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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

NOVEN PHARMACEUTICALS, INC.

11960 S.W. 144th Street, Miami, Florida 33186
305-253-5099

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

     As of March 1, 2002, there were 22,496,632 shares of Common Stock outstanding.

     The aggregate market value of the voting stock held by non-affiliates of the registrant on March 1, 2002, was approximately $467 million.

DOCUMENTS INCORPORATED BY REFERENCE:

Part III:      Portions of registrant’s Proxy Statement for its 2002 Annual Meeting of Shareholders.

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NOVEN PHARMACEUTICALS, INC.

Annual Report on Form 10-K
for the year ended December 31, 2001

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PART I

Item 1. Business.

General

     Noven Pharmaceuticals, Inc. (“Noven”) is a leader in the development and manufacture of advanced transdermal drug delivery products and technologies and prescription transdermal products. Noven was incorporated in Delaware in 1987, and its principal executive offices are located at 11960 S.W. 144th Street, Miami, Florida 33186; its telephone number is (305) 253-5099.

     Noven’s principal commercialized products are transdermal drug delivery systems for use in hormone replacement therapy. Noven’s first product was an estrogen patch for the treatment of menopausal symptoms marketed under the brand name Vivelle® in the United States and Canada and under the brand name Menorest® in Europe and certain other markets. In May 1999, Noven’s second generation estrogen patch, the smallest transdermal estrogen patch ever approved by the United States Food and Drug Administration (“FDA”), was launched in the United States under the brand name Vivelle-Dot®. This product has been approved in several foreign countries and is expected to be launched in 2002 under the brand name Estradot®. Noven also developed a combination estrogen/progestin transdermal patch for the treatment of menopausal symptoms, which is marketed under the brand name CombiPatch® in the United States and under the brand name Estalis® in Europe and certain other markets. See “Transdermal Drug Delivery — Products” below for a more complete description of Noven’s transdermal products and their marketing status.

     Noven has an active research and development program featuring a broad range of products and therapeutic categories. Two of its development projects are currently in the active clinical trial stage. Noven has completed some clinical trials for several additional products for which it intends to seek a development partner before pursuing further trials. Noven is currently engaged in a second round of Phase III clinical trials for MethyPatch®, its once-daily transdermal methylphenidate delivery system for the treatment of Attention Deficit Hyperactivity Disorder (“ADHD”) which is expected to be completed and evaluated in the first half of 2002. If the Phase III trial is successful, Noven would expect to file a New Drug Application (“NDA”) with the FDA thereafter. Noven believes that this product will address several serious issues associated with existing therapies and, if approved, will compete in the over $1 billion market for drugs that treat ADHD in the United States. No assurance can be given that the results of the pending Phase III trial will support an NDA filing, that Noven will be able to successfully complete and file the NDA in a timely manner, that the product will be approved by the FDA or that, if approved, it will be successfully marketed. See “Research and Development” below for a more complete description of Noven’s product development program, and see “Transdermal Drug Delivery — Products” below for a more complete description of Noven’s methylphenidate product.

Novogyne Pharmaceuticals

     In May 1998, Noven and Novartis Pharmaceuticals Corporation (“Novartis”) formed a joint venture limited liability company called Vivelle Ventures LLC to market and sell women’s prescription healthcare products. The joint venture does business under the name Novogyne Pharmaceuticals (“Novogyne”), and markets Vivelle®, Vivelle-Dot® and CombiPatch® in the United

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States. In 2001, Noven’s equity in earnings of Novogyne represented 74% of Noven’s income before taxes.

     Novogyne is managed by a committee of five members, three appointed by Novartis and two appointed by Noven. Pursuant to the joint venture operating agreement, certain significant actions require a supermajority vote of the committee members. The President of Novogyne is Robert C. Strauss, who also serves as President, Chief Executive Officer and Chairman of the Board of Noven.

     The establishment of Novogyne modified a prior relationship in which Noven had licensed to Novartis the exclusive right to market Vivelle® in the United States and Canada and had received royalties from Novartis based upon Novartis’ sales. Noven initially invested $7.5 million in return for a 49% equity interest in Novogyne. Novartis contributed its rights to Vivelle® to Novogyne and also licensed to Novogyne the right to use the Vivelle® trademark in return for a 51% equity interest in Novogyne. Under the terms of the joint venture agreements, Noven manufactures and supplies Novogyne with Vivelle®, Vivelle-Dot® and CombiPatch®, performs marketing, sales and promotional activities, and receives royalties from Novogyne based on Novogyne’s sales of certain of the products. Novartis distributes Vivelle®, Vivelle-Dot® and CombiPatch® and provides certain other services to Novogyne, including marketing to the managed care sector.

     Novogyne’s management committee has the authority to distribute cash to Novartis and Noven based upon a contractual formula. The joint venture agreements provide for an annual preferred return of $6.1 million to Novartis and then an allocation of income between Novartis and Noven depending upon sales levels attained. Noven’s share of income increases as product sales increase, subject to a maximum of 49%.

     Novogyne acquired the exclusive United States marketing rights to CombiPatch® in March 2001 in a series of transactions involving Novogyne, Noven, Novartis and Aventis Pharmaceuticals, the U.S. pharmaceuticals business of Aventis Pharma AG (“Aventis”). Prior to the transaction, Aventis had been Noven’s exclusive licensee for CombiPatch® in the United States. The transaction was structured as (a) a direct purchase by Novogyne from Aventis of certain assets for $25.0 million, which was paid at closing, (b) a grant-back by Aventis to Noven of certain intellectual property rights relating to CombiPatch®, and (c) a simultaneous license by Noven to Novogyne of these intellectual property rights. The consideration payable by Noven to Aventis, and by Novogyne to Noven, was $40.0 million, which was due in four quarterly installments of $10.0 million each with the final payment in March 2002. As a consequence of the transaction and under the terms of Noven’s existing license agreement with Aventis, Noven received $3.5 million from Aventis, which amount was deferred and recognized as license revenue over ten years beginning in the first quarter of 2001.

     In a related transaction, Novartis Pharma AG (“Novartis AG”) acquired from Aventis the development and marketing rights to future generations of Noven’s combination estrogen/progestin patch in all markets other than Japan, and Novogyne expects to sublicense the United States rights to these product improvements from Novartis AG. If and when any future generation combination products are commercialized and sublicensed to Novogyne, Novogyne will pay a royalty to Novartis AG on the United States sales of such products. Noven manufactures and supplies CombiPatch® and

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expects to manufacture and supply any future combination products to Novogyne and to Novartis AG. Noven expects that Novogyne’s product line will be expanded in the future, although no assurance can be given that Novogyne will add additional products or that such products will be successfully marketed, and any such expansion would be subject to the approval of Novartis.

     Either party may dissolve the joint venture in the event that Novogyne does not achieve certain financial results. Noven expects that the applicable financial targets will be achieved, although no assurance can be given that unexpected events will not affect Novogyne’s financial performance. Dissolution may also result from a change in control of Noven if the acquirer is a top ten pharmaceutical company (as measured by annual dollar sales). Upon dissolution, Novartis would reacquire the rights to market Vivelle® and Vivelle-Dot® subject to the terms of Novartis’ prior arrangement with Noven, and Novogyne’s other assets would be liquidated and distributed to the parties in accordance with their capital account balances as determined pursuant to the joint venture operating agreement. The operating agreement also has a buy/sell provision which allows either party to compel either the purchase of the other party’s interest in Novogyne or the sale of its own interest at a price set by the party triggering the buy/sell provision. Novartis is a larger company with greater financial resources than Noven, and therefore may be in a better position to be the purchaser if the provision is triggered.

Strategy

     Noven’s strategy for continued growth and profitability is to utilize its proprietary transdermal drug delivery technology to establish a leadership position in this field, and to develop and market products utilizing its proprietary transmucosal drug delivery technology. In pursuing this strategy, Noven intends to focus on developing products for the following therapeutic areas: hormone replacement therapy and central nervous system conditions, including ADHD and pain management. On a long-term basis, Noven will seek to (i) establish its own sales force to market certain of its independently developed products, including MethyPatch®, and potentially to acquire products to market through its own sales force, (ii) expand its transdermal technology base, (iii) form new strategic alliances with other pharmaceutical companies, and (iv) capitalize on the opportunity presented by its collaboration with Novartis through Novogyne by licensing certain of Noven’s women’s health products to Novogyne and by expanding Novogyne’s product range beyond transdermal products. No assurance can be given that Noven will successfully implement all or part of its long-term strategy or that its strategy will be successful.

HRT Market Overview

     There are more than 40 million post-menopausal women in the United States, and this group is expected to grow by 50% by 2020. Noven estimates that worldwide sales of all hormone replacement products, including those delivered transdermally, are over $3.5 billion annually and that worldwide transdermal hormone replacement product sales are over $500.0 million annually. With the aging of the population worldwide, conditions and diseases such as menopause, osteoporosis and heart disease, which may benefit from hormone replacement therapy, are expected to become significantly more prevalent.

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     Menopause begins when the ovaries cease to produce estrogen, or when both ovaries are removed surgically prior to natural menopause. The most common acute physical symptoms of natural or surgical menopause are hot flashes and night sweats, which can occur in up to 85% of menopausal women. Another common problem is vaginal dryness. This condition, which affects an estimated 25% of women, usually begins within five years after menopause. Moderate-to-severe menopausal symptoms can be treated by replacing the estrogen that the body can no longer produce. Estrogen replacement therapy relieves hot flashes and night sweats effectively, and prevents drying and shrinking of the reproductive system.

     Another condition related to the inability to produce estrogen is osteoporosis, a progressive deterioration of the skeletal system through the loss of bone mass. The loss of estrogen in menopause causes increased skeletal resorption and decreased bone formation. Osteoporosis currently affects over 20 million women and contributes to approximately 1.5 million fractures annually in the United States. Morbidity and suffering associated with these fractures are substantial. Estrogen replacement prevents the loss of bone mass and reduces the incidence of vertebral and hip fractures in older women. Numerous medical studies and the National Institutes of Health recommend a combination of estrogen replacement therapy, exercise and Vitamin D as the most effective method of preventing osteoporosis in post-menopausal women.

     Various reported studies have suggested that estrogen replacement therapy may reduce the risk of colon cancer and cardiovascular disease, and may prevent or treat osteoarthritis, Alzheimer’s disease, strokes, and tooth loss in menopausal women, but the efficacy of estrogen replacement therapy for the prevention or treatment of these conditions has not been conclusively demonstrated. Other reported studies suggest that prolonged use of estrogen or combination estrogen/progestin hormone replacement therapy may increase the risk of endometrial or breast cancer and/or may present other health risks.

Transdermal Drug Delivery

Description

     Transdermal drug delivery systems utilize an adhesive patch containing medication which is administered through the skin and into the bloodstream over an extended period of time. Transdermal drug delivery systems may offer significant advantages over conventional oral and parenteral dosage forms, including non-invasive administration, controlled delivery, improved patient compliance, reduced abuse potential, and avoidance of certain problems and adverse side-effects.

     Noven’s most advanced patches utilize its patented DOT Matrix™ patch technology. DOT Matrix™ is a highly efficient class of diffusion-based drug-in-adhesive patch technology that can often deliver more drug through less patch area than competitive patches, without using irritating skin permeation enhancers and without compromising adhesion.

     DOT Matrix™ patches, such as Vivelle-Dot®/Estradot®, CombiPatch®/Estalis® and MethyPatch®, utilize a patented blend of silicone, acrylic and drug. This blend causes thousands of microscopic pockets of concentrated drug to be formed and uniformly dispersed throughout the

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patch’s drug/adhesive layer. The resulting high concentration gradient between each drug pocket and the skin works to enhance the diffusion of drug from the patch, through the skin and into the bloodstream. This innate delivery efficiency minimizes the need for skin permeation enhancers. Precise ratios of silicone, acrylic and drug regulate the rate of DOT Matrix™ drug delivery and help assure therapeutic blood levels over the intended course of therapy.

     Noven believes that its technology enables it to develop patient-friendly transdermal systems that improve a patient’s quality of life by reducing skin irritation sometimes associated with transdermal drug delivery systems, improving adhesion and minimizing patch size. Noven’s transdermal drug delivery systems are capable of being modified to deliver a wide variety of chemical entities. With DOT Matrix™ technology, larger molecules, previously believed to be unsuitable for transdermal delivery, can be administered at efficacious doses with minimal irritation. Reduced patch size can have a beneficial effect on patient preference and provide an advantage over competitive patches that deliver similar compounds through a larger patch. DOT Matrix™ technology may also permit Noven to develop patient-friendly patches in cases where, due to the nature of the compound, competitors’ products could not deliver a proper dose without making the patch objectionably large.

Products

First Generation Transdermal Estrogen Delivery System

     Noven’s first generation transdermal estrogen delivery system (marketed as Vivelle®, Menorest®, and Femiest®) is available by prescription and utilizes Noven’s advanced transdermal matrix technology. This product delivers 17-beta estradiol, the primary estrogen produced by the ovaries, through a patch that is applied twice weekly. This product offers five dosage strengths, thereby allowing physicians to maintain patients on the appropriate dose of estrogen.

     This product has been approved for marketing by the FDA, as well as by regulatory authorities in 44 foreign countries, for the treatment of menopausal symptoms. This product has also been approved for marketing in the United States and 40 foreign countries for the prevention of osteoporosis. Marketing rights to this product are held by Novogyne in the United States, by Aventis in Japan, and by Novartis AG in all other territories. Marketing rights outside of the United States and Canada were held exclusively by Aventis until October 1999, when Novartis AG sublicensed Aventis’ rights to market the product in all of Aventis’ exclusive markets other than Japan. Novartis AG is selling this product under the brand name Menorest® in over 20 foreign countries, including France, Germany and the United Kingdom. Novogyne markets this product under the brand name Vivelle® in the United States, Novartis AG’s Canadian affiliate markets this product in Canada, and Aventis markets this product under the brand name Femiest® in Japan.

     Pursuant to license and supply agreements with Novartis AG, Novogyne and Aventis, Noven manufactures Vivelle®, Menorest® and Femiest® for these parties and receives fees based on their sales of the products. The supply agreements for Menorest® and Femiest® are long-term agreements and the supply agreement for Vivelle® expires in January 2003. Noven expects that the Vivelle® supply agreement will be extended on satisfactory terms, but there can be no assurance that the agreement will be extended on satisfactory terms or at all. Failure to extend the supply agreement

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could have a material adverse effect on Noven’s business and results of operations. Designation of a supplier requires the affirmative vote of 4 of the 5 members of Novogyne’s management committee.

Second Generation Transdermal Estrogen Delivery System

     Noven’s continued efforts to improve its matrix patch technology have resulted in the successful development of a second generation transdermal estrogen replacement system called Vivelle-Dot®. This second generation system, utilizing Noven’s proprietary Dot Matrix™ technology, is only one-third the area of a Vivelle® or Menorest® system at any given dosage level, yet provides the same delivery of drug over the same period. This system is even more flexible and comfortable to wear than the first generation product, with a lower potential for skin irritation. This product is bioequivalent to Noven’s first generation product and is available in four dosage strengths. An application is pending with FDA to add a fifth dosage strength and to add a claim for the treatment of osteoporosis. In November 2001, the FDA issued to Novartis an approvable letter relating to this application. There can be no assurance that the conditions in the approvable letter will be met or that the FDA will grant final approval of the application.

     In January 1999, Noven received FDA approval to market Vivelle-Dot® for the treatment of the symptoms of menopause, and, in May 1999, Novogyne launched Vivelle-Dot® in the United States. Aventis has marketing rights for Vivelle-Dot® in Japan. In November 2000, Noven entered into an exclusive license agreement with Novartis AG pursuant to which Noven granted Novartis AG the right to market Vivelle-Dot® under the name Estradot® in all countries other than the United States, Canada and Japan. The agreement also grants Novartis AG marketing rights in the same territories to any product improvements and future generations of estrogen patches developed by Noven. Noven received an up-front license payment of $20.0 million upon execution of the agreement. For accounting purposes, the up-front payment has been deferred and is being recognized as license revenue over 10 years beginning in the fourth quarter of 2000. Under the terms of the agreement, Novartis AG is responsible for seeking approval to market Estradot® in its territory. In March 2001, Estradot® was approved for marketing in the Netherlands. In November 2001, Estradot® successfully completed the European Mutual Recognition Procedure. The product has since been approved for marketing in certain other European countries and the regulatory authorities of other countries are reviewing Novartis’ registration applications. The agreement provides that receipt of regulatory approval in one of several specified countries triggers a $5.0 million milestone payment to Noven. Noven received the $5.0 million payment in the fourth quarter of 2001 even though the applicable approvals had not been obtained. This milestone payment has been deferred and will be recognized as license revenue over the same period as the up-front payment, beginning in the quarter when an applicable approval is obtained. There can be no assurance that Novartis AG will be successful in effecting additional registrations of Estradot®. Novartis markets several other estrogen patches in addition to Noven’s products. The growth of Estradot® sales depends, in part, on Novartis’ willingness and ability to convert sales of its existing patches to Estradot®. There can be no assurance that Novartis will choose to actively convert sales of its existing patches to Estradot®.

     Pursuant to license and supply agreements with Novartis AG and Novogyne, Noven manufactures the product for these parties and receives fees based on their sales of the product. The supply agreement for Estradot® is a long-term agreement and Vivelle-Dot® is supplied under the

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same agreement as Vivelle®. As discussed above, although Noven expects that the supply agreement will be extended, there can be no assurance that it will be extended on satisfactory terms or at all.

Transdermal Combination Estrogen/Progestin Delivery System

     Another of Noven’s major developments in HRT was the first combination transdermal therapy system approved for marketing by the FDA, a combination patch containing 17-beta estradiol and a progestin, norethindrone acetate. Benefits of estrogen replacement therapy include menopausal symptom control, osteoporosis prevention and cardiovascular protection. For women who have an intact uterus (non-hysterectomized), estrogen replacement therapy has been associated with an increased risk of endometrial cancer. To address this situation, a combination therapy of estrogen and progestin is prescribed. Using both products together has been shown to reduce the risk of endometrial cancer while continuing to produce the benefits of estrogen replacement therapy. Further, studies have shown that continuous use of both estrogen and low dose progestin may be effective for many women in eliminating the monthly menstrual cycle or irregular bleeding.

     In 1998, Aventis, Noven’s then exclusive worldwide licensee for this product, received approval from the FDA, as well as regulatory authorities in 13 foreign countries, to market the product for the treatment of menopausal symptoms. As described above in “Business – Novogyne Pharmaceuticals”, Novogyne acquired marketing rights to the product in March 2001 and markets the product under the brand name CombiPatch® in two dosage strengths in the United States, where it is the only available combination HRT patch. Pursuant to the October 1999 sublicense by Aventis to Novartis AG described above, Novartis AG also acquired the right to market this product outside of the United States and Japan and is marketing this product under the brand name Estalis® in a number of foreign countries. Estalis® is presently only approved in one dosage strength in most European countries. While Novartis AG has advised Noven that it intends to seek approval for a second dosage strength, no assurance can be given that Novartis AG will seek such approval or will be successful, and no assurance can be given as to the timing of any such approval or launch in any given country. Noven expects that growth in Estalis® sales outside of the United States will be limited unless and until a second dosage strength (which is approved in the United States) is approved and launched.

     In June 2001, Noven and Novartis AG entered into a development agreement relating to future generations of combination estrogen/progestin patch products.

     Pursuant to license and long-term supply agreements with Novartis AG and Novogyne, Noven manufactures the combination product for these parties and receives fees based on their sales of the product.

Transdermal Methylphenidate Delivery System

     Noven has developed a once-daily transdermal methylphenidate patch for the treatment of ADHD. ADHD is the most commonly diagnosed and the most widely studied behavioral disorder in children in the United States. ADHD is characterized by developmentally inappropriate levels of attention, concentration, activity, distractibility and impulsivity symptoms. The disorder typically causes functional impairment that can limit success and create hardship in school, at work, and in

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social and familial relationships. As children age, the symptoms can lead to serious conduct disorders, criminal behavior, substance abuse and accidental injuries.

     While prevalence rates can vary dramatically from study to study, it is widely reported that ADHD affects about 3 to 5% of school-aged children in the United States, over 2 million children nationwide. Prevalence rates vary among studies because of differences in diagnostic criteria. Stimulant therapies, including methylphenidate, are the most prescribed drug type for the treatment of ADHD. ADHD symptoms often persist into adolescence and adulthood. Some studies have reported that ADHD will persist into adulthood in up to 60% of individuals. Industry analysts have valued the ADHD market at over $1 billion, with as many as 1.5 million children receiving pharmacological treatment for ADHD.

     Presently, all ADHD medications approved in the United States are delivered orally, and the majority of patients require more than one dose per day. Noven expects that its patch, worn under clothing, would eliminate the stigma that many children suffer when receiving oral medication during the school day, and may reduce the drug diversion and abuse issues that affect most pill formulations. Noven also believes that its product will provide physicians with broad dosing flexibility, because dosing can be discontinued by simply removing the patch. Noven completed a Phase III clinical study for MethyPatch® in March 2001, and the results of that study were inconclusive. In November 2001, Noven commenced another Phase III study with a revised dosing regimen, which is expected to be completed and evaluated in the first half of 2002. If this study is completed and is successful, Noven would expect to file an NDA with the FDA thereafter. No assurance can be given that the results of the Phase III trial will support an NDA filing, that Noven will be able to successfully complete and file the NDA in a timely manner or that the NDA will be approved.

     The market for ADHD drugs is highly competitive, with a product mix that includes generic methylphenidate, other stimulant medications and a variety of other drug types. There are several other once-daily ADHD medications on the market, and other products which may have improved safety and efficacy profiles are also in development. There can be no assurance that Noven will successfully commercialize the product or that it will compete effectively against extended release oral formulations of methylphenidate and/or other ADHD medications. Some of the companies marketing competitive products are substantially larger and have greater financial resources than Noven, as well as greater experience commercializing pharmaceutical products.

Dependence on Licensees and Joint Venture

     During 2001, 45%, 43% and 10% of Noven’s revenues were generated from sales to, and contract revenue, fees and royalties received from, Novogyne, Novartis AG, and Aventis, respectively, and 74% of Noven’s income before taxes was attributable to Noven’s equity in Novogyne’s earnings. Noven expects to be dependent on sales to Novartis AG and Novogyne, as well as fees and royalties generated from such parties’ sales of its transdermal delivery systems, for a significant portion of its expected revenues for the next several years, and no assurance can be given regarding the amount and timing of such revenues. Failure of either of these parties to successfully market Noven’s products would cause the quantity of products purchased from Noven and the amount of fees and royalties ultimately paid to Noven to be reduced and would therefore have a

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material adverse effect on Noven’s business and results of operations. Noven expects to be able to exert influence on the marketing of Vivelle®, Vivelle-Dot® and CombiPatch® in the United States through its participation in the management of Novogyne, but the management committee of Novogyne is comprised of a majority of Novartis representatives. With respect to Novartis AG’s marketing efforts, Noven’s agreements with Novartis AG impose certain obligations on Novartis AG, but there can be no assurance that such agreements will provide Noven with any meaningful level of protection or cause Novartis AG to perform at a level that Noven deems satisfactory.

     In addition to Noven’s dependence on sales by licensees, Noven expects that a significant amount of its earnings for at least the next several years will be generated through its interest in Novogyne, and no assurance can be given regarding Novogyne’s future profitability. Novogyne’s sales force is significantly smaller than the sales forces promoting several competitive products, and there can be no assurance that Novogyne’s sales force will be successful. CombiPatch® prescription trends declined during 2000 and have not improved significantly since Novogyne acquired marketing rights to CombiPatch® in March 2001, and there can be no assurance that Novogyne’s sales force will be successful in growing CombiPatch® sales. Failure of Novogyne to successfully market Vivelle®, Vivelle-Dot® or CombiPatch® would have a material adverse effect on Noven’s business and results of operations. See “Competition” below for a more complete description of the competitive factors affecting Noven and its business.

Transmucosal Drug Delivery

Description

     Large, complex, bioengineered molecules such as peptides, proteins and carbohydrates typically require an injectable route of delivery. When taken orally (as capsules or tablets) they are broken down and largely inactivated in the stomach and intestines. The transdermal route is also unsuitable for these molecules because they are often too large to pass through intact skin. Transmucosal drug delivery utilizing Noven’s transmucosal patch technology may offer a viable alternative. The lining of the mouth is thin and highly vascular, and drugs can pass rapidly across the mucosa and into the bloodstream without being subjected to breakdown in the gastrointestinal tract. Noven’s oral patch technology provides the opportunity to focus and maintain a high concentration of drug against the mucosa to maximize absorption. Noven’s transmucosal drug delivery system utilizes a bio-adhesive patch containing medication which adheres to the buccal mucosa. The system then administers the drug across the mucosa and into the bloodstream. Transmucosal drug delivery also has many of the advantages associated with transdermal drug delivery, including non-invasive administration and controlled delivery.

     There are many other companies active in the development of transmucosal delivery systems. Challenges faced by Noven and these companies in developing marketable transmucosal systems include designing a stable transmucosal platform that will deliver drug at a predictable rate, creating an adhesive system that will adhere in a wet environment, designing a product that a patient will find comfortable to wear, and identifying suitable compounds for incorporation into the system.

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Products

     DentiPatch® — Transmucosal Lidocaine Delivery System

     Noven’s first transmucosal delivery system, the DentiPatch® system, is a patented, proprietary technology consisting of a thin, solid state multi-laminate construction with a drug-bearing bio-adhesive that delivers lidocaine through the buccal mucosa over time. DentiPatch® was approved for marketing by the FDA in May 1996 and is the first FDA-approved, and still the only commercially available, oral transmucosal patch. Noven launched the product nationwide in April 1997. The product is indicated for the amelioration of pain from oral injections and soft tissue dental procedures. It is the first topical anesthetic clinically proven to prevent pain when large needles are inserted to the bone. Noven is currently marketing the DentiPatch® system in the United States through a network of independent distributors. Sales of DentiPatch® do not contribute meaningfully to Noven’s results of operations.

Research and Development

     For the years ended December 31, 2001, 2000 and 1999, Noven spent $11.0 million, $13.6 million and $7.2 million, respectively, for company-sponsored research and development activities. From time to time, Noven may supplement its research and development efforts by entering into research and development agreements, joint ventures and other collaborative arrangements with other companies. Research on certain products has been suspended pending the identification of an appropriate business partner. In allocating research and development dollars and resources, Noven may devote greater resources to the development of products that Noven believes it can market and sell without a business partner. Noven’s research and development philosophy is to identify drugs that can be delivered either transdermally or transmucosally, which can be developed rapidly and which have substantial market potential. Noven also seeks therapies that can be improved by using Noven’s innovative technologies. Noven will typically seek to develop products that use established agents which currently are being delivered to patients other than transdermally or transmucosally. In addition, Noven may enter into agreements to develop transdermal drug delivery systems utilizing proprietary compounds of other companies.

     Noven’s research and development expense may vary significantly from quarter to quarter depending on product development cycles and the timing of clinical studies. Noven intends to focus on long-term growth prospects, and therefore may incur higher than expected research and development expenses in a given period rather than delay clinical activities. These variations in research and development spending may not be accurately anticipated and may have a material effect on Noven’s results of operations.

     The length of time necessary to complete clinical trials, and from submission of an application for market approval to a final decision by a regulatory authority, varies significantly. No assurance can be given that Noven will have the financial resources necessary to complete products under development, that those projects to which Noven dedicates sufficient resources will be successfully completed, that Noven will be able to obtain regulatory approval for any such product, or that any approved product may be produced in commercial quantities, at reasonable costs, and be successfully marketed, either by Noven or by a licensing partner. Similarly, there can be no

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assurance that Noven’s competitors, many of whom have greater resources than Noven, will not develop and introduce products that will adversely affect Noven’s business and results of operations.

     The following table summarizes as of March 1, 2002 the status of products marketed, approved and/or under development by Noven and is qualified by reference to the more detailed descriptions elsewhere in this Form 10-K. Noven has additional products in early development and continuously evaluates other drugs that may be suitable for transdermal or transmucosal delivery.

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*  These products are available for licensing, and Noven does not intend to further the development of these products unless and until it has entered an agreement with another company to assist in the development. There can be no assurance that Noven will be able to identify any such development partner or that it will be able to enter into a license or development agreement on commercially reasonable terms. The failure to enter into such an agreement could negatively affect the ability of Noven to develop, manufacture and commercialize these products and may result in the discontinuation of these development projects.

Manufacturing

     Noven conducts its manufacturing operations in a facility comprised of two approximately 40,000 square foot buildings located on approximately 10 acres in Miami-Dade County, Florida. This facility has been inspected by the FDA and by the Medicines Control Agency of the United Kingdom and found to be in compliance with applicable regulatory requirements. This facility has also been certified by the Drug Enforcement Administration to manufacture products containing controlled substances. This facility is currently producing Menorest®, Vivelle®, Femiest®, Vivelle-Dot®, Estradot®, CombiPatch®, Estalis® and DentiPatch® for commercial sale. With this facility, Noven’s manufacturing capability is approximately 400 million patches per year. There is sufficient room for further development of facilities at this site that would significantly increase Noven’s manufacturing capacity to accommodate additional products under development. Noven anticipates that full development of this site, including possible new construction on the property, can accommodate Noven’s space requirements for the foreseeable future. No assurance can be given that Noven will have the financial resources necessary to expand adequately its manufacturing capacity if and when the need arises.

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     Noven has the capacity to design, develop, build and maintain its production equipment, including fabrication of replacement parts where appropriate. Additionally, Noven’s engineering expertise provides valuable support to its research and development groups by rapidly fabricating or modifying equipment essential in the product development program.

     Raw materials essential to Noven’s business are generally readily available from multiple sources. Certain raw materials and components used in the manufacture of Noven’s products are, however, available from limited sources, and in some cases, a single source. Any curtailment in the availability of such raw materials could be accompanied by production or other delays, and, in the case of products for which only one raw material supplier exists, could result in a material loss of sales, with consequent adverse effects on Noven’s business and results of operations. In addition, because raw material sources for pharmaceutical products must generally be approved by regulatory authorities, changes in raw material suppliers may result in production delays, higher raw material costs and loss of sales, customers and market share.

Marketing

     Except for the DentiPatch® product, Noven has historically granted marketing rights to its products to its joint venture company, Novogyne, or to larger pharmaceutical companies. As Noven develops new products, it will evaluate whether to license such products to a larger company or to Novogyne or to utilize its own clinical, marketing and sales capabilities. Noven’s evaluation will be conducted on a product-by-product basis and will include consideration of the characteristics of the particular market and the estimated costs associated with clinical studies, sales, marketing and distribution. These combined costs and Noven’s financial position will be factored into the decision whether to license or directly conduct clinical trials and market the product. Noven expects that it will seek to retain manufacturing rights in any future licensing transactions, partly in an effort to safeguard its proprietary technology. There can be no assurance that Noven will be able to reach a favorable agreement in any particular transaction or collaborative arrangement.

     The establishment of Novogyne provided Noven with a sales force over which it has substantial day-to-day management control. If Noven develops any products in the future for the women’s healthcare market, it may seek to license the marketing rights for such products to Novogyne.

     If Noven is able to successfully complete its clinical program and file an NDA for its MethyPatch® product, Noven expects to establish a sales force to sell MethyPatch® in the United States rather than granting exclusive marketing rights to a third party. Establishing a sales force, and expanding Noven’s sales and marketing infrastructure to support the sales force, would require the expenditure of substantial funds. There can be no assurance that, if MethyPatch® is approved for marketing by the FDA, Noven will generate sufficient sales of the product to cover the expense of Noven’s sales and marketing organization and/or to realize adequate profits. In addition, some of these expenses may be incurred prior to receipt of marketing approval. In the event that MethyPatch® is not approved for marketing, these expenses will not be recovered. Additionally, any delays in organizing a sales force for Noven’s MethyPatch® product could have an adverse impact on Noven’s ability to market the product and to realize profits from sales of the product.

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Competition

     The markets for Noven’s products are highly competitive. All drug delivery products being developed by Noven will face competition from both conventional forms of drug delivery (i.e., oral and parenteral), and possibly alternate forms of drug delivery, such as controlled release oral delivery, liposomes, implants, gels and creams. In addition, some or all of the products being marketed or developed by Noven face, or will face, competition from other transdermal or transmucosal products that deliver the same drugs to treat the same indications.

     Competition in drug delivery systems is generally based on a company’s marketing strength, product performance characteristics (i.e., reliability, safety, patient convenience) and product price. Acceptance by physicians and other health care providers, including managed care groups, is also critical to the success of a product. The first product on the market in a particular therapeutic area typically is able to obtain and maintain a significant market share. In a highly competitive marketplace and with evolving technology, there can be no assurance that additional product introductions or developments by others will not render Noven’s products or technologies noncompetitive or obsolete.

     Noven faces competition from a number of companies in the development of transdermal and transmucosal drug delivery products, and competition is expected to intensify as more companies enter the field. Competitors include Elan Corporation, plc, Watson Pharmaceuticals, Inc., Mylan Pharmaceuticals, Inc., LTS Lohmann Therapie-Systeme AG, Ethical Holdings, plc, Johnson & Johnson, Schering-Plough Corporation, 3M Corporation, Groupe Fournier and others. Some of these companies are substantially larger than Noven and have greater financial and research and development resources than Noven, as well as greater experience in developing and commercializing pharmaceutical products. Noven also competes with other drug delivery companies in the establishment of business arrangements with large pharmaceutical companies to assist in the development or marketing of products.

     Noven has attempted to minimize certain competitive risks by its technological innovation and by developing strategic alliances with larger pharmaceutical companies. Noven also believes that its hormone replacement systems have certain competitive advantages, such as their small size, excellent adhesion, reduced skin irritation and broad dosing ranges.

     Other competitive factors affecting Noven’s business include the prevalence and influence of managed care organizations, government organizations, buying groups and similar institutions that are able to seek price discounts and rebates on pharmaceutical products. As the influence of these entities continues to grow, Noven and its marketing partners may face increased pricing pressure. Outside of the United States, Noven’s products may be affected by government price controls and reimbursement policies.

Patents and Proprietary Rights

     Noven seeks to obtain patent protection on its delivery systems and manufacturing processes where possible. Noven has obtained over 25 United States patents and over 120 foreign patents relating to its transdermal and transmucosal delivery systems and manufacturing processes, and has over 100 pending patent applications worldwide.

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     As a result of the changes in United States patent law under the General Agreement on Tariffs and Trade and the accompanying Agreement on Trade-Related Aspects of Intellectual Property Law, which took effect in their entirety on January 1, 1996, the terms of some existing Noven patents have been extended beyond the term of seventeen years from the date of grant. Noven patents filed after June 7, 1995 will have a term of twenty years computed from the effective filing date.

     Noven is unaware of the existence of any challenge to the validity of its patents or of any third party claim of patent infringement with respect to any of its products that could have a material adverse effect on Noven’s business or prospects.

     Although there is a statutory presumption as to a patent’s validity, the issuance of a patent is not conclusive as to such validity, or as to the enforceable scope of the claims of the patent. There is no assurance that Noven’s patents or any future patents will prevent other companies from developing similar or functionally equivalent products. Furthermore, there is no assurance that any of Noven’s future processes or products will be patentable, that any pending or additional patents will be issued in any or all appropriate jurisdictions or that Noven’s processes or products will not infringe upon the patents of third parties.

     Noven also attempts to protect its proprietary information under trade secret laws. Generally, Noven’s agreements with each employee, licensing partner, consultant, university, pharmaceutical company and agent contain provisions designed to protect the confidentiality of its proprietary information. There can be no assurance that these agreements will not be breached, that Noven will have adequate legal remedies as a result thereof, or that Noven’s trade secrets will not otherwise become known or be independently developed by others.

Government Regulation

     Noven’s operations are subject to extensive regulation by governmental authorities in the United States and other countries with respect to the testing, approval, manufacture, labeling, marketing and sale of pharmaceutical products. Noven devotes significant time, effort and expense to address the extensive government regulations applicable to its business.

     The marketing of pharmaceutical products requires the approval of the FDA in the United States. The FDA has established regulations, guidelines and safety standards which apply to the pre-clinical evaluation, clinical testing, manufacturing and marketing of pharmaceutical products. The process of obtaining FDA approval for a new product may take several years and is likely to involve the expenditure of substantial resources. The steps required before a product can be produced and marketed for human use typically include: (i) pre-clinical studies; (ii) submission to the FDA of an Investigational New Drug Exemption (“IND”), which must become effective before human clinical trials may commence in the United States; (iii) adequate and well controlled human clinical trials; (iv) submission to the FDA of a New Drug Application (“NDA”) or, in some cases, an Abbreviated New Drug Application (“ANDA”); and (v) review and approval of the NDA or ANDA by the FDA.

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     An NDA generally is required for products with new active ingredients, new indications, new routes of administration, new dosage forms or new strengths. An NDA requires that complete clinical studies of a product’s safety and efficacy be submitted to the FDA, the cost of which is substantial. These costs can be reduced, however, for delivery systems which utilize approved drugs.

     An ANDA involves an abbreviated approval process that may be available for products that have the same active ingredient(s), indication, route of administration, dosage form and dosage strength as an existing FDA-approved product, if clinical studies have demonstrated bio-equivalence of the new product to the FDA-approved product. Under FDA ANDA regulations, companies that seek to introduce an ANDA product must also certify that the product does not infringe on the approved product’s patent or that such patent has expired. If the applicant certifies that its product does not infringe on the approved product’s patent, the patent holder may institute legal action to determine the relative rights of the parties and the application of the patent, and the FDA may not finally approve the ANDA until a court finally determines that the applicable patent is invalid or would not be infringed by the applicant’s product.

     Pre-clinical studies are conducted to obtain preliminary information on a product’s safety. The results of these studies are submitted to the FDA as part of the IND and are reviewed by the FDA before human clinical trials begin. Human clinical trials may commence 30 days after receipt of the IND by the FDA, unless the FDA objects to the commencement of clinical trials.

     Human clinical trials are typically conducted in three sequential phases, but the phases may overlap. Phase I trials consist of testing the product primarily for safety in healthy volunteers or a small number of patients at one or more doses. In Phase II trials, the safety and efficacy of the product are evaluated in a patient population somewhat larger than the Phase I trials. Phase III trials typically involve additional testing for safety and clinical efficacy in an expanded population at different clinical test sites. A clinical plan, or protocol, accompanied by the approval of the institution participating in the trials, must be submitted to the FDA prior to commencement of each phase of the clinical trials. The FDA may order the temporary or permanent discontinuation of a clinical trial at any time.

     The results of product development and pre-clinical and clinical studies are submitted to the FDA as an NDA or an ANDA for approval. If an application is submitted, there can be no assurance that the FDA will review and approve the NDA or an ANDA in a timely manner. The FDA may deny an NDA or an ANDA if applicable regulatory criteria are not satisfied or it may require additional clinical testing. Even if such data is submitted, the FDA may ultimately deny approval of the product. Further, if there are any modifications to the drug, including changes in indication, manufacturing process, labeling, or a change in a manufacturing facility, an NDA or an ANDA supplement may be required to be submitted to the FDA. Product approvals may be withdrawn after the product reaches the market if compliance with regulatory standards is not maintained or if problems occur regarding the safety or efficacy of the product. The FDA may require testing and surveillance programs to monitor the effect of products which have been commercialized, and has the power to prevent or limit further marketing of these products based on the results of these post-marketing programs.

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     The approval procedures for the marketing of Noven’s products in foreign countries vary from country to country, and the time required for approval may be longer or shorter than that required for FDA approval. Even after foreign approvals are obtained, further delays may be encountered before products may be marketed. For example, many countries require additional governmental approval for price reimbursement under national health insurance systems. If practical and acceptable to the FDA, Noven intends to design its protocols for the clinical studies of its products to permit acceptance of the data by foreign regulatory authorities and to thereby reduce the risk of duplication of clinical studies. However, additional studies may be required to obtain foreign regulatory approval. Further, some foreign regulatory agencies may require additional studies involving patients located in their countries.

     Manufacturing facilities are subject to periodic inspections for compliance with the FDA’s good manufacturing practices (“GMP”) regulations and each domestic drug manufacturing facility must be registered with the FDA. Foreign regulatory authorities may also have similar regulations. In complying with standards set forth in these regulations, Noven must expend significant time, money and effort in the area of quality assurance to insure full technical compliance. Facilities handling controlled substances, such as Noven’s, also must be licensed by the United States Drug Enforcement Administration, and are subject to more extensive regulatory requirements than those facilities not licensed to handle controlled substances. Noven has produced transdermal drug delivery products in accordance with the FDA’s GMP regulations for clinical trials, manufacturing process validation studies and commercial sale. FDA approval to manufacture a drug is site specific. In the event an approved manufacturing facility for a particular drug becomes inoperable, obtaining the required FDA approval to manufacture such drug at a different manufacturing site could result in production delays, which could adversely affect Noven’s business and results of operations.

     The federal and state governments in the United States, as well as many foreign governments, from time to time explore ways to reduce medical care costs through health care reform. Due to uncertainties regarding the ultimate features of reform initiatives and their enactment and implementation, Noven cannot predict what impact any reform proposal ultimately adopted may have on the pharmaceutical industry or on the business or operating results of Noven.

     Noven’s activities are subject to various federal, state and local laws and regulations regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, and may be subject to other present and possible future local, state, federal and foreign regulations. Under certain of these laws, Noven could be liable for substantial costs and penalties in the event that waste is disposed of improperly. While it is impossible to accurately predict the future costs associated with environmental compliance and potential remediation activities, compliance with environmental laws is not expected to require significant capital expenditures and has not had, and is not presently expected to have, a material adverse effect on Noven’s earnings or competitive position.

Employment

     Noven employs approximately 252 people; approximately 97 are engaged in manufacturing and process development, 19 in research and development, 57 in clinical research, regulatory affairs, quality assurance and quality control and 79 in marketing and administration. No employee is

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represented by a union and Noven has never experienced a work stoppage. Noven believes its employee relations are good. In addition to the employees employed directly by Noven, Novogyne has a contract sales force of approximately 120 individuals that are managed by Noven under the terms of the Novogyne joint venture agreements.

Risk of Product Liability Claims

     Testing, manufacturing and marketing pharmaceutical products subject Noven to the risk of product liability claims. Noven believes that it maintains an adequate amount of product liability insurance, but there can be no assurance that its insurance will cover all future claims or that Noven will be able to maintain existing coverage or obtain additional coverage at reasonable rates. There can be no assurance that claims arising under any product liability cases, whether or not covered by insurance, will not have a material adverse effect on Noven’s business, financial condition or results of operations.

Seasonality

     There are no significant seasonal aspects to Noven’s business.

Item 2. Properties.

     Noven’s headquarters and manufacturing facilities are located on a 10 acre site in Miami, Florida. On this site, Noven owns an approximately 28,000 square foot building which is used for laboratory, office and administrative purposes. Noven also leases from Aventis, for nominal rent, two approximately 40,000 square foot buildings on this site, which are being used by Noven for manufacturing, engineering, administrative and warehousing purposes. One of these facilities has been certified by the Drug Enforcement Administration to manufacture products containing controlled substances. The lease expires in 2024 and Noven has an option to purchase the leased facilities at any time during the term. Aventis may terminate the lease prior to the expiration of its term upon termination or expiration of the 1992 license agreement between Noven and Aventis. Noven expects that it will have sufficient cash to purchase the facility in this event. Nonetheless, if Noven were unable to purchase the facility, termination of the lease by Aventis could have a material adverse effect on the business and results of operations of Noven.

     Noven also owns 5 acres of vacant land on a contiguous site that could accommodate new buildings for a variety of manufacturing, warehousing and developmental purposes. Noven believes that its facilities are in satisfactory condition, are suitable for their intended use and, in the aggregate, have capacities in excess of those necessary to meet Noven’s present needs.

     Noven’s sole manufacturing facility and its research and development activities, as well as its corporate headquarters and other critical business functions, are located in an area subject to hurricane casualty risk. Although Noven has certain limited protection afforded by insurance, Noven’s business, earnings and competitive position could be materially adversely affected in the event of a major windstorm or other casualty.

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Item 3. Legal Proceedings.

     Deborah A. Kaliser v. Noven Pharmaceuticals, Inc., Robert C. Strauss, James B. Messiry, and Steven Sablotsky, United States District Court, Southern District of Florida; November 8, 2001.

     Bernard Middleton, et al., v. Noven Pharmaceuticals, Inc., Robert C. Strauss, James B. Messiry, and Steven Sablotsky, United States District Court for the Southern District of Florida; November 20, 2001.

     Evelyne Shabo, et al., v. Noven Pharmaceuticals, Inc., Robert C. Strauss, James B. Messiry, and Steven Sablotsky, United States District Court for the Southern District of Florida; December 12, 2001.

     Leah Constantine, et al., v. Noven Pharmaceuticals, Inc., Robert C. Strauss, James B. Messiry, and Steven Sablotsky, United States District Court for the Southern District of Florida; December 17, 2001.

     Joseph A. Papa, et al., v. Noven Pharmaceuticals, Inc., Robert C. Strauss, James B. Messiry, and Steven Sablotsky, United States District Court for the Southern District of Florida; January 3, 2002.

     These actions are essentially identical actions brought by plaintiffs that purport to represent a class of purchasers of Noven’s common stock during the period March 27 through November 1, 2001. Plaintiffs allege that during that period, Noven and its officers and directors named as defendants violated Sections 10 and 20 of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by making material misstatements and omissions regarding international sales of certain of Noven’s products that are the subject of an exclusive license agreement with Novartis Pharma AG. Plaintiffs seek unspecified damages, for themselves and the class, based on the allegedly artificially inflated prices they paid for their shares of Noven’s common stock. On March 12, 2002, the Court entered an order consolidating all of the captioned actions into a single consolidated action and directing plaintiff’s counsel to file a single amended and consolidated complaint.

     Noven believes that these lawsuits are without merit and intends to vigorously defend these lawsuits, but their respective outcomes cannot be predicted. Any of such lawsuits, if determined adversely to Noven, could have a material adverse effect on Noven’s financial position and results of operations. Noven’s ultimate liability with respect to any of the foregoing proceedings is not presently determinable.

     Noven is a party to other pending legal proceedings arising in the normal course of business, none of which Noven believes is material to its financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.

     Noven did not submit any matters to a vote of stockholders during the fourth quarter of the fiscal year ended December 31, 2001.

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Executive Officers of the Registrant

     Set forth below is a list of the names, ages, positions held and business experience of the persons serving as executive officers of Noven as of March 1, 2002. Officers serve at the discretion of the Board of Directors. There is no family relationship between any of the executive officers or between any of the executive officers and any of Noven’s directors, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected.

     Jeffrey F. Eisenberg.     Mr. Eisenberg, age 36, has been with Noven since November 1998 and, since November 2000, has served as Vice President – Strategic Alliances, General Counsel & Corporate Secretary. From 1995 through 1998, Mr. Eisenberg served as Associate General Counsel and then as Acting General Counsel of IVAX Corporation.

     W. Neil Jones.     Mr. Jones, age 49, has been with Noven since February 1997 and, since November 2000, has served as Vice President — Marketing & Sales. From 1981 through 1997, he served Ciba-Geigy Corporation in a variety of sales and marketing positions, most recently as Executive Director of Marketing.

     Juan A. Mantelle.     Mr. Mantelle, age 43, has been with Noven since March 1990 and, since June 2000, has served as Vice President & Chief Technical Officer. From December 1986 to March 1990, he served Paco Research Corp. as Manager – Product Development. From April 1983 to December 1986, he served Key Pharmaceuticals, Inc. as Senior Research Engineer.

     James B. Messiry.     Mr. Messiry, age 59, has been Vice President & Chief Financial Officer of Noven since January 1999. From 1979 through 1984, and subsequently from 1991 until 1998, he served the Bacardi group of companies in a variety of senior executive positions in Europe and North America, most recently as Vice President of Bacardi-Martini, Inc. Between 1985 and 1991, Mr. Messiry held senior finance positions at Beatrice Latin America and Dole Fresh Fruit. From 1973 to 1979, Mr. Messiry served Pfizer, Inc. in various financial and strategic planning roles.

     Robert C. Strauss.     Mr. Strauss, age 60, has been President, Chief Executive Officer & Chairman of the Board of Noven since June 2001. From December 1997 to September 2000, he served as President & Chief Executive Officer and as a Director of Noven, and from September 2000 to June 2001, he served as Co-Chairman of Noven. From March 1997 to July 1997, he served as President and Chief Operating Officer and a Director of IVAX Corporation. From 1983 to 1997, he served in various executive positions with Cordis Corporation, most recently as its Chairman of the Board, President and Chief Executive Officer. Mr. Strauss serves on the Board of Directors of CardioGenesis Corporation (medical devices), Columbia Laboratories, Inc. (pharmaceuticals), Percardia Inc. (medical devices) and TissueLink Medical, Inc. (surgical devices and procedures).

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

     (a)  Market Information

     Noven’s Common Stock is listed on the Nasdaq Stock Market and is traded under the symbol NOVN. The following table sets forth, for the periods indicated, the high and low sale prices for the Common Stock as reported on the Nasdaq Stock Market.

     (b)  Holders.

     As of March 1, 2002 the number of stockholders of record was 345.

     (c)  Dividends.

     Noven has never paid a cash dividend on its Common Stock and intends to retain all earnings for the operation and expansion of its business and does not anticipate paying cash dividends in the foreseeable future.

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Item 6. Selected Financial Data.

     The selected financial data presented below is derived from the audited financial statements of Noven. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Financial Statements and related notes appearing elsewhere in this Form 10-K.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     The following discussion and analysis should be read in conjunction with the 2001 financial statements and the related notes included in this Form 10-K.

General

     From its inception in 1987 through 1994, Noven engaged primarily in the development of advanced transdermal and transmucosal drug delivery systems. During this period, Noven’s revenues consisted primarily of amounts paid to Noven under license agreements with Novartis and Aventis. Beginning in 1995, when Noven’s first generation transdermal estrogen delivery system received initial regulatory approvals, Noven derived a significant portion of its revenues from the sale of its products to its licensees, Novartis and Aventis.

     In May 1998, Noven and Novartis formed Novogyne to market and sell women’s prescription healthcare products in the United States and Canada. Novogyne markets Vivelle®, Vivelle-Dot® and CombiPatch® in the United States. Novogyne is managed by a committee consisting of five members, three of which are appointed by Novartis and two of which are appointed by Noven. Pursuant to the joint venture operating agreement, certain significant actions require a supermajority vote of the committee members. The President of Novogyne is Robert C. Strauss, who also serves as President, Chief Executive Officer and Chairman of the Board of Noven.

     The establishment of Novogyne modified a prior relationship in which Noven had licensed to Novartis the exclusive right to market Vivelle® in the United States and Canada and had received royalties from Novartis based upon Novartis’ sales. Noven initially invested $7.5 million in return for a 49% equity interest in Novogyne. Novartis contributed its rights to Vivelle® to Novogyne and also licensed to Novogyne the right to use the Vivelle® trademark in return for a 51% equity interest in Novogyne. Under the terms of the joint venture agreements, Noven manufactures and supplies Novogyne with Vivelle®, Vivelle-Dot® and CombiPatch®, performs marketing, sales and promotional activities, and receives royalties from Novogyne based on Novogyne’s sales of certain of the products. Novartis distributes Vivelle®, Vivelle-Dot® and CombiPatch® and provides certain other services to Novogyne, including marketing to the managed care sector.

     The joint venture agreements provide for an annual preferred return of $6.1 million to Novartis and then an allocation of income between Novartis and Noven according to a contractual formula depending upon sales levels attained. Novogyne’s management committee has the authority to distribute cash to Novartis and Noven based upon a contractual formula. Noven’s share of income increases as product sales increase, subject to a maximum of 49%. Novogyne’s income resulted in the recognition by Noven of $14.0 million, $9.3 million and $1.5 million in income in 2001, 2000 and 1999, respectively. In 2001, 2000 and 1999, Noven received $13.1 million, $2.2 million and $0.6 million in distributions from Novogyne based upon Novogyne’s results of operations for the years ended December 31, 2000, 1999 and 1998, respectively. All of Noven’s 2001 distributions from Novogyne plus an additional $2.6 million were reinvested in Novogyne to fund Noven’s portion of the CombiPatch® license transaction. Noven expects that a significant portion of its earnings and cash flow for the next several years will be generated through its interest in

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Novogyne, but no assurance can be given regarding Novogyne’s future profitability or cash distributions. See Note 6 of Noven’s Audited Financial Statements herein for a summary of Novogyne’s audited financial statements.

     Novogyne acquired the exclusive United States marketing rights to CombiPatch® in March 2001 in a series of transactions involving Novogyne, Noven, Novartis and Aventis. Prior to the transaction, Aventis had been Noven’s exclusive licensee for CombiPatch® in the United States. The transaction was structured as (a) a direct purchase by Novogyne from Aventis of certain assets for $25.0 million, which was paid at closing, (b) a grant-back by Aventis to Noven of certain intellectual property rights relating to CombiPatch®, and (c) a simultaneous license by Noven to Novogyne of these intellectual property rights. The consideration payable by Noven to Aventis, and by Novogyne to Noven, was $40.0 million, which was due in four quarterly installments of $10.0 million each with the final payment in March 2002. As a consequence of the transaction and under the terms of Noven’s existing license agreement with Aventis, Noven received $3.5 million from Aventis, which amount was deferred and recognized as license revenue over ten years beginning in the first quarter of 2001. Since the relaunch of CombiPatch® by Novogyne in May 2001, CombiPatch® total prescriptions have not increased meaningfully. If Novogyne is unable to grow CombiPatch® prescriptions, Novogyne’s growth may slow and its contribution to Noven’s earnings and cash flow may be limited. Any failure by Novogyne to remain profitable or to continue to make distributions could have a material adverse effect on Noven’s results of operations or financial condition.

     Marketing rights outside of the United States and Canada for both Noven’s first generation transdermal estrogen delivery system (marketed as Menorest®) and Noven’s transdermal combination estrogen/progestin delivery system (marketed as Estalis®) were held exclusively by Aventis until October 1999, when Novartis AG sublicensed Aventis’ rights to market these products in all of Aventis’ exclusive markets other than Japan. In connection with the transaction Noven received $2.7 million in cash from Aventis as Noven’s share of the sublicense fee paid to Aventis. This amount was recorded as deferred license revenue and is being recognized as license revenue over seven and one-half years beginning in the fourth quarter of 1999. Novartis AG is selling Menorest® in over 20 foreign countries, including France, Germany and the United Kingdom, and is selling Estalis in a number of countries. Estalis® is only approved in one dosage strength in most European countries. While Novartis AG has advised Noven that it intends to seek approval for a second dosage strength, no assurance can be given that Novartis AG will seek such approval or will be successful, and no assurance can be given as to the timing of any such approval or launch in any given country. Noven expects that growth in Estalis® sales outside of the United States will be limited unless and until a second dosage strength is approved and launched.

     In a transaction related to Novogyne’s acquisition of United States marketing rights to CombiPatch®, Novartis AG acquired from Aventis the development and marketing rights to future generations of Noven’s combination estrogen/progestin patch in all markets other than Japan, and Novogyne expects to sublicense the United States rights to these product improvements from Novartis AG. If and when any future generation combination products are commercialized and sublicensed to Novogyne, Novogyne will pay a royalty to Novartis AG on the United States sales of such products. Noven manufactures and supplies CombiPatch®, and expects to manufacture and supply any future combination products to Novogyne and to Novartis AG.

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     In November 2000, Noven entered into an exclusive license agreement with Novartis AG pursuant to which Noven granted Novartis AG the right to market Vivelle-Dot® under the name Estradot® in all countries other than the United States, Canada and Japan. The agreement also grants Novartis AG marketing rights in the same territories to any product improvements and future generations of estrogen patches developed by Noven. Noven received an up-front license payment of $20.0 million upon execution of the agreement. For accounting purposes, the up-front payment has been deferred and is being recognized as license revenue over 10 years beginning in the fourth quarter of 2000. Under the terms of the agreement, Novartis AG is responsible for seeking approval to market Estradot® in its territory. In March 2001, Estradot® was approved for marketing in the Netherlands. In November 2001, Estradot® successfully completed the European Mutual Recognition Procedure. The product has since been approved for marketing in certain other European countries and the regulatory authorities of other countries are reviewing Novartis’ registration applications. The agreement provides that receipt of regulatory approval in one of several specified countries triggers a $5.0 million milestone payment to Noven. Noven received the $5.0 million payment in the fourth quarter of 2001 even though the applicable regulatory approvals had not been obtained. This milestone payment has been deferred and will be recognized as license revenue over the same period as the up-front payment, beginning in the quarter when an applicable approval is obtained. There can be no assurance that Novartis AG will be successful in effecting additional registrations of Estradot®. Novartis markets several other estrogen patches in addition to Noven’s products. The growth of Estradot® sales will depend, in part, on Novartis’ willingness and ability to convert sales of its existing patches to Estradot®. There can be no assurance that Novartis will choose to actively convert sales of its existing patches to Estradot®.

     Noven is developing a once-daily transdermal methylphenidate delivery system called MethyPatch® for the treatment of ADHD. In March 2001, Noven learned that its first large-scale Phase III trial for this product was inconclusive. This result caused a delay of at least one year in the commercialization of this product and resulted in additional research and development expenses in 2001 and 2002. Noven is now engaged in a second Phase III clinical trial for MethyPatch®, which is expected to be completed and evaluated in the first half of 2002. If the Phase III trial is successful, Noven would expect to file an NDA with the FDA thereafter. If Noven’s MethyPatch® NDA is approved, Noven intends to establish its own sales force to market the product. In such event, Noven would expect that its sales and marketing expenses would increase as it prepares for the expected commercialization of the product. No assurance can be given that the results of the pending Phase III trial will support an NDA filing, that Noven will be able to successfully complete and file the NDA in a timely manner, that the product will be approved by the FDA or that, if approved, it will be successfully marketed.

     Noven expects that revenues from product sales to its licensees will fluctuate from quarter to quarter and year to year depending upon various factors not in Noven’s control, including, but not limited to, the marketing efforts of each licensee, the inventory requirements of each licensee, the impact of competitive products, the timing and scope of Estalis® and Estradot® launches and commercialization efforts by Novartis AG , the growth, if any, in CombiPatch® prescriptions in the United States, the product pricing of each licensee and the timing of certain royalty reconciliations and payments under Noven’s license agreements. Noven’s earnings may fluctuate because of, among other things, fluctuations in research and development spending resulting from the timing of clinical trials involving products in development. Other factors that could impact Noven’s revenues or earnings are discussed under “Cautionary Factors that May Have an Impact on Future Results” herein.

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Results of Operations

Revenues:

     Total revenues are summarized as follows (dollar amounts in thousands):

     The $3.0 million, or 7%, increase in 2001 revenues versus 2000 revenues was primarily attributable to an increase in license revenue, which related to the license of Estradot® to Novartis AG in the fourth quarter of 2000 and the license of CombiPatch® to Novogyne in the first quarter of 2001. Product sales were slightly higher in 2001 as a result of higher sales of CombiPatch® in the United States and, to a lesser extent, higher sales of Estalis® outside of the United States, partially offset by a decline in sales of Vivelle® and Vivelle-Dot® to Novogyne due to planned inventory reductions at Novogyne.

     The $11.3 million, or 36%, increase in 2000 revenues versus 1999 revenues was primarily attributable to an increase in product sales. The increase in product sales was primarily a result of sales of Estalis®, which Noven began shipping to Novartis AG beginning in the fourth quarter of 1999, and to a lesser extent, higher sales of Vivelle® and Vivelle-Dot®. Vivelle-Dot® was launched by Novogyne in May 1999. A decline in sales of CombiPatch® in the United States from 1999 to 2000 partially offset the increased sales of Noven’s other products.

Gross Margin:

     Noven’s gross margin declined to 53% for 2001 from 54% in 2000. The decrease resulted from unfavorable product mix as Noven sold more product outside of the United States (where sales have a lower gross margin), while United States sales declined. The decrease in gross margin was partially offset by higher minimum fee payments from Novartis AG.

     Noven’s gross margin declined to 54% for 2000 from 59% in 1999. The decrease was primarily attributable to Novogyne increasing its inventory during 2000 in anticipation of an increase in product demand, which caused an increase in the profit that Noven was required to defer with respect to product sold to Novogyne that remained in Novogyne’s inventory at December 31, 2000. Noven defers the recognition of 49% of its profit from products sold to Novogyne until such

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inventory is sold by Novogyne. (See Note 1, Description of Business - Vivelle Ventures LLC, in the Notes to Financial Statements for more information.) In addition, product mix contributed to the decline in gross margin as Noven sold more product outside of the United States while United States sales remained generally consistent with the prior year.

Operating Expenses:

     Operating expenses are summarized as follows (dollar amounts in thousands):

Research and Development

     The $2.6 million, or 19%, decrease in 2001 research and development expenses versus 2000 research and development expenses was primarily attributable to a decrease in clinical study expenses for MethyPatch®, partially offset by increases related to additional personnel.

     The $6.5 million, or 90%, increase in 2000 research and development expenses versus 1999 research and development expenses was primarily attributable to clinical studies and related expenses for MethyPatch®.

Marketing, General and Administrative Expenses

     The $2.8 million, or 32%, increase in 2001 marketing, general and administrative expenses versus 2000 marketing, general and administrative expenses was primarily attributable to an increase in outside consulting services related to the implementation of an enterprise resource planning system, consulting costs related to improvements in production efficiencies, reserves for obsolete production equipment and higher legal fees related to the CombiPatch® license transaction. The increase in expenses was partially offset by a decline in recruitment costs and other related expenses.

     The $0.9 million, or 11%, increase in 2000 marketing, general and administrative expenses versus 1999 marketing, general and administrative expenses was primarily due to higher personnel, recruitment costs and outside consulting services.

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Other Income and Expenses:

Interest Income

     Interest income, net, increased approximately $0.4 million, or 28%, in 2001 as compared to 2000, primarily due to higher average balances in cash and cash equivalents, partially offset by lower interest rates in 2001 as compared to the prior year.

     Interest income, net increased approximately $1.0 million, or 304%, in 2000 compared to 1999, primarily due to higher average balances in cash and cash equivalents due to the receipt of $20.0 million related to the license of Estradot®.

Income taxes

     Noven’s effective tax rate was 36% for the year ended December 31, 2001. The provision for income taxes is based on the Federal and state statutory rates. Realization of the deferred income tax asset of approximately $15.0 million at December 31, 2001 depends upon generating sufficient future taxable income. Although realization is not assured, management believes it is more likely than not that the deferred income tax asset will be realized based upon estimated future taxable income.

     Income tax benefit of $7.6 million for the year ended December 31, 2000 resulted from the recognition of a deferred income tax benefit of $9.4 million offset by current income tax expense of $1.8 million. This was caused by an $11.5 million reduction of valuation allowance on deferred income tax asset.

Equity in Earnings of Novogyne

     The financial results of Novogyne are summarized as follows (dollar amounts in thousands):

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     Novogyne’s increase in revenue of $31.4 million, or 54%, in 2001 as compared to the prior year is primarily attributable to increased sales of Vivelle-Dot® and the addition of CombiPatch® (licensed in March 2001), partially offset by a decrease in Vivelle® sales. Novogyne’s selling, general and administrative expenses increased to $31.4 million for the year ended December 31, 2001 from $21.3 million in 2000, primarily due to expenses relating to the relaunch of CombiPatch® and to an approximate 20% increase in the size of the Novogyne sales force. Novogyne amortized $4.6 million related to the CombiPatch® acquisition cost during the year ended December 31, 2001.

     Novogyne’s increase in revenue of $24.3 million, or 71%, in 2000 as compared to the prior year is attributable to increased sales of Vivelle-Dot®, which was launched in the second quarter of 1999. Novogyne’s selling, general and administrative expenses increased to $21.3 million from $17.7 million in the prior year, primarily due to higher sales force and promotional expenses due to higher sales.

     Liquidity and Capital Resources:

     As of December 31, 2001 and 2000, Noven had $49.4 million and $41.0 million in cash and cash equivalents and working capital of $45.8 million and $46.7 million, respectively.

     Cash provided by (used in) operating, investing and financing activities is summarized as follows (amounts in thousands):

Operating Activities:

     Net cash provided by operating activities in 2001 primarily resulted from the receipt of a one-time license fee in the amount of $3.5 million from Aventis in connection with the CombiPatch® license transaction and a one-time $5.0 million milestone payment in connection with the Estradot® license to Novartis AG. See Note 5, License Agreements, in the Notes to Financial Statements for more information. A non-cash item (equity in earnings of Novogyne of $14.0 million) constituted more than 100% of Noven’s net income of $12.1 million. Changes in working capital accounted for most of the remaining change over the prior period.

     Net cash provided by operating activities in 2000 primarily resulted from the receipt of a one-time up-front license fee of $20.0 million in November 2000 from Novartis AG in connection with the Estradot® license agreement. Non-cash items (equity in earnings of Novogyne of $9.3 million and deferred income tax benefit of $9.4 million) constituted 95% of Noven’s net income of $19.6 million. Changes in working capital accounted for most of the remaining increase over 1999.

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     Net cash provided by operating activities in 1999 was generated by a one-time $2.7 million license fee from Aventis in connection with the sub-license of Estalis® and Menorest® to Novartis AG. Non-cash items (equity in earnings of Novogyne of $1.5 million and deferred income tax benefit of $5.0 million) constituted 62% of Noven’s net income of $10.5 million. Changes in working capital accounted for most of the remaining increase.

Investing Activities:

     Net cash used in investing activities in 2001 was primarily attributable to the implementation of an enterprise resource planning system and a $2.6 million net investment in Novogyne related to the CombiPatch® license transaction. Net cash provided by investing activities during 2000 was attributable to $2.2 million of cash distributions from Novogyne, partially offset by the purchase of fixed assets and payment of patent development costs. Net cash used by investing activities in 1999 was attributable to the purchase of fixed assets and payment of patent development costs, partially offset by a $0.6 million cash distribution from Novogyne.

Financing Activities:

     Net cash provided by financing activities in each of 2001, 2000 and 1999 was attributable to cash received in connection with the issuance of common stock from the exercise of stock options, partially offset by payments made on notes payable.

     In December 2000, Noven entered into a secured revolving credit facility (the “Credit Facility”) providing for borrowings of up to the lesser of $10.0 million or eligible accounts receivable. The Credit Facility will terminate in April 2003 and bears interest at LIBOR plus 1.50% (1.876% at December 31, 2001). At December 31, 2001 and 2000, there were no amounts outstanding under the Credit Facility. Terms of the Credit Facility include, among other things, minimum net worth, revenue and operating results requirements, as well as certain financial ratios, measured on a quarterly basis.

     Noven’s principal sources of short-term liquidity are existing cash, cash generated from product sales, fees and royalties under license agreements, distributions from Novogyne, and borrowings under its Credit Facility. Presently, Noven’s short-term liquidity is largely dependent on sales of, and license royalties and fees related to sales of, a relatively small number of products. As a result, any decrease in the sales of those products by Noven or its licensees could have a material adverse effect on Noven’s short-term liquidity or require Noven to rely more heavily on its existing cash reserves or on borrowings under its Credit Facility to support its operations and business. Many factors that could impact sales of Noven’s products are discussed under “Cautionary Factors that May Have an Impact on Future Results” herein.

     Noven believes that it will have sufficient cash available to meet its operating needs and anticipated short-term capital requirements. For the long term, Noven intends to utilize funds derived from the above sources, as well as funds generated through sales of products under development or products that Noven may license or acquire from others. Noven expects that such funds will be comprised of payments received pursuant to future licensing arrangements, as well as Noven’s direct sales of its own products. Noven expects that its cash requirements will continue to increase, primarily to fund clinical studies for products under development and for plant and

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equipment to expand production capacity. There can be no assurance that Noven will successfully complete the development of such products, that Noven will obtain regulatory approval for any such products, that any approved product may be produced in commercial quantities, at reasonable costs, and be successfully marketed, or that Noven will successfully negotiate future licensing arrangements. Because much of the cost associated with product development is incurred prior to product launch, if Noven is unable to launch additional commercially viable products that it develops or that it licenses or acquires from others, Noven will have incurred the up-front costs associated with product development or acquisition without the benefit of the liquidity generated by sales of those products, which could adversely effect Noven’s long-term liquidity needs. Many factors that could impact Noven’s ability to develop or acquire and launch additional commercially viable products are discussed under “Cautionary Factors that May Have an Impact on Future Results” herein. To the extent that capital requirements exceed available capital, Noven will seek alternative sources of financing to fund its operations. In addition to the Credit Facility which expires in April 2003, alternative financing may be needed to fund further activities. No assurance can be given that alternative financing will be available, if at all, in a timely manner, or on favorable terms. If Noven is unable to obtain satisfactory alternative financing, Noven may be required to delay or reduce its proposed expenditures, including expenditures for research and development and plant and equipment, in order to meet its future cash requirements. See “Cautionary Factors that May Have an Impact on Future Results” herein for a description of matters that could affect Noven’s short or long-term liquidity.

Outlook:

     The principal factors that Noven now expects will influence its 2002 financial outlook include:

	•		The timing and magnitude of international product sales to Novartis AG;
	•		Novogyne’s ability to increase Vivelle® family and CombiPatch® sales;
	•		Costs associated with new clinical studies for products in development; and
	•		Costs associated with the continued clinical trials of MethyPatch® and related launch preparation.

     Other factors that could impact Noven’s 2002 financial outlook are discussed under “Cautionary Factors that May Have an Impact on Future Results” herein.

International Product Sales

     Sales of Noven’s international products to Novartis AG in the second half of 2001 were substantially lower than in the first half of the year. Noven receives firm orders from Novartis AG on a partial year basis, which limits Noven’s ability to accurately forecast full year sales to Novartis AG.

     Based on discussions with Novartis AG, Noven believes that second half 2001 Estalis® sales were affected by high inventory levels and the lack of a second dosage strength in certain countries. Novartis AG has advised that it plans to seek approval of a second dosage strength in European countries where only one strength is presently approved. Noven expects Estalis® sales to decline in

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2002 compared to 2001, and does not expect significant renewed growth in Estalis® sales unless a second dosage is available in Europe and commercialized, which may take several years.

     Noven received its first orders for Estradot® in the fourth quarter of 2001, and recorded its first Estradot® sales in the first quarter of 2002. These sales relate to initial Estradot® launches expected to begin in the second quarter of 2002 and to continue through 2003. Although Novartis AG has advised Noven that it expects to receive government approvals of Estradot® in time for planned launches, not all approvals have been received and there is no assurance that those approvals will be received on a timely basis or at all. Failure to receive those approvals on a timely basis could adversely affect Novartis AG’s launch plans for Estradot® which would adversely impact Noven’s Estradot® sales during 2002.

Vivelle® Family & CombiPatch®

     Prescription growth for the Vivelle® family of estrogen patches has historically increased from period-to-period. At some point the prescription growth of the Vivelle® family may make further gains by the product line more difficult as a result of market saturation. In addition, since the relaunch of CombiPatch® by Novogyne in May 2001, CombiPatch® monthly total prescriptions have not increased meaningfully. Novogyne has forecast growth in 2002 for both CombiPatch® and the Vivelle® family. If that growth is not realized, Novogyne would not meet its revenue and income targets, which would affect Noven’s ability to meet its own financial targets for 2002.

MethyPatch® Launch Costs

     Noven expects to complete its MethyPatch® Phase III clinical trial and evaluate the resulting data in the first half of 2002. If Phase III results support the filing of a MethyPatch® NDA, Noven would expect to incur sales, marketing and other expenses in 2002 in anticipation of a MethyPatch® approval and launch in the second half of 2003. These expenses could cause Noven’s sales and marketing expenses to increase in 2002. Noven expects that these expenses will increase significantly as launch approaches.

New Clinical Studies

     During 2002, Noven expects to initiate clinical trials for the development of as many as three new prescription transdermal therapies. These projects, together with continuing MethyPatch® research and development expenses, are expected to increase Noven’s research and development expense in the mid 40% range in 2002 as compared to 2001. A significant portion of the expected ongoing MethyPatch® clinical expenses were incurred during the first quarter of 2002, when the majority of Phase III patients were under clinical study. The future level of research and development expenditures will depend on, among other things, the status of products under development and the outcome of clinical trials, strategic decisions by management, the consummation of new collaborative arrangements and Noven’s liquidity. Noven’s research and development expenses may vary significantly from quarter to quarter depending on product development cycles and the timing of clinical studies.

Liquidity and Capital Resources

     In 2002, Noven expects to invest up to $2.0 million in plant and equipment to increase production capacity. Cash requirements for Federal and state income taxes, marketing expenditures related to the launch of MethyPatch® and clinical study expenses are also expected to increase

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compared to 2001. Noven expects that it will receive net cash distributions from Novogyne in 2002, although no assurances can be given that Novogyne’s earnings will be sufficient to support distributions or that Novogyne’s management committee will authorize them.

Full-Year 2002

     Based on information and forecasts from Novartis AG, Estradot® sales in 2002 are not expected to fully offset the anticipated decline in Estalis® sales, resulting in an international sales decline in 2002. If Noven’s 2002 sales targets for the Vivelle® family and CombiPatch® are achieved. Noven expects that growth in its United States revenues should offset this international decline. In such a case, Noven would expect 2002 revenues to increase modestly over 2001 and would expect diluted earnings per share to be $0.45 to $0.55. Noven expects gross margin for 2002 to be comparable to 2001 levels, subject to changes in product and country mix, higher than expected production costs, and unexpected changes in Novogyne’s inventory. Novogyne’s revenues are expected to increase 25% to 30% in 2002 compared to 2001, depending upon, among other things, the success of CombiPatch®. Noven expects its equity in earnings of Novogyne to increase in 2002 compared to the prior year, and expects its effective income tax rate for 2002 to be 34% to 37%.

Cautionary Factors that May Have an Impact on Future Results

     Except for historical information contained herein, the matters discussed in this report are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about Noven’s and its strategic partners’ respective plans, objectives, expectations, estimates, strategies, product approvals and development plans, and anticipated financial results. These statements are typically identified by the use of terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “could,” “should,” “will,” “would” and similar words. These statements are based on Noven’s current expectations and beliefs concerning future events but are subject to risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors affecting Noven’s operations, results of operations, markets, products, prices and prospects, and other factors discussed elsewhere in this report and the other documents filed by Noven with the Securities and Exchange Commission (“SEC”). These factors may cause Noven’s results to differ materially from the statements made in this report or otherwise made by or on behalf of Noven. The following is a brief summary of some of the risk factors, which are not listed in order of priority, that could adversely affect Noven’s results. Most of these factors are described elsewhere in this report, but the risks described below are not the only risks Noven faces. Noven does not undertake to update any of these forward-looking statements or to announce the results of any revisions to these forward-looking statements except as required by law.

•

Noven faces competition from a number of companies in the development of transdermal and transmucosal drug delivery products, and competition is expected to intensify as more companies enter the field. Some of these companies are substantially larger than Noven and have greater financial and research and development resources than Noven, as well as greater experience in developing and commercializing pharmaceutical products. As a result, they may succeed in developing competing technologies or obtaining governmental approvals for products before us. Noven’s products compete with other transdermal products as well as alternative

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		dosage forms of the same or comparable chemical entities. There can be no assurance that Noven’s products will successfully compete against competitive products or that developments by others will not render Noven’s products obsolete or uncompetitive. If we cannot maintain competitive products and technologies, our current and potential strategic partners may choose to adopt the drug delivery technologies of our competitors or their own internally developed technologies.
•		Noven’s equity in earnings of Novogyne contributed 74% of Noven’s income before taxes in 2001, and Novogyne’s results will likely continue to be material to Noven in the future. Because, among other things, Noven and Novartis are vastly different in size, and because Novartis sells competing products outside of Novogyne, the interests of Noven and Novartis may not always be aligned. This may result in potential conflicts between Noven and Novartis on matters relating to Novogyne which we may not be able to resolve on favorable terms. Novartis has the right to dissolve Novogyne under certain circumstances. Novogyne’s management committee is comprised of a majority of representatives from Novartis. In addition, the joint venture operating agreement has a buy/sell provision which allows either party to compel either the purchase of the other party’s interest in Novogyne or the sale of its own interest at a price set by the party triggering the buy/sell provision. Novartis is a larger company with greater financial resources than Noven, and therefore may be in a better position to be the purchaser if the provision is triggered. If the provision is triggered and Novartis is the purchaser, there can be no assurance that Noven would be able to reinvest the proceeds of the sale in a manner that would result in sufficient earnings to offset the loss of earnings from Novogyne. If the provision is triggered and Noven is the purchaser, there can be no assurance that Noven would not be adversely affected by the changes in capital and/or debt structure that would likely be required to finance the purchase transaction.
•		Noven expects to be dependent on sales to Novartis AG and Novogyne, as well as fees and royalties generated from such parties’ sales of its transdermal delivery systems, for a significant portion of its expected revenues for at least the next several years, and no assurance can be given regarding the amount and timing of such revenues. Failure of any of these parties to market Noven’s products successfully would cause the quantity of products purchased from Noven and the amount of fees and royalties ultimately paid to Noven to be reduced and would therefore have a material adverse effect on Noven’s business and operations. In the short term, Noven’s growth depends in part on Novartis AG’s launch plans and marketing efforts with respect to Estalis® and Estradot®, and the scope and success of those efforts are outside the control of Noven. Noven receives firm orders from Novartis AG on a partial year basis which limits Noven’s ability to accurately forecast full year sales to Novartis AG. Novartis and its affiliates sell competing products, both in the United States and abroad, and there can be no assurance that Novartis will promote Noven’s products at the expense of its other products or that the present supply agreement for Vivelle® and Vivelle-Dot® will be extended. Due to Noven’s dependence on Novogyne and Novartis AG, we may be unable to negotiate favorable business terms with them or resolve any dispute that we may be involved in with them in a favorable manner.
•		Noven’s pharmaceutical company partners market and sell many of the products Noven develops and manufactures. If one or more of those partners fails to pursue the marketing of Noven’s products as planned, or if marketing of any of those products (including Estradot®or a second dosage strength of Estalis®) is otherwise delayed, Noven’s revenues and gross profits may be

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		adversely affected which may also adversely affect Noven’s short-term liquidity. Noven cannot control the timing and other aspects of the development and launch of products incorporating its technologies and marketed by others because Noven’s partners may have different priorities from Noven’s. Even if our marketing partners aggressively pursue the launch and marketing of our products, regulatory matters or other external factors may prevent or delay the launch and marketing of our products. Therefore, the commercialization and marketing of products Noven has under development may be delayed unexpectedly. Although Noven intends to establish an in-house sales force for certain of its products under development, including MethyPatch®, Noven’s principal commercialized products are principally marketed and sold by Novogyne and Novartis, and Noven does not presently have a significant direct marketing channel to consumers for its drug delivery technologies. The marketing organizations of our partners may be unsuccessful, or those partners may assign a lower level of priority to the marketing of our products. If marketing efforts for Noven’s products are not successful, our revenues and results of operations may be adversely affected, which may also adversely affect Noven’s short-term liquidity.
•		Noven’s long-term strategy is dependent, in part, upon the successful development, licensing or acquisition of new products, such as MethyPatch®, and their successful commercialization. There can be no assurance that Noven will be able to identify promising products or technologies. The length of time necessary to complete clinical trials and obtain marketing approval from regulatory authorities may be considerable. No assurance can be given that Noven will have the financial resources necessary to complete products under development, that those projects to which Noven dedicates sufficient resources will be successfully completed, that Noven will be able to obtain regulatory approval for any such product, or that any approved product can be produced in commercial quantities, at reasonable costs, and be successfully marketed, either by Noven or by a licensing partner. A project can fail or be delayed at any stage of development, even if each prior stage was completed successfully, which could adversely impact Noven’s ability to recover its investment in the product. Some of Noven’s development projects will not be completed successfully or on schedule. Many of the factors which may cause a product in development to fail or be delayed, such as difficulty in enrolling patients in clinical trials, the failure of clinical trials, lack of sufficient supplies or raw materials, inability to apply the subject product or technology on a commercial scale on an economical basis and changes in regulations, are beyond Noven’s control. In some cases, Noven has begun and, in the future, may begin development of a product that it does not intend to independently develop through clinical trials and market, with the expectation that a licensee will be identified to assist in development and/or marketing. There can be no assurance that Noven will attract a business partner for any particular product or will be able to negotiate an agreement on commercially reasonable terms. If an agreement is not reached, Noven’s initial development investment in any such product may not be recovered.
•		Almost all of Noven’s revenues are currently generated through sales of its hormone replacement therapy transdermal delivery systems. While these products have been found to be safe and effective by the FDA and the regulatory authorities of those countries where Noven’s products are approved, published studies have concluded that there may be health risks associated with hormone replacement therapy, including potentially increased risk of endometrial or breast cancer. Evidence that hormone replacement therapy is or could be associated with such risks could adversely affect physician or patient preference for addressing the indications hormone replacement therapy is intended to address, which could adversely affect the ability of Noven to market its products.

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•		Noven depends upon collaborative agreements with pharmaceutical companies to obtain regulatory approval for, market and sell certain of its products. Additionally, Noven intends to seek developmental partners to develop, test and obtain regulatory approval for, and commercialize certain of its products presently under development. The number of Noven’s products that are successfully developed and commercialized will affect Noven’s revenues. If Noven does not enter into additional agreements in the future, or if our current or future agreements do not result in successful marketing of Noven’s products, its revenue and results of operations may be adversely affected.
•		Noven’s operations are subject to extensive regulation by governmental authorities in the United States and other countries with respect to the testing, approval, manufacture, labeling, marketing and sale of pharmaceutical products. These regulations are wide-ranging and govern, among other things: adverse drug experience reporting regulations, product promotion, product manufacturing, including good manufacturing practices, and product changes or modifications. Noven’s facilities handle controlled substances, resulting in additional extensive regulatory requirements and oversight. Noven devotes significant time, effort and expense addressing the extensive government regulations applicable to its business. Even if a product is approved by a regulatory authority, product approvals may be withdrawn after the product reaches the market if compliance with regulatory standards is not maintained or if problems occur regarding the safety or efficacy of the product. Failure to comply with governmental regulations may result in fines, warning letters, unanticipated compliance expenditures, interruptions or suspension of production and resulting loss of sales, product seizures or recalls, injunctions prohibiting further sales, withdrawal of previously approved marketing applications, and criminal prosecution.
•		Marketing claims are the basis for a product’s labeling, advertising and promotion. After FDA approval of a product incorporating Noven’s technologies, the Division of Drug Marketing, Advertising and Communication, must approve marketing claims asserted about that product. If approval of acceptable marketing claims is not obtained for any of Noven’s products, revenues derived from that product may be limited. There can be no assurance that our marketing partners will comply with the foregoing restrictions with respect to claims that they may assert about our technology or products.
•		Noven’s supply agreements with its licensees also impose strict obligations on Noven with respect to the manufacture and supply of Noven’s products. Noven devotes significant time, effort and expense complying with these requirements. Failure to comply with the terms of these supply agreements may result in Noven being unable to supply product to its licensees, resulting in lost revenue by Noven and potential responsibility for damages and losses suffered by its licensees.
•		The federal and state governments in the United States, as well as many foreign governments, from time to time explore ways to reduce medical care costs through health care reform. In the United States, these proposals include government programs involving prescription drug reimbursement benefits for seniors. Due to the diverse range of proposals put forth from country to country and the uncertainty of any proposal’s adoption, Noven cannot predict what impact any reform proposal ultimately adopted may have on the pharmaceutical industry or on the business or operating results of Noven.

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•		Substantially all of Noven’s revenues are generated through sales of transdermal delivery systems. Noven’s products are marketed primarily to physicians, some of whom are reluctant to prescribe a transdermal delivery system when an alternative delivery system is available. Noven and its licensees must demonstrate to prescribing physicians the benefits of transdermal delivery, especially with respect to products such as MethyPatch® for which there is presently no transdermal system on the market. The commercial success of Noven’s products is also based in part on patient preference, and difficulties in obtaining patient acceptance of Noven’s transdermal or transmucosal delivery systems may similarly impact Noven’s ability to market its products.
•		Noven’s success will depend, in part, on its ability to obtain or license patents for its products, processes and technologies. If Noven does not do so, its competitors may exploit Noven’s innovations and deprive Noven of the ability to realize revenues from those innovations. There is no assurance that Noven will receive patents for any of its patent applications or that any existing or future patents that it receives or licenses will provide competitive advantages for its products. Additionally, there can be no assurance that Noven’s patents or any future patents will prevent other companies from developing similar or functionally equivalent products, or challenging, invalidating or avoiding Noven’s patent applications or any existing or future patents that Noven receives or licenses. Furthermore, there is no assurance that any of Noven’s future processes or products will be patentable, that any pending or additional patents will be issued in any or all appropriate jurisdictions or that Noven’s processes or products will not infringe upon the patents of third parties.
•		Noven also relies on trade secrets, unpatented proprietary know-how and continuing technological innovation. Noven uses confidentiality agreements with licensees, suppliers, employees and consultants to protect its trade secrets, unpatented proprietary know-how and continuing technological innovation, but there can be no assurance that these parties will not breach their agreements with us. Noven also cannot be certain that it will have adequate remedies for any breach. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. Furthermore, Noven cannot be sure that its trade secrets and proprietary technology will not otherwise become known or that Noven’s competitors will not independently develop Noven’s trade secrets and proprietary technology. Noven also cannot be sure, if it does not receive patents for products arising from its research, that it will be able to maintain the confidentiality of information relating to its products.
•		Noven’s success will also depend in part on its ability to operate without infringing the proprietary rights of others, and there can be no assurance that Noven’s products and processes will not infringe upon the patents of others. If a third party asserts a claim of infringement, Noven may have to seek licenses, defend infringement actions or challenge the validity of those third-party patents in court. If Noven cannot obtain the required licenses, or is found liable for infringement or is not able to have these patents declared invalid, Noven may be liable for significant monetary damages, encounter significant delays in bringing products to market or be precluded from participating in the manufacture, use or sale of products or methods of drug delivery covered by the patents of others. There can be no assurance that Noven has identified, or that in the future it will be able to identify, all U.S. and foreign patents that may pose a risk of potential infringement claims.

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•		Like all pharmaceutical companies, the testing, manufacturing and marketing of Noven’s products may expose Noven to potential product liability and other claims resulting from their use. If any such claims against Noven are successful, Noven may be required to make significant compensation payments and suffer the associated adverse publicity. Noven maintains product liability insurance, but there can be no assurance that its insurance will cover all future claims or that Noven will be able to maintain existing coverage or obtain additional coverage at reasonable rates. If a claim is not covered or if Noven’s coverage is insufficient, Noven may incur significant liability payments that would negatively affect our earnings and our business.
•		Certain raw materials and components used in the manufacture of Noven’s products are available from limited sources, and, in some cases, a single source. Any curtailment in the availability of such raw materials could be accompanied by production or other delays, and, in the case of products for which only one raw material supplier exists, could result in a material loss of sales. Additionally, regulatory authorities must generally approve raw material sources for pharmaceutical products. Without adequate approved supplies of raw materials or packaging supplies, Noven’s manufacturing operations may be interrupted until another supplier could be identified, its products approved and trading terms with it negotiated. Noven may not be able to identify an alternative supplier and any supplier that Noven does identify may not be able to obtain the requisite regulatory approvals in a timely manner, or at all. Furthermore, Noven may not be able to negotiate favorable terms with an alternative supplier. Any disruptions in Noven’s manufacturing operations from the loss of an approved supplier may cause Noven to incur increased costs and lose revenues and may have an adverse effect on Noven’s relationships with its partners and customers, any of which could have adverse effects on Noven’s business and results of operations.
•		All of Noven’s products are manufactured at a single facility located in Miami, Florida. An interruption of manufacturing operations resulting from regulatory issues, technical problems, casualty loss (including hurricane) or other factors could result in Noven’s inability to meet production requirements, which may cause Noven to lose revenues and which could have an adverse effect on Noven’s relationships with its partners and customers any of which could have a material adverse effect on Noven’s business and financial results. Without Noven’s existing production facility, Noven would have no other means of manufacturing its products until it was able to restore the manufacturing capability at our facility or develop an alternative manufacturing facility. Although Noven carries business interruption insurance to cover lost revenues and profits, this insurance does not cover all possible situations and there can be no assurance that any event of casualty to our facility would be covered by such insurance. In addition, Noven’s business interruption insurance would not compensate it for the loss of opportunity and potential adverse impact on relations with our existing partners and customers resulting from our inability to produce products for them.
•		If Noven successfully completes clinical trials and files an NDA for its MethyPatch® product, Noven expects to establish a sales force to sell MethyPatch® in the United States rather than grant exclusive marketing rights to a third party. Establishing a sales force, and expanding Noven’s

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		sales, marketing and business infrastructure to support the sales force, would require the expenditure of substantial funds. There can be no assurance that, if MethyPatch® is approved for marketing by the FDA, Noven will generate sufficient sales of the product to cover the ongoing expense of Noven’s sales and marketing organization and/or to realize adequate profits. In addition, some of these expenses may be incurred prior to receipt of marketing approval. In the event that MethyPatch® is not approved for marketing, these expenses will not be recovered. Additionally, any delays in organizing a sales force for MethyPatch® could have an adverse impact on Noven’s ability to market the product and realize profits from sales of the product. Noven has no experience marketing or selling products to the physician group that would prescribe MethyPatch® and therefore has a disadvantage compared to certain of its competitors.
•		There is an ongoing public debate in the United States regarding the appropriateness of using methylphenidate and other medications to treat children with ADHD. Noven expects that this debate will continue for the foreseeable future. The outcome of this debate is uncertain, and Noven cannot predict what impact, if any, the increased public attention will have on the market for products indicated for ADHD generally, or on MethyPatch® specifically.
•		From time to time Noven may need to acquire licenses to patents and other intellectual property of third parties to develop, manufacture and commercialize its products. There can be no assurance that Noven will be able to acquire such licenses on commercially reasonable terms. The failure to obtain such a license would negatively affect the ability of Noven to develop, manufacture and commercialize certain products, and could therefore have an adverse effect on Noven’s business and financial results.
•		Noven relies on insurance to protect it from many kinds of business risk, including product liability, business interruption, property and casualty loss, employment practices liability and directors’ and officers’ liability. As a result of the events of September 11, 2001, an increase in the number of securities class action suits, an increase in damages and/or settlements paid in connection with certain of these class actions, an increase in the number of product liability claims and the resulting damages and settlements, and other factors, Noven has experienced, and expects to continue to experience, difficulty in obtaining insurance with adequate coverage at historical rates. In most cases, as insurance policies expire, Noven may be required to procure policies with narrower coverage, more exclusions, and higher premiums. There can be no assurance that the insurance that Noven maintains and intends to maintain will be adequate, or that the cost of insurance and limitations in coverage will not adversely affect Noven’s business and financial results.
•		In 2001, Noven implemented a new enterprise resource planning system. Noven expects that, over time, the new system will result in improved business processes and increased operating efficiencies. As Noven’s employees become familiar with the new system, Noven expects that some errors may occur, some of which could adversely impact Noven’s business and financial results. There can be no assurance that the system will perform as expected or that the anticipated improvements in business processes and operating efficiencies will be achieved. In the event of serious system malfunctions or deficiencies, Noven could experience business interruptions, which could adversely impact Noven’s business and financial results.

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•		In November and December 2001 and January 2002, individuals purporting to be shareholders of Noven filed a total of five substantially identical lawsuits against Noven and certain of its directors and officers in the United States District Court for the Southern District of Florida. The plaintiffs each seek to act as representatives of a class consisting of all purchasers of Noven’s common stock between March 27 and November 1, 2001. The plaintiffs each allege that during that period, Noven and its officers and directors named as defendants violated Sections 10 and 20 of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by making material misstatements and omissions regarding international sales of certain of Noven’s products that are the subject of an exclusive license agreement with Novartis AG. The plaintiffs seek unspecified damages, for themselves and the purported class, based on the allegedly artificially inflated prices paid for their shares of Noven’s common stock. On March 12, 2002, the Court entered an order consolidating all of the captioned actions into a single consolidated action and directing plaintiff’s counsel to file a single amended and consolidated complaint. Noven believes that these lawsuits are without merit, and intends to defend these lawsuits vigorously, but their outcomes cannot be predicted. However, an adverse determination to Noven in any of such lawsuits could have a material adverse effect on Noven’s financial position and results of operations.
•		Noven’s corporate charter documents, Delaware law and Noven’s stockholders’ rights plan include provisions that may discourage or prevent parties from attempting to acquire us. These provisions may have the effect of depriving our stockholders of the opportunity to sell their stock at a price in excess of prevailing market prices in an acquisition of Noven. Noven’s board of directors has the authority to issue up to 100,000 shares of preferred stock and to determine the rights, preferences and privileges of those shares without any further vote or action by our stockholders. The rights of holders of our common stock may be adversely affected by the rights of the holders of any preferred stock that may be issued in the future. Additional provisions of our certificate of incorporation and bylaws could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting common stock. These include provisions that limit the ability of stockholders to bring matters before an annual meetings of stockholders, call special meetings or nominate candidates to serve on Noven’s Board of Directors.
		Noven is also subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, either alone or together with affiliates and associates, owns (or within the past three years, did own) 15% or more of the corporation’s voting stock.
		Noven also has a stockholders’ rights plan, commonly referred to as a “poison pill,” which is intended to cause substantial dilution to a person or group who attempts to acquire Noven on terms that our Board of Directors has not approved. The existence of the stockholders’ rights plan could make it more difficult for a third party to acquire a majority of Noven’s common stock without the consent of Noven’s Board of Directors.
•		The market price of Noven’s common stock was extremely volatile in 2001 and may continue to be volatile going forward. In 2001, Noven’s common stock traded as low as $13.12 per share and as

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		high as $41.50 per share before closing at $17.75 on December 31, 2001, the last trading day of the year. Any number of factors, including many over which Noven has no control and many unrelated to Noven’s business or financial results, may have a significant impact on the market price of Noven’s common stock, including: announcements by Noven or its competitors of technological innovations or new commercial products, changes in governmental regulation, receipt by Noven or one of its competitors of regulatory approvals, developments relating to patents or proprietary rights of Noven or one of its competitors, publicity regarding actual or potential medical results or risks for products that Noven or one of its competitors market or has under development; and period-to-period changes in financial results and the economy generally. Noven, like any other company with a volatile stock price, may be subject to further securities litigation, which could have a material adverse effect on Noven’s business and financial results.
•		Fluctuations in Noven’s operating results may lead to fluctuations or declines in its stock price. Noven’s operating results may fluctuate from quarter to quarter and from year to year depending on demand by its customers for Noven’s products, new product introductions, pharmaceutical company ordering patterns, the number and timing of product development milestones that Noven achieves, and the level of Noven’s spending on new drug delivery technology development and technology acquisition, and internal product development.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

     Noven had no variable rate debt outstanding during the year ended or at December 31, 2001. Therefore, changes in interest rates did not affect interest expense, earnings or cash flows in 2001. Market risks relating to Noven’s operations may result from changes in LIBOR interest rates if Noven borrows under its Credit Facility. Noven cannot predict market fluctuations in interest rates and their impact on any variable rate debt that Noven may have outstanding from time to time, nor can there be any assurance that fixed rate long-term debt will be available at favorable rates, if at all.

Item 8. Financial Statements and Supplementary Data.

     See Index to Financial Statements at page 52 of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

     Not applicable.

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PART III

Item 10.    Directors and Executive Officers of the Registrant.

     The information concerning directors required by item 10 is incorporated by reference to Noven’s Proxy Statement for its 2002 Annual Meeting of Shareholders. The information concerning executive officers required by item 10 is contained in the discussion entitled “Executive Officers of the Registrant” in Part I hereof.

Item 11.    Executive Compensation.

     The information required by item 11 is incorporated by reference to Noven’s Proxy Statement for its 2002 Annual Meeting of Shareholders.

Item 12.    Security Ownership of Certain Beneficial Owners and Management.

     The information required by item 12 is incorporated by reference to Noven’s Proxy Statement for its 2002 Annual Meeting of Shareholders.

Item 13.    Certain Relationships and Related Transactions.

     The information required by item 13 is incorporated by reference to Noven’s Proxy Statement for its 2002 Annual Meeting of Shareholders.

PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)(1)		Financial Statements
		See Index to Financial Statements at page 52 of this report.
(a)(2)		Financial Statement Schedules

     All schedules have been omitted because the required information is not applicable or the information is included in the financial statements or the notes thereto.

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(a)(3) Exhibits

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(b)		Reports on Form 8-K.
		On November 6, 2001, Noven filed a Current Report on Form 8-K relating to the adoption of a shareholder rights plan.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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INDEX TO FINANCIAL STATEMENTS

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INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders
of Noven Pharmaceuticals, Inc.:

We have audited the accompanying balance sheets of Noven Pharmaceuticals, Inc. (“Noven”) as of December 31, 2001 and 2000, and the related statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of Noven’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Vivelle Ventures LLC (d/b/a Novogyne Pharmaceuticals), Noven’s investment in which is accounted for by use of the equity method, for the years ended December 31, 2001, 2000 and 1999. Noven’s equity in Vivelle Ventures LLC of $32,043,000 and $15,431,000 at December 31, 2001 and 2000, respectively, and Noven’s share of that joint venture’s income of $14,013,000, $9,294,000 and $1,487,000 for the years ended December 31, 2001, 2000 and 1999, respectively, are included in the accompanying financial statements. Such financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such joint venture for 2001, 2000 and 1999, is based solely on the report of such other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits, and the reports of other auditors, provide a reasonable basis for our opinion.

In our opinion, based on our audits, and the reports of other auditors, such financial statements present fairly, in all material respects, the financial position of Noven Pharmaceuticals, Inc. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP
Certified Public Accountants

Miami, Florida
February 15, 2002

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NOVEN PHARMACEUTICALS, INC.

Balance Sheets
At December 31, 2001 and 2000
(in thousands except share amounts)