the nine months ended September 30, 2002 from $3.7 million for the comparable period in 2001. Approximately $2.0 million of the increase in research and development expense was attributable to increased costs associated with the Phase II clinical trials and initiation of toxicology studies for ocinaplon and bicifadine. Approximately $445,000of the increase was primarily attributable to net increased costs related to clinical trials and toxicology studies for two of our other compounds. The remaining increase of $1.0 million was primarily attributable to additional personnel of $533,000 and severance for two employees of $312,000, offset by a net decrease in professional fees of $57,000 and bonuses of $24,000.

        General and Administrative Expense.    General and administrative expense increased $1.2 million to $2.8 million in the nine months ended September 30, 2002 from $1.6 million for the comparable period

18

in 2001. The increase was primarily attributable to increased payroll costs associated with our personnel of $784,000, increased office and related expenses of $316,000 and increased professional fees of $73,000. The increase in payroll costs was primarily attributable to increased bonuses to our employees of $228,000, increased non-cash compensation expense of $307,000, and increased salaries of $178,000 as we expanded our operations. The increase in office and related expenses was primarily related to an increase in directors and officers' insurance of $194,000 and an increase in advertising expenses of $61,000.

        Loss in Investment in DOV Bermuda.    Loss in investment in DOV Bermuda decreased $350,000 to $659,000 in the nine months ended September 30, 2002 from $1.0 million in the comparable period in 2001. The decrease resulted primarily from decreased costs associated with the formulation development work for ocinaplon and bicifadine performed by Elan.

        Interest Income.    Interest income increased $322,000 to $600,000 in the nine months ended September 30, 2002 from $278,000 in the comparable period in 2001. The increase was due to higher balances of cash and cash equivalents in the nine months ended September 30, 2002 resulting from the $59.0 million of net proceeds received from our initial public offering, offset by lower average interest rate yields in the nine months ended September 30, 2002.

        Interest Expense.    Interest expense increased $777,000 to $1.6 million in the nine months ended September 30, 2002 from $871,000 in the comparable period in 2001, virtually all related to interest expense on our convertible exchangeable promissory note and convertible line of credit with Elan. This increase was primarily due to higher outstanding balances on the convertible exchangeable promissory note and the convertible line of credit and an increase in the additional interest discussed below. Both the Elan convertible exchangeable promissory note and convertible line of credit contain interest that will be paid, at Elan's option, either in cash or our common stock. In accordance with EITF 00-27, we evaluate this conversion feature each time interest is accrued on the notes. This feature resulted in interest expense of $899,000 for the nine months ended September 30, 2002, an increase of $722,000 from the comparable period of 2001, due primarily to the increase in the fair value of our common stock. To the extent the value of our common stock is at or above $3.98 per share with respect to the convertible exchangeable promissory note or $3.41 per share with respect to the convertible line of credit, we will continue to incur additional interest expense each time interest is accrued on the particular note.

        Other Expense, net.    We had $388,000 of other expense, net in the nine months ended September 30, 2002. We did not record any other expense, net in the comparable period in 2001. In the nine months ended September 2002, other expense, net consisted primarily of a decrease of $538,000 in value of the warrants to acquire Neurocrine common stock, which we earned in 2001 upon the achievement of a certain milestone, offset by the decrease in our liability to Wyeth-Ayerst of $189,000 associated with the warrants. This resulted in an overall net expense of $350,000 associated with these warrants.

Liquidity and Capital Resources

        At September 30, 2002, our cash and cash equivalents and marketable securities totaled $62.5 million compared with $13.6 million at December 31, 2001. The increase in cash balances at September 30, 2002 resulted primarily from the completion of our initial public offering of 5,000,000 shares of common stock at $13.00 per share, raising net proceeds of $59.0 million, net of underwriting discounts and estimated offering expenses, offset by funding of our operations during the nine months ended September 30, 2002. At September 30, 2002, we had working capital of $61.7 million.

        Net cash used in operations during the nine months ended September 30, 2002 amounted to $9.2 million, as compared with cash provided by operations of $2.4 million in the comparable period in

19

2001. The increase in cash used in operations resulted primarily from the increase in clinical development activities and the addition of personnel. Cash used in operations during the nine months ended September 30, 2001 was offset by the receipt of the $7.5 million license fee from Biovail, net of amortization. Non-cash expenses related to stock-based compensation, interest expense and depreciation and amortization expenses were $2.4 million in the nine months ended September 30, 2002 and $1.3 million in the comparable period in 2001. Non-cash depreciation in the value of investments was $350,000, net in the nine months ended September 30, 2002.

        We believe that our existing cash and cash equivalents will be sufficient to fund our anticipated operating expenses, debt obligations and capital requirements until at least the end of 2003. Our future capital uses and requirements depend on numerous factors, including:

•

our progress with research and development;



•

our ability to establish and the scope of any new collaborations;



•

the progress and success of clinical trials and preclinical studies of our product candidates;



•

the costs and timing of obtaining, enforcing and defending our patent and intellectual rights;



•

the costs and timing of regulatory approvals; and



•

expenses associated with currently pending and potential litigation.

        In addition to the foregoing, our future capital uses and requirements are also dependent in part on the ability of our licensees and collaborative partners to meet their obligations to us, including the fulfillment of their development and commercialization responsibilities in respect of our product candidates. Our licensees and collaborative partners, Elan, Biovail and Neurocrine, may encounter conflicts of interest, changes in business strategy or other business issues, or they may acquire or develop rights to competing products, all of which could adversely affect their ability or willingness to fulfill their obligations to us and, consequently, require us to satisfy, through the commitment of additional funds or personnel or both, any shortfalls in their performance. On July 31, 2002, Elan Corporation, plc, our partner in the DOV Bermuda joint venture, announced a recovery plan that includes the divestiture of businesses, assets and products that are no longer core to Elan. If Elan should determine that it no longer wishes to fund the joint venture, we intend to assess our options, including self-funding of Elan's portion of the joint venture or entering into substitute collaborative arrangements. Whatever the outcome of the foregoing, we are committed to pursuing the development of these product candidates on the present schedule.

        To meet future capital requirements, we may attempt to raise additional funds through equity or debt financings, collaborative agreements with corporate partners or from other sources. If adequate funds are not available, we may be required to curtail or delay significantly one or more of our product development programs. In addition, future milestone payments under some of our collaborative or license agreements are contingent upon our meeting particular research or development goals. The amount and timing of future milestone payments are contingent upon the terms of each collaborative or license agreement. Milestone performance criteria are specific to each agreement and based upon future performance. Therefore, we are subject to significant variation in the timing and amount of our revenues, milestone expenses and results of operations from period to period.

        In connection with the securities class action lawsuits described under Part II, Item 1 of this report, our providers of primary and excess liability insurance for directors and officers, D&O, have asserted that the policy binders they issued in connection with our initial public offering are not effective. We strongly disagree with their positions, have advised the carriers that we intend to hold them to their original binder terms as we vigorously pursue resolution of these matters, and have initiated arbitration against the primary D&O carrier. We cannot provide any assurance that a satisfactory resolution of these matters will be achieved or that litigation will not ensue. Pending

20

resolution, we will incur expenses, including attorneys' fees in attempting to resolve the coverage disputes. These expenses may be significant and, as a result, may materially and adversely affect our results of operations. In addition, our inability to obtain primary coverage as provided in our original binder could adversely affect our financial condition, results of operations and liquidity, since expenses incurred in defending the class actions may not be reimbursable by the insurers and any losses in respect of the class action lawsuits may be borne solely by us. We have reached an agreement with the excess D&O carrier that for claims other than the securities class action lawsuits described above, the excess D&O policy will remain in place, effective for losses in excess of $10.3 million. If the arbitration award determines there is no primary D&O coverage, we will be responsible for losses, if any, up to $10.3 million, normally covered by such insurance for director and officer reimbursement. We cannot assure you that replacement primary D&O coverage will be available or, if it is, will be available on financial terms comparable to those offered by the original carrier that has denied coverage. Further, if replacement coverage is secured, it will not cover previously-initiated class or related class actions arising out of our initial public offering and may contain other exceptions and coverage restrictions not found in the primary carrier's original policy binder.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risks

        To date, we have invested our cash balances with significant financial institutions. In the future, the primary objective of our investment activities will be to maximize the income we receive from our investments consistent with preservation of principal and minimum risk. Some of the securities that we invest in may have market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk in the future, we intend to maintain our portfolio of cash equivalents and investments in a variety of securities, including commercial paper, money market funds, government and non-government debt securities and corporate obligations.

        The investment balance of $1.8 million at September 30, 2002 includes warrants we received from Neurocrine under our sublicense agreement. We have a corresponding accrued royalty of $645,000 included in accrued expenses related to the portion of the Neurocrine warrants we must remit to Wyeth-Ayerst under our license agreement. As the warrants represent a derivative financial instrument under SFAS 133 "Accounting for Derivative Instruments and Hedging Activities," both the asset and the liability to Wyeth-Ayerst are reflected in our financial statements at fair value and we record an adjustment to those fair values at the end of each reporting period with the corresponding gain or loss reflected in other income or other expense. Included in other expense, net for the nine months ended September 30, 2002, was $350,000 for the net result of the decrease in the value of the warrants offset by the decrease in the liability. We calculated these values using a Black-Scholes methodology. The fair value of the warrants will fluctuate based on many factors including but not limited to overall stock market conditions, the fair value of Neurocrine's common stock, the volatility in Neurocrine's common stock and length of time left on our warrants, currently four and one-half years. The majority of the value in the asset at September 30, 2002, relates to the term of the warrants and the fact that Neurocrine's common stock is volatile. As long as we continue to own these warrants, we expect these factors and the corresponding value of the asset and liability to continue to fluctuate perhaps significantly from quarter-to-quarter and from year-to-year. As of November 4, 2002, the fair market value of these warrants was $2.0 million, an increase of $202,000 from September 30, 2002, due primarily to an increase in the market value of Neurocrine's common stock. This is partially offset by a corresponding increase in the liability to Wyeth-Ayerst of $71,000.

ITEM 4. Controls and Procedures

        As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of

21

the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer along with the Company's Chief Financial Officer. Based upon that evaluation, the Company's Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls or in other factors, that could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

        Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding disclosure.

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PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

Biovail/Andrx Litigation

        Until recently, Andrx Pharmaceuticals, Inc., Andrx, and Biovail Corporation were involved in litigation relating to our DOV diltiazem patent in the United Stated District Court for the Southern District of Florida. This litigation was instituted following the license of our DOV diltiazem patent to Biovail and Biovail's subsequent listing of that patent in the FDA's "Orange Book" as claiming its branded drug Tiazac under approved new drug application, or NDA, 20-401. This listing had the effect of preventing FDA approval of Andrx's abbreviated new drug application, or ANDA, for a generic version of Tiazac for up to 30 months. Among other things, Biovail claimed that Andrx's generic version of Tiazac infringed our DOV diltiazem patent. Andrx, among other things, claimed that its generic version of Tiazac did not infringe our DOV diltiazem patent, that our DOV diltiazem patent is invalid and that our license agreement with Biovail is invalid because it is an unreasonable restraint of trade in violation of antitrust laws. We were not a party to that litigation, and made no attempt to join in the litigation.

        In April 2002, Biovail withdrew its Orange Book listing described above. Also in April 2002, Biovail dismissed its claim that Andrx's generic version of Tiazac would infringe our DOV diltiazem patent, with prejudice, thereby barring Biovail from reasserting the same claim in the future. The federal court in Florida also ordered that Andrx's claims of non-infringement and invalidity were moot. Subsequently, as part of an overall settlement with Biovail, Andrx dropped its claims that our patent and license agreement with Biovail are invalid. As reported, pursuant to the Biovail-Andrx settlement, Biovail and Andrx agreed (a) to file a stipulation of dismissal with prejudice of all pending claims, (b) to enter into mutual releases of any unasserted claims relating to Biovail's Cardizem CD and Tiazac and Andrx's generic versions of those products and (c) that Biovail will permit Andrx to manufacture and market, Taztia, Andrx's generic version of Tiazac, free of any patent infringement claims Biovail may have or acquire.

        Our license agreement with Biovail gives Biovail the exclusive right to enforce the DOV diltiazem patent against others, including the exclusive right to sue others for past, present and future infringements of the DOV diltiazem patent. We are contractually obligated under certain circumstances to reimburse Biovail for legal fees and disbursements incurred in connection with such patent enforcement, up to a maximum of $1.5 million. On July 10, 2002, Biovail, citing this contractual provision asserted that DOV is responsible for the reimbursement of legal expenses of approximately $1.3 million that Biovail allegedly incurred to enforce the DOV diltiazem patent against Andrx. We believe that we are not obligated to reimburse Biovail for these expenses. Among other reasons, we believe that Biovail's actions in listing the DOV diltiazem patent in the Orange Book were taken in major part to secure a stay of FDA approval of Andrx's generic drug, rather than to enforce the DOV diltiazem patent. Further, Biovail's litigation with Andrx involved many issues, including violation of antitrust laws, unrelated to the DOV diltiazem patent or its validity. As noted above, Biovail withdrew its Orange Book listing, Andrx and Biovail filed a stipulation of dismissal of the patent infringement action against Andrx with respect to the DOV diltiazem patent and as noted below, the FTC announced a complaint against Biovail founded on the alleged illegality of the Orange Book filing. We have responded to Biovail's July claim, rejecting it on both procedural and substantive grounds. We have also responded to Biovail's subsequent assertion that failure to pay its legal fees will constitute a material breach of the license agreement entitling Biovail to legal remedies including rescission. We believe that any such dispute is subject to mandatory arbitration and that the sole remedy for any award of legal fees is an offset against royalties, if any. We have also submitted our own contractual claim for legal fees and disbursements of $422,677 against Biovail resulting from license agreement misrepresentations and the Orange Book filing. Nonetheless, we may be responsible for a portion of Biovail's legal expenses with regard to litigating Biovail's claim that Andrx's generic drug infringes the DOV diltiazem patent and may fail to recover our legal expenses.

Federal Trade Commission Investigation

        Related to the Andrx/Biovail litigation, in March 2001, following a request for investigation by Andrx, the Federal Trade Commission, or FTC, notified us that it was conducting a nonpublic investigation to determine whether Biovail or any other person was engaged in unfair methods of competition in violation of the Federal Trade Commission Act, and that the primary focus was the legality of Biovail's January 2001

23

Orange Book listing of the DOV diltiazem patent. The FTC letter sought information related to the Biovail license agreement. We have cooperated with the FTC in its requests.

        On April 23, 2002, the FTC announced a complaint against Biovail and a proposed consent order with Biovail to settle the antitrust investigation. The proposed consent order requires Biovail to return to us the exclusive license to manufacture and sell any extended release formulation of diltiazem using the DOV diltiazem patent in the Tiazac field, defined as a drug product approved by the FDA for sale pursuant to NDA 20-401, or that is described in any ANDA for which approval is sought by referencing NDA 20-401. On July 18, 2002, the license agreement was amended to return to us, without payment, all license rights, exclusive and non-exclusive, to practice our diltiazem patent in the Tiazac field. The amendment has the effect of precluding Biovail from using the DOV diltiazem patent in the Tiazac field, while, at the same time, maintaining the agreement between us and Biovail to develop, manufacture and market a new drug approved for sale under an NDA other than Biovail's existing NDA 20-401. We believe this amendment fully reflects the intention of the parties to the license agreement. The effect of this change in the license agreement means that we are entitled, but not required, to grant an exclusive or a non-exclusive license to other persons for the manufacture and sale of an extended release formulation of diltiazem that is described in any ANDA for which approval is sought by referencing Biovail's NDA 20-401. We continue to have the right to receive royalties from any licensee who manufactures and sells an extended release formulation of diltiazem using the DOV diltiazem patent. The FTC has approved the license agreement amendment, and the proposed consent order between the FTC and Biovail has been declared final.

Securities Class Action Lawsuits

        From April 29, 2002, a number of class action lawsuits were filed naming us as defendants, certain of our officers and directors and certain of the underwriters in our April 25, 2002 initial public offering of 5,000,000 shares of our common stock. The lawsuits were filed in the United States District Court for the Southern District of New York and the United States District Court for the District of New Jersey. The complaints that have been served allege violations of Sections 11, 12 and 15 of the Securities Act of 1933 as well as Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission, based upon our alleged failure to disclose the filing of a revised registration statement and prospectus for our initial public offering reflecting changes to the 1999 financial statements of our joint venture with Elan Corporation, plc, DOV (Bermuda), Ltd. These class actions were brought on behalf of purchasers of our common stock in or traceable to our initial public offering and seek money damages or rescission. On July 29, 2002, Judge Robert W. Sweet consolidated before him the lawsuits filed in the Southern District of New York and appointed lead plaintiffs and approved the selection of counsel for the lead plaintiffs. On August 16, 2002, Judge Sweet consolidated before him the lawsuits filed in the United States District Court for the District Court of New Jersey with the lawsuits filed in the Southern District. The deadline for the filing of a consolidated complaint has not yet expired. Defendants' time to respond has been extended pending the filing of a consolidated complaint. We believe that we have meritorious defenses to the claims alleged in the class actions and we intend to vigorously defend against the claims. However, litigation is inherently uncertain and we cannot give assurances as to the ultimate outcome or effect of these actions. If the plaintiffs in these actions were to prevail, such an outcome could have a material adverse effect on our financial condition, results of operations and liquidity.

ITEM 2. Changes in Securities and Use of Proceeds

Use of Proceeds from Registered Securities

1)

The effective date of the Securities Act registration statement for which the use of proceeds information is being disclosed was April, 24, 2002, and the Commission file number assigned to the registration statement is 333-81484.

4)

(v) From April 24, 2002 to the date hereof, a reasonable estimate of the amount of expenses incurred by us in connection with the issuance and distribution of the securities in the offering is $6,000,000, which consists of direct payments of (i) $1,300,000 in legal, accounting and printing fees; (ii) $4,550,000 in underwriters discount, fees and commissions; and (iii) $150,000 in miscellaneous expenses. No payments for such expenses were made to (i) any of our directors, officers, general partners or their associates, (ii) any person(s) owning 10% or more of any class of our equity securities, except for $14,500 in

24

reimbursement of initial public offering related legal expenses of shareholder Biotechnology Value Fund, L.P., which together with affiliates, owns 14.22% of our outstanding equity securities or (iii) any of our affiliates.

(vi)

Our net offering proceeds after deducting our total estimated expenses were $59,000,000.



(vii)

As of November 13, 2002, we have invested the net offering proceeds primarily in cash and cash equivalents, short-term money market accounts, and investment-grade securities. No payments out of the net proceeds were made to (i) any of our directors, officers, general partners or their associates, (ii) any person(s) owning 10% or more of any class of our equity securities or (iii) any of our affiliates.

ITEM 5. Other Information

Risk Factors and Factors Affecting Forward-Looking Statements

        If any of the events covered by the following risks occur, our business, results of operations and financial condition could be harmed. In that case, the trading price of our common stock could decline. In addition, our actual results may differ materially from our forward-looking statements as a result of the following factors.

Our stock price is likely to be volatile and the market price of our common stock may decline.

        Prior to our April 25, 2002 initial public offering of 5,000,000 shares of our common stock, there had been no public market for our common stock and an active public market for our common stock may not develop or continue following our initial public offering. Market prices for securities of biopharmaceutical companies have been particularly volatile. In particular, our stock price has experienced a substantial decline since our initial public offering. Some of the factors that may cause the market price of our common stock to fluctuate include:

•

results of clinical trials conducted by us or on our behalf, or by our competitors;



•

business or legal developments concerning our collaborators or licensees, including Elan Corporation, plc, or Elan, and Biovail Laboratories Incorporated, or Biovail;



•

regulatory developments in the United States and foreign countries;



•

developments or disputes concerning patents or other proprietary rights;



•

changes in estimates or recommendations by securities analysts;



•

public concern over our drugs;



•

litigation;



•

future sales of our common stock;



•

general market conditions;



•

changes in the structure of health care payment systems;



•

failure of any of our product candidates, if approved, to achieve commercial success;



•

economic and other external factors or other disasters or crises; and



•

period-to-period fluctuations in our financial results.

        If any of the risks relating to our initial public offering occurred or if any of the foregoing risks occur in the future, it could cause our stock price to fall and may expose us to class action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. In this regard, following a decline in the aftermarket trading price of our common stock in connection with our initial public offering, beginning on April 30, 2002 through the date hereof, a number of class action lawsuits have been filed naming us as defendants, in addition to certain of our officers and directors and certain of our underwriters. For a complete description of these class action lawsuits and the risks they present, please refer to the "Part II—Other Information" section of this report under the subheading "Item 1. Legal Proceedings—Securities Class Action Lawsuits."

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We have incurred losses since our inception and expect to incur significant losses for the foreseeable future, and we may never reach profitability.

        Since our inception in April 1995 through September 30, 2002, we have incurred significant operating losses and, as of September 30, 2002, we had an accumulated deficit of $34.1 million. We have not yet completed the development, including obtaining regulatory approvals, of any product candidate and, consequently, have not generated any revenues from the sale of products. Even if we succeed in developing and commercializing one or more of our product candidates, we may never achieve significant sales revenue and we expect to incur operating losses for the foreseeable future. We also expect to continue to incur significant operating expenses and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we:

•

conduct clinical trials;



•

fund the operations of DOV (Bermuda), Ltd., or DOV Bermuda, our joint venture with Elan;



•

conduct research and development on existing and new product candidates;



•

make milestone and royalty payments;



•

seek regulatory approvals for our product candidates;



•

commercialize our product candidates, if approved;



•

hire additional clinical, scientific and management personnel;



•

add operational, financial and management information systems and personnel; and



•

identify additional compounds or product candidates and acquire rights from third parties to those compounds or product candidates through a grant of a license to us, referred to as in-licensing.

        We need to generate significant revenue to achieve and maintain profitability. We may not be able to generate sufficient revenue and we may never be able to achieve or maintain profitability.

We are dependent on the successful outcome of clinical trials for our five lead product candidates.

        None of our product candidates is currently approved for sale by the United States Food and Drug Administration, or FDA, or by any other regulatory agency in the world, and our product candidates may never be approved for sale or become commercially viable. Before obtaining regulatory approval for the sale of our product candidates, they must be subjected to extensive preclinical and clinical testing to demonstrate their safety and efficacy for humans. Our success will depend on the success of our currently ongoing clinical trials and subsequent clinical trials that have not yet begun.

        There are a number of difficulties and risks associated with clinical trials. The possibility exists that:

•

we may discover that a product candidate may cause harmful side effects;



•

we may discover that a product candidate does not exhibit the expected therapeutic results in humans;



•

results may not be statistically significant or predictive of results that will be obtained from large-scale, advanced clinical trials;



•

we or the FDA may suspend the clinical trials of our product candidates;



•

patient recruitment may be slower than expected; and



•

patients may drop out of our clinical trials.

        Given the uncertainty surrounding the regulatory and clinical trial process, we may not be able to develop safe, commercially viable products. If we are unable to successfully develop and commercialize any of our product candidates, this would severely harm our business, impair our ability to generate revenues and adversely impact our stock price.

We may not receive regulatory approvals for our product candidates or approvals may be delayed.

        Regulation by government authorities in the United States and foreign countries is a significant factor in the development, manufacture and commercialization of our product candidates and in our ongoing research

26

and development activities. All our product candidates are in various stages of research and development and we have not yet requested or received regulatory approval to commercialize any product candidate from the FDA or any other regulatory body.

        In particular, human therapeutic products are subject to rigorous preclinical testing, clinical trials and other approval procedures of the FDA and similar regulatory authorities in foreign countries. The FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale and distribution of biopharmaceutical products. Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each therapeutic indication to establish the product candidate's safety and efficacy. The approval process may take many years to complete and may involve ongoing requirements for post-marketing studies. Additionally, even after receipt of FDA approval, the FDA may request additional trials to evaluate any adverse reactions or long-term effects. The scope and expense of such post-approval trials could be extensive and costly to us. Any FDA or other regulatory approval of our product candidates, once obtained, may be withdrawn. If our product candidates are marketed abroad, they will also be subject to extensive regulation by foreign governments.

        Any failure to receive regulatory approvals necessary to commercialize our product candidates would have a material adverse effect on our business. The process of obtaining these approvals and the subsequent compliance with appropriate federal and state statutes and regulations require spending substantial time and financial resources. If we, or our collaborators or licensees, fail to obtain or maintain or encounter delays in obtaining or maintaining regulatory approvals, it could adversely affect the marketing of any product candidates we develop, our ability to receive product or royalty revenues and our liquidity and capital resources.

Our operating results are subject to fluctuations that may cause our stock price to decline.

        Our revenue is unpredictable and has fluctuated significantly from year-to-year and quarter-to-quarter and will likely continue to be highly volatile. We believe that period-to-period comparisons of our past operating results are not good indicators of our future performance and should not be relied on to predict our future results. For example, in 2000 we recorded no revenue while in 2001 we had $5.7 million in revenue, primarily as a result of license fees from Biovail and a milestone payment from Neurocrine Biosciences, Inc, or Neurocrine. In the future, our operating results in a particular period may not meet the expectations of any securities analysts whose attention we may attract, or those of our investors, which may result in a decline in the market price of our common stock.

We rely entirely on the efforts of Neurocrine for the development, design and implementation of clinical trials, regulatory approval and commercialization of our insomnia compound, indiplon.

        In 1998, we sublicensed indiplon to Neurocrine without retaining any material rights other than the right to receive milestone payments and royalties on product sales, if any. The clinical development, design and implementation of clinical trials, the preparation of filings for FDA approval and, if approved, the subsequent commercialization of indiplon, and all other matters relating to indiplon, are entirely within the control of Neurocrine. We will have no control over this process and, as a result, our ability to receive any revenue from indiplon is entirely dependent on the success of Neurocrine's efforts. Neurocrine may fail or otherwise decide not to devote the resources necessary to successfully develop and commercialize indiplon, which would impair our ability to receive milestone or royalty payments, if any, in respect of indiplon.

Our success in developing our product candidates depends upon the performance of our licensees and collaborative partners.

        Our efforts to develop, obtain regulatory approval for and commercialize our existing and any future product candidates depend in part upon the performance of our licensees and collaborative partners. Currently, we have license and collaborative agreements with Elan, Biovail, Neurocrine and Wyeth-Ayerst, formerly American Cyanamid Company. In connection with these agreements, we have granted certain rights, including development and marketing rights and rights to defend and enforce our intellectual property. We do not have day-to-day control over the activities of our licensees or collaborative partners and cannot assure you that they will fulfill their obligations to us, including their development and commercialization responsibilities in respect of our product candidates. We also cannot assure you that our

27

licensees or collaborators will properly maintain or defend our intellectual property rights or that they will not utilize our proprietary information in such a way as to invite litigation that could jeopardize or potentially invalidate our proprietary information or expose us to potential liability. Further, we cannot assure you that our licensees or collaborators will not encounter conflicts of interest, changes in business strategy or other business issues, or that they will not acquire or develop rights to competing products, all of which could adversely affect their willingness or ability to fulfill their obligations to us. On July 31, 2002, Elan Corporation, plc, our partner in the DOV Bermuda joint venture, announced a recovery plan that includes the divestiture of businesses, assets and products that are no longer core to Elan. If Elan should determine that it no longer wishes to fund the joint venture, we intend to assess our options, including self-funding of Elan's portion of the joint venture or entering into substitute collaborative arrangements. Whatever the outcome of the foregoing, we are committed to pursuing the development of these product candidates on the present schedule.

        Any failure on the part of our licensees or collaborators to perform or satisfy their obligations to us could lead to delays in the development or commercialization of our product candidates and affect our ability to realize product revenues. Disagreements with our licensees or collaborators could require or result in litigation or arbitration, which could be time-consuming and expensive. If we fail to maintain our existing agreements or establish new agreements as necessary, we could be required to undertake development, manufacturing and commercialization activities solely at our own expense. This would significantly increase our capital requirements and may also delay the commercialization of our product candidates.

Our existing collaborative and licensing agreements contain, and any such agreements that we may enter into in the future may contain, covenants that restrict our product development and commercialization activities.

        Our existing license and collaborative agreements contain covenants that restrict our product development or future business efforts and have involved, among other things, the issuance of debt and equity securities, limitations on our ability to license our product candidates to third parties and restrictions on our ability to compete. Because of these restrictive covenants, if our licensees or collaborators fail to fulfill their obligations to us or we are otherwise not able to maintain these relationships, we cannot assure you that we will be able to enter into alternative arrangements or assume the development of these product candidates ourselves. This would significantly affect our ability to commercialize our product candidates. Further, we cannot assure you, even if alternative arrangements are available to us, that they will be any less restrictive on our business activities.

Biovail and the Federal Trade Commission have agreed to a settlement that may lead to a reformation of our license agreement with Biovail.

        Related to the Andrx/Biovail litigation, the Federal Trade Commission, or FTC, commenced an investigation to determine whether Biovail or any other person is engaging in unfair methods of competition. The FTC purported to focus primarily on the legality of Biovail's listing of the DOV diltiazem patent with the FDA. In connection with this investigation, the FTC requested that we provide information regarding our license with Biovail. On April 23, 2002, the FTC announced a complaint against Biovail and a proposed consent order with Biovail to settle the antitrust investigation. The proposed consent order requires Biovail to return to us the exclusive license to manufacture and sell any extended release formulation of diltiazem in the Tiazac field, defined as a drug product that has been approved by the FDA for sale pursuant to NDA 20-401 or that is described in any ANDA for which approval is sought by referencing NDA 20-401. We are not a party to the proposed consent order. On July 18, 2002, the license agreement with Biovail was amended to return to us, without payment, all license rights, exclusive and non-exclusive, to practice the diltiazem patent in the Tiazac field. The effect of this change in the license agreement means that we are entitled, but not required, to grant a non-exclusive license to other persons for the manufacture and sale of an extended release formulation of diltiazem that is described in any ANDA for which approval is sought by referencing Biovail's NDA 20-401. We continue to have the right to receive royalties from any licensee who manufactures and sells an extended release formulation of diltiazem using the DOV diltiazem patent. For a further description of these issues and the risks they present, please refer to the "Part I—Other Information" section of this report under the subheading "Item 1. Legal Proceedings—Federal Trade Commission Investigation."

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Our 80.1% ownership in the Elan joint venture may be significantly reduced and Elan's interest in the joint venture could potentially exceed our interest.

        In connection with our joint venture with Elan, we issued to Elan an $8.0 million convertible exchangeable promissory note. The outstanding principal balance, including accrued unpaid interest, is convertible into shares of our common stock. In the alternative, Elan may elect to exchange the outstanding principal balance of the note for equity in the joint venture sufficient to increase its overall ownership interest equal to ours. If Elan elects to exchange its note, our interest in any profits the joint venture may receive from ocinaplon and bicifadine will be significantly reduced. Elan's ownership could increase further if we fail to meet our future joint venture funding requirements.

If certain technological competitors of Elan acquire at least ten percent of our voting stock or trigger other change of control clauses, Elan may, at its option, terminate its license agreement with the joint venture, which could lead to a termination of the joint venture itself.

        Under the Elan joint venture agreements, Elan has certain change of control rights that, if triggered, would permit it to terminate the license agreement under which Elan granted the right to use its proprietary release technologies to the joint venture. This could also lead to a termination of our license agreement with the joint venture and a termination of the joint venture. Some of Elan's change of control termination protections are triggered if a named technological competitor of Elan:

•

directly or indirectly acquires ten percent or more of our or the joint venture's voting stock, or otherwise controls or influences our or the joint venture's management or business; or



•

enters into any joint venture, collaborative, license or other agreement with us or the joint venture to the extent that the competitor is materially engaged in our or the joint venture's business or development.

        In January 2001, we entered into our license, research and development agreement with Biovail, a named technological competitor of Elan. We do not believe that Elan's consent to that agreement was required since Biovail is not materially engaged in our business or development. Biovail neither holds nor has any options to purchase our voting securities. The patent licensed to Biovail is only one of various patents we hold and DOV diltiazem is one of eight product candidates we are developing. Further, we have retained control of the development of DOV diltiazem, and we retain significant voting rights regarding the patent licensed to Biovail through our participation on the joint oversight committee organized to establish and manage the research and development process. We do not, therefore, believe that Elan is entitled to terminate its license agreement with the joint venture as a result of our entering into the Biovail license agreement without Elan's consent. Nonetheless, we sought consent from Elan, which Elan refused to grant. While Elan has not asserted that its consent was required, objected to our entering into the Biovail license agreement or threatened to terminate its license agreement with the joint venture, it has stated that it reserves its rights with respect to this issue. If Elan seeks to terminate its agreement based on our failure to obtain its consent, we cannot assure you that a court would not ultimately permit such termination. Upon such an event, our ability to successfully develop ocinaplon and bicifadine may be impaired.

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If we are unable to create sales, marketing and distribution capabilities, or enter into agreements with third parties to perform these functions, we will not be able to commercialize our product candidates.

        We do not have any sales, marketing or distribution capabilities. In order to commercialize our product candidates, if any are approved, we must either acquire or internally develop sales, marketing and distribution capabilities or make arrangements with third parties to perform these services for us. If we obtain FDA approval for our existing product candidates, we intend to rely on relationships with one or more pharmaceutical companies or other third parties with established distribution systems and direct sales forces to market our product candidates. If we decide to market any of our product candidates directly, we must either acquire or internally develop a marketing and sales force with technical expertise and with supporting distribution capabilities. The acquisition or development of a sales and distribution infrastructure would require substantial resources, which may divert the attention of our management and key personnel, and negatively impact our product development efforts. Moreover, we may not be able to establish in-house sales and distribution capabilities or relationships with third parties. To the extent we enter into co-promotion or other licensing agreements, our product revenues are likely to be lower than if we directly marketed and sold our product candidates, and any revenue we receive will depend upon the efforts of third parties, which may not be successful.

If we cannot raise additional funding, we may be unable to complete development of our product candidates.

        At September 30, 2002, we had cash and cash equivalents and marketable securities of $62.5 million. We currently have no commitments or arrangements for any financing. We believe that our existing cash and cash equivalents will be sufficient to fund our anticipated operating expenses, debt obligations and capital requirements until at least the end of 2003. We believe that we may require additional funding after that time to continue our research and development programs, including preclinical testing and clinical trials of our product candidates, for operating expenses, and to pursue regulatory approvals for our product candidates. Lack of funding could adversely affect our ability to pursue our business. We cannot assure you that financing will be available when needed on terms acceptable to us, if at all. We may continue to seek additional capital through public or private financing or collaborative agreements. If adequate funds are not available, we may be required to curtail significantly or eliminate one or more of our product development programs.

The success of our business depends upon the members of our senior management team, our scientific staff and our ability to continue to attract and retain qualified scientific, technical and business personnel.

        We are dependent on the members of our senior management team, in particular, our Chief Executive Officer, Dr. Arnold Lippa, our President, Dr. Bernard Beer, our Senior Vice President and Chief Scientific Officer, Dr. Phil Skolnick, and our Senior Vice President, Drug Development, Dr. Laurence Meyerson, for our business success. Moreover, because of the specialized scientific and technical nature of our business, we are also highly dependent upon our scientific staff, the members of our scientific advisory board and our continued ability to attract and retain qualified scientific, technical and business development personnel. Drs. Lippa and Beer each hold a substantial amount of vested common stock not subject to repurchase in the event of termination. We do not carry key man life insurance on the lives of any of our key personnel. There is intense competition for human resources, including management in the scientific fields in which we operate and there can be no assurance that we will be able to attract and retain qualified personnel necessary for the successful development of our product candidates, and any expansion into areas and activities requiring additional expertise. In addition, there can be no assurance that such personnel or resources will be available when needed. The loss of the services of Drs. Lippa, Beer, Skolnick or Meyerson, or other key personnel, could severely harm our business.

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Because some of our patents with respect to some of our product candidates have expired or will expire in the near term, we may be required to rely solely on the Hatch-Waxman Act for market exclusivity.

        A number of patents that we licensed from Wyeth-Ayerst have expired, including the patent that provides protection for the use of DOV 216,303 for the treatment of depression and the use of bicifadine for the treatment of pain. In addition, our patent covering ocinaplon and indiplon is due to expire in June 2003. We currently have patents protecting intermediates useful in the manufacture of ocinaplon that are not due to expire until 2007, and we have applied for additional patents relating to ocinaplon. In addition, Neurocrine has stated that it has filed nine U.S. and foreign patent applications on indiplon. Regardless of these efforts, these patents and patent applications, if approved, may not afford us adequate protection against generic versions of our product candidates or other competitive products. In the event we achieve regulatory approval to market any of our product candidates, including bicifadine, DOV 216,303 or ocinaplon, and we are unable to obtain adequate patent protection for the ultimate marketed product, we will be required to rely to a greater extent on the United States Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, and applicable foreign legislation, to achieve market exclusivity. The Hatch-Waxman Act generally provides for marketing exclusivity to the first applicant to gain approval for a particular drug by prohibiting filing of an abbreviated new drug application, or ANDA, by a generic competitor for up to five years after the drug is first approved. The Hatch-Waxman Act, however, also accelerates the approval process for generic competitors using the same active ingredients once the period of statutory exclusivity has expired. It may also in practice encourage more aggressive legal challenges to the patents protecting approved drugs. In addition, because some of our patents have expired, third parties may develop competing product candidates using our product compounds and if they obtain regulatory approval for those products prior to us, we would be barred from seeking an ANDA for those products under the Hatch-Waxman Act for the applicable statutory exclusivity period.

We face intense competition and if we are unable to compete effectively, the demand for our products, if any, may be reduced.

        The pharmaceutical industry is highly competitive and marked by a number of established, large pharmaceutical companies, as well as smaller emerging companies, whose activities are directly focused on our target markets and areas of expertise. We face and will continue to face competition in the discovery, in-licensing, development and commercialization of our product candidates, which could severely impact our ability to generate revenue or achieve significant market acceptance of our product candidates. Furthermore, new developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur in the pharmaceutical industry at a rapid pace. These developments may render our product candidates or technologies obsolete or noncompetitive. We are focused on developing product candidates for the treatment of central nervous system, cardiovascular and urological disorders, and we have a number of competitors. If one or more of their products or programs are successful, the market for our product candidates may be reduced or eliminated. Compared to us, many of our competitors and potential competitors have substantially greater:

•

capital resources;



•

research and development resources, including personnel and technology;



•

regulatory experience;



•

preclinical study and clinical testing experience; and



•

manufacturing, distribution and marketing experience.

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        As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than us. Our competitors may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates or technologies. Our competitors may also develop drugs that are more effective, useful and less costly than ours and may also be more successful than us and our collaborators or licensees in manufacturing and marketing their products.

        If we are unable to protect our intellectual property, our competitors could develop and market products based on our discoveries, which may reduce demand for our product candidates.

        To a substantial degree, our success will depend on the following intellectual property achievements:

•

our ability to obtain patent protection for our proprietary technologies and product candidates, as well as our ability to preserve our trade secrets;



•

the ability of our collaborators and licensees to obtain patent protection for their proprietary technologies and product candidates covered by our agreements, as well as their ability to preserve related trade secrets; and



•

our ability to prevent third parties from infringing upon our proprietary rights, as well as the ability of our collaborators and licensees to accomplish the same.

        Because of the substantial length of time and expense associated with bringing new products through the development and regulatory approval processes in order to reach the marketplace, the pharmaceutical industry places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. Accordingly, we, either alone or together with our collaborators or licensees, intend to seek patent protection for our proprietary technologies and product candidates. The risk exists, however, that these patents may be unobtainable and that the breadth of the claims in a patent, if obtained, may not provide adequate protection of our, or our collaborators' or licensees', proprietary technologies or product candidates. We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our collaborators, licensees, employees and consultants. We also have confidentiality and invention or patent assignment agreements with our employees and some of, but not all, our collaborators and consultants. If our employees, collaborators or consultants breach these agreements, we may not have adequate remedies for any such breach, and our trade secrets may otherwise become known to or independently discovered by our competitors. In addition, although we own or otherwise have certain rights to a number of patents, the issuance of a patent is not conclusive as to its validity or enforceability, and third parties may challenge the validity or enforceability of our patents or the patents of our collaborators or licensees. We cannot assure you how much protection, if any, will be given to our patents if we attempt to enforce them or if they are challenged in court or in other proceedings. It is possible that a competitor may successfully challenge our patents, or the patents of our collaborators or licensees, or that challenges will result in elimination of patent claims and therefore limitations of coverage. Moreover, competitors may infringe our patents, the patents of our collaborators or licensees, or successfully avoid them through design innovation. To prevent infringement or unauthorized use, we may need to file infringement claims, which are expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the ground that our patents do not cover its technology. In addition, interference proceedings brought by the United States Patent and Trademark Office, or USPTO, may be necessary to determine the priority of inventions with respect to our patent applications or those of our collaborators or licensees. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and be a distraction to management. We cannot assure you that we, or our

32

collaborators or licensees, will be able to prevent misappropriation of our respective proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

The intellectual property of our competitors or other third parties may prevent us from developing or commercializing our product candidates.

        Our product candidates and the technologies we use in our research may inadvertently infringe the patents or violate the proprietary rights of third parties. In addition, other parties conduct their research and development efforts in segments where we, or our collaborators or licensees, focus research and development activities. We cannot assure you that third parties will not assert patent or other intellectual property infringement claims against us, or our collaborators or licensees, with respect to technologies used in potential product candidates. Any claims that might be brought against us relating to infringement of patents may cause us to incur significant expenses and, if successfully asserted against us, may cause us to pay substantial damages. Even if we were to prevail, any litigation could be costly and time-consuming and could divert the attention of our management and key personnel from our business operations. In addition, any patent claims brought against our collaborators or licensees could affect their ability to carry out their obligations to us. Furthermore, as a result of a patent infringement suit brought against us, or our collaborators or licensees, the development, manufacture or potential sale of product candidates claimed to infringe a third party's intellectual property may have to stop or be delayed, unless that party is willing to grant certain rights to use its intellectual property. In such cases, we may be required to obtain licenses to patents or proprietary rights of others in order to continue to commercialize our product candidates. We may not, however, be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even if we, or our collaborators or licensees, were able to obtain rights to a third party's intellectual property, these rights may be non-exclusive, thereby giving our competitors potential access to the same intellectual property. Ultimately, we may be unable to commercialize some of our potential products or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our business.

Our ability to receive royalties and profits from product sales depends in part upon the availability of reimbursement for the use of our products from third-party payors, for which we may or may not qualify.

        Our royalties or profits will be heavily dependent upon the availability of reimbursement for the use of our products from third-party health care payors, both in the United States and in foreign markets. The health care industry and these third-party payors are experiencing a trend toward containing or reducing the costs of health care through various means, including lowering reimbursement rates and negotiating reduced payment schedules with service providers for drug products. These cost containment efforts could adversely affect the market acceptance of our product candidates and may also harm our business. There can be no assurance that we will be able to offset any of or all the payment reductions that may occur. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor's determination that use of a product is:

•

safe, effective and medically necessary;



•

appropriate for the specific patient;



•

cost-effective; and



•

neither experimental nor investigational.

        Reimbursement approval is required from each third-party payor individually, and seeking this approval is a time-consuming and costly process. Third-party payors may require cost-benefit analysis

33

data from us in order to demonstrate the cost-effectiveness of any product we might bring to market. We cannot assure you that we will be able to provide data sufficient to gain acceptance with respect to reimbursement. There also exists substantial uncertainty concerning third-party reimbursement for the use of any drug product incorporating new technology. We cannot assure you that third-party reimbursement will be available for our product candidates utilizing new technology, or that any reimbursement authorization, if obtained, will be adequate.

We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability for a product and may have to limit its commercialization.

        The use of our product candidates in clinical trials and the sale of any approved products may expose us to a substantial risk of product liability claims and the adverse publicity resulting from such claims. These claims might be brought against us by consumers, health care providers, pharmaceutical companies or others selling our products. If we cannot successfully defend ourselves against these claims, we may incur substantial losses or expenses, or be required to limit the commercialization of our product candidates. We have obtained limited product liability insurance coverage for our clinical trials in the amount of $3.0 million per occurrence and $3.0 million in the aggregate. Our insurance coverage, however, may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us would decrease our cash and could cause our stock price to fall.

ITEM 6. Exhibits and Reports on Form 8-K

(a)

Exhibits.

        None.

(b)

Reports on Form 8-K.

        We filed current reports on Form 8-K on May 3, August 12 and October 16, 2002, reporting information under Item 5. Other Events.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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CERTIFICATIONS

        Arnold Lippa, Chief Executive Officer of the Company and Barbara Duncan, Chief Financial Officer of the Company certify as follows:

        (1)  I have reviewed this quarterly report on Form 10-Q of DOV Pharmaceutical, Inc ("Registrant").

        (2)  Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.

        (3)  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Registrant as of, and for, the periods presented in this quarterly report.

        (4)  Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Registrant and we have:

        (a)  designed such disclosure controls and procedures to ensure that material information relating to Registrant is made known to us by others particularly during the period for which this quarterly report is prepared;

        (b)  evaluated the effectiveness of Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

        (c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

        (5)  Registrant's other certifying officer and I have reported, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors:

        (a)  that we have discovered or are aware of no significant deficiencies in the design or operation of internal controls that could adversely affect Registrant's ability to record, process, summarize and report financial data or any material weaknesses in internal controls; and

        (b)  that we have discovered or are aware of no fraud, whether or not material, that involves management or other employees who have a significant role in Registrant's internal control.

        (6)  Registrant's other certifying officer and I have indicated in this quarterly report that there were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation including any corrective actions with regard to significant deficiencies and material weaknesses.

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FURTHER CERTIFICATIONS

        The undersigned officers of DOV Pharmaceutical, Inc. (the "Company") hereby certify that the Company's quarterly report on Form 10-Q for the quarterly period ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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QuickLinks

ITEM I. Financial Statements

ITEM 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations

ITEM 3. Quantitative and Qualitative Disclosures About Market Risks
ITEM 4. Controls and Procedures

ITEM 1. Legal Proceedings
ITEM 2. Changes in Securities and Use of Proceeds
ITEM 5. Other Information

ITEM 6. Exhibits and Reports on Form 8-K