“I’m so so sorry. He was just diagnosed last year,” his mom told me… “It’s so bad that we have to give him pills three times a day…”

Her son, Ryan, had just bumped into me at a Christmas party, almost knocking me down…and I spilled coffee all over my sweater.

She went on to explain that Ryan has attention-deficit/hyperactivity disorder, or ADHD. Ryan is one of some 4.4 million children diagnosed with ADHD. Most of them take medication. As you might imagine, the costs of ADHD are pretty staggering. In 2003, those costs totaled around $3.3 billion.

So for this issue of Penny Sleuth, I’ve found a hidden small-cap drug delivery company with a new, patent protected way to capitalize on that multi-billion dollar market.

The company trades for under $15 bucks a share… And over the course of a 14-month period that ended earlier this year, investors saw a 146% return on their money. Now, by expanding their product offering, they’re set up for another double.

Here’s the full story…

From Under $15 to Over $30 a Share…

The majority of kids with ADHD take one of two types of medication: Ritalin or Adderall. Almost all of the kids take these in an oral form, either by pill or chewable tablet. But, that’s about to change…

Noven Pharmaceuticals (NOVN: NASDAQ), a small-cap stock that trades for under $14.00 a share (as of this morning), has a new way to deliver medication…

They call it “dot-matrix” patch technology. It’s just like a band-aid. You simply peal off the back of the patch and stick it on. Noven mixes the medicine with an acrylic and silicone adhesive, making it easy for anyone to apply.

No more huge “horse” style pills to swallow. No more nasty tasting medicine to spoon in your mouth…

Besides from the ease of use, the patches have a few more key advantages over ingestible pills. First, they bypass the liver. No risk of liver damage. Next, they provide steady delivery. You don’t have to worry about remembering when to take your next pill. And finally, you can remove them at any time…whereas you can’t “un-swallow” a pill.

The best part is that Noven doesn’t take on the risk of developing and marketing the drugs. They simply partner with the manufacturer/marketers, develop the medicine in a “patch” form and collect royalties from the sale.

Sure, but your probably thinking to yourself, “This isn’t new… I’ve seen medications in patch form before, right?”

You’re right, this isn’t new… It’s just improved and patent protected — with a patent that runs through 2014. They currently hold 35 U.S. patents and 315 foreign patents. They have an additional 145 worldwide patents pending for their dot-matrix technology…

Noven’s dot-matrix patches are considerably smaller than its competitors. Sometimes, as small as a third the size of the competition. Noven also has better adhesion and less irritation than competitor’s patches.

Noven has the ADHD market covered with both the Ritalin and Adderall products. Their Ritalin patch, called Daytrana, launched in 2006. It’s the only ADHD patch on the market that’s been approved by the FDA. 

Their Adderall patch is in development and expected to launch in 2010. But, the ADHD market isn’t the only market they’re in…

Existing Product Lines

ADHD is just one of the two major markets that Noven serves. The other is the estrogen therapy market for women experiencing menopause.

According to West Coast Asset Management, estrogen therapy is a $1.7 billion market. Most women take pills — about 65% of them. But about 17% use patches I bet more and more will use the patches as they “discover” Noven’s patch.

Noven’s “Vivelle-dot” patch has over a 50% market share of the patch users — and it’s growing stronger every day. Why? Because it’s the smallest estrogen therapy patch on the market. Women don’t want to wear a big ugly patch on their skin. But, Noven’s patch has gotten rave reviews so far.

Through a joint partnership, they’re expected to pull in $35 million in earnings from their estrogen patch in 2007.

But what really gets exciting is the future uses of the patch technology…

They’ll Be Able to Deliver More Than 35 Drugs in a Patch Form

Noven believes that they could deliver more than 35 drugs in a patch form… Patches could deliver medication for everything from pain, to leaky bladders, to birth control, to motion sickness.

It’s hard to know what all of these potential products could be worth. Noven won’t disclose its new partnerships until after they’ve inked them (for obvious competitive reasons).

They did however, announce that in August they bought JDS, a small pharmaceutical company. This is significant because JDS specializes in psychological drugs that treat depression and bipolar disorder… So I can only imagine that they’ll soon look to develop these in patch form, too.

Investors who bought just 100 shares 14 months ago could have pocketed over 1,200 bucks… Now the recent market pullback is offering us a great time to buy again.

With its existing drugs, the company is already worth more than their current share price. If you add in the potential of future potential patches, you could easy double your money by the end of 2008…

If this idea intrigues you, you better hurry to get in… As I was typing this edition of Penny Sleuth to you, Rueters broke a story that sent the stock up 14% in late trading:

“Noven Pharmaceuticals Inc said U.S. health regulators gave tentative approval for its experimental drug, Stavzor, to treat bipolar disorder, migraine and epilepsy…”

The future of drug delivery is here…and it comes in the form of tiny, band-aid like patches…

To your wealth,

Joe Schriefer
January 2, 2008

P.S.: There are two other pharma companies that I believe will do even better than Noven in the near future. Our CXS stock-screening system — the system that has previously identified winners that could have made you 404%, 371% and 259% — has recently scored both of these new pharma stocks an “8 out of 10” on its ranking system… Anything with a rating this high has some major profit potential.

Penny Sleuth Contributor

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