UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF FLORIDA

__________________________________________)

DEBORAH A. KALISER on behalf of herself ) and all others similarly situated, )

)Plaintiff, )

) v. )

) NOVEN PHARMACEUTICALS, INC., )ROBERT C. STRAUSS, JAMES B. )MESSIRY, and STEVEN SABLOTSKY )

)Defendants. )

_________________________________________ )

PLAINTIFF'S CLASS ACTION COMPLAINT

Plaintiff makes the following allegations, except as to allegations specifically pertaining to

plaintiff and plaintiff's counsel, based upon the investigation undertaken by plaintiff's counsel, which

investigation included analysis of publicly-available news articles and reports, public filings, press

releases, other matters of public record, and consultation with a forensic accountant.

NATURE OF THE ACTION

1. This is a class action on behalf of all purchasers of the common stock of Noven

Pharmaceuticals, Incorporated ("Noven" or the "Company") between March 27, 2001, and

November 1, 2001, inclusive, (the "Class Period"), seeking to pursue remedies under the Securities

Exchange Act of 1934 (the "Exchange Act").

2. Throughout the Class Period, defendants issued highly positive statements regarding

projected sales for its women's hormone replacement products "Estradot" and a similar product called

- 2 -

"Estalis." Noven signed an exclusive licensing agreement with Swiss pharmaceutical giant Novartis

Pharma AG ("Novartis") to market these two products in Europe. What defendants discovered, by no

later than November 13, 2000, was that Novartis had no intention of aggressively marketing these

products. In fact, Novartis sold its own product, "Estraderm" on which it reaped 100% of the profits.

Accordingly, Novartis shelved Noven's products in favor of selling its own. Despite their knowledge of

these sales problems with international sales, which constituted over 50% of Noven's revenues,

defendants made no disclosures to the public in any of Noven's public filings with the Securities and

Exchange Commission ("SEC") or press release that its international sales would suffer until August,

2001.

3. In addition, defendants knew, but failed to disclose, that sales of Estalis were projected

to decline because Noven had "stuffed the channels" to Novartis by over-shipping quantities of Estalis

to Novartis despite insiders' knowledge that Novartis was not selling the product and thus would not be

placing any re-orders.

4. On August 2, 2001, defendants partially revealed the truth, announcing that sales to

Novartis were far below what analysts and the investing public were led to expect. In response to the

August announcement, Noven stock plunged 43%, closing at $18.98 on August 3, 2001. On

November 1, 2001, defendants revealed the truth: that Novartis' orders had slowed dramatically and

that Noven's revenues and earnings would fall far short of expectations. Noven announced that Noven

expected 2001 earnings per share of between 40 and 45 cents, a far cry from the previous EPS

estimate of 66 cents. Defendants revealed for the first time that Novartis had an existing hormone

replacement product system, Estraderm, and had no existing plans to convert to Noven's products. In

- 3 -

response, Noven stock lost a third of its value in one day of trading, and reached a seventeen month

low.

On

Nove

mber

7,

2001

,

Nove

n

trade

d at $15 per share, far from its price of $39 in July, 2001, before the truth was revealed. The impact of

defendants' misleading statements and omissions is illustrated graphically below:

- 4 -

JURISDICTION AND VENUE

5. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C.

§§1331, 1337 and 1367 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).

6. This action arises under Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C.

§ § 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5).

7. Venue is proper in this District pursuant to Section 27 of the Exchange Act (15 U.S.C.

§ 78aa) and 28 U.S.C. § 1391(b) and (c). Substantial acts in furtherance of the alleged fraud and/or its

effects have occurred within this District and Noven maintains its principal executive offices in this

District.

8. In connection with the acts and omissions alleged in this complaint, defendants, directly

or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to,

the mails, interstate telephone communications, and the facilities of the national securities markets.

PARTIES

9. Plaintiff purchased Noven common stock during the Class Period, as set forth in the

accompanying certification which is incorporated herein by reference, and was damaged thereby.

10. Defendant Noven is a pharmaceutical company with its principal executive offices

located at 11960 S.W. 144th Street, Miami, Florida, 33186. Noven develops transdermal and

transmucosal drug delivery technologies and products.

- 5 -

11. The individual defendants, at all times relevant to this action, served in the capacities

listed below and received substantial compensation:

Name Position

Robert C. Strauss President, Co-Chairman and Chief Executive Officer

James B. Messiry Chief Financial Officer

Steven Sablotsky Co-Chairman and Director

12. The Individual Defendants, as senior officers and/or directors of Noven were

controlling persons of the Company. Each exercised their power and influence to cause Noven to

engage in the fraudulent practices complained of herein.

13. Each of the defendants is liable as a participant in a fraudulent scheme and course of

business that operated as a fraud or deceit on purchasers of Noven common stock, by disseminating

materially false and misleading statements and/or concealing material adverse facts. The scheme: (i)

defendants deceived the investing public regarding Noven's business, its finances and the intrinsic value

of Noven common stock; and (ii) caused plaintiff and other members of the Class to purchase Noven

common stock at artificially inflated prices.

PLAINTIFF'S CLASS ACTION ALLEGATIONS

14. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure

23(a) and (b)(3) on behalf of a Class, consisting of all persons who purchased or otherwise acquired

Noven common stock between March 27, 2001 and November 1, 2001, inclusive (the "Class

Period"), and who were damaged thereby. Excluded from the Class are defendants, members of the

immediate family of each of the Individual Defendants, any subsidiary or affiliate of Noven and the

- 6 -

directors, officers and employees of Noven or its subsidiaries or affiliates, or any entity in which any

excluded person has a controlling interest, and the legal representatives, heirs, successors and assigns of

any excluded person.

15. The members of the Class are so numerous that joinder of all members is impracticable.

While the exact number of Class members is unknown to plaintiff at this time and can only be

ascertained through appropriate discovery, plaintiff believes that there are thousands of members of the

Class located throughout the United States. As of March, 2001, there were reportedly more than 22

million shares of Noven common stock outstanding. Throughout the Class Period, Noven common

stock was actively traded on the NASDAQ (an open and efficient market) under the symbol “NOVN”.

Record owners and other members of the Class may be identified from records maintained by Noven

and/or its transfer agents and may be notified of the pendency of this action by mail, using a form of

notice similar to that customarily used in securities class actions.

16. Plaintiff's claims are typical of the claims of the other members of the Class as all

members of the Class were similarly affected by defendants' wrongful conduct in violation of federal law

that is complained of herein.

17. Plaintiff will fairly and adequately protect the interests of the members of the Class and

have retained counsel competent and experienced in class and securities litigation.

18. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the questions

of law and fact common to the Class are:

1) whether the federal securities laws were violated by defendants' acts and

- 7 -

omissions as alleged herein;

2) whether defendants participated in and pursued the common course of conduct

complained of herein;

3) whether documents, press releases, and other statements disseminated to the

investing public and the Company's shareholders during the Class Period misrepresented material facts

about the business, finances, financial condition and prospects of Noven;

4) whether statements made by defendants to the investing public during the Class

Period misrepresented and/or omitted to disclose material facts about the business, finances, value,

performance and prospects of Noven;

5) whether the market price of Noven common stock during the Class Period was

artificially inflated due to the material misrepresentations and failures to correct the material

misrepresentations complained of herein; and

6) the extent to which the members of the Class have sustained damages and the

proper measure of damages.

19. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden of

individual litigation make it impossible for members of the Class to individually redress the wrongs done

to them. There will be no difficulty in the management of this suit as a class action.

SUBSTANTIVE ALLEGATIONS

Background: The Novartis Deal

1 Unless otherwise indicated, emphasis is added.

- 8 -

20. On November 6, 2000, Noven and Novartis issued a joint press release announcing a

marketing agreement under which Novartis acquired the exclusive rights to market Estradot (a

transdermal estrogen patch for menopausal symptoms) in all countries outside the United States,

Canada, and Japan. Estradot was already jointly marketed by Noven and Novartis in the US (under

the name Vivelle-Dot) through a joint venture, Novogyne Pharmaceuticals. As part of the license,

Noven would receive an up front payment of $20 million, and an additional milestone payment upon

receipt of certain regulatory approvals. According to the agreement, Noven would manufacture and

supply Novartis with the product. No other financial terms of the deal were disclosed.

21. According to the Company’s quarterly report filed on November 13, 2000, the deal

was an exclusive license pursuant to which Noven granted Novartis the right to market Estradot.

Specifically, the 10-Q stated:

Noven received an up-front license payment of $20 million upon execution of theagreement and will receive an additional milestone payment upon registration ofEstradot in certain European countries. The up-front payment as well as the milestonepayment will be deferred and recognized as license revenue over 10 years beginning inthe fourth quarter of 2000. Noven will manufacture Estradot for Novartis andwill receive continuing fees under the agreement based on product volume.1

22. On February 26, 2001, defendants issued a press release announcing “record” financial

results for the quarter and year ended December 31, 2000. Noven reported a before-tax increase in

net income of 110%, a 36% increase in revenues, and an increase in Novogyne’s net income of 172%.

Commenting on the Company’s outlook, defendants Strauss stated:

For 2001 and beyond, we believe that growth drivers in place to continue to rapidly

- 9 -

improve our top and bottom lines. We expect that, through Novogyne, our transdermalestrogen patches will continue to gain share in the U.S. hormone replacement therapymarket, and that Novartis will begin to extend the reach of our estrogen and ourcombination patches internationally.

23. On March 22, 2001, the Company issued a press release entitled “Noven’s Estradot

receives first European marketing authorization”. The press release announced that regulatory

authorities in the Netherlands approved Estradot for the treatment of menopausal symptoms.

Commenting on the approval, defendant Strauss stated: “[w]e are pleased that the first European

approval for Estradot is in hand . . . Novartis’ significant global resources and demonstrated

commitment to women’s health give us great confidence in its ability to successfully commercialize

Estradot in the licensed territories.”

24. On March 23, 2001, in response to the news that Estradot was on its way to being

accepted and successfully commercialized in Europe, Noven stock rose 25% and reached over $26

per share.

The Class Period Begins

25. On March 27, 2001, defendants filed an Annual Report on Form 10-K for the year

ended December 30, 2000, signed by the individual defendants. With respect to the Estradot licensing

agreement, the 10-K announced that Estradot had been approved for marketing in the Netherlands.

The 10-K further stated, in marked contrast to the previous 10-Q, that: “[t]here can be no

- 10 -

assurance that Novartis AG will be successful in effecting the additional registrations of

Estradot or that Noven will receive the milestone payment.”

26. The Annual Report filed on March 27, 2001, also included a section which purported

to caution investors regarding certain “risks” of investing in Noven. For example, the 10-K included a

section regarding competition which stated:

Noven faces competition from a number of companies in the development oftransdermal and transmucosal drug delivery products, and competition is expected tointensify as more companies enter the field. Some of these companies are substantiallylarger than Noven and have greater financial and research and development resourcesthan Noven, as well as greater experience in developing and commercializingpharmaceutical products. Noven’s products compete with other transdermal productsas well as alternative dosage forms of the same or comparable chemical entities. Therecan be no assurance that Noven’s products will successfully compete againstcompetitive products or that developments by others will not render Noven’s productsobsolete or uncompetitive.

27. The March 27, 2001 10-K also included a statement regarding the Novartis Estradot

agreement, stating:

In the short term, Noven’s growth depends in part on Novartis’ launch plans andmarketing efforts with respect to Estalis and Estradot, and the scope of those efforts areoutside the control of Noven.

28. These purported "warnings" detailed in ¶ 26, did not adequately caution investors

regarding the risks of investing in Noven stock.. As detailed below in ¶29, at the time defendants filed

Noven's Annual Report, defendants already knew sales to Novartis were declining dramatically.

Indeed, the language in the 10-K stating that "[t]here can be no assurance that Novartis AG will be

- 11 -

successful in effecting the additional registrations of Estradot or that Noven will receive the milestone

payment" was language not included in the November 13, 2000 10-Q which stated that, Noven "will

receive an additional milestone payment." The inclusion of this language, which differed materially from

the language in the 10-Q (which stated the receipt of the milestone payment was a certainty) indicates

that defendants learned, after November 2000, that Novartis would not be taking reasonable measures

to sell Noven's products in Europe.

29. The statements detailed above were false and misleading for the following reasons:

(a) Noven had ready access to Novartis’s marketing plan with respect to the Estradotlicense. For example, according to the Company’s quarterly report on Form 10-Qfiled on November 13, 2000, Novartis was required to provide Noven with a writtenmarketing plan setting forth a detailed description of Novartis’ strategies and businessplan with respect to the marketing, distribution and sale of each licensed product. Inaddition, at Noven’s request, designated employees from Novartis were required tomeet with Noven to discuss Novartis’ performance under the license agreement. Accordingly, defendants knew that Novartis wasnot successfully marketing Noven's products, and Noven could not expect to generate significant revenues from the licensing agreement;

(b) Novartis manufactured products which directly competed with Estradot. Theseproducts included Estraderm and Monrest. Novartis clearly wanted to limit sales ofEstradot in order to maximize sales of Estraderm and Menorest, for which it did nothave to pay Noven and could reap 100% of the profits from. Indeed, Novartis still hadquantities of Estraderm in stock, which it intended to sell prior to even commencing significant sales activity of Noven's products;

(c) On November 2, 2001, for the first time, defendants revealed that Estradot was indirect competition with Estraderm, Novartis' own product, and that Novartis had not,and was not currently scheduled to replace its own Estraderm franchise with Estradot;

30. Investors had no way of knowing the actual terms of the Novartis deal. In the

Company's November 13, 2000 10-Q, the crucial terms of the deal, including the countries in which

- 12 -

Novartis planned to sell Noven's products, were blocked out for confidentiality reasons. Accordingly,

the investing public was dependent upon defendants' public statements for information regarding the

Novartis deal.

31. In addition to shielding themselves from personal losses as Noven's stock price

declined, as detailed in ¶ 40, defendants were also motivated to conceal the truth regarding international

sales in order to maintain Noven's place on the Russell Equity Indexes. On July 12, 2000, Noven

announced its stock had been added to the Russell 3000 and Russell 2000 equity indexes. The benefit

of inclusion in the Russell index system is that institutional purchasers and certain fund managers are

required to purchase a certain amount of stock which is listed on the Russell Indexes. Indeed,

according to the July 12, 2000 press release, more than $175 billion is invested annually in funds that

rely on Russell's Indexes. Annually in June or July, a company's worthiness for inclusion in the Russell

Indexes is reevaluated. Accordingly, defendants were strongly motivated, and did, conceal the truth

regarding Novartis' declining orders in order to avoid the accompanying stock price plunge and avoid

delisting from the Russell Indexes. Not coincidentally, the first inkling of Noven's international problems

was revealed in early August 2001, a month after Russell's annual reevaluation.

32. On April 3, 2001, after the Company revealed that it would delay seeking approval for

an attention deficit disorder treatment by six to twelve months, Noven shares fell 33%, to $19.13. On

April 30, 2001, in an effort to regain Noven’s lost market capitalization, defendants issued a press

release touting international Estradot sales.

33. In the April 30, 2001 press release, defendants reported first quarter 2001 results for

the quarter ended March 31, 2001. Noven reported net income of $2.7 million, income before income

2 "Mutual Recognition Procedure" refers to a procedure for approving drugsinternationally which have already received Federal Food and Drug Administration in the United States.

- 13 -

taxes of $4.2 million, and revenues of $12.7 million, compared to $9.6 million for the first quarter of

2000. With respect to Estradot and Estalis sales internationally, defendant Strauss stated:

Also during the first quarter, Estradot received its first European approval. Novartis isnow expected to advance the Mutual Recognition Procedure2 process to get theproduct broadly approved in Europe. Novartis’ license of Estradot, combined withtheir previous license of Estalis and their recent acquisition of rights to future versions ofthe combination patch, give us great confidence that Novartis is committed to Noven’sproducts and technologies. This should bode well for the long-term growth of Noven’shormone replacement therapy business.

34. On May 1, 2001, in response to the news, Noven stock rose a dramatic 50% based

on the first quarter press release.

35. In response to the seemingly stellar first quarter 2001 results, defendants received

renewed analyst attention, and a flurry of “strong buy” ratings. For example, a May 1, 2001 analyst

report issued by Deutsche Bank Alex Brown issued a strong buy rating for Noven. The strong buy

rating was based, in part, on international sales. The report stated:

Another key event for 2001 includes the rollout of Estradot beginning next quarterthroughout Europe. We expect this product to be a significant engine of profit growth,particularly in the second half of the year as it is launched in most European countries.

. . .[W]e continue to expect both Estradot and Estalis (the European tradename for CombiPatch (describe)), marketed in Europe by Novartis, to besignificant engines of revenue and profit growth in 2001. . .

36. The report noted that “management remains comfortable with EPS estimates in the

range of $0.60-$0.70 for the year”, stating:

- 14 -

In terms of guidance for the remainder of 2001, management remains comfortable withEPS estimates in the range of $0.60-$0.70 for the year. However, on a quarterlybasis, the Company indicated that 2Q1 results would likely be more similar to 1Q1results than they are to current analysts’ estimates of $0.15-$0.17, with a greater EPSramp expected through the remainder of the year than current analysts’ estimatessuggest. This largely reflects both an anticipated pick-up in prescription trendslater in the year for CombiPatch, which Novogyne will relaunch imminently,and initial shipments of Estradot to Novartis in support of European productlaunch toward the end of the year.

37. On May 8, 2001, Noven management gave a presentation at Deutsche Banc Alex

Brown’s Annual Healthcare Conference in Baltimore, Maryland. At the presentation, management

provided a summary of Noven’s current business and growth prospects. A May 9, 2001 report issued

by Deutsche Bank based on managements’ presentation, stated:

On the European front, management indicated that Estalis has now been shipped tomore than 15 countries with launches expected to continue by partner Novartisthroughout the remainder of this year and into 2002. As far as Estradot is concerned,the Company expects to commence initial shipments to Novartis in late 2001 and into2002, pending pan-European approval, which should occur during the second half ofthis year. Europe is an especially important market for Estradot, especially given thatthe European transdermal hormone replacement therapy market is about twice the sizeof the estimated $250 million U.S. transdermal HRT market and Novartis’ dominantposition in this market.

38. On May 14, 2001, defendants filed a report on Form 10-Q for the period ending

March 31, 2001, signed by defendant Messiry, which repeated the financial results described above for

the first quarter of 2001.

39. The statements detailed above were materially false and misleading. As defendants

knew, sales to Novartis had declined, as Novartis failed to increase sales efforts due to existing

- 15 -

inventory of its own product, Estraderm. In addition, Novartis had a backlog of Estalis and would not

be placing any additional orders in the near future.

40. On May 4, 2001, June 4, 2001 and June 6, 2001, despite the seemingly stellar financial

results, defendant Messiry sold Noven shares near the stock's Class Period high, generating proceeds

of over $438,000. Messiry sold an additional 8,000 shares on August 24, 2001, generating an

additional $139,000. Similarly, defendant Sablotsky effectively hedged against any possible downturn

in the stock, selling $1,614,700 worth of Noven stock at artificially inflated prices, and exercising

options to acquire additional stock for as little as $6.19 per share in order to maintain the appearance

that he was not divesting himself of over-priced Noven stock.

41. On July 13, 2001, Noven issued a press release announcing that defendant Sablotsky,

a co-founder of the Company, resigned from the Board of Directors as “the final step in a Noven

management transition. . .”

The Truth Begins To Emerge

42. On August 2, 2001, defendants issued a press release announcing that Noven signed a

product development agreement with Novartis relating to the development of line extensions and

product enhancements to the Estalis line of products. Under the agreement, Noven would receive

certain payments as development milestones are received.

- 16 -

43. On August 2, 2001, defendants issued a press release announcing financial results for

the second quarter and first half of 2001. Defendant reported second quarter earnings per share of

$0.14, and a pre-tax income increase of 63%, with a 26% increase in revenues. Significantly,

defendants revealed that they would have to revise Noven’s financial forecast for full year 2001.

Defendant Strauss stated:

Our international business has not progressed as rapidly as we had hoped. NovartisPharma AG licenses our principal international products, Estalis (R) and Estradot (TM),in most markets outside the U.S. We expected to receive significant orders for thoseproducts as Novartis Pharma purchased supply for planned international launches. Todate, orders have been substantially less than we anticipated, and this will significantlyaffect our second half results.

We believe that the failure to order at expected levels reflects Novartis Pharma'sstrategies relating to regulatory approvals and launch timing, not a lack of commitmentto commercializing Noven's products. Several recent developments support his belief. In March of this year, our joint venture with Novartis Pharmaceuticals acquiredCombipatch, the U.S. version of Estalis. As announced separately today, NovartisPharma and Noven have entered into an agreement to develop line extensions to theCombipatch/Estalis product line. And Novartis Pharma continues to advance theEuropean mutual recognition process for Estradot. We believe that these developmentsevidence Novartis Pharma's confidence and commitment to the long-term success ofEstalis and Estradot in global markets.

Product order issues aside, we consider our relationship with Novartis Pharma to beexcellent. We are working with our colleagues there to better understand theirregulatory and launch strategies, and to determine when additional orders will bereceived.

44. This partial disclosure of the problems Noven was experiencing internationally with

sales to Novartis was stunning to investors and analysts. An August 3, 2001 analyst report issued by

C.E. Unterberg Towbin analyst Ken Trbovich downgraded Noven from “strong buy” to “neutral”

based on the August 2, 2001 Noven press release. The analyst report characterized the disclosure as

- 17 -

one that “shocked the Street”. Nonetheless, the August statement was false and misleading because

Novartis was far from "committ[ed]" to the "long term success of Estalis and Estradot" since these

products directly cut into Novartis' share of the hormone replacement market, and shelved these

products in favor of Estraderm, its own product.

45. An August 3, 2001 Deutsche Banc Alex Brown report downgraded Noven based on

the news of poor international sales. The report noted:

• In a very surprising development, the company announced that international ordersfrom partner Novartis for Estalis and Estradot will be significantly lower than anticipatedfor the second half of this year. As a result, management expects 2001 EPS in therange of $0.40 to $0.45. In addition, no guidance was provided for 2002.

• Management was unable to provide any insight as to why Novartis has failed to placeexpected orders for Estradot and Estalis in support of international launches. We arealso quite perplexed especially given Novartis’ efforts in securing the marketing rights toand advancing the commercialization of these products.

46. In response to the news, that Noven expected profits of between 40 cent and 45 cents

per share (a far cry from the 66 cents the market was led to expect), Noven lost $14.34, or 43

percent of its value, closing at $18.98 on August 3, 2001. Nonetheless, the full extent of Noven's

international sales decline, while known to Noven insiders, was still unknown to the investing public.

47. On August 10, 2001, defendants filed a quarterly report on Form 10-Q for the period

ending June 30, 2001, the second quarter of fiscal 2001. The report was signed by defendant Messiry.

The report again failed to disclose the magnitude of the problems Noven was experiencing

internationally.

- 18 -

48. On August 14, 2001, an article published on The Motley Fool discussed Novartis'

European difficulties, stating:

The problem was the guidance provided by Noven's management. The questionscentered on international (primarily European) sales. Novartis has the internationalmarketing rights to Noven's patches, which, for the purposes of confusing stockanalysts, are marketed as Menorest (Vivelle), Estalis (Combipatch), and Estradot(Vivelle-Dot).

Noven's management noted that European product orders from Novartis didn'tmaterialize as expected, and revised the full-year forecast to pre-tax operating incomegrowth of 25% to30% and a full-year EPS of between $0.40 and $0.45, down fromconsensus estimates of around $0.60 per share. This compares to last year's adjustedEPS figure of $0.34 per share. Revenues are not expected to be "modestly higher"than last year's.

Noven's management as not well informed as to the reasons behind the shortfall inproduct orders from Novartis, but made the rather ominous statement that part ofNoven's expected growth in 2002 was to be from Europe, and that revenues in 2002could be relatively flat without some performance from Novartis.

Strangely, Noven's management didn't appear to know much about the plans Novartishas for its products in Europe. In fact, they seemed a little mystified as to why ordersdidn't materialize. Considering that approximately 60% of Noven's product revenuecomes from outside the United States, this is disconcerting news. One would think thatit would be well worth the company's time to book a plane to Basel yesterday. On theconference call, Noven managers did note that they had already schedule some facetime with Novartis, and we hope this will result in better information flow between thetwo companies.

The failure of orders to materialize from Novartis is doubly mystifying when youconsider that Novartis made two announcements concerning Noven products the sameday earnings were released. The first was Novartis press release announcing theapplication for Estradot in the EU under the mutual recognition procedure, which wouldallow Novartis to market the product in all EU countries. (The patch was recently

- 19 -

approved in the Netherlands, which will act as the Reference Member State.)

49. On October 10, 2001, Deutsche Bank issued an analyst report updating investors on

the outlook for Noven's third quarter. The report noted that:

We remain cautiously optimistic that growth internationally will resume longer term,driven by the launch of Estradot, which we expect in early 2002 pending the receipt ofpan-European approval. While all indications appear to be that Novartis remainscommitted to Noven's products, it is the level of commitment that remains unclear.

50. In fact, as defendants had known for several months, Novartis was far from committed

to Noven's products, and was in fact shelving Noven's products in favor of its own hormone

replacement products.

The Truth Regarding International Sales

51. On November 1, 2001, defendants belatedly revealed the truth regarding dismal sales

to Novartis in Europe. In a November 1 press release announcing third quarter earnings, defendant

Strauss stated, with respect to Novartis:

Ever since Novartis Pharma first licensed the product, we have been hopeful that theywould rapidly convert their existing transdermal estrogen business to Estradot. Weknow that active conversion is an option under consideration in the launch planningprocess, and we are doing everything possible to influence the outcome. We mustrecognized the fact that, without broad conversion, launches may not bee asrobust or rapid as we would like. At this time, we understand that Novartis Pharmahas not reached a decision on conversion strategy or timing.

Estalis orders by Novartis Pharma in the second half of 2001 have been much lowerthan in the first half, and forecasted orders for 2002 are lower than 2001. NovartisPharma has advised that its inventory levels for Estalis are high. We alsounderstand that Novartis Pharma plans to seek approval of a second Estalis dosage

- 20 -

strength in European countries where only one strength is presently approved, and thatthey have initiated a supporting clinical study. We do not expect renewed growth in oursales of Estalis until the second dosage is approved.

52. Defendants also announced dramatically reduced earnings projections for the fourth

quarter of 2001 and for 2002. Defendant Strauss stated:

We expect 2001 fourth quarter revenues to be in line with the quarter that we justcompleted. Fourth quarter diluted earnings per share should be in the $0.10 to $0.12range. Pre-tax income for full year 2001 is expected to increase in the 40% rangecompared to 2000. We expect to earn $0.45 t0 $0.47 per share for full-year 2001,which represents an increase over our prior full year guidance of $0.40 to $0.45 pershare. This increase is largely due to lower than planned expenses in the 2001 fourthquarter.

As indicated, we have seen a significant decline in Estalis orders, and we expect thatdecline to continue at least through 2002. Estradot orders in 2002 are expected to beinsufficient to offset Estalis declines. As a result, we expect our international sales todecline substantially in 2002 compared to 2001. Noven's target for 2002 calls for salesgrowth in Vivelle-Dot and CombiPatch sufficient to offset this international decline. Ifmet, we would expect 2002 revenues to be comparable with 2001 full-year revenues,and 2002 diluted earnings per share to be in the $0.45 t0 $0.55 range.

53. A November 2, 2001 analyst report issued by Deutsche Bank lowered Noven's EPS

projections, based on the "cloudy" outlook for Europe. The report concluded that 2002 will essentially

be a "lost year" for Noven, with no earnings growth. The report stated, with respect to international

sales of Estalis:

With regard to Estalis - the European trade name for CombiPatch - managementindicated that orders in 2H01 have been "much lower" than in 1H01" and that forecastsreceived from Novartis to date indicate that sales in 2002 will be lower than 2001levels. This has apparently resulted from distribution channel inventory levels thatremain high from the original launch of the product, according to Noven management. Additionally, Noven does not expect any resumption of growth in sales of this productuntil Novartis receives regulatory approval for a second dosage strength in Europe, forwhich Novartis has initiated a clinical study (in the United States this product wasoriginally launches with two dosage strengths). Our suspicion all along is that Novartis

- 21 -

has not been aggressively detailing the product. This may be why.

The net result of these developments is that international sales to Noven are expected todecline substantially in 2002 as compared to 2001 levels, and should approximateslightly in excess of 30% of Noven's total revenue in 2002.

54. In response to the news revealing the truth about Noven's international sales to

Novartis, the stock plunged 33% to $14.89, a seventeen month low.

APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-THE-MARKET DOCTRINE

55. At all relevant times, the market for Noven common stock was an efficient market for

the following reasons, among others:

(i) Noven common stock met the requirements for listing, and was listed and

actively traded, on the NASDAQ, a highly efficient market;

(ii) As a regulated issuer, Noven filed periodic public reports with the SEC;

(iii) Noven stock was followed by securities analysts employed by major brokerage

firms who wrote reports which were distributed to the sales force and certain customers of their

respective brokerage firms. Each of these reports was publicly available and entered the public

marketplace.

(iv) Noven regularly issued press releases which were carried by national

newswires. Each of these releases was publicly available and entered the public marketplace.

56. As a result, the market for Noven securities promptly digested current information with

respect to Noven from all publicly-available sources and reflected such information in Noven's stock

price. Under these circumstances, all purchasers of Noven common stock during the Class Period

- 22 -

suffered similar injury through their purchase of stock at artificially inflated prices and a presumption of

reliance applies.

NO SAFE HARBOR

57. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this complaint. The

specific statements pleaded herein were not identified as "forward-looking statements" when made. To

the extent there were any forward-looking statements, there were no meaningful cautionary statements

identifying important factors that could cause actual results to differ materially from those in the

purportedly forward-looking statements. Alternatively, to the extent that the statutory safe harbor does

apply to any forward-looking statements pleaded herein, defendants are liable for those false forward-

looking statements because at the time each of those forward-looking was made the particular speaker

knew that the particular forward-looking statement was false, and/or the forward-looking statement

was authorized and/or approved by an executive officer of Noven who knew that those statements

were false when made.

SCIENTER ALLEGATIONS

58. As alleged herein, defendants acted with scienter in that defendants knew that the public

documents and statements, issued or disseminated by or in the name of the Company were materially

false and misleading; knew or recklessly disregarded that such statements or documents would be

issued or disseminated to the investing public; and knowingly and substantially participated or

acquiesced in the issuance or dissemination of such statements or documents as primary violators of the

federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of

- 23 -

information reflecting the true facts regarding Noven and its business practices, their control over and/or

receipt of Noven' allegedly materially misleading misstatements and/or their associations with the

Company which made them privy to confidential proprietary information concerning Noven were active

and culpable participants in the fraudulent scheme alleged herein. Defendants knew and/or recklessly

disregarded the falsity and misleading nature of the information which they caused to be disseminated to

the investing public. This case does not involve allegations of false forward-looking statements or

projections but instead involves false statements concerning the Company's business, finances and

operations. The ongoing fraudulent scheme described in this complaint could not have been

perpetrated over a substantial period of time, as has occurred, without the knowledge and complicity of

the personnel at the highest level of the Company, including the Individual Defendants.

59. The Individual Defendants engaged in such a scheme to inflate the price of Noven

common stock in order to: (i) protect and enhance their executive positions and the substantial

compensation and prestige they obtained thereby; and (ii) enhance the value of their personal holdings

of Noven common stock and options.

FIRST CLAIM

(Violations Of Section 10(b) Of The Exchange ActAnd Rule 10b-5 Promulgated Thereunder Against

All Defendants)

60. Plaintiff repeats and realleges each and every allegation contained above.

61. Each of the defendants: (a) knew or recklessly disregarded material adverse non-

public information about Noven's financial results and then existing business conditions, which was not

disclosed; and (b) participated in drafting, reviewing and/or approving the misleading statements,

- 24 -

releases, reports and other public representations of and about Noven.

62. During the Class Period, defendants, with knowledge of or reckless disregard for the

truth, disseminated or approved the false statements specified above, which were misleading in that they

contained misrepresentations and failed to disclose material facts necessary in order to make the

statements made, in light of the circumstances under which they were made, not misleading.

63. Defendants have violated § 10(b) of the Exchange Act and Rule 10b-5 promulgated

thereunder in that they: (a) employed devices, schemes and artifices to defraud; (b) made untrue

statements of material facts or omitted to state material facts necessary in order to make statements

made, in light of the circumstances under which they were made, not misleading; or (c) engaged in acts,

practices and a course of business that operated as a fraud or deceit upon the purchasers of Noven

stock during the Class Period.

64. Plaintiff and the Class have suffered damage in that, in reliance on the integrity of the

market, they paid artificially inflated prices for Noven stock. Plaintiff and the Class would not have

purchased Noven stock at the prices they paid, or at all, if they had been aware that the market prices

had been artificially and falsely inflated by defendants' false and misleading statements.

SECOND CLAIM

(Violation Of Section 20(a) Of The Exchange Act Against Individuals Defendants)

65. Plaintiff repeats and realleges each and every allegation contained above.

66. The Individual Defendants acted as controlling persons of Noven within the meaning of

Section 20(a) of the Exchange Act. By reason of their senior executive and/or Board positions they

- 25 -

had the power and authority to cause Noven to engage in the wrongful conduct complained of herein.

67. By reason of such wrongful conduct, Noven and the Individual Defendants are liable

pursuant to §20(a) of the Exchange Act. As a direct and proximate result of these defendants' wrongful

conduct, plaintiff and the other members of the Class suffered damages in connection with their

purchases of Noven stock during the Class Period.

WHEREFORE, plaintiff prays for relief and judgment, as follows:

1) Determining that this action is a proper class action and certifying plaintiff as class

representative under Rule 23 of the Federal Rules of Civil Procedure;

2) Awarding compensatory damages in favor of plaintiff and the other Class members against

all defendants, jointly and severally, for all damages sustained as a result of defendants' wrongdoing, in

an amount to be proven at trial, including interest thereon;

3) Awarding plaintiff and the Class their reasonable costs and expenses incurred in this action,

including counsel fees and expert fees; and

4) Such other and further relief as the Court may deem just and proper.

- 26 -

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

DATED: November ____, 2001.

MILBERG WEISS BERSHADHYNES & LERACH LLP

By: ______________________________Kenneth J. VianaleFla. Bar No. 169668Maya SaxenaFla. Bar. No. 00954945355 Town Center Road, Suite 900Boca Raton, FL 33486Tel: (561) 361-5000Fax: (561) 367-8400 -and-Steven G. SchulmanSamuel H. RudmanOne Pennsylvania PlazaNew York, NY 10119Tel: (212) 594-5300Fax: (212) 868-1229

BARRACK RODOS & BACINEDaniel E. Bacine3300 Two Commerce Square2001 Market StreetPhiladelphia, PA 19103Tel: (215) 963-0600Fax: (215) 963-0838

Attorneys for Plaintiff