Pay Attention to Noven

On Monday, drug developer Noven Pharmaceuticals (Nasdaq: NOVN  ) announced results from another quarter of strong growth. Revenue nearly doubled versus the year-ago period as sales of its attention-deficit hyperactivity disorder patch, Daytrana, began to pick up in the first quarter and earnings came in at $0.20 a share. 

Daytrana has only been on the market since June of last year and is sold by marketing partner Shire (Nasdaq: SHPGY  ) . In the first quarter, prescriptions for the drug increased 14% versus the fourth quarter. Shire's sales of Daytrana were only $12 million for the first quarter, although this number was artificially suppressed by $7 million worth of coupons handed out to help promote the drug.

Investors need to pay close attention to how much marketing Shire does for Daytrana and how sales of the patch are going. Considering the lack of any meaningful drug pipeline at Noven, Daytrana will drive the company's revenue growth for at least the near and intermediate terms. In the second half of the year, Shire plans to file a marketing application for the drug in Europe, so by the end of 2008, Daytrana should bring another sales boost from the E.U.

Some tiny companies in the stock market quietly go about their business without the need for pomp and circumstance. Oftentimes, small caps trounce the market and make shareholders very wealthy, if management continues to keep a razor-sharp eye on things like controlling costs and not excessively diluting shareholders with options. Noven is shaping up to be a company with many of these same qualities. For example, both research and development and selling, general, and administrative costs were kept in check this quarter, and share dilution was modest versus a year ago despite the company undergoing a big transformation. More conservative investors looking for a relatively stable specialty pharmaceuticals company without the huge risk (or multibagger reward, for that matter) than is typical of the sector would be smart to take a look at Noven.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.


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