815838--3/13/2009--NOVEN_PHARMACEUTICALS

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Our business may be significantly harmed if we are unable to adequately resolve the issues raised by the FDA in the warning letter we received in January 2008. Recalls or withdrawals of our products could have a material adverse effect on our results of operations and financial condition. Our approved products may not achieve the expected level of market acceptance. If we cannot develop, license or acquire new products and commercialize them on a timely basis, including Mesafem our financial condition and results of operations could be adversely affected In order to diversify and complement our current product offerings, we may pursue new product and technology acquisitions, which may be costly and may not provide the expected benefits. We may be unable to obtain marketing approval for our new products on a timely basis or at all. We may not realize the expected benefits of the Noven Therapeutics acquisition. The Noven Therapeutics acquisition is expected to dilute our earnings for an undetermined period of time. Publication of negative results of studies or clinical trials may adversely impact our products. We do not control Novogyne, and we may face additional risks because Novartis, our joint venture partner, has significantly greater resources than we have. We depend on Novartis to perform financial, accounting, regulatory, compliance, inventory, sales deductions and other functions for Novogyne. We depend on partners to obtain regulatory approval for, and to market and sell, certain of our transdermal products. Our marketing partners sell products that compete with our transdermal products. Failure to comply with our supply agreements or otherwise adequately supply our transdermal products to our licensees could negatively affect our financial condition and results of operations. We face scale-up risks in manufacturing new transdermal products in commercial quantities. We rely on third party manufacturers to supply us with our oral products. Failure of these third parties to comply with governmental regulations or our manufacturing and supply agreements or otherwise supply our oral products could negatively affect our financial condition and results of operations. We rely on a single supplier or a limited number of suppliers for certain raw materials and compounds used in our transdermal products. Our supply of methylphenidate and other controlled substances must be approved by the DEA. Compliance with governmental regulation is critical to our business. If we market products in a manner that violates health care fraud and abuse laws, we may be subject to civil or criminal penalties. Decreased margins on sales of Daytrana may adversely impact our results of operations. We face significant competition, which may result in others discovering, developing or commercializing products before, or more successfully than, we do. Competitors may use legal, regulatory and legislative strategies to prevent or delay the launch of our products. The European market for our transdermal products may be limited due to pricing pressures and other matters. Our quarterly operating results are subject to significant fluctuations. Our results of operations will be adversely affected if we or Novogyne fail to realize the full value of our intangible assets, which significantly increased as a result of the Noven Therapeutics acquisition. We previously invested a portion of our cash in auction rate securities, which subjects us to liquidity and investment risk. We could be required to record additional impairment charges if the fair value of these investments continues to decline. There are inherent uncertainties involved in the estimates, judgments and assumptions used in the preparation of our consolidated financial statements, and any changes in those estimates, judgments and assumptions could have a material adverse effect on our financial condition and results of operations. If our estimates for returned products are incorrect, there could be a materially adverse impact on our net revenues and results of operations. We cannot be certain of the protection or confidentiality of our patents and proprietary rights. Third parties may claim that we infringe their proprietary rights, forcing us to expend substantial resources in resulting litigation, the outcome of which is uncertain. Any unfavorable outcome could negatively affect our financial condition and results of operations. We may experience reductions in the levels of reimbursement for our products by governmental authorities, private health insurers and managed care organizations. We are subject to chargebacks and rebates when our products are resold to, or reimbursed by, governmental agencies and managed care buying groups, which may reduce our net revenues and impact our results of operations. Health care reform or other changes in government regulation could harm our business. We may be exposed to product liability claims and we cannot assure that our insurance will be adequate. All of our transdermal products are manufactured at one location. An interruption of production at this facility could negatively affect our business, financial condition and results of operations. We use hazardous chemicals at our Miami manufacturing facility. Potential claims relating to improper handling, storage or disposal of these chemicals could be time consuming and costly. Our insurance coverage may not be adequate and rising insurance premium costs could negatively affect our profitability. Our financial condition and results of operations could be harmed if we are required to perform under existing or future contractual indemnification provisions. Our success depends on attracting and retaining our key employees. Our stockholders rights plan, our corporate charter documents, Delaware law and our joint venture operating agreement with Novartis may have an anti-takeover effect. The market price for our common stock is volatile.

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815838--3/13/2009--NOVEN_PHARMACEUTICALS_INC