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And yet there has not been one iota of proof that any acquiring company will be taking over ELTP. All I am seeing is a silly conspiracy theory promoting this idea. . .just hypothetical nonsense.
Conjectural nonsense at its finest. In other words. . . .pure crapola.
You are very welcome imanjen 13.
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Seeking Alpha Transcript from today's CC in its entirety:
Elite Pharmaceuticals, Inc. (OTCQB:ELTP) Q4 2023 Earnings Conference Call June 30, 2023 11:30 AM ET
Company Participants
Nasrat Hakim - President and Chief Executive Officer
Conference Call Participants
Operator
Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a listen-only mode.
Before management begins speaking, the Company has the following statements. Elite would like to remind their listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties that are subject to changes at any time, including, but not limited to, statements about Elite’s expectations regarding future operating results.
Forward-looking statements are made pursuant to the Safe Harbor provisions of the federal securities laws and represent management’s current expectation. Actual results may differ materially. Elite disclaims any obligation to update or revise its forward-looking statements, except as required by law. More complete information regarding forward-looking statements, risks and uncertainties can be found in the reports Elite files with the SEC, which are available on Elite’s website at elitepharma.com under the Investor Relations section. Elite encourages you to review these documents carefully.
With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.
Nasrat Hakim
Thank you, Matthew, and good morning, ladies and gentlemen. Thank you for joining us today. My name is Nasrat Hakim, I am Elite’s Chairman and CEO. This is our year-end earnings call. I will give you a summary of the company's financials, an update on Elite's R&D, manufacturing, sale and distribution, and answer some of the questions that you have submitted to Diane.
Before I start let me address the issue of our CFO vacancy. Since Diane received a few questions about the subject and I don't want to wait till the end. We have Carter Ward as our CFO for over 13-years. He was here a lot longer than I have been here. And while Carter got a great opportunity elsewhere that we could not match, we wished him well and encouraged him to take it, because he, his family and he is a good person, good CFO and a good stockholder, whom we stay in contact with till today.
Mark helped us recruit his successor. We took a chance on a gentleman, who was a controller and we promoted him to CFO, and he was really good. The pressure got to him and he want to go back to his old job. Anytime you are in a regulated industry where you're subject to the SEC and the auditors as scanning every decision you make and you have to consult with the SEC at times all the time, it [Indiscernible] when you are not used to it. But I would like to emphasize that he did a decent job. He was good and he actually resigned. He made the choice to leave. The next two CFOs did not. I will say nothing further about the subject out of respect for everybody. When you're working for a small company, you got to work.
All right. As the acting CFO at least for today, I have the pleasure of updating you on our wonderful financials. Yesterday, we filed our 10-K for the year ending March 31, 2023. Elite is on a March fiscal year, a copy of the 10-K is available in the Investors Section of our website at elitepharma.com. It is also posted on sec.gov and many other websites that provide link to our filings.
I'll start with the financial update with the income statement. We had record sales of about $34 million this fiscal year, up approximately $2 million, compared to the last year ending in 2022. Last year we had $32 million this year it's $34 million. This is primarily to the sales of our generic version of Adderall, Naltrexone tablets and Loxapine capsules. The cost of goods sold was $17.6 million, compared to $17.5 million during the previous year.
Now as a general rule, the cost of goods usually increases as revenues increase. Despite a $2 million increase in revenues, the cost of goods held constant. We posted an operating profit of approximately $3.7 million, compared to $5 million in 2022. The $1.7 million decrease in operating profit was primarily driven by an increase in R&D spending of about $2 million over the previous year. Previous year we have spent about $1.5 million, this year we spent $3.5 million, $2 million more than previous year.
Our operating expenses were $13 million, an increase of approximately $3 million over the previous year of $10 million. The increase was primarily related to R&D increase in spending, that's $2 million and $1 million of interest on our outstanding loan.
Let's move to our balance sheet. Our working capital is $13.6 million, compared to $12.2 million during the previous year. Our cash from operating activities is $3.7 million, down from $6.5 million, compared to the previous year for the reasons we spoke of R&D expenses et cetera in 2023. Our total cash on hand was $7.8 million as of March 31, 2023. That is after we paid a $12 million loan to East West Bank.
Let me say a couple of words about the loan that we recently repaid. Elite's working capital requirements have increased as we transition to direct sales. Payment terms for direct sales require a longer time for repayment and a longer inventory hold time, compared to licensing our product. Elite had a $12 million loan from East West Bank that we intended to use part of it for this purpose. Due to restrictive covenants and Lannett's termination agreement, the bank would not allow us access to the majority of the loan money, but continue charging us on the full loan.
Therefore, Elite decided to pay off the loan and decided to raise the money elsewhere. The company put in place a loan proposal to raise $6 million under the same terms as East West Bank, but without the restrictions. This is a short-term loan to be paid in one to two years. It's a short-term loan for one year with only Elite having the right to extend it to a second year to support the sales transition. This new loan provides the working capital needed without the restrictions that East West Bank put on us. It will also allow us to reduce the outstanding debt interest by on $6 million by 50%.
So we had $12 million, we really didn't need all of it, so we're, kind of, borrowed $6 million with paying interest on $12 million, to less pay interest on $6 million. Same exact conditions except actual Elite the money instead of paying interest and not using it. And so far, I have contributed $3 million and there is $1 million in the queue that's coming week and we may pause in here to see how we do before we raise the other two, okay? We have potential investors that are willing to do this, but for now we may pause and see how the working capital working and continue with that. That is mainly to help us reduce the cost of interest of borrowing this money.
Now an important fact I was to highlight is our annual sales have been on progressive trend for the past five years. $7.5 million in fiscal year 2019, $18 million in 2020; $25 million in fiscal year 2021, $32 million in 2022, and now $34 million this fiscal year. In a short period of five years, Elite's revenues have drastically increased by 325%. That is excellent news for us.
The bad news is our stock price is inversely proportional to our achievements. The better we do, the less value it gets over the past five years, even though quarter-after-quarter, year-after-year, we have shown growth in the business that is undeniable, the stock price is still disappointing and not where we want it to be. Once we go through an adjustment period in the next few months, now that we started our own sales and marketing, this trend will continue.
The revenues after few months -- just to give you a target date, let's say January of 2024 and few months. From January -- December, will be substantially higher when they are today. I mentioned the number $40 million in revenues annually during the last conference call. I would like to resend that and say it will be north of $40 million. To continue this trend, we need to invest in R&D. We need to feed the pipeline. Elite continues to invest in product development. Our goal is to commercialize a new competitive products as we grow and diversify our portfolio. Elite recently filed two ANDAs, a generic antimetabolite ANDA and a generic dopamine agonist ANDA. These two are under review by FDA today.
In addition, the company submitted partial ANDA for pain management for review by FDA. The partial application contains the recently conducted insufflation study. Elite intends to provide the FDA with the remaining data in Q3 of 2023 to complete this filing. We disclosed a while back that we're actually continued working on a generic version of Oxycodone. And the last time we filed it, we had deficiencies and one of the deficiencies that everybody got is that an insufflation study was not conducted. It was cost prohibitive. That study alone is about $1.5 million, $2 million, and this is why we put the project on hold.
Once we learn that the things are turning in the opioid world and the states and the federal government have sued everybody they can sue and settled everything they can settle. Now the pendulum is switching and we really believe in the next three to five years that opioids are going to come back under managed control. Nowadays, before we release anything, we have to have realization, where actually the FDA can come in here and know exactly where each bottle not lot, each bottle ended up at what pharmacy or whose house okay? That's how sterilization works.
It also demanded the FDA that we have RIMs where we have to educate the doctors and the patients about the use. They also reduce the amount of prescriptions or tablets per prescription that you can have at home you cannot likely all days have automatic refill. You have to go to the doctor. You can get a specific amount. So all of these are factors in opioids getting back to the market in my opinion. And this is why we started working on this product.
Once we did the insufflation study, we are resourced because the results were positive and we wanted to make an announcement. But then we learned that there are three other companies that are doing the same thing and we did not want them to beat us to the punch by knowing that we just made an announcement that we're going to file. So we had to be quiet, wait till we file a partial application to get the PDUFA date going, okay? And now I can tell you about it. The full application should be filed by August 1st and hopefully the FDA would accept it. That usually takes 45 to 60 days and once they do, we'll make an announcement.
All right. Elite has three products that have moved from the formulation development phase and are now in the clinical phase. They are in the pilot BE phase. We have conducted pilot studies or the BE studies or the BE study is ongoing. For future growth, Elite has other products that have entered the formulation development stage. We will update you on other development products when we reach certain milestones such as filing or approval.
Let me take a second and summarize R&D as I did with the financials. In order to have a full R&D system and a company functional R&D system, you have to have formulations that are pending FDA approval, because they're going to get approved and you recognize revenues from that. You need to have some that you're doing clinical trials on or close to filing with the FDA. And you have to have some that you've just vetted the process, yes, these are good products for us to have, they are fit for our company, the extended release or tablet or capsule, which we can do versus an injectable.
What I just described to you right now, we have products that are in the formulation stage. We have three that are in the clinical stage and two are with FDA. We have a fully functional R&D system. The second thing I want to emphasize is that the three products that I mentioned that are in the clinical stage are all needle movers. What I mean by that, they will have material impact on the company if any of them is approved. If we got one of them approved, we'll continue the positive revenue trend beyond 2024 and 2025 as a result of the contribution from them. If we hit all three of them, that would be a very good day for Elite and the stockholders.
We finished this year with a strong sales through our licensees. And by year I mean fiscal year ending March 31st, 2023. We saw revenue growth from the year before. We invested some of our profits and the continued development of our pipeline and invested in creating our sales on -- and distribution organization. The products that are bringing the revenues today are Amphetamine, IR and ER. These are Elite's largest products this year. We expect them to continue to be that under Elite's label. We have contracts in place and we expect to maintain our double-digit marketing shares with these products.
Management of the DEA quota is always a challenger. However, Elite has been able to manage through this challenge to-date. Amphetamine IR remains on the FDA shortage list and both products are in demand. A few minutes ago, I got a call from Kirko the IMS or IQVIA data came out for the month of May, we just launched in April and we didn't have that much material to launch, because we were making everything for Lannett. And for the month of April, for the IR, were on command with 6.68% of the market. I definitely expect that number to improve.
Isradipine and Trimipramine are being sold under Elite's label now as of April 1st although modest in volume. Both products have only one competitor and that is really important. Isradipine in particular is an interesting opportunity and we believe with direct sales, Elite can increase the value of this product. And so Isradipine can make a difference in contributing margins to the bottom line of Elite.
Loxapine and Dantrolene are also transitioned to Elite’s label as of April 1st. Both products have only two competitors. Pricing has been challenging though despite few competitors and despite Loxapine only recently coming off of the FDA shortage list. But we do expect that we will be making a -- they will be making a contribution to the company and hopefully the margins, because they are in a field of two players will be healthy margins of profit.
License products, we will continue to sell selected products through licensees as well. For example, our long-term partner TAGI that's been with us for a decade and a half, we’ll continue to sell Phentermine and Naltrexone for us. The increase in sales are introducing new products once the ANDAs are approved, require more employees, more warehouse storage space and more equipment. We are in the process of upgrading several pieces of equipment in the facility to keep up with sales demands. But there is a point where we will have to have another facility to support our manufacturing. And the time to plan for it is now.
It's an expensive project, but it's one of the most important projects that's on my mind. As an executive, you always have to think within a three-year time zone plus or minus, not only three-years in the future. Decisions we made few years ago impact us today. We need to continue refining these decisions, adjusting them and planning to make them better. Decisions we make today are going to affect us in the future and we need to do the same. For example, when we did the three basket approach or three-pronged approach, slowing the [art] (ph) technology, creating partnerships that led to SunGen and amphetamine combo and developing our own R&D, that decision is really what made us profitable today, okay?
On the first part, slowing down the art technology, it was draining as the FDA kept asking for more and more and each study will cost millions of dollars and these millions of dollars, I don't believe in borrowing money. So we were selling shares and we'll address that in a second. And we as a point where we can't do that anymore, because it doesn't look like there is an ending sight for that. Slowing that down and focusing our attention on partnerships and our own product give us amphetamine combo and give us the products we have today and made us the viable company we did today.
If we did not and if we actually borrowed money back then in order to support the art technology, we will be like a corn bankrupt. It will be bankrupt even like Lannett, whom today even though they survived, but the stockholders didn't. The stockholders got zero money and the private detectors took over the whole company. Elite would have been in the same position and even though our stock is low, it has the hope of coming back because our great financials. But if we borrowed money, there will be zero hope and zero opportunity for us to even make it.
Okay. Sales and marketing -- sales and distribution is one of these instances. In addition to thinking of another plan, sales and distribution is another one of these instances. Just to give you a historic background of how we got here, you all know and understand and remember that we then have sales and marketing, so us and SunGen partners with Lannett for the IR and ER, we engaged in a three-year licensing agreement that would end March of 2022. Lannett did a good job with growing the net sales for the amphetamine IR and ER. Elite and Lannett decided to extend the licensing agreement by two years to 2024, and that's March 2024. It was interesting that Lannett extended it at about the same month in November 2021, when they got approval for their amphetamine ER.
Well, when that happened, immediately responding into action and start planning for the company's future, we start looking into sales and marketing by 2024 or another distributor, because we sold the writing on the wall. Now in January of 2022 after about a month or two of [Indiscernible] it was starting to bother me, I started to search for a VP of sales. We screened and interviewed several candidates, three very solid candidates, still we met Kirko and of course, we selected number four, who was in my opinion outstanding.
In July 2022, Lannett received approval for the IR and for amphetamine. Even then, they placed them on the discontinued list and everybody tried to assure me like, hey, don't worry, they have GMP issues, their financial problems, they don't want to head up with making this, you're making it taking all the risk and they're just selling it, they put it on the discontinued list. There is no way they want to sell it.
And I said, no. We continue trying to get licensed in all 50 states, hiring somebody to do this and planning for our own sales and marketing. Sure enough shortly after, Lannett exercised six month termination clause in the agreement. Within these six months because of all of the background work we did, we got licensed in all 50 states and we hired Kirko. September of ‘22, I believe 5th or 6th of September, we hired Kirko. When we hired Kirko, we want him to succeed, so we immediately also issued a termination notice to Epic to bring home Isradipine and Trimipramine also by March of ’22. We got six month notice from Lannett. We issued six month notice to everybody else, hey, we want our products back, because we've got somebody who's going to sell them. We terminated the contract with Lannett for Dantrolene and brought that home by March 2023.
We terminated the Prasco agreement and brought home Loxapine by March 2023. So in addition to Amphetamine IR and ER, we also had Phendimetrazine and Phentermine and Dantrolene and Isradipine and Trimipramine and Loxapine for [Indiscernible] that makes it a little better for a salesperson to go in with all of these products instead of one.
Kirko joins in September and with the mandate to set up a commercial operations group and launch the Elite brand, meaning launch Elite's products on our label. For all of Elite's ANDAs that are available by April 1st, 2023. Kirko explained to us what the process involved, he needed to set up a national distribution system with the support of 3PL partners, 3PL stands for third-party logistics provider. Because Elite does not have the capability and the warehouse operation to ship directly from here to pharmacies in smaller months and pick and pack and all of that, we needed the 3PL to do that. So he did that, he developed the specifications for the 3PL service. He set up the RFP process for the interested 3PL service providers to bid on a three-year contract to work with Elite. We consider six providers, reduced it to three and selected [Crossroads] (ph).
Kirko’s mandate was to develop a commercial sales, marketing and distribution strategy, ecocide and distribution contracts with distributing partners such as McKesson, AmerisourceBergen, Cardinal, buying groups such as Premier Genetics, Optisource, Topco, RX Sourcing strategies, LLC, retailers such as CVS, Walgreens, Publix and Myers. He also set up the contracting with the Center for Medicare and Medicaid Services CMS to provide access to Elite's products. And was ready for national distribution of 29 NDCs on Elite's label by April 1st, 2023.
We got him in September and October, he already signed the contract with Crossroads the 3PL in November, he had the first contract delivered to us with Premier by December. He had contracts with Publix, Myers, Optisource, Golden Oaks and then Red Oaks, which is 50% for our business. He had contracts in place with all of these guys in addition to working with the staff, getting license in all 50 states, listing at in the compendium as well.
When in March, the customer awards commitments began coming in, we are making batches for Lannett and we still managed to launch our products on April 1st. April 1st through June, it's my rough estimation that this is going to be a dip quarter, it's going to be a low quarter. It's going to be in the $7 million range in revenues. Now we're talking about $7 million range just remember in 2019 in the entire year we made seven $7 million. Now in this quarter is about as much as we used to make an entire year. Elite now has in place logistics, warehousing, sales, and financial reporting for both controlled and uncontrolled products.
Elite is executing its growth plan by filing new ANDAs as I've explained, obtaining product approvals and creating our own sales and distribution organization. We look forward to reporting our first quarter's earnings and talking to you about it or analyzing it with you on August 15th. Goodbye.
All right, so take -- I'll go to some of the questions that you sent to Diane. And honestly some of the questions are as always some of our stockholders are brilliant, they ask the right questions, some of them give me great feedback and some not so much.
I'll start first with the partnerships and sales. The first set of questions, but five, six of them, five of them are about Mikah and Adderall, okay? I've addressed this issue to death and there will be no more at a single decision. If and when, the Board of Directors decided this time to make an offer. And if it is accepted then there will be an announcement, till then, we are in the same norm we were in the port, where SunGen on this product and if SunGen sold it to a Chinese or Indian company, would have been in the same boat or even worse, it does not impact Elite in any way shape or form. The board will decide if and when they are going to make an offer and you're asking the question doesn't mean I'm going to tell you, oh yeah, thanks for asking, I talked to the board and they said let's do this.
These questions are meant to create negative impact on the Board and create gossip and we're done with that. We are a serious company. We're starting sales and marketing. We need to start in sustaining serious questions. Questions like why didn't you give us the money in 2020 in order to buy this are really ridiculous.
Okay? Under Lannett, Adderall XR barely scratched the surface. What are the expectations for Elite with this and the IR? Very intelligent question, really very complicated question. If this was not a controlled substance, I will tell you it will be like a home run with the base is loaded, but this is a controlled substance. We cannot sell more than what the DEA permits us. We definitely are trying, but today I'm trying to give you the honest to witness positive picture about the company, so I don't want to talk about the demons on my head and that is the DEA Census Code hand to mouth, we are having to struggle and turn things around and all the hard work we're doing here, that's not for you guys to worry about. That's for Doug Plassche and myself and Chris Dick and Kirko to worry about.
But we cannot make a product if we don't have the API. To get the API, the DEA needs to allow us quota. The DEA is really controlling the quota now. The DEA is not developed here. They have a good point. They sent us analysis that they authorize, let's say I don't remember the numbers, let's say 5 billion units to go to the market and they only see 3 billion in the market. So where are the other 2 million? Are people holding on in it to drive the prices up or to wait till somebody can deliver and they have a failure to supply situation? They need to investigate that stuff. But Elite is now one of these people, we're a tiny little company that really are making this stuff and next day we're shipping it and we can show evidence that it's going straight to the pharmacy and it's being sold, okay?
But of course, we have to go through the channels everybody goes through and we have to work with the DEA. And but for that we would do very well, okay. With this long answer, let me give you a positive twist. My expectations for 2024 that will probably double the ER sales, okay, at least go 1.5 times what we have with Lannett. I'm hoping showing the DEA that I'm selling all of this and I have contracts that will give us a break and that break will go a little at a time, so it's not going to happen today. So maybe by next year, when I show them all that data, they'll trust us and give us more. But up till then, we're going to be selling pretty much about the same thing we sold under Lannett or maybe a little more.
Development questions, any word on the oxy genetic abuse study? Yes, as I just updated you, we really ran the insufflation study. We had to go radio silence on it because of competitive reasons. We submitted the data to FDA will supplement it in another 30-days or so with the rest of it. We will wait for them to give us final answer, I'm going to have final answer, we'll let you know.
Does Elite Pharmaceutical have any plans to resume their abuse deterrent technology? Not at this time, it's extremely costly. As I mentioned before, we don't have the money for us to go back to the SequestOx, which is going to cost millions of dollars, we are better served taking care of the facility, the parent R&D line, Kirko, sales and marketing, and creating a foundation that will survive. Later on, when we have money disbursed, then we can do that. But right now, I have no interest in doing that for the reasons I mentioned. The ER is of interest to me and Pfizer is still blocking everything, because of what they did and we forget a way around that when we have the money. Right now, we don't.
Please provide an update on the Pyros genetic vigabatrin launch? We are nearing one year into three year deal with zero revenues generated thus far. We sold Pyros the product. It is theirs, okay? We are contact manufacturers. When they ask us to manufacture it, we will manufacture it at a cost plus, but that's about it. This is not a product that we intend to discuss. I wish them success. We will support them in any way we can to succeed, but this is their product now and we will contact manufacturers for a couple of years for them and we'll move on, okay.
Any update on Dexcel in Israel? Fanish ask this week we actually heard it from them. They sent us a notification telling us they are going to sent a samples for us to test, so let me explain to our stockholders that don't understand the issue in here what's going on. We have a product that's approved by FDA. We are selling it in America. The Israelis would like it. These are either laws are different than ours. They have the administrative health that needs to approve this product. If it's approved by FDA, that's a plus, but that doesn't mean they automatically let it in the country. So Dexcel have to go through specific steps in order to make that product fit their country if they can. They may not be able to, okay. This is an exploratory venture that are trying. They think they can. They think it's a great opportunity, they think they want to talk about other products. But all of that to me is talking till we get to the point where it gets approved?
From our end there is nothing for us to do. The product is already approved. All we can do is they sent the samples to go please compare this to that. Please compare to what we sell in Israel. Please look if you can see certain impurities for the Israeli Ministry of Health. Whatever they ask us for, we'll do it. If and when we have a material event such as they're going to launch the product, we'll tell you. It will be great news for us to share. Other than that, there's nothing for us to discuss really.
Can you please provide some clarity on the CFO changes? I already did that. There's two, three questions on that. When you work for a small company, you got to work hard. Look at Kirko in six months, he moved mountains. Doug Plassche, unbelievable acoustic same thing, I have an outstanding senior staff that we are all on the front line doing the work. I cannot handle a person that recruiters bring into us. So they can be a corporate person sitting in their office and wanting to hire and entire staff and not work. You need to be a worker be at Elite, that's what we all are.
Business strategies, almost all previously communicated, strategies have failed. The three-pronged that was the last long-term strategy review. Please provide a strategic vision for investors as to where the company is heading near-term and long-term? And I only read this questions to make a point. First, the reason we exist today is because of the three-pronged approach, number one. Number two, every single quarter even though we are an OTC, bulletin boards, small company, I have digitize on what we're doing, what we have done and what we're going to do. So these are the questions I will not be answering in the future.
What are the revenue expectations for the current quarter? It's going to be above 7%. The next quarter maybe 8.5%. The one after, maybe we'll start hitting the mark, if not, definitely, by January. And as I said, I do expect us to surpass the 40 million at least when they did this [Indiscernible] and we are full swing and especially for next fiscal year. And by the way, the next CFO, the very first mandate for him or her, is going to be change this fiscal year crap from March to a normal year, because that is really annoying.
What events has happened between the loss you see and today that you feel may have a material impact on the Elite share price? The first question is part of the question is wonderful. The second one is the depressing part. As I just said, all of the good things that happen it seems like our share price is inversely proportional to our achievement. We've done a lot of great things and the share price is not moving. So I am not sure yet short-term what I can do to move it. Long-term, I have a plan, okay. In a year or two when we get couple of more products, there are certain things we can do in order to change that. But right now we have done a lot of things. I just want to throw them all from all of the achievements setting up sales and marketing, moving the products in-house, our revenues, all of that has been since the last meeting.
What impact, if any, has the expiration of the Lannett partnership with the Elite Financials revenues on profitability? As I said, I am hoping that will be in better financial shape, because now we're in charge for our own destiny we can sell other products not only Amphetamine IR and ER with the same figure. Okay, I'll disclose something for you to understand what I mean. The company that was selling one of our products, not the Amphetamine IR and ER, our lesser products brought in certain revenues in 12-months in the whole year. Kirko in 12-weeks brought in twice as much money and they did in the whole year. Why? Because it's his product, he's going there and trying to sell it, okay, versus the other company they put it and some compendium registering and somebody orders that they do and they don't, they don't. He actually sold more than they did in a whole year in 2.5 months, okay?
And it's still the first quarter, yes. So this is the kind of thing that I'm hoping will help us financially. Revenue wise it's going to be more, profit is going to be a little tricky, because now we have a higher cost for the sales and marketing department, okay? Just to give you a simple example that just came to mind, let's assume you're a pharmacist and you have five products in your pharmacy and one of them is mine, you're selling it. Well, you decide not to sell mine anymore and I want to sell it. If I open a pharmacy for that one product, if you and I sell the same amount of product, my cost is higher, because I only have one in the pharmacy and you got five, okay? So how the profitability is going to work over the next few months? I'm still trying to figure out that out and what other products we can supplemented with, maybe even going as far as asking another company if we can sell their product in order for us to do that. There are other things we can do. But right now, I got to focus on how to make this a success, okay? And then we'll move to the next step.
As Elite has become self-sufficient financially. Would you consider taking your salary in all cash as this would have a definite impact on the dilution of the share of the company? Listen, nothing would please me more than I would have been paid in cash from day one. The reason I don't is because we don't have the money. And it is a little bit weird for me to say to the board, hey, yeah, why don't you pay me in cash? And by the way, I'm loaning you money because you need it. So yes, the answer is yes long-term, I'm hoping in a year or two, we will change all of that. As of today, it's only me and the Board that gets and talks everybody else, we've cleared that out. And hopefully we will change that. But right now, this is what's working for us and we'll continue doing it for at least another year.
Can Mr. Hakim explain on the press release regarding the increase in R&D and setting up sales and distribution effect or efforts? Both are quite important. My interest in R&D is if the company is working on products with substantial marketing opportunity. That's very intelligent question. That's really a true stockholders question and the answer is yes, as I've explained before, we're spending more on R&D, because that's our lifeline, that's our bloodline and unless we feed that, is going to be a point where your revenues are kind of start to go down and you'll go out of business and the same goes for the sales and marketing. Thank you for that question.
Okay. Launch of Elite's label. How is the launch of the Elite label going? It's going well. It's very exciting actually. I traveled with Kirko to Dallas one time. We spent an entire week of going through with all of the potential sales and marketing distributors and man he knows everybody and he's well connected in there. And we launched as April 1st, slow and study and May was much better than April and June was better than April and May. And July will be that and August will part to tip-off and after that we will be in a nice trajectory.
We have not had any updates on the impact of the new sales department leader has had on the company? Can you share with us some of the achievements since he came on board? I already went through all of that. Kirko has done an outstanding job with Elite. So I'll not repeat everything I said, but I'll tell you this, Kirko is not only a great employee. He's really a great human being, yes. I sat when we want to meet with that also, I sat with him in the car for five, six hours each race, so we spent 10 to 12 hours in the car. He really is a wonderful human being. He is a good family man, a good human being. He is fun, he is intelligent, he is highly educated and IT graduate. He speaks multiple languages. He is well liked as I said everywhere we went to a conference call, it was like speed dating. They bring people every 20 minutes. Every 20 minutes you have to part two different company and they kicked them out another 20 minutes. And everybody that came in, he either knew them, knew the college that were there before them and knew their families and knew their company once it's with their history. So many of them were delighted to see him and that goes a long way in getting sales and marketing.
What he's done in the past six months, we take somebody else over two years, okay? I just realized something. Diane, do you think Kirko is listening? Because if Kirko is listening, this is going to ask me to renegotiate his contract. So let me amend my question and say this, he's doing okay, all right? I'm going to have to study him for a year and two before I give you a final answer.
Well, thank you all for listening. This concludes our meeting for today. We will talk to you on August 15. Have a wonderful weekend and happy birthday to America. Thank you, Mathews.
Operator
Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
This is nothing but conjectural nonsense.
Seeking Alpha Transcript from today's CC in its entirety:
Elite Pharmaceuticals, Inc. (OTCQB:ELTP) Q3 2023 Earnings Conference Call February 15, 2023 11:30 AM ET
Company Participants
Nasrat Hakim - President and Chief Executive Officer
Robert Chen - Chief Financial Officer
Conference Call Participants
Operator
Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a listen-only mode.
Before management begins speaking, the Company has the following statements. Elite would like to remind their listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties and are subject to changes at any time, including, but not limited to, statements about Elite’s expectations regarding future operating results.
Forward-looking statements are made pursuant to the Safe Harbor provisions of the federal securities laws and represent management’s current expectation. Actual results may differ materially. Elite disclaims any obligation to update or revise its forward-looking statements, except as required by law. More complete information regarding forward-looking statements, risks and uncertainties can be found in the reports Elite files with the SEC, which are available on Elite’s website at elitepharma.com under the Investor Relations section. Elite encourages you to review these documents carefully.
With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.
Nasrat Hakim
Thank you, Matthew, and good morning, ladies and gentlemen. Thank you for joining us today. My name is Nasrat Hakim, I’m Elite’s Chairman and CEO. This is our earnings call and CFO, Robert Chen, will give us a summary of the company's financials, after which, I'll come with a corporate update and answer some of the questions that you have submitted to Dianne.
Robert, you are on.
Robert Chen
Thank you, Nasrat and thank you to everyone for joining our third quarter conference call today. Yesterday, we filed our 10-Q for our third quarter ended December 31. Elite is on a March fiscal year. A copy of the 10-Q, is announced by the announcer earlier, is available in the Investors section of our website at elitepharma.com. It is also on sec.gov and many other websites that provide link to our filings.
Now I would like to give an overview of the financial and some commentary as well. I will start with the income statement. We had a strong sales of about $9.3 million for this quarter, up by 3% as compared to the same quarter last year. Our sales on Amphetamine IR tablets and Amphetamine ER capsules remains steady and strong.
Moving down to cost of goods sold. Our cost of goods sold was about $4.3 million as compared to $5 million for the same period in the prior fiscal year. The decrease was due in large part to an improved margin on products sold during the three months ended December 31, 2022. The company posted a gross profit of about $4.9 million for this quarter versus $4 million for the prior quarter. The increase in gross profit was due to a combination of increased sales and improved product margin.
Our operating expense stands at about $3 million for this quarter and $2.2 million for the prior quarter. The increase in operating expense was largely due to the increased spending in product development. As a result, our operating income was about $2 million versus $1.8 million for prior quarter last year.
Our net income was about $3 million as compared to $2.3 million for the prior quarter. The main driver contributing to the increase in net income was a recognition of other income of $1 million partially offset by the increased spending in interest payment.
For the nine months ended December 31, 2022, we had a strong sales of about $25.5 million versus $24.6 million for the same period last year, up about $0.9 million or 4%. This is primarily due to the strong sales of Amphetamine IR tablets and Amphetamine ER capsules.
I just want to give you information about this sales figure. Our company has been on an upward trend in sales, including $8 million in the fiscal year 2019, $18 million for 2020, $25 million for 2021 and $32 million for last year.
Now we're judging by the trends of sales so far, the company's sales number this year is expected to exceed the sales number of last year at $32 million. And we hold the momentum will go on. For the first three quarters, the cost of goods sold was about $12.4 million versus $13.2 million for last year. The gross profit was about $13.2 million, a $1.8 million over last year due to strong revenue and improved product margin.
Our operating expenses stand at about $9.1 million versus $7.2 million for both periods. The increase in operating expense was mostly attributable to the increased spending in product development in payroll and professional expenses.
Our operating income was about $4.1 million versus $4.2 million for the same period last year. Our net income for the nine months ended December 31, 2022, was about $4.8 million as compared to $6.5 million for the prior period.
The main driver contributing to the decrease in net income, including the following four factors: We have $1 million lower from derivative liability due to outstanding stock warrants, a $0.9 million for NOL sales, which the company does not have during this period, and a $0.7 million spending increase in interest payment and partially offset by other income of $1 million recognized for this period.
So I'll take a little bit update about the derivative liability. The change in the fair value of derivative instrument is determined in large part by the change in the closing price of company's common stock with an inverse relationship. In other words, the higher the common stock price, the larger liability.
Also for your information, this transaction does not have any impact on the company's cash flow. Now let me move down to our balance sheet. Our working capital remains solid at about $27 million, up about $14.3 million as compared to March 31, 2022.
The increase in working capital reflects the company's ability to control its spending and to a greater degree due to the $12 million loan we have obtained from the East West Bank in April last year. The loan will be used for general working purpose -- working capital purpose. Our total cash on hand is about $18 million on December 31, 2022.
With that, I now will turn the floor back to Nasrat for overview of the company.
Nasrat Hakim
Thank you, Robert. Today's update will cover Elite's financials, R&D pipeline, manufacturing facility and sales and distribution and commercial strategy. Then we'll go to Q&A.
I'll start with a few words about Elite's financials. Good fundamental start with a sound balance sheet that leads to a strong R&D pipeline, manufacturing systems and sales and distribution organization.
So I'll start with the first one. Elite had solid numbers for revenues, profits and cash flow for both the quarter and year-to-year. I am very pleased with the direction the sales are going and looking forward to Elite taking on that task. This is our fourth year of growth and profitability.
Not long ago, we did not have enough money to pay for working capital. Today, we are self-sufficient and profitable. We have solid revenues for this quarter and year-to-date, and we are on target to surpass last year's performance and exceed annual revenues for the fourth year in a row. That is not common nor it's an easy task for an OTC company.
It is unfortunate that our increase in revenues by more than 450% over the past four years, was met with a 50% decline in our share price. It is frustrating to me, the Board of Directors, the employees and Elite stockholders. On a positive note, the increase in revenues and profitability gave us the opportunity to have a strong R&D pipeline.
Elite continues to invest in product development. Our goal is to commercialize new competitive products to continue to grow and diversify our portfolio. It takes years to build a solid R&D system on pipeline. First, you need product selection, not an easy task.
It involves a lot of uncertainty because you never know who's going to be in the market several years from now. And who is going to own the API plant and whether they're going to manufacture in India or China where they are more competitive in pricing than us.
Then you move on to the pre-formulation selection to analyze how many of these products selected can be made at your facility without a major capital investment, such as CapEx to remodify your facility. This could be an area where Elite has an advantage with difficult-to-make formulations that involve fluid blood -- fluid-bed technology or those that involve controlled substances because, for example, you cannot make the governed products overseas. So you eliminate at least that part of the competition.
Then going through the formulation optimization. We have to do in vitro stability, impurity profile, a challenging comparison to the brand, pilot clinical trials, which also cost a lot of time and money, optimization of the formulations, pivotal clinical trials, again, lots of money, long-term stability, AMDA filing, FDA inspections, approval and finally, larger scale manufacturing and sales and distribution. I mentioned each and every one of these steps because this is what it takes to create an entire R&D system so you can have an R&D pipeline.
First, product selection. Several products have been evaluated and selected. And now with the input of sales and marketing, we have a better chance at picking the products that have the best opportunity of making money in the future.
Second step is other products entered into the formulation development stage. So now the first part of the pipeline is getting filled with the help of Kirko and the team and analysis is being done as what is viable and what's not. And second, we have a second analysis products that are being screened for potential formulation to go into the clinical trials.
Several products are undergoing in vitro evaluation and brand comparison. And Elite has had two additional products that have moved from the formulation development phase into the clinical study phase this year or this quarter.
Elite recently completed successful BE studies for two generics. We've issued press releases on both, one has been filed an AMD has been filed and the other will be filed in Q2. And there is a third product that we have made an announcement about that have updated you on before. It's a generic opioid extended release that we are working on and doing insufflation study, and that is expected to be filed this year as well.
So if you look at all the stages of product development, we have populated each and every one of them for us to have a true pipeline that will be continuing from now to several years to come. We will update you on other development products when we reach a specific milestones such as the BE study, filing or approval.
Now a healthy balance sheet also enabled us to support R&D, but also manufacturing and sales and distribution. We continue to improve our manufacturing facility by adding new equipment and personnel. We are able to maintain the current business with one enhanced shift, except for packaging, where we have two shifts. Again, this is the third pillar that I look for.
First, we have a sound balance sheet. Then we have an R&D pipeline that is populated throughout every stage, now the manufacturing facility, do we have capacity. We're running at one shift granted is an enhanced, but we can go to two shifts and potentially three or even weekend. And to do that, we have to make sure that the equipment you have some redundant equipment and the personnel are capable to do that to expand with the demand as it comes.
As of today, running at one shift, we are capable of supporting the business as it is and as it was under our partner, Lannett. Next, as the sales and distribution organization. This is a division that we did not have before and I've talked to you about this for about a year now. Ever since we learned that Lannett had their own products that got approved by FDA.
We started working on bringing a sales and marketing professional and getting licenses and all of that stuff. So this is what we said right now. We have been preparing for and are now ready to launch our own label with our own sales and distribution organization.
Direct sales are an important strategic step that allows us to retain a large share of the product revenues and profits and give us more direct control of product sales and pricing strategy. Since our last discussion, Elite has in place logistics, warehousing sales and financial reporting for both controlled and non-controlled substances and products. Elite has wholesale manufacturing licenses for all 50 states and the District of Columbia. Elite's products are listed in the [ Compendia ], contracts are in place with certain key distributors with others to follow.
Starting in April, Elite will have the following products in the market under our elite labs label. Amphetamine IR and ER. These products are in a competitive market. The management of DEA quota can be and has been challenging.
Amphetamine IR remains on the FDA shortage list and customers remain very interested in quality supplier for both the IR and ER products. Elite expects those products to continue to do very well under Elite's label. We're going to continue supplying Lannett until April. And after that, we'll take over, and I expect them to do very well under Elite's label.
Isradipine and trumapramine will be sold under Elite's label as well as of April. Although modest in size, both products have only one or two competitors, therefore, the margins can be attractive. We believe that being directly involved in pricing will help Elite to increase the value of these products. Loxapine and Dantrolene will also be offered as of April 1 and under Elite's label.
Loxapine has recently been on the FDA's product shortage list. Dantrolene pricing has been challenging with the competitors like [indiscernible]. We are expecting, though, to capture a modest market share with good margins as we enter under our own label.
In addition, we continue to sell select products through licensees. Our long-term partner study is an example of that. International opportunities moving very slowly, but at least has a couple of opportunities for sales of our products outside of the U.S., which we continue to work and develop with partners. Elite will provide updates going forward upon reaching milestones or material levels of sales.
Vigabatrin is a specialty product in a competitive market. The market became more challenging because of the -- at the time when Elite filed and the time we get an approval, so many other companies got in and the product because it is so specific and its acquiring very difficult to sell. So we decided to divest it to a partner who is more suited for this job that knows how to handle this kind of product. And in addition to money received, we also have three-year contract manufacturing with this buyer -- with buyers.
To wrap up, Elite is executing on its growth plan and launching our own sales and distribution department. We look forward to another good quarter and an exciting year.
Let me go to Q&A and a little comment about Q&A before we start with the questions you submitted to Dianne. Some of the questions are always -- are pretty intelligent. Others this time were a little more on the emotional outburst and some are predictions and comments or advice. So what we'll do is we'll group them and answer really what is relevant to the business. And I'll give a couple of examples on the things that I usually get.
So the first group, a couple of people asked about the stock buyback. Lots of advice on that. Isn't it a perfect time to declare a stock buyback? The stock is depressed and this could be a different strategy if the priorities were there. We did not have the money we have committed for other things, okay?
When you have extra money to spare after supporting new products and worrying about the loan and developing your own R&D and sales and marketing, we have extra money. This wouldn't be a bad thing to do. We are not in a position to do that right now.
Buy back half the outstanding shares, borrow money for it if the company has to. Again, same answer. Thank you for your voice, but these are not things we don't think about all the time.
What plans does Elite have to produce a nongeneric product? Again, we've never talked about making a nongenetic product. We have the or technology, and everybody knows what status of SequestOx is and all the other products are generic. So we'll be discussing from. I'm not sure.
Update of pending trials of potential generics, that is most question, and future revenues for those new drugs. We do not comment on future revenues for products, we can tell you what the IMS data is. And that's simply because by the time we get an approval, we don't know how many people have gotten in. So to tell you now there's so much we're going to make before we know even we have approval or how many people are there is impossible.
But as to the first part of your question, as I stated earlier, we have one product that's already filed two that has BE, will be filed soon, one right now and the other is the opioid, I spoke about, and three other products that will go into clinical trials within the coming two quarters. Okay.
Several questions about SequestOx. The first is a SequestOx is still on life support or will you finally pull the plug and allow the rest in fees. That's funny. It's a pending application and if we decided to move on with the final clinical trials, we let you know as of now, we're not.
How does SequestOx up against its competitors, Remoxy and RoxyBond. That's a smart question, actually. Remoxy is abused the current technology that's considered to be a physical abuse and they really struggled with that.
It took the FDA rejected them three times. They took three filings with FDA, their NDA was rejected three times for -- and did not give up, which is really good. And the second is RoxyBond, which the company has been struggling too. They've got a good technology that makes multiple opioids. And one of the ones they made before was Morphabond, which is morphine sulfate.
This one is Oxy -- Oxycodone. And both products have done very well. They are branded products, so they have to be detailed, cost tens of millions of dollars, and the revenues were less than the cost of these products. So they have been sold from one company to the next. I know we ended up now because a few years ago, these products were offered to us.
The fact is Elite's technology is the best of all of them, but we would still encounter the same challenges that they are encountering with cost. All of these products have generics. With respect to our SequestOx, once and if we get there, we need to figure out what to do at the time for the IR because the IR products for OxyIR are in the market and they're extremely inexpensive. And even the VA and the government and everybody talks about the crisis in the U.S. with opioids, they don't buy these products.
They are not buying them now. They are still buying the generic because their dollar goes further and covering more of their VA people, for example, or the insurance insists on it. So even though it sounds sexy, that is not really the product for us right now. More -- the more lucrative product would be, if the question was about SequestOx ER because ERs always have a better market for multiple reasons. But that to me is the one I think about and I haven't found a way to penetrate the market because Pfizer have the same technology we have, except ours is better than that we don't leak like they used to.
They got approval for [indiscernible], but they did not launch. And our entire revenues for Elite are a rounding error and Pfizer's balance sheet and yet they saw a risk and they did not launch. So that would be the product I would think about for the future, and I figure out what to do with it, not the other two.
Operations, can you please provide an update on the net situation? That's a good question. Our contract with Lannett is almost done. April 1 is the date, okay? We are in the process of transitioning to our own sales and marketing team. It is my expectation that we've done well the last quarter, as you saw from the numbers, we're going to do well this quarter. The quarter after we split from Lannett, we may have a dip and the dip would be because all of the products we're making, they are taking it and selling it.
So April, May, June, we need time in order for us to build our own inventory in order to be able to launch, but for the DA quota, we would be doing that concurrently in the past quarter. But the EA will not give you extra materials, so you can launch for you and make product for somebody else. We have not been successful at letting them do that.
So we may have a little bit of a dip. But after that, we are going to do very well. My prediction is that this coming year is going to be bigger than the current year, okay?
I am hoping we'll go -- we'll hit the $40 million and beyond, frankly, for next year. Just a little bit more pressure on care [ph].
Does Elite have a second shift, only for packaging? We only run one shift Monday-through Friday. It's enhanced in that some people come in a little early and stay a little late as needed, except for packaging as of end of January, we started the second shift.
Lots of questions about Kirko. At what point do you see a third shift being employed to handle the current and new opportunities being provided by Kirko and his team. Update on Mr. Kirko's first six months of activities. Do you see any results from hiring a new VP of Sales? Or is he mainly working on building a new sales and distribution infrastructure.
Well, that's what a new VP of sales would be doing. He's doing all of the above, okay? Just I will not go through too details. I've already updated you on all the contracts and the states and all of that, that is working on. I will summarize by saying this, Kirko is an outstanding addition to our team. He is exceptional at what he does, and he is delivering on all of my expectations.
Kirko and I have been together to many of these sales meetings and will be for an entire week on the road at a sales meeting in Dallas. Uplisting is the NASDAQ still on the back burner as the stock has not moved upward in any meaningful fashion.
NASDAQ is always on the top of my agenda. Let me repeat. NASDAQ is always on top of my agenda. Uplisting will happen when the time is right. I'm not going to get anxious and have a reverse split when we're running so low and stock price or anything else. We need to do things right. Emotions have no place in making business decisions.
We have to be patient. I may be frustrated like [ heck ] because of the stock price with the achievements that I just mentioned, all of the 4 divisions I mentioned that we're doing very well in and the stock being so low is very frustrating. I acknowledge that. But that's not going to make me rush through things and get us all into a situation that we wish we're not in.
Poison Pill, will Elite to renew the Poison Pill in November 2023. No. Short selling, there is a lawsuit and people are inquiring about it. We're not going to be a part of it. We'll watch and keep our options open. But right now, it's all I guess any window, I haven't read anything concrete yet or seeing concrete as it pertains to Elite. Okay?
I think we get more damage from stockholders that really are not stakeholders, people who hang around our chat rooms and for the past 15 years if they're not Elite, or from some of our stockholders that are not happy with the stock price, then we get damaged from the naked short.
Last question about stock promotion. Can Elite do more marketing, telling the story of Elite and the gentleman goes on to say that he runs the company and he can help us do that. What can Elite marketing do besides what I propose to attract more investors. I appreciate your question and offered to help.
What we can do is what we've been doing, okay, stick to our principles, stay focused on the job, knowledge the fundamentals, improve the revenues and profits and balance sheet like we have, develop the R&D system on pipeline like we have, enhance manufacturing and create sales marketing organization like we did, this is what made us profitable. Now then move to NASDAQ and we move to NASDAQ or before we move to NASDAQ, that is when your idea will be seriously considered.
Question-and-Answer Session
End of Q&A
Operator
Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Like I said before. . .delays occurred when Elite had their past trials conducted in the US. If Elite had decided to have their recent studies done in the US the same thing could have happened.
Thanks for pointing that out N2K. A thumbs up for you. This is one of the reasons why Elite and many other pharmas have their clinical trials conducted in India.
And yet in past years Elite has conducted their trials in India and the US with resultant delays happening in both countries.
And yet there are big pharmas who have their clinical trials conducted in India because of economics. I don't see a problem with Elite Pharma doing their trials there.
India now prime destination for big pharma's global clinical trials
Published February 15,2022
https://www.fortuneindia.com/enterprise/india-now-prime-destination-for-big-pharmas-global-clinical-trials/107141
Seeking Alpha Transcript from today's CC in its entirety:
Elite Pharmaceuticals, Inc. (OTCQB:ELTP) Q2 2023 Earnings Conference Call November 15, 2022 11:30 AM ET
Company Participants
Nasrat Hakim – President and Chief Executive Officer
Robert Chen – Chief Financial Officer
Conference Call Participants
Operator
Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a listen-only mode.
Before management begins speaking, the Company has the following statements. Elite would like to remind their listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties and are subject to changes at any time, including, but not limited to, statements about Elite’s expectations regarding future operating results.
Forward-looking statements are made pursuant to the Safe Harbor provisions of the federal securities laws and represent management’s current expectation. Actual results may differ materially. Elite disclaims any obligation to update or revise its forward-looking statements, except as required by law.
More complete information regarding forward-looking statements, risks and uncertainties can be found in the reports Elite files with the SEC, which are available on Elite’s website at elitepharma.com under the Investor Relations section. Elite encourages you to review these documents carefully.
With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.
Nasrat Hakim
Thank you, Paul, and good morning, ladies and gentlemen. Thank you for joining us today. My name is Nasrat Hakim, I’m Elite’s Chairman and CEO. This is our earnings call and our CFO, Robert Chen will give us a summary of the company’s financials after which, I’ll come back with the corporate update and answer some of the questions that you have submitted to Dianne.
Robert, you have the floor.
Robert Chen
Thank you, Nasrat, and thank you to everyone for joining our second quarter conference call today. Yesterday, we filed our 10-Q for our second quarter ended September 30, 2022. Elite is on a March fiscal year, a copy of the 10-Q is available in the Investor section of our website at elitepharma.com. It is also on sec.gov and many other websites that provide links to our filings.
Now, I would like to give an overview of the financial and some commentary as well. Let me start with the income statement. We had a strong sales of about $8.6 million for this quarter of a little bit as compared to same quarter last year. Our sales on Amphetamine IR Tablets and Amphetamine ER Capsules remain steady.
Moving down to cost of goods sold. As a general trend, our cost of goods sold reflect direct proportionally to the level of revenue at about $4.8 million for both periods. The company post a gross profit of about a $3.8 million for both periods. Our operating expense stand in about $2.7 million for this quarter and a $2.3 million for the prior quarter. The increase in operating expense was largely due to the increase spending in product development.
As a result, our operating income was about $1.1 million versus a $1.4 million for prior quarter last year. Our net income was about $1.5 million as compared to $1.8 million for the prior quarter. The main driver contributing to the decrease in net income was the increase spending in interest payment.
Now, I’m going to move to six-month period ended September 30, 2022. We had a strong sales of about $16.3 million versus $15.6 million for the same quarter last year, up about $0.6 million or 4%. This is primary due to the strong – stronger sales of Amphetamine IR Tablets and Amphetamine ER Capsules. Just for your information, as I like to mention to remind you a gentle reminder, the company has been on a upward trend in the sales including $8 million in 2019, $18 million in 2020, $25 million in fiscal year 2021 and $32 million for last year.
For the first two quarters, the cost of goods sold was about $8.4 million versus $8.3 million for last year, and the gross profit was about $7.8 million, a $0.5 million over last year due to stronger revenue. Our operating expenses stand in about $5.7 million versus a $5 million for both periods. The increase in operating expense was mostly attributable to the increase in payroll and the professional expenses. Our operating income was about a $2.1 million versus $2.4 million for the same period last year.
Our net income for the six-month ended September 30, 2022 was about $1.8 million as compared to $4.2 million for the – for prior period. The main drivers contributing to the decrease in net income, including the following three factors. The first one about $0.8 million from the derivative liability due to outstanding stock warrants and $0.9 million for annual sales, which a company does not have during this period and a $0.4 million spending increase in interest payments.
For your information, that change in the fair value of derivative instrument is determined in large part by the change in closing price of the company common stock with an inverse relationship. In other words, the higher the common stock price, the larger the liability. So for your information as well, this transaction does not have any impact on our – on companies at cash flow.
Let me now move down to our balance sheet. Our working capital was a strong at about $24 million, up about $12 million as compared to March 31, 2022. The increase in working capital reflects the company’s ability to control is a spending and also to a great degree due to the $12 million loan we have obtained from East West Bank in April this year. The loan will be used for general working purpose. Our total cash on hand is about $19 million at September 30, 2022.
With that, I will now turn the floor back to Nasrat for the overview on the company.
Nasrat Hakim
Thank you, Robert. Today, I’ll update you on Elite’s ongoing activities, pipeline, progress, and commercial strategy before we go to Q&A. But first let me say a couple of thoughts about revenues and profits. We had another solid quarter with good numbers in revenues, profits, and cash flow. For four years now, Elite has had a very good run with increased revenues quarter-to-quarter and year-to-year.
Going from $8 million to $32 million and becoming profitable, that is not an easy task for an OTC company or any company for that matter. We have faced a lot of challenges, FDA, DEA, partnership, cash flow, the pandemic, et cetera. At the end of the day, the audited SEC filed numbers tell the story of how we figured out.
Now, a positive balance sheet means that Elite will continue to invest in R&D to diversify our product and support our growth. I’ll have more to say about that shortly. And it also means that Elite has the ability to invest in its own sales and distribution organization to allow Elite to sell selected products directory to wholesalers and distributors. And I’ll say more about that as well.
I’ll start with an update on the status of our current commercial products. Elite’s products are classified into two categories as far as sales and marketing is concerned. Products that are distributed through our partner, which are the majority of our products and our revenues today, and products that are sold directly by us to distributors.
A TAGI distributes Elite’s Naltrexone and the Bariatric products. TAGI has been with us for a very long time and the revenues and profits from TAGI are steady. Prasco distributes Loxapine Capsules under their Burel Pharmaceutical label and Loxapine has captured a modest market share and we are hoping to do better in the future.
Praxgen is our partner for Doxycycline tablets. No decision have been made on that yet. Epic is our partner and distributor for Isradipine and Trimipramine. We believe these products have an upside potential. Lannett is our partner in Dantrolene and of course an Amphetamine IR and ER, although, the Amphetamine products are in a very competitive market. Lannett and Elite have done a very good job at marketing them and have done very well to-date. Amphetamine IR continues to be on the FDA’s shortage list, Elite will be selling these products under Elite label beginning in the second quarter of 2023, April 1, 2023.
Going forward, Elite will still have the two categories that I just spoke of, except the majority of the products and the majority of the revenue will be coming from products sold by Elite on Elite’s label. Amphetamine IR and ER will be sold directly under Elite’s label beginning April 1, 2023. Isradipine and Trimipramine similarly will be sold under Elite’s label about the same time. We also retained the rights to Vigabatrin, a product that was approved earlier this year.
The rest of the products will be evaluated on case by case basis and figure out how we can bring them home or if it’s in our best interest to keep them with a partner. In addition to selling our products in the U.S., Elite has several opportunities for the sale of our products outside the United States. We continue to work on these details and look forward to successful sales in the future. Elite will provide updates on ongoing products and negotiations with overseas companies as we reach milestone or material events.
So let me explain. When a company orders $25,000, $50,000 or $100,000 worth of Elite’s product, because they want to test the market overseas. That is not a material event, because it’s a one-time thing. So we do not [indiscernible] But if the same company comes back to us now and say, that process was very successful, now I’m going to own a $100,000 a week, that becomes a very material event and that’s when we [indiscernible] okay. So we are working with overseas companies and we will let you know when and if anything materializes.
Elite has taken significant strategic steps to start selling our own products under our own label. We waited for the right time to start our own sales and distribution and the time is now. It was my hope that we will reach about $60 million in revenues before we start our own sales and marketing. But the event that unfolded with Lannett and others forced us to accelerate that and I am not unhappy about the prospect, especially with Kirko joining us. We are setting up the structure and national distribution for Elite’s labels for selected products and NDC numbers, and we will begin distributing in Q2 of 2023.
Direct sales will allow Elite to retain a larger share of the product profits and more direct control of the product sales and pricing strategy for those products. It’s an important step that makes Elite more complete pharmaceutical company with all operational structures including sales and marketing. The most important step for sales and distribution was making a key new hire. Elite hired Kirko Kirkov as our Chief Commercial Officer. Kirko will set up the required structure and will oversee Elite sales and distribution. Kirko comes with a strong background in commercial sales and distribution with over 15 years in pharmaceutical management and commercial operations. He previously worked for Vertice Pharma as their General Manager, and before that he was at Sandoz for many years in various capacities, both in the U.S. and overseas.
Kirko started out at Sandoz with overseas responsibilities as the country’s head in Bulgaria and then Russia before he took a senior position with Sandoz in U.S. commercial operation. Kirko’s best talent is not his excellent experience and outstanding education including graduate degrees from MIT. It really is his great personality and love to sell. I am and we are very excited to have Kirko as our part of the executive team.
Elite is also strengthening its financial group and will add more functionality as we see progress. For warehousing and distribution, Elite has chosen a 3PL, third party logistics, that will work with Elite to provide functionality on a contract basis. This allows Elite to focus on sales and operations. As Elite’s at sub-distribution and warehousing, we are integrating the various pieces of Elite structure with our 3PL partner, such as a commercial financial operation, customer support, compendial testing, ERP, EDI, manufacturing, shipping, distribution. All of that is being coordinated with the 3PL partner.
We also are contracting with wholesalers distributors and group purchasing organizations and institutions as a supplier to sell our own products obviously. And we are securing sales and distribution licenses in each state and territory. To-date, we have 47 states. We are licensed in 47 states and the District of Columbia and we have three states that are pending.
I will continue to update you on our progress in these key initiatives as we achieve more milestones. On the development front, lead continues to invest in product development. Our goal is to commercialize a new competitive products to continue to grow and diversify our portfolio and also to give Kirko something to sell or more to sell. Currently, Elite has three products that are in clinical trials or bioequivalency studies.
One of these products we recently announced positive results. We expect to file the ANDA later this year as soon as we receive the final report from the CRO. The two other products are in clinical trials. One should be completed in January, February timeframe, meaning the clinical trials should be completed then, I’m filed in Q1 of 2023, and the second hopefully will be completed toward the end Q1 of 2023 and we’ll file it sometime in Q2 2023.
Additional products in development now are being readied for future and upcoming DE studies for next year. We will update you on the other development products and as we progress, as we get material events such as a DE study – successful DE study, a filing or an approval.
To wrap up, Elite is executing on its growth, obtaining product approvals, launching new products, and starting a new sales on marketing distribution department. We look forward to another great quarter.
Let’s go to Q&A. Diane sent me a list of all the questions that the stockholders have submitted. So I’ll take them from the top and go through them one by one.
Question-and-Answer Session
A - Nasrat Hakim
There are lot of reasons why people put their products on the discontinued list. It makes the reportings for pharmacovigilance for adverse drug events and other reportings for regulatory purposes easier. It also makes the investigations easier. If somebody complains about, let’s say, Adderall IR and they don’t know what the lot number is. The FDA will send a notification to everybody. And if you are on the discontinued list, you say, hey, I’m not making the products on this continued list, so you don’t have to investigate.
There are advantages to doing that. And it’s really not that difficult to get it back off of the discontinued list. Literally, Lannett can have a large quantity and notify the Orange Book and within a week or two be in the market.
Second question, in August 2022, Praxgen discontinued Doxycycline, did they change their mind and no longer want to launch this product to delete?
No. Again, they put it on the espionage for the same reason as Lannett, so they can do less work for regulatory and what have you. Okay.
SequestOx, are you still thinking about submitting SequestOx or have you begun the process, if the later when is your target date for resubmission assuming all as well?
We have never withdrawn SequestOx. It’s still a pending application with the FDA. We just did not finish all of the clinical trials they ask us to do. That’ll cost tons of money, millions of dollars, but we cannot resubmit what has not been withdrawn. It’s still an active application. We have decided not to pursue it because of financials as I’ve explained many times before.
Dexcel, any new news on Dexcel front. Israel has no Adderall at all. Does the situation influence the Ministry of Health’s approval?
No. This is a decision for them. They are the experts in their own country. They will be working with their country. We are here to support them anytime they need us. We have absolutely no control and no knowledge of actually how they do things in Israel. They’re our partner. When they tell us they’re ready, we are ready.
DEA, I always get the same questions about DEA. Did Elite reach his quota for the year for Adderall products? Did Elite experience any API shortage? Did the DEA FDA increase Elite’s quota?
We have had no quota issues. We have requested quota from the DEA on regular basis. We have support the request with all the material documents that we have given them. And they have helped us out and approved it. Now many times the approval came in, in the last second where they gave us a heart attack and we’re sitting here nervously awaiting the approval and the quota. But every time they have come through for us to date, as you can see from all the revenues we’re making, we have not had any issues with the DEA. They do control the market. They are very good at that. They do not issue quota to anybody. You have to go through a lot of very important steps in showing them sales and showing them projections and showing them consumption before they allow it. So they do a very good job.
Can you please confirm the dates of the new ANDAs? As I’ve shared with you every time we spoke, we’ve encountered lots of delays from the CROs for the clinical trials. So in 2022, I was hoping for four ANDAs, we’ve gotten one and we’ll apply the second one, we will have two this year. Mainly, due to the delay in clinical trials, the – and that I’m waiting for the clinical trials, I’m waiting for in January, February timeframe, we signed the contract and initiated the process last January. It was supposed to be done in June, July. It’s not going to be done until January, February this year. Again, due to delays, regulatory issues with the Indian government and also COVID and restrictions and all of that. So I cannot give you a date, because I am at the mercy of others in supporting us.
From Elite standpoint, we’re ready, but we have to have the clinical trials done before we can submit, okay. So last year or this year 2022, we’ll have two ANDAs this coming year within the first half, I hope, again, barring no delays in the clinical trials, we will have two more. And then we will sit down and talk to our CROs about a more realistic schedule for delivery. I don’t want them to just sign at the dot line to commit us financially and later on take a lot longer. Even though, I truly believe everything that happened was unexpected. The recruiting have changed, because of COVID and other factors. And India also added additional requirement of three months stability for clinical trials that are done in there, okay? So we will share with you material events as they happen. I cannot make exact predictions because of the reasons I just explained.
Does Elite now own all of Mikah share of Adderall? No. The Board of Directors actually came up with a plan and an offer, which was acceptable. And then as soon as that happened, we received an official notification from Lannett terminating the agreement, and we decide to go for sales and marketing group. These two variables make things uncertain and we did not want to create MS. So we’re back in offer now and we’ll revisit this issue later on.
What are your yearly predictions for Elite revenues? We don’t do predictions, but I will give you a lagging indicator. As you heard from Robert, the first half of the year, we got $16.3 million. So extrapolate and see what you think that will happen.
How long before Elite is fully self-sufficient in sales, marketing, and distribution? It definitely is going to be before April 1, 2023. We’re almost there right now. I would say we’re about 80% of the way. As I’ve – as you’ve seen from what I said or heard from what I said, I am very pleased with the Kirko and he is on the right path working with Robert in finance with Doug in production with Chris in business development. The team is working very, very closely together to get us there and we’re almost there.
I read this question anyways. Is there any way to have the SEC investigate what is happening to Elite stock? The company is doing the right things. The CEO is managing risk properly, the revenues are going up. The company is cash flow positive and still the price of the stock goes down.
There is no logical explanation. You are correct. That’s all I can say. It’s very frustrating. We’re doing all the right things. Four or five years ago, the stock was $0.15 or even before that $0.30, when we were not making in any money. And now that we are actually a viable company where the profitable company, which you don’t see too many on the OTC that are or even on NASDAQ frankly.
We still the stock goes down. So there is no rhyme and reason with it. I’m hoping that all will change when we get more products, our own sales and marketing and maybe make a transition to a better exchange.
Are you – are any companies offering to buy Elite? Well, when your house is not for sale, nobody comes and makes an offer on it. We will – that will be offers on Elite when we have better financial statements and we put Elite out there just like we did with Epic and other companies that have been a part of, right.
Last question. Can Mr. Kirko sell our Adderall anywhere in the U.S. that Lannett doesn’t and/or sell the – to the pharmacies that are out of stock? Or does he have to wait till March 30? The fact is he has to wait till April 1, 2023, selling it to anyone other than Lannett in the United States. Underline that because we have partners overseas and it’s fine. In the United States, we can only make a product for Lannett to sell and they can only buy a law sell product that’s made by us till April 1. They are not allowed to sell their own product and we are not allowed to make our product for anybody else. That’s how the contract is.
Okay. Well, thank you, Robert for very good numbers and thank you, Paul. And thank you, ladies and gentlemen. We’re looking for hopefully another good quarter, this quarter a news of filing an ANDA and hopefully one more successful clinical trial before we talk next on the middle of February. Have a great day. Thank you.
Operator
Thank you, ladies and gentlemen. This does conclude today’s conference. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Okay. . .try not to gloat too much. Yes, I listened to the CC audio and there was mention of a minimum 15 - 25 cent share price needed before consideration could be given to a reverse split.
Thanks no2koolaid. . .you've just confirmed that I am not losing my mind after all. LOL
NAS. . .I have listened to the audios and read the transcripts and found that they closely track each other as to content other than the spelling mistakes in the transcripts. It would be best to listen to the audio then read the transcripts to catch anything missed the first time.
NAS. . .that's a great suggestion. I would do this but I do not subscribe to IHub. Maybe someone who has this service could do this?
I have been a shareholder since 2012. I have read and re-read all CC's several times since that time. I have saved all CC's to my hard drive for the past eight years. There is no record of Nasrat saying the share price must be 15 cents in order to complete a reverse spit. Saying that is just pure bullshit.
Well. . .I would prefer to see proof rather than just believing something on someone's say so. In other words: no proof = bullshit
There is NO record; it does not exist.
There is no mention of a 15 cent share price or reverse split (to uplist to NASDAQ) anywhere in the Q2 2022 CC (November 16/2021):
"Amphetamine XR and Amphetamine IR, these are products that are in a very competitive market frankly. And they have done very well for us. We have done very well to date with our partner, Lannett. We have discussed NASDAQ on money calls before and there is a question on that on this call. So I will say a couple thoughts about uplifting for NASDAQ. A key goal for Elite is uplisting to NASDAQ. When the time is right, there are specific requirements that Elite must meet to qualify for the uplisting. We are working diligently to achieve them. We will continue to monitor our growth and income generation and we'll update you on uplisting when the time is right.
To wrap up, Elite is executing on its growth plans, working on new product approvals and capitalizing on its commercial product line. Our sales and distribution partners are performing well. We look forward to another profitable quarter."
I would very much like to know in which CC Nasrat had mentioned the number 15 cents. I don't ever remember him mentioning any specific share price as a precursor to a reverse spit being undertaken.
You are very welcome Sharkey. The few questions that I had submitted over the years have always been answered.
Seeking Alpha Transcript from today's CC in its entirety:
Elite Pharmaceuticals, Inc. (OTCQB:ELTP) Q1 2023 Earnings Conference Call August 16, 2022 11:30 AM ET
Company Participants
Nasrat Hakim - President and Chief Executive Officer
Robert Chen - Chief Financial Officer, Secretary and Treasurer
Conference Call Participants
Operator
Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a listen-only mode.
Before management begins speaking, the Company has the following statement. Elite would like to remind their listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties that are subject to changes at any time, including, but not limited to, statements about Elite’s expectations regarding future operating results.
Forward-looking statements are made pursuant to the Safe Harbor provisions of the Federal Securities Laws and represent management’s current expectation. Actual results may differ materially. Elite disclaims any obligation to update or revise its forward-looking statements, except as required by law.
More complete information regarding forward-looking statements, risks and uncertainties can be found in the reports Elite files with the SEC, which are available on Elite’s website at elitepharma.com under the Investor Relations section. Elite encourages you to review these documents carefully.
With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.
Nasrat Hakim
Thank you, Matthew, and good morning, ladies and gentlemen. Thank you for joining us today. My name is Nasrat Hakim, I’m Elite’s Chairman and CEO. This is Elite's earnings call and our CFO, Mr. Robert Chen, will give us a summary of the company's financials after which, I'll come back with the corporate update and answer some of the questions that you have submitted to Dianne.
Robert, the floor is yours.
Robert Chen
Thank you, Nasrat, and thank you to everyone for joining our first quarter conference call today. Yesterday, we filed our 10-Q for our first quarter ended June 30th, year 2022. Elite is on a March fiscal year, a copy of the 10-Q is available in the Investor section of our website at elitepharma.com. It is also on sec.gov and many other websites that provide links to our filings.
Today, I would like to give you an overview of the financial and provide some commentary as well. Starting with the income statement, we had a strong sales of about $7.7 million for this quarter, up about $0.6 million or 9%, compared to the same quarter last year. This is primarily due to the strong sales of Amphetamine IR tablets and Amphetamine ER capsules. Again, I would like to remind you the strong, the important fact that our sales have been on an upward trend from $8 million in the fiscal year 2019, $18 million in 2020, $25 million in fiscal year 2021 and $32 million for year 2022.
Moving down, we come to cost of goods sold. As a general trend our cost of goods sold reflect direct proportionally in percentage increase in revenue. The company posted a gross profit of about $4 million and $0.4 million over last year, due to stronger revenue. Our operating income was about $1 million versus $0.97 million for prior quarter last year. Our operating expense maintained at a relative steady level at $3 million for this quarter versus $2.6 million for the prior quarter.
Our net income was about $0.3 million, compared to $2.4 million for the prior quarter. The main driver contributing to the decrease in net income are two major items: one, is the derivative and liabilities due to the outstanding stock warrants, about $1.1 million, and the other is the net operating loss of sales about $1 million, which the company does not have during this quarter.
Let me give you a brief explanation as to the calculation of the derivative liability. The change in the fair value of the derivative instrument is determined in large part by the change in the closing price of the company common stock with an inverse relationship. In other words, the higher the common stock price the larger than liability. So that's why the variance is about $1.1 million. And also for your information, the transaction does not have an impact on the company's cash flow.
Now let's move down to balance sheet. Our working capital was strong at about $25 million, up about $12.6 million over the prior period. The increase in working capital reflects the company's ability to control its spending and also to a great degree due to the $12 million loan we have obtained from the East West Bank in April this year. The loan will be used for general working capital purpose. Our cash flow, our cash -- total cash on hand is about $20 million at June 30, year 2022.
So with that, I'll now turn over the floor back to Nasrat for an overview on the company.
Nasrat Hakim
Thank you, Robert. We met six weeks ago, so we don't have a tremendous update for you today. But as always, I'll take this opportunity to update you on the impact of safety on the company, Elite's financials, research and development pipeline, our commercial products, and then we'll go to Q&A for the questions that you have already submitted to Dianne.
Regarding safety and COVID-19 my concerns have not changed about the effect of the pandemic on supply chain and inflation and business continuity. All it takes is one missing component to bring the manufacturing and shipping to a halt. For us or any other industry, this is not limited to Elite or Pharmaceuticals. To-date, our commercial products have not been materially affected by the supply chain problems. This is not to say that we have not been impacted, we are feeling the impact on our R&D pipeline mostly in the form of delays in clinical trials that continue to affect us.
Regarding financials, Robert hit on the right numbers. Revenues, profits and cash flow, I am very pleased with the direction the sales are going and hope our sales and marketing partners continue on this path. Our cash position is solid, it is a combination of profits we made and money we borrowed. The money we made supports working capital and R&D, and the money we borrowed was to support business ventures, including the potential purchase of the Amphetamine IR and ER.
More than two years ago, SunGen informed us that they lost their financial backup and they were in the market to sell their shares of Amphetamine IR and ER to raise cash. They would not accept payments in Elite's stock and Elite does not have the cash to buy the ANDAs. Our former CFO, Carter Ward, tries to get Elite alone, but was turned down due to lack of profitability. By the time Mark Brickman joined us, we had a better financial track record and we were able to get a loan.
Three things happened while we're seeking the loan. First, the owner of the building that houses Elite's manufacturing, DEA [volts] (ph), quality, packaging and warehouse decided to sell the building. The man is 91-years-old and he decided to exit the business. Second, Lannett received approval for Amphetamine ER, which indicates that they could be manufacturing and selling their own product. And the third Mark was no longer with us.
Buying the building instead of leasing it was not on the table 12-months ago and neither was parting from Lannett at this time. As to the building, quick analysis showed us that moving out would cost us a lot more than staying and buying the building. And I'll go through the analysis for you in a minute. The building was offered to us at a warehouse price, not as a pharmaceutical building, which the rents will be a lot higher. So if we buy another warehouse, we will have to retrofit it at a tremendous cost.
And moving to a rental or a building that we purchased would require tech transfer of all the products and bioequivalency for some anything that's an ER would require a brand new clinical trials and that costs a lot of money. So we got loan, we invested a couple of million and financed the rest and closed in July. This action was a very positive step for Elite. The alternative would have been much more costly.
With respect to acquiring the second half of Amphetamine IR and ER, the Board of Directors is and will soon decide if and when and under what terms to make an offer to purchase the assets. In which case, the money we borrowed could be utilized to purchase the ANDAs. If not, it will be utilized to enhance R&D.
Speaking of R&D, Elite continues to spend significant amount on research and development. It is our number one priority and number one focus. Our goal is to create a new set of products that are diverse enough that they stabilize the company, in case we get a hit on one of the products such as Amphetamine IR or ER, then the company will not be materially affected and will survive. The more pillars we can add to stabilize the company, the better it is for all of us.
Elite is working on a number of generic ANDAs. Currently, we have a three clinical trials that we signed contract for. One will be done in the U.S. and two in India. Two of the three are difficult products that take longer than the average time to execute the clinical trials. Bottom line, many opportunities are currently being pursued and you will hear about them at the appropriate time. Right now, all I can tell you is we have about half a dozen ANDAs that we are working on actively and about a dozen that range from the early stages all the way to clinical trials.
This year 2022, we have received two approvals from FDA. One ANDA for, doxycycline tablets a product we co-own with SunGen plus or Praxgen and the other is Vigabatrin, which is owned by Elite. Regarding Doxy, we will be working with our partner to determine the next steps. Regarding Vigabatrin, the sales and marketing is licensed to Lannett, this product includes a REMS component, and we'll need to work on it with Lannett for the next few months to ensure that they are a part of the REMS system.
On the commercial front, Amphetamine ER and IR are two products that are in a very competitive market. They have done very well for us. We have done very well to-date with our partner Lannett. And as I stated before, they have approval for their own IR and ER, we have not received an official notice that Lannett wishes to terminate the sales and distribution agreement for these products. However, okay, we cannot take anything for granted. We need to take and/or take in all the necessary management measures to protect Elite, if that happens. By finding and searching for a new sales and marketing partner just in case or by going at it ourselves.
To that end, we are getting licensed in all 50 States each State has its own unique requirements. We have already filled out the applications for all 50 States. And we have already received responses from more than half of them that we are already approved, so we’re approved in half and the other half are pending. We are interviewing three PL for distribution, we do not have warehouses, we do not have distribution systems. This is what Lannett and TAGI and Epic do on our behalf. So we're interviewing third-party logistics for distribution and comparing prices to find the best deal for a small company like us. We have also interviewed VPs for sales and marketing to be ready to select somebody as soon as we -- if we hear from Lannett.
The stakes are too high for us not to be ready, in case if that happens. Having our own sales and marketing force is something that I've always wanted for Elite. I was planning on it once we get few more ANDAs, and maybe four more, to make it financially more feasible. But this may accelerate the process and whatever happens, we'll be ready for it.
Okay. Moving on to the rest of the commercial product line. Loxapine is marketed by Prasco under the Burel Pharmaceutical label. It is one of those products that was affected by the supply chain, because we could not get a critical component, actually a budget capsule for that. In the amount that they needed for sales and marketing. We got very little, just to barely cover the market that they already have. We expect to resolve these issues and expect future growth for this product. Isradipine and trimipramine are distributed by Epic. There are interesting products they have very limited competition. And with Epic, we're already seeing a little more profit and revenues. Naltrexone and the Bariatric line are distributed by TAGI with a steady revenue stream.
To wrap up, Elite is executing on its growth plans, working on new product approvals and capitalizing on its commercial product line. Our sales and distribution partners are performing well. We look forward to another profitable year.
Let's go to Q&A. As always, you sent your questions to Diane and many of you ask the same question in a different way. So we group them and if we pick a question, that's all the different in the news, please understand this because other people ask the same question.
Question-and-Answer Session
A - Nasrat Hakim
And we'll start with the first one about the corporate finance. Question number one. Given how cheap the stock is valued on the OTC market? Has management considered using some free cash flow to conduct buyback? I believe that even if a small amount of stock is removed from the float 1 million to 2 million shares. And the subsequent press release would assist in raising the Company's market capitalization.
Robert, would you take that one?
Robert Chen
Sure. Thank you, Nasrat. I think this is a good question, so sometime a company will engage in a stock buyback program when it has extra cash. A key upside of a buyback for investors is the reduction in a supply of shares. When there are a few shares to go around that can trigger a rise in price. And this is a pretty general phenomenon. But unfortunately, this phenomenon may or may not necessarily happen to an OTC stock price. And even when it does happen is a short lived. At the same time, the earnings per share EPS may improve with the stock buyback.
However, given the number of our common stock outstanding, the net effect will be quite minimal. So at this stage, as our CEO repeatedly emphasized, I believe the company believes the best way to move forward is to continue to build up its foundation with increased revenue through its product development program. And this product development program require huge outflow of cash. So as such, the company will not engage in a stock buyback at this point. That will be my answer to this question. Give it back to you, Nasrat.
Nasrat Hakim
Thank you, Robert.
Robert Chen
Thank you.
Nasrat Hakim
Thank you, Robert. The next question, what are the financial reasons for the purchase of the building that we previously rented?
As I stated, the building was going to be sold whether we like it or not. The owner wants to sell it, they sell it. The entities that were interested in buying it are the ones who bought pretty much everybody on our street and they were going to make it into a retirement plan. So moving out would cost us a lot more than buying the building, and moving out the renting, which require that we go through tech transfer of all the products and clinical trials.
So just let me walk you through the financials. Well, I'm not going to go through the -- when we last gave the financials, I'll give you the general picture. If we actually moved out and the new building is a warehouse, we have to spent a lot of money retrofitting it, and we have spent a lot of money dismantling all the equipment that are spot to the walls that are built in into the plummings of electrical and gases and all of that cost a lot of money sometimes more then the equipment is worth free, okay?
And when you're doing that, what are you going to manufacture with? We got [indiscernible] marketing supply. In addition, the FDA requires that you set up a new company, make lots in there, put them on three months' stability and then submit it to the FDA to steady to be approved to continue there. So there is massive downtime. In addition, they required us to go back and receive the clinical trials for any product that's an extended release. When you do the math, and I have done the math, you would pay more than the twice of the building and the cost of tech transfer and clinical trials and equipment movement. So it makes absolutely no sense to leave, okay.
So buying the building was really the best option for Elite. We were very happy that the owner sold it as, as a warehouse at the warehouse price, he didn't say now to pharmaceutical company, I want more money. And as I said, moving anywhere else would have cost us a lot more. So it was a win-win for us.
Question number three, another similar question. There are two, three similar questions, I'm just going to read one. Perhaps the follow-up questions can be answered in tomorrow's call. How is Hakim going to allocate the $12 million loan? I mean, A, hire uncertainty in new drug applications, other people ask pretty much the same question in a different way.
So the money will be allocated as needed by the company. A part of it was allocated to the down payment and the building that I just went through analysis of why we wanted to buy it. Another could be a potential purchase of the other 50% interest in the IR and ER potential purchase of other ANDAs and/or a current R&D project and their clinical trials. Meaning, right now, we have certain budgets for clinical trials that we have the extra money. We could increase the number of products that go through the clinical trials or expedite it. It also could go to investments in sales and marketing department and infrastructure for that. We are open, we would look at what is the best for Elite, and the Board of Directors will make the final determination.
The next question, another stock that I own, SNGX is about to have a skin cancer drug. So part the NDA process or through the NDA process. SNGX does not have any manufacturing capability and is located nearby in Princeton, New Jersey. Would management consider speaking with them and seeing if the -- if an agreement could be reached to work together to make their skin cancer and potential psoriasis creams?
Thank you so very much for thinking of Elite and for suggesting that. Unfortunately, this is the wrong technology for us. We don't have the facility to make a creams and ointment or a sterile product and that's what you need for cancer, and that's what you're describing. This is a different facility, a brand is for [indiscernible] before, but it requires different equipment, different packaging lines, it's not the same as business as we're in.
Question number five. Would rather Chen bring over to Elite any new drugs from [KBT] (ph). Robert?
Robert Chen
Sure. Thank you, Nasrat. This is -- again is a very interesting question. KBT, where I worked before is currently engaging in -- on a drug for chronic kidney disease is a branded product, which is in its early clinical Stage 3. So it remains years away probably two to three years before you can file it registration with FDA. So it's not something we would pursue even we have the opportunity to do so at this point. Give it back to you, Nasrat. Thank you.
Nasrat Hakim
Thank you, Robert. When is this Dexcel launch expected? Okay, we really are anxious and looking forward to that. But you understand that the Israeli government have to take the application from the U.S. and run it through their system, because this is a brand new application for Dossier and they come back and ask for certain testing to be done. They have their own standards, they accept some stuff on Dossier, but not everything. So Dexcel is working very hard to get the approval, but we do not know when would that happen. This is not something that we are handling or can handle. We get updates from Dexcel anytime they hear from the Israeli government, they call us, say, please run this search for us. Please do the following work for us. And we're on top of it trying to push as much as we can from our side, but we are depending on our partner to come through from the other side, okay? And as soon as that happen, it's something that we will notify you or inform you about in future calls.
All right. Last question, it's a set of questions that I'll combine together that are all about Oxy, ER. Are we pursuing a partnership or are the prospects of partners? What's the expected generic income from it? Are we using our unique [ADF] (ph) formulation with it? So a lot of questions about what we announced in the 10-K the last time.
So first, let me say, no, we're not using our own ADF. This is -- this formulation that we have disclosed that we're working on is a straight generic equivalent of Oxycodone. No one has entered the market yet to compete with Oxycodone as a generic. Couples of companies made a brand new products, but nobody has done that. And that's because, of course, Purdue had a ton of patents and they went back to FDA and changed their regulations and asked for more clinical trials and quite a few other things. So we are running the last set of clinical trials that we believe the regulations calls for today. Well, actually that the regulations does call for today, okay? And we hope that we could file by Q2 of 2023. If all goes well, and please remember that part, okay?
We are working on something, just because we're working on something, it doesn't mean that the FDA is not going to change their mind and add the requirement. But if all stays constant, we believe this is the last clinical trial that we need to conduct and we will be able to file next year, okay? We don't have a partner, and we have now looked at that, because if we do have sales and marketing, then we don't need a partner. If we don't, then we stay with the land, then we might. All of that will come to fruition after we file, the FDA accepts the application, we settle whatever patents and lawsuit Purdue has and get an approval. When you get close to that within -- we'll know hopefully within a year plus or minus where there were changes that the FDA comes back with the complete response letter or ask a little questions about this and that.
Once we get to that point after filing, then we'll have a better idea. As of today, we're making all the right choices, we're taking all the right steps, we're following the guidance to achieve, we're checking with experts to make sure everything goes well. And if all goes well, the filing will be in Q2 of 2023, okay.
That was the last question and that concludes our meeting for today. Thank you, Matthew, and thank you ladies and gentlemen for joining us and have a wonderful day.
Operator
Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Ah yes. . .the big "IF" he sells at that price. Fifteen cents is just a number picked out of thin air by somebody. It means nothing. It has no bearing on current fundamentals and what the future fundamentals will be.
And. . .it is too nice of a day here to spend the day pecking a keyboard.
I'm thinking there are a lot more shareholders out there who would not be happy with a lousy 15 cents.
No. . .I would not be happy with a 15 cent a share buyout!!!
I don't know about anybody else but I laughed my ass off when I read that. That is so funny.
Seeking Alpha Transcript from today's CC in its entirety:
Jun. 30, 2022 5:39 PM ETElite Pharmaceuticals, Inc. (ELTP)
Elite Pharmaceuticals, Inc. (OTCQB:ELTP) Q4 2022 Earnings Conference Call June 30, 2022 11:30 AM ET
Company Participants
Nasrat Hakim - President and CEO
Robert Chen - Chief Financial Officer
Dianne Will - Vice President, Investor Relations
Conference Call Participants
Operator
Good morning, ladies and gentlemen. And welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a listen-only mode.
Before management begins speaking, the company has the following statement. Elite would like to remind their listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties that are subject to changes at any time, including, but not limited to, statements about Elite’s expectations regarding future operating results.
Forward-looking statements are made pursuant to the Safe Harbor provisions of the Federal Securities Laws and represent management’s current expectations. Actual results may differ materially. Elite disclaims any obligation to update or revise its forward-looking statements, except as required by law.
More complete information regarding forward-looking statements, risks and uncertainties can be found in the reports Elite files with the SEC, which are available on Elite’s website at elitepharma.com under the Investor Relations section. Elite encourages you to review these documents carefully.
With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.
Nasrat Hakim
Thank you, Matthew, and good morning, ladies and gentlemen. Thank you for joining us today. My name is Nasrat Hakim. I am Elite’s Chairman and CEO. This is our earnings call and with us for the first time is our CFO, Mr. Robert Chen. Robert joined Elite on May 5th. His primary focus has been to work on the 10-K.
Robert will speak to his background in few minutes. I am just very happy that he has experience in taking the private company all the way to NASDAQ. He will be an excellent addition to the executive team. Welcome aboard Robert. I would like to thank Marc Bregman for his service to Elite during last year.
As with our usual format, Robert will give us a summary of the company’s financials. After which I will come back with a corporate update and answer some of the questions that we submitted to Dianne. I am delighted to introduce to you our new CFO, Mr. Chen. Robert, you have the floor.
Robert Chen
Okay. Thank you, Nasrat. And thank you to everyone to join our Fiscal 2021 (sic) [2022] Year End Conference Call today. As you have heard Nasrat introduction, I am Robert Chen, Elite new CFO. To give you a brief background about myself. I am a CPA and I have over 25 years of financial and operational experience with a primary focus on life science companies, both public and private, ranging from preclinical development to commercial operations.
Prior to join Elite, I most recently served as Vice President of KBP Biosciences. I have also previously held the CFO position at Victory Commercial Management. I believe the highlights of my working experience can be better summarized as follows, leadership in transitioning the finance department of a private corporation to a public NASDAQ listed corporation and I have done three times in building startup pharmaceutical company, the financial operation, internal control infrastructure from scratch.
With that background, I am going to move to introduction of kind of financial overview of an income statement and our balance sheets. Yesterday we filed our 10-K for the year ended March 31st. Elite is on the March fiscal year, a copy of the 10-K is available in the Investor section of our website at the elitepharma.com. It is also on sec.gov and many other websites that provide links to our filings.
Now I would like to give you an overview of the financial and some commentary as well. Starting with the income statement, we had record sales of about $32 million this fiscal year, up about $7 million or 27% compared to last year. This is the primary due to the strong sales of the generic version of Adderall, Naltrexone tablets and the Loxapine capsules.
Well the important fact here I want to point out here is, our sales have been only upward trend from $8 million in the fiscal year 2019, $18 million in 2020, $25 million in 2021 and now $32 million this fiscal year. Without a doubt this year Elite has achieved our highest revenue in Elite’s sales history. In a period of four years, the company’s revenue increased by 400-fold -- 400%.
Now I will move down to other P&L section, we come to cost of goods sold, as a general rule, the cost of goods sold pretty much reflect direct proportionately to our increase in revenue. We also post an operating profit of about $5 million, $3 million over last year due to the strong revenue.
Our operating expenses maintained at the relative steady level at $9.7 million for this year and $9.8 million for prior year, even though our sales has -- have increased by 27% over last year. This is a sign that Elite demonstrated its great strength in operating efficiency.
Our net income reached $8.9 million versus up about $3.8 million up 75% compared to last year. Including in the net income are some adjustments related to other income, which includes a positive fair value adjustment or our derivative instrument about $1.4 million pick up and another pick up on the deferred tax benefits of about $1.7 million.
The deferred tax benefits were recorded because the company has started to generate positive net income during the past two years. As such, the company believe is appropriate to utilize the net operating loss carry-forward incurred during prior periods. Our calculation of a deferred tax benefit was based on a two-year positive net income projection.
In summary, the operation results are truly a remarkable accomplishment by Elite management team, including an upward trend for both revenue and the income, while being able to control its operating expenses. One key impact to know is that this increased revenue and the cash flow in particular will help to support our product pipeline development.
Now let’s move down to our balance sheet, our working capital stayed at a strong level about $12 million, up $6 million or a nearly 91% increase over the prior year. Our cash from operating activity reached an impressive $6.5 million or $3.5 million increase over last year and our total cash on hand is about $8.9 million at March 31, 2022. This is mainly attributed to our strong sales and ability to control our spending. Again, the bottomline is that Elite is a profitable and has a stable and financial outlook.
This concludes my financial review. I will now turn it over back to Nasrat for an overview on the company.
Nasrat Hakim
Thank you, Robert. Today’s update will include a few comments about Elite financials echoing what Robert just told us then cover safety research and development pipeline, and commercial products. Before we go to Q&A, I will also talk about opioid strategy. The purchase of the new buildings, a lot of people are interested in that and potential partner of sales and marketing force.
Regarding safety, we are operating in a once in a life pandemic. COVID-19 is a pandemic that is affecting us all. It is affecting Elite, our suppliers, service providers and sales and marketing partners. It is affecting our business, as well as everyone else’s business in the United States and globally.
We continue following local and federal guidelines, and the CDC’s recommendations. Most of our employees are vaccinated. We are still taking all the necessary precautions to ensure employee safety, and most importantly, business continuity.
My concern regarding the effects of the pandemic and supply chain inflation on our lives and businesses continue. All it takes is one missing component to bring manufacturing and shipping to a halt for us in the United States and any other industry frankly.
To-date our commercial products have not been materially affected by the supply chain problems. That is not to say we have not been impacted. It has not been easy. We are feeling the impact on our R&D pipeline mostly in the form of delays in clinical trials. I will say more about that later.
Regarding revenues and profits, Robert hit on all the right numbers, revenues, profits and cash flow. I am very pleased with the direction the sales and marketing are going, and hope our sales partners continue on this path.
Two years ago, we did not have enough money for working capital. Today, we are self-sufficient and profitable. We have surpassed last year’s excellent performance, and just to echo what Robert said, we went in four years from $7.5 million revenues to $18 million in revenues to $25 million in revenues and this year, we hit $32 million. That is solid progress.
As I said, there were a lot of questions about the building. So I am going to start the update of the manufacturing facility with that. Around the beginning of the year, the owner of Building 135, 137, that houses our manufacturing, packaging, warehouse, quality assurance department decided to sell the building.
He is 91-year young and amazing man who has worked with us for years. He got an offer from a company that’s buying pretty much all the buildings on our street.
He was kind enough to offer us to buy the building. We still had four years on the lease, but that was it. We could not renew any more after that. So we went through a quick analysis of our options and looked at the market around us.
First, we evaluated what would happen if we move out and rent another place. The group that’s buying the area is converting it into nursing homes and extended long-term facilities. So if we moved out, we will have to rent the buildings, if we rent a similar warehouse building. First, the rental prices were twice as much. Apparently the gentleman being a wonderful 91-year old retired in Florida has not been checking on the prices and we have gotten a discount of almost 50%.
Second, anytime you move, there are certain equipments that will be a total loss. For example, we have a fluid bed that cost us almost $2 million, mostly in installation, it’s embedded in the walls and the electronics and that has to be taken out and moved.
Third, there’s the cost for clinical trials or tech transfer of all of the products that you have. So at the end of the day, when you calculate your cost if you have to move out, in addition, you have to buy new equipment in order to run the new batches there and submit them to FDA so you can get approval later on.
It will cost us actually more than the price of the building. No kidding. It will cost us about $3 million to $4 million more to move than to stay. So it was a no brainer. We went to the Board of Directors with the analysis and the Board instructed us sometime in January to move forward and try our best to buy the building and I am very happy to say that we are closing in July. This action was a very positive step for Elite. The alternative would have been much more costly.
In addition, the final comments on this, anytime you own an asset like that, it’s a positive thing. I have been a part of a company before when we needed money. We had the building that we had for manufacturing in California. We found the buyer that we actually sold them the company under the condition that they lease it back to us at a premium. So it is not a bad way also to raise cash in the future once we have built in equity. Right now we pay for about half of it and finance the other half. Our payments per month now are a lot less than what they were before. That is the rent is a lot less than the mortgage.
Regarding R&D, Elite continues to spend significant amount of research and development on the research and development. It is our number one priority and number one focus. Our goal is to create a new set of products that are diverse enough that they stabilize the company such that in case we get hit on one or two products that are material to us such as Amphetamine IR and ER, the company will not suffer materially and at least can survive. The more pillars we can add to stabilize the company, the better it is for all of us.
As you know, we received an ANDA approval for the Generic Sabril. Elite is working on a number of other generics as well. Currently, we have three clinical trials that we signed contract for. One will be done in the U.S. and two in India. Two of the three are difficult products and take longer than average time to execute the clinical trials.
The clinical trials are one of these things that got affected by COVID. There are different regulations that they have to apply to protect the patients, the import/export licenses. So this has had really some impact on us. I was hoping that by now for one of the products we would have results of the clinical trials instead the company has not even started the process. Again, you can only operate within the atmosphere that you have and this is today’s atmosphere, things are moving slower than usual from our CROs and we have to work with that.
The bottomline is this, we have many opportunities that are currently being pursued. We have six ANDAs that are -- at R&D level that are well-developed and we have a total of 12 that range from early development all the way to clinical trials.
This year 2022 we have received two approvals from FDA. One ANDA for Doxycycline tablet, a product we co-own with SunGen/Praxgen and the other is the Generic Sabril, which is owned by Elite.
Regarding Doxy, we will be working with our partner to determine the next step. Praxgen/SunGen have their own thoughts of they want to do. They really want to move forward with it. And we need to negotiate with them and figure out how are we going to handle that.
Genetic Sabril, the sales and marketing has been licensed to Lannett and this is an agreement to work out with Lannett almost a year ago. This product includes REMS component that we will have to work with Lannett over the next few months in order to implement. This is the product that you need a specialized pharmacist, physician and patient all educated on how to take it in order to take it.
Regarding the rest of the commercial products, Amphetamine IR or ER are two products that are in a very competitive market. We have done very well. They have done very well for both of us, Lannett and Elite. We are happy with the job that Lannett is doing. As stated before, Lannett has an approval for Amphetamine ER and waiting for this approval for the IR. We have not received an official notice from Lannett wishing to terminate the sales and distribution agreements for this product. So they are still officially and are our partner.
But we are taking all necessary measures to protect Elite if that happens, such as when evaluating other sales and marketing partner in case if this happen or we are evaluating whether we can do it ourselves. To that end, if we are going to do it ourselves, there are lot of things that we need to do way in advance. We cannot wait till we receive notice from them, because one of the things you need is to be licensed in all 50 states and it takes a minimum of six months to get licensed in all states. That’s because each state has its own requirements, ranging from just send me a check and you get a license to, we need the $100,000 bond, FBI and state background checks, fingerprinting and the works. So far, we filed about 35 state applications. We expect the rest will be done within the next two months.
We are also interviewing three PL companies, third-party logistics for distribution and evaluating whether we want to do the distribution ourselves and comparing the pricing. In order for us to launch a product we need somebody who either have third-party logistics or we need to start our own distribution center. So we are looking at the cost and effect of both.
And finally, we are feeling out the market and interviewing or talking to potential VPs for sales and marketing. Again, this is a complex operation that’s going to require a Vice President for Sales and Marketing to be able to handle it.
Having said all of that, let me emphasize, it all may amount to nothing, as we may stay with Lannett, but the stakes are too high for us not to be ready in case they decide to move forward on their own.
Having our own sales and marketing team is something that I have always wanted for Elite. I was planning on it once we get four more ANDAs. This just may accelerate the process. Enough said about that.
Loxapine, we launched last June and it is one of the products that really was affected by the supply chain. Our partner, Prasco, who marketed under their brand Burel were going to take bids to get a small business and we couldn’t because one of the components that you make that product with was in short supply. So we could not promise to double or triple the business because we could not deliver and then we will end up in a problem where we have to pay for failure to supply.
So we are working through that. They are doing well with it now and I hope they will do better once we resolve the supply chain issue. We expect to resolve these issues and expect future growth from this product, hopefully, within the next six months or so.
Isradipine and Trimipramine, Epic is our partner with these products. They are interesting products in that. They have limited competition. With Epic, we are seeing a little more profit and revenues and we hope that continues.
There are many questions about NASDAQ. I always get asked about that. So we have discussed NASDAQ many times before and I will say the same thing again. A key goal for Elite is to uplist the NASDAQ. When the time is right, everybody remember the first part, but not the second part, when the time is right, there are specific requirements that Elite must meet to qualify for the uplisting. We are working diligently to achieve them.
Going from $7.5 million in revenue to $32 million is a part of that, but we are not there yet. We will continue to monitor our growth and income generation and we will update you on the uplisting when the time is right.
I will not and have resisted for years going to NASDAQ on the fundamentals we have. Because if we do have a reversal split whether it’s 10 or 20, whatever it is to get us to NASDAQ and then when we get there, we don’t have the right fundamentals and we gravitate back to the OTC Board, everybody at the sound of my voice would lose 10 to 20-fold their investment, okay. And that could happen very easily. This is why even though it’s lucrative and you would be in NASDAQ for a short period of time and it’s not the right thing for any of us unless we get to the right fundamentals. And if it happens, it happens, it happens tomorrow fine. It happens in 100 years fine. I am not going to do it and risk the company going through what a lot of companies going through and that is gravitating back to the bulletin board.
Okay, to wrap this up, Elite is executing on its growth plans, working on new product approvals and capitalizing on its commercial product lines. Our sales and distribution partners are performing well. We look forward to another profitable year.
As always, you have sent Dianne a whole bunch of questions. Many of them are repeat and others are within the same family. So she divided them into categories and we will try to address those next.
Before I start, a gentleman sent an email with a late question that Dianne passed on to me asking about if we have any other communications with Pfizer since I mentioned them before? And the answer is no.
I have already given the update on the building. So I am not going to repeat that again and our partnership with Lannett or potential other partners. If there is a question that’s tangential I will address it. If not, these three have already been taken care of.
Question-and-Answer Session
A - Nasrat Hakim
The first question is about Praxgen, SunGen and Elite. So the first question is, is the partnership with Praxgen basically the same as it is with SunGen, have we project then how many projects have been added or dropped?
So let me explain something in here. SunGen was sued by Sun Pharmaceutical. Sun Pharmaceutical is a huge international pharmaceutical and SunGen moved into an office not too far from them.
When they saw the name SunGen, they thought they are trying to pull a fast one on them and convince people that they are Sun generic division. So they filed a lawsuit and force them to change their name. So it’s the same company. They just happen to change their name.
Everybody thinks that Praxgen bought SunGen and why aren’t we working with them. They are still the same company, that’s fine, suffering from financial hardship that they lost their Chinese supporter. They just changed their name, that’s all, okay. So the partnerships that we had with SunGen are the same as Praxgen because there’s nothing but change with the name.
Now the only thing we have in common with them is what was pending. Everything else we dissolved and moved on. The only thing that I was spending was Doxycycline tablets, ANDA and capsule know-how, that’s it. Other than that, we have no business with SunGen/Praxgen except they are friends, they know us, they call us, we call them and that’s about it.
There is no collaborations, no R&D, nothing else, except for these two products. And we need to reach a resolution for them sometime soon. Actually, it’s one product and one know-how, okay. The rest of the questions -- a lot of questions about the same thing, Praxgen versus SunGen and when they bought them when they can buy us, it’s the same company.
What is the approximate total market value for the drugs we are working on with Praxgen? Again, it’s Doxy tablets and capsules only. Products that we have left with SunGen only these two.
Why did SunGen sell its 50% interest of Adderall or why didn’t Praxgen want to keep it? Again, it’s the same company. They sold it because they really did not have the money. They would have loved to have kept it. On a side note, this is from the co-CEO, the best and most successful relationship they had was with us that’s produced Amphetamine IR and ER.
And they would have loved to have kept that and made money, except they lost their Chinese financer and when they had no more money and a ton of things that they are working on and employees, they needed a cash infusion and that’s why they came to us. Elite did have the money and then end up selling it to Mikah. They were desperate for money and they wish even until today, they had the money to keep it, okay.
Research and development, product pipeline. We were co-developing a fairly big CNS drug with SunGen, and then it got put on hold. Is it back on again with SunGen or Praxgen? We acquired the right to proceed with the -- that product, the SunGen levered system product. So we will be proceeding with it ourselves. Actually, we are working on it.
There are supposed to be another drug approval in Q2 of 2022. Did Elite receive a complete response letter? No, no, we had two approvals, Doxy and Generic Sabril. Generic Sabril, I think, is what you are talking about. And of the two, only one counts toward the ANDAs that I promised we are going to come through on. Doxy does not count for that. It was left over from last year.
A question on my compensation and why can’t we pay him in cash? I love you, I love cash, please start paying me cash. The Board changed that. I get half -- I actually get my salary in cash and I get my bonus in stocks now. In old days, I used to get everything on stocks. Now I get my salary in cash and my bonus in stocks.
Again, another question on Doxycycline. When will Doxycycline be marketed? As soon as we resolve the issues with SunGen, figure out what they want to do. We cannot proceed ourselves without them. The ANDA is in their name and once we do, we will let you know.
Have you ever considered promoting the use of methadone in the prison and jail system? It could save lives and reduce reoffending. Dianne sent me this question, actually, first, I wasn’t going to read it, because we don’t have methadone anymore. But then I really decided to because this person has a heart and this is not a bad idea, actually. It will be very difficult for a little entity like Elite to penetrate through state and federal prison system and figure out what they have and don’t have and support them. But this is not a bad idea for somebody else, okay. And also, that’s an opioid and then you need opioid insurance and also a host of problems. So it’s not the right thing for us, but a brilliant idea. Is there a difference between jail and prison?
Robert Chen
No.
Dianne Will
No.
Robert Chen
Yeah.
Nasrat Hakim
A financial question for Nasrat. I don’t know, they are given Robert to break, I guess. Do the end -- year end results include revenues from Dexcel? And the answer is no and let me explain that. We are working with Dexcel to launch our product in Israel, okay.
They need to get approval from the Israeli government before we do that and that involves a ton of work. Our team, not only regulatory, but the entire team have been working very hard with them to get them all the papers they need in order to get the approval.
Now there is a reciprocation between Israel and U.S. So they don’t have to do the clinical trials again, but they have to submit all of the paperwork for the ANDA and run a few tests in vivo or in vitro, actually, test before we can do that.
So we are going back and forth with them and I hope that they can conclude this sometime soon. And after they finish, then there is a waiting period by the Israeli Government. So I am not expecting anything is going to happen for at least six months, if we are lucky, okay.
Things move slow in regulatory agencies. But this is a product that’s still alive. Our partnership with Dexcel is very exciting. We are hoping this will be a success and there will be other products we can collaborate on, whether it’s for the U.S., I mean, for Israel or Europe, okay.
Has Elite suffered from discontinued API procurement? No, we have not. As I mentioned earlier, not API procurement. One of our products, Loxapine, had one of the components, not being as available for us to be able to bid more, but it wasn’t the API and we have never had any issues with API. So we have done a very good job on that.
Can you please provide more color around the market size for the four ANDAs that are coming? I honestly can’t for multiple reasons, but I am going to give you one right now. Any time we file four ANDAs, we start the clinical trials and that ANDA, let’s say, is going to bring in $100 potentially, and then you work on other ANDA that’s going to bring in $1.
You don’t know which one is going to get through the clinical trials, get the FDA, get approved. So I cannot tell you what is the universe for these ANDAs, because I don’t know what’s going to get there first, okay.
The eight ANDAs we are working on out of the total of 12 are substantial. ANDA are about what all the big boys and girls in the market working on, okay. So we will be throwing our head in with the big boys and see what we can do. Some of them are similar to Amphetamine ER and some are similar to Loxapine and everything in between, okay.
As an investor, I was happy to see a PR in Micro Cap Daily and I apologize for never hearing about it. Dianne have to explain to me. Do you plan to have more PRs in 2020? We will always issue press releases for PR worthy of news, okay. We are not going to just issue PRs for sake PRs. Any time there’s something that is relevant, we will update you guys.
NASDAQ, what our current NASDAQ plans? I already explained that. From the transcript dating back to 2017, you said that you are going to go to NASDAQ. Now it’s 2022, does you not realize that people like me are reading and following everything he says? Yes, I am hoping that you are following the fact that I am really saying we want to go to NASDAQ, but we are not going to do it until we have fundamentals and unless we have the fundamentals, we are not going to do that, okay. To go to NASDAQ, just to go to NASDAQ have a reverse split and go there with the debt is detrimental to all of us.
Is there any activity in R&D around ADT technology currently, okay. That will be the last question. I will take actually the last question there is and let me answer it this way. The landscape in the world of opioids is changing, okay. Historically, Purdue did not do all the ethical things that you should in marketing OxyContin.
The federal government sued them. The politicians jumped on the bandwagon and start declaring the big bet, pharmaceutical companies are doing the wrong things and are causing a pandemic and drug overuse -- overdoses in America and they got a lot of milage out of that, too.
Later the states saw dollar signs and they also jumped on the bandwagon and they start suing everybody and their cousin as well. When they saw money, they stopped suing just Purdue, they started suing generic companies that the FDA approved their product and they are used for the intended use. Generic companies do not have the capability of changing the labeling. You follow the labeling of the brand, okay.
So when you go there and FDA says, yes, this is what you are supposed to make and this is the label you put on it, unless you are selling it illegally on the street, you are doing what the law told you. But all the states start suing and they made a ton of money as well. Of course, when we saw of this, we got out of town. We don’t want to get sued because even if we win, we cannot handle the litigation part. It is my understanding that things are changing.
Now in Congress, they are getting lots of complaints that the person whom the drug is made for, the person who’s in pain, who has cancer, who has a surgery, who has arthritis, that are the users of 99.9% of the drugs. Nobody is thinking about them. Everybody is seeing about the junkies and the abusers.
So the Congress couldn’t shift overnight. Otherwise, they look like hypocrites. I am not sure if that will bother them. But they are now listening. And they are seeing that, okay, we first sued everybody and their cousin, there’s nobody else to sue.
Then we demanded REMS where every single doctor now gets educated on opioids, they can only prescribe certain amount to a patient, that the pharmacist get educated on same thing, that the pharmaceutical companies are creating marketing surveillance, that we have serialization where every single bottle we manufacture can be traced to your house. All the FDA have to ask is where is this bottle and we can actually have the supply chain to trace it all the way to the end user.
The movement is going in the direction where, hey, if a person complies with REMS, with regulatory surveillance, with serialization and they do not break the law and selling to a specific pharmacy like the guy sold to Florida firm where single Florida pharmacy more than they sell to 10 other states, then maybe they are protected from lawsuits or at least they will put parameters where if you meet this criteria, you shouldn’t be sued.
I don’t think that’s going to happen overnight and my gut feeling is that over the next three years, Congress will act on that. Well, for us to be back in the market, it’s going to take us at least a couple of years to get there.
As was announced, we are working on Oxy ER. We have to do certain studies that will be concluded by Q1 of 2023. And we will be filing the product that takes the FDA another at least year to evaluate it, so probably end up filing it in Q2. It takes them a year.
And pending lawsuits and maneuvers from Purdue to delay us like the delay in the industry, things could come together and we may be one of the first ones once we have that Safe Harbor that Congress acts that opioids are okay.
Right now, come hell or high water, I am not getting into the market. And I have said before to the investors, to the stockholders and to my staff, we cannot even find the company, insurance company that would insure us for opioids.
We cannot find a partner that will take on that burden and we do not have the money to defend ourselves and none of the little products we have, Oxy doesn’t highly hydrate that [ph] for a small company like us, would have brought enough money for us to make it worth it. And Oxy ER anti-abuse may bring in enough money for us to be able to buy the right insurance or to take a risk. All of that can be handled in the future, pending what the legislators do.
But again, one more thing we try to be careful with and not miss an opportunity by preparing with our know-how knowledge, clinical trials, to be next in line in case if it happened and if it doesn’t happen, we lost some money. If it happens, that will be a huge return for all of us.
That would be it for today. That was the last question. I will talk to you again in six weeks. Thank you for listening today, and thank you, Operator. Thank you, Matthew.
Operator
Thank you, ladies and gentlemen. This concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
You said:
No. . .Nasrat did not guarantee an approval.
Thanks for the DD. I'll take facts over "the sky is falling" crapola rhetoric any day.
Is it possible this is conjectural bullshit? Why. . .yes it is.
That is great DD. Much appreciated. Member mark given.
I don't give a rat's patootie. . .because I am going to wait for as long as it takes.
Nasrat. . .please ignore the ludicrous and repetitive nonsense about selling the company now. As a shareholder, I would prefer ELTP at least launch a few more ANDA's and increase revenues before even considering the sale of the business. I will wait for as long as it takes for this to happen.
I'm seeing a a whole lot of huffing and puffing and trying to blow the (ELTP) house down. LOL
According to the February CC, Nasrat is anticipating an ANDA approval during the first half of this year (June/July). So let's see what happens when/if this approval does occur. Also hoping for this ANDA (developed in partnership) to have minimal competition and a decent market size/number.
And I totally agree with you on this.
Like I said. . .a stronger pipeline and higher rev's are what's needed here. We are willing to wait for this.
Laughable nonsense
My family, friends and I own millions of shares and there is no way we would ever vote for the sale of ELTP at this time. The company needs a stronger pipeline and more rev's before any kind of consideration could be given to the sale of Elite.
HGilS. . .no proof will ever be given to us showing new LPC activity.
As I like to say:
No proof = Bullshit