Value Investing Congress Blog

Noven Pharmaceuticals (Nasdaq: NOVN) recently made significant changes to its board of directors and senior management. The company hired a new CFO, accepted the resignation of its long time Chairman and CEO Robert C. Strauss, and appointed Wayne P. Yetter as its new Chairman. We applaud these actions and believe a tremendous amount of value will come from the changes.

The Chairman and CEO roles are now separated, and Mr. Yetter has an outstanding reputation and track record. He is the former CEO of Novartis Pharmaceuticals and Astra Merck, and also served as the COO of IMS Health, all large and successful companies. Interestingly, Mr. Yetter was the CEO of Novartis at the time it established the Novogyne joint venture with Noven. For a company with an enterprise value of only $250 million, Noven has an impressive leader at the helm.

Noven has appointed Jeffrey F. Eisenberg, Senior VP of Strategic Alliances, as Interim CEO and expects to announce a new CEO shortly. We believe that a well recognized industry leader with a proven track record will be appointed. Noven presents an outstanding opportunity for a top notch executive to take charge of a profitable company with a very flexible balance sheet, at a time when its stock is extremely depressed and its opportunities are abundant. In our opinion, prior management did not aggressively exploit Noven’s drug delivery platform or utilize its overcapitalized balance sheet.

The company has best-in-class drug delivery technology and a deep pipeline of products – both proprietary and with market leading partners – in various stages of development. In addition, Noven’s strengths play into the key challenges faced by Big Pharma today. Its patented Dot-Matrix technology differentiates products and extends patent life, while requiring a short timeframe for regulatory approval and a relatively small amount of development capital. In addition, Noven has outstanding proof of concept via its Vivelle-Dot patch for Estrogen Therapy and its Daytrana patch for ADHD. Both are market leading products with no close competitors.

We see tremendous value in Noven, which should become apparent to the market as new products are approved and a new management direction takes hold. We believe Noven’s 49% ownership of its Novogyne joint venture alone is worth 40% more than its current enterprise value, and that does not attribute any value to its four additional approved products or its robust product development pipeline. At present, we believe Noven’s stock is selling for $0.38 on the dollar. A significant share repurchase would be extremely accretive, and the pursuit of strategic alternatives would likely catapult the stock. Regardless of the means, we are confident that the gap between Noven’s share price and its intrinsic value will be closed over the long term.

Bill Ackman, one of America’s best-known activist investors, will be speaking at our Value Investing Congress at Time Warner Center in New York on Wednesday, November 28. Bill’s done a great service to the investing public while making outsized returns for his investors by pushing corporate managers to behave in ways that build shareholder value. For several years, Bill has been studying financial guarantors such as MBIA and Ambac, who insure municipal bonds, mortgages and other financial instruments. Though he is keeping a tight lid on his remarks before the upcoming Congress, his presentation earlier this year at the Ira Sohn Investing Conference, “Who’s Holding the Bag?” could very well be a small taste of what’s to come.

At the first New York Value Investing Congress, his presentation on McDonald’s impacted the market significantly, and many investors profited from his intervention (I certainly did!). Bill has told us that his upcoming presentation at the 2007 Value Investing Congress next week will be one of the boldest public statements he’s ever made and will have significant market-moving implications. There are still a few seats left so if you would like to register please visit www.ValueInvestingCongress.com.

Bill has been kind enough to share his presentation from the Ira Sohn Investing Conference with us. To read it now, click here. I hope you find this as worthwhile as I did. I’d love to hear your thoughts.

John L. Schwartz, MD
CEO
Schwartz Tilson Information, Inc.
www.ValueInvestingCongress.com

Heilbrunn Center for Graham & Dodd Investing
17th  Annual Graham & Dodd Breakfast
David Einhorn’s Prepared Remarks
October 19, 2007
 

            What strikes me the most about the recent credit market crisis is how fast the world is trying to go hack to business as usual. In my view, the crisis wasn’t an accident. We didn’t get unlucky. The crisis came because there have been a lot of bad practices and a lot of bad ideas. Securitization is a mediocre idea. Re-securitization of already securitized assets into a CDO is a bad idea. Re-securitization of CDOs into CDO-squared is a really bad idea. So is funding a pool of long-term illiquid assets with very short-term funding in the so called asset backed commercial paper market. And as I will get to in a moment, it is a horrendous idea to delegate most of the responsibility for assessing credit risk to a group of credit rating agencies paid for by the issuers rather than the buyers of bonds.

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