New River Pharmaceuticals Announces Third Quarter 2006 Results

RADFORD, Va., Nov. 7  /PRNewswire-FirstCall/ -- New River Pharmaceuticals Inc. (NASDAQ:NRPH) today announced its financial results for the three months ended October 1, 2006.  New River recognized a net loss of $13.6 million, or $(0.38) per share, basic and diluted, for the three months ended October 1, 2006, compared to a net loss of $9.1 million, or $(0.25) per share, for the three months ended October 2, 2005.  Cash and short-term investment balances were $162.8 million at October 1, 2006.

For the three months ended October 1, 2006, New River recognized $5.0 million of revenue related to its collaboration agreement with Shire Pharmaceuticals Group plc (Shire) (LSE:SHP); (NASDAQ:SHPGY); (TSX: SHQ) with respect to NRP104, New River's lead product candidate.  New River is recognizing milestone revenue from the collaboration that is not subject to refund over the estimated product development period for each of three indications for NRP104, pediatric, adult and adolescent, based on the estimated proportional effort associated with each indication.  To date, New River has received $100 million under the terms of its collaboration with Shire, a portion of which is refundable under certain circumstances, and has recognized $31.9 million of the amount received as revenue.

During the third quarter, New River sold approximately $137.8 million principal amount of convertible notes due in 2013 to institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.  The notes bear interest at 3.5% per year.  In connection with the sale of the notes, New River entered into convertible note hedge transactions with respect to its common stock at a cost of approximately $43.5 million and sold warrants to acquire its common stock in private transactions for net proceeds of approximately $29.5 million.  New River also concurrently purchased $41.0 million of its common stock under a prepaid forward purchase contract.  These transactions were designed to offset New River's exposure to potential dilution upon conversion of the notes.  In addition, New River intends to use the remaining net proceeds for working capital to develop its sales and marketing capabilities for NRP104, including the co-promotion of NRP104 under the terms of the collaboration agreement with Shire, as well as for research and development of its other product candidates and for general corporate purposes.

General and administrative expenses were $6.2 million for the three months ended October 1, 2006 compared to $4.3 million for the three months ended October 2, 2005.  The increase in these expenses is due primarily to increases in shared marketing expenses with Shire under the terms of the collaboration agreement.

Research and development expenses were $13.3 million for the three months ended October 1, 2006, compared to $5.2 million for the three months ended October 2, 2005.  This increase is primarily the result of increases in external development costs associated with NRP104, including manufacturing costs of validation batches, and stock-based compensation expense as a result of accelerating the vesting of certain awards in recognition of employee performance.  Stock-based compensation expense was $4.0 million for the three months ended October 1, 2006, of which $3.3 million was related to equity- settled awards that have a non-cash impact on New River.

"We continue to execute on all fronts and are well positioned to build on our capabilities," said Krish Krishnan, New River's Chief Financial and Chief Operating Officer.  "On October 6, 2006, we received an approvable letter from the FDA on NRP104 for the treatment of ADHD in children.  We anticipate launching NRP104 in the second quarter of 2007 in collaboration with Shire. We recently completed an End-of-Phase 2 meeting with the FDA on NRP290, our second pipeline candidate, which we are developing for the treatment of acute pain.  We also believe we are making good progress in other areas of our portfolio such as hormone replacement therapy and chronic pain."

New River Pharmaceuticals Inc. is a specialty pharmaceutical company developing novel pharmaceuticals that are generational improvements of widely prescribed drugs in large and growing markets.

For further information on New River, please visit the company's website at http://www.nrpharma.com/.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This press release contains certain forward-looking information that is intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995.  Forward- looking statements are statements that are not historical facts.  Words such as "expect(s)," "feel(s)," "believe(s)," "will," "may," "anticipate(s)" and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance.  Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of New River Pharmaceuticals, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include: those discussed and identified in the New River Pharmaceuticals Inc. annual report on Form 10-K, filed with the SEC on March 15, 2006; the timing, progress and likelihood of success of our product research and development programs; the timing and status of our preclinical and clinical development of potential drugs; the likelihood of success of our drug products in clinical trials and the regulatory approval process; our drug products' efficacy, abuse and tamper resistance, resistance to intravenous abuse, onset and duration of drug action, ability to provide protection from overdose, ability to improve patients' symptoms, incidence of adverse events, ability to reduce opioid tolerance, ability to reduce therapeutic variability, and ability to reduce the risks associated with certain therapies; the ability to develop, manufacture, launch and market our drug products; our projections for future revenues, profitability and ability to achieve certain threshold sales targets; our estimates regarding our capital requirements and our needs for additional financing; the likelihood of obtaining favorable scheduling and labeling of our drug products; the likelihood of regulatory approval under the Federal Food, Drug, and Cosmetic Act without having to conduct long and costly trials to generate all of the data which are often required in connection with a traditional new chemical entity; our ability to develop safer and improved versions of widely prescribed drugs using our Carrierwave (TM) technology; our success in developing our own sales and marketing capabilities for our lead product candidate, NRP104; and our ability to obtain favorable patent claims.  Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.  New River Pharmaceuticals does not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.  Readers are also urged to carefully review and consider the various disclosures in New River Pharmaceuticals' annual report on Form 10-K, filed with the SEC on March 15, 2006, as well as other public filings with the SEC.

  Contacts:

   The Ruth Group
   John Quirk (investors)
   646-536-7029
   

   Zack Kubow (media)
   646-536-7020
   



                NEW RIVER PHARMACEUTICALS INC. AND SUBSIDIARY
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)

                                                October 1,     January 1,
                     Assets                        2006           2006
  Current assets:
      Cash and cash equivalents                $73,974,851     $3,515,572
      Short-term investments                    88,825,000     49,250,000
      Other receivables                            371,289        135,755
      Prepaid expenses and other current assets  1,494,873        798,090
          Total current assets                 164,666,013     53,699,417

  Property and equipment:
      Leasehold improvements                        99,644         94,609
      Machinery and equipment                    1,110,950        819,472
      Construction in progress                     301,689              -
                                                 1,512,283        914,081
      Less accumulated depreciation and
       amortization                                676,981        653,427
          Property and equipment, net              835,302        260,654
  Convertible notes issuance costs               4,414,620              -
      Total assets                            $169,915,935    $53,960,071

      Liabilities and Shareholders' Equity (Deficit)

  Current liabilities:
      Capital lease obligation -- current          $24,252        $22,298
      Accounts payable                           7,743,639      1,548,473
      Unpaid and accrued research and
       development expenses                      8,406,226      3,201,732
      Accrued compensation                       2,254,728      2,203,898
      Due to affiliates                            174,460         34,138
      Interest payable                             879,566              -
      Deferred revenue -- current                8,178,482              -
      Accrued stock based compensation --
       current                                   2,009,308              -
          Total current liabilities             29,670,661      7,010,539

  Capital lease obligation -- noncurrent             8,707         27,148
  Accrued stock-based compensation               7,194,806      3,404,435
  Deferred revenue                              59,970,988     50,000,000
  Convertible notes                            137,750,000              -
          Total liabilities                    234,595,162     60,442,122

  Shareholders' Equity (Deficit):
      Preferred stock, par value $0.001 per share.
          Authorized 25,000,000 shares; none
           issued and outstanding                        -              -
      Common stock, par value $0.001 per
       share.  Authorized 150,000,000 shares;
       issued and outstanding 36,708,732 shares
       at October 1, 2006 and 36,367,064 shares
       at January 1, 2006                           36,709         36,367
      Additional paid-in capital                15,277,219     63,326,824
      Accumulated deficit                      (79,993,155)   (69,845,242)
          Total shareholders' equity (deficit) (64,679,227)    (6,482,051)
      Commitments and contingencies
          Total liabilities and shareholders'
           equity (deficit)                   $169,915,935    $53,960,071



               NEW RIVER PHARMACEUTICALS INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF OPERATIONS

                           Three months ended         Nine months ended

                         October 1,   October 2,   October 1,   October 2,
                           2006          2005         2006          2005
                                (Unaudited)               (Unaudited)

  Collaboration
   revenues             $5,025,453           $-   $31,850,530           $-

  Operating costs and
   expenses:
     Selling, general,
      and
      administrative     6,224,842    4,327,045    19,720,602    9,272,568
     Research and
      development       13,292,263    5,247,036    24,390,172   14,072,247
     Depreciation
      and amortization
      of property and
      equipment             34,698       41,562       115,400      116,378

        Total
         operating
         expenses       19,551,803    9,615,643    44,226,174   23,461,193

        Operating
         income (loss) (14,526,350)  (9,615,643)  (12,375,644) (23,461,193)

  Other income
   (expense):
     Loss on disposal
      of fixed assets      (10,226)           -       (10,226)           -
     Interest expense     (993,897)      (1,633)     (996,428)      (3,487)
     Interest income     1,921,871      515,814     3,945,282    1,336,552

        Total other
         income, net       917,748      514,181     2,938,628    1,333,065

  Loss before
   cumulative effect
   of change in
   accounting
   principle           (13,608,602)  (9,101,462)   (9,437,016)  (22,128,128)

  Cumulative effect
   of a change in
   accounting
   principle                     -            -      (710,897)            -

        Net loss      $(13,608,602) $(9,101,462) $(10,147,913) $(22,128,128)

  Net loss per share:
     Basic                  $(0.38)      $(0.25)       $(0.28)       $(0.62)
     Diluted                $(0.38)      $(0.25)       $(0.28)       $(0.62)


DATASOURCE: New River Pharmaceuticals Inc.



CONTACT:  Investors: John Quirk, [phone],

, or Media: Zack Kubow, [phone],

, both of The Ruth Group, for New River Pharmaceuticals

Inc.



Web site:  http://www.nrpharma.com/ 

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