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It is a typo...they listed Elite at 60 cents instead of 6 cents...
The impact of the pandemic is little understood by many...and, among others, Elite has been impacted. Let me expand on that...
I listened to presentations given by a biotech with a relatively new commercialized drug talking on a Zoom conference with Goldman Sachs and Raymond James. The nexus of the agreement between both company analysts and the biotech is this...
Even now, healthcare workers able to write scripts are still only having "live interactions" (aka seeing patients) and able to write scripts or provide hands on in-person healthcare 70% of where they were pre-pandemic (and please do not tell me how your PCP is different, this is an accepted industry wide number that all pharma is dealing with). Moreover, the belief is that it will take at least nine more months to achieve pre-pandemic levels of interactions. The salient point is that across the board commercial activities have led to a decline in Q-Q revenues by many pharma companies that have relatively new products they are commercializing. Elite's experience this past year is no different than others. However, according to the all-knowing Goldman Sachs, the belief is that not only will companies return to pre-pandemic sales but the expectation is an additional bump up resulting from pent-up or suppressed demand.
Despite arguments to the contrary, Elite is not operating in a vacuum and does not control the external environment.
As to this...
I heartily disagree with the assessment that the CC was disappointing. I was particularly happy with the manner in which Nasrat laid out the process of drug development and a clear path in the next two years of developing, filing, and getting approved 4 drugs each year. I also liked the reference to Mikah and Nasrat saying the SunGen portfolio would be available and he thought Elite would have the money to buy it in the second half of 2022 (if we see cries of self-enrichment with any such deal, please do the math - Nasrat benefits himself far more with Elite than with Mikah; I know I have done the math). The financial position of the company will further the development timeline because the company has the money to pay for it rather than having to resort to dilution, which had become impossible under the former LPC agreement that required the p/s to be 10 cents or more (and that alone should make clear the manipulative effort to prevent Elite's development).
Remember, all this with little debt means that what we heard combined with what we know (the nexus of events in late 2023) means Elite will be positioned where many of us thought it would be five years ago. And that should make clear of the strategic turnaround of the company.
One more thing...Much has been said about Elite's selling its pain meds, though retaining the value enhancing ADT. Smart and strategic move. However, let's do a little comparison with Collegium, a company that received FDA approval in April 2016 for an XR opioid and was able to avoid the food effect that led to Elite's CRL. I have looked at COLL and I know others have, thinking what might have been for Elite. COLL generated more than $310 M in revenues last FY and many Elite investors are envious. But, what about its p/s evolution? Interesting as to that...COLL IPO'd at $12. It is currently $22.50 and it has never been higher than $26.80 (if keeping score, at peak that is a 2.23X and currently 1.88X...not exactly crushing it). Relatedly, the discussion we heard from Nasrat on the last CC tells us - if we paid attention - that the future for Elite will see revenues that exceed COLL's and Elite's p/s will be a multiple of it's current p/s and far and away exceed the multiple of COLL.
The ADT tech has value and would be included in any M&A. How it gets valued depends on whether the acquirer or merged firm could commercialize it. But, as Nasrat made clear on the last CC, it retains value...
A well reasoned post about Elite. Thanks.
HAPPY FATHERS DAY TO ONE AND ALL...
Not sure if you are keeping score, but when I make a mistake about the facts related to Elite, I make it clear that I have errored. Hard to have an honest and forthright discussion about the company if we do not make it clear what is fact and what is not. In addition to admitting error, the next most important thing for readers of the Elite board is to recognize the difference between fact and opinion. Particularly if that opinion lacks evidence or links in support. Opinions about Elite are fine, but the reader gets to determine if they are grounded in experience and education. Because of my background and having testified in court under the Daubert v. Merrill-Dow test for expertise, I approach the discussion of Elite with the same basis. It is about perspective born of education and experience. It is why the complexity I experienced working for a global firm enables me to weigh Elite's management strategies and actions and provide a grounded assessment. It does not mean I am always right, but it does mean I try to be.
So, as to that, I mentioned that any third party assessment of Elite to determine its value (whether done by them or another firm) would involve various tests for value and one of the most commonly accepted in the business world is a discounted cash flow analysis. While that involves math, as with any multiple regression formulae it requires certain common assumptions - for example the discount rate, it usually is 10%. Then there is a variable that is based on the SEC required reporting by the company on the quarterly or annual report, it is a variable depending on a company's earnings and it is not subjective. However, there are two other variables that require reasonably subjective estimates based on what the company has done and where it might go over time, which means there is data to support the estimates. No getting away from these as they are and can only be subjectively drawn from an assessment of real possibilities - grounded to use my term. So, let me ask (and there is no exact answer, which is why there are ranges in DCF scores)...In percentages, what do you think Elite's short term growth will be (3-5 years) and what might be their growth thereafter (the formula does not have a terminal end)?
If we can get to some agreement, I will do the DCF...So, what say you or anyone else? And just to be clear, the formula does not use zeros for either growth category. I guess we can say the formula requires mindfulness.
Based on the variables that get plugged into the DCF model, it all comes down to three words...It just depends!
Depends on the Standard...https://www.investopedia.com/ask/answers/nasdaq-listing-requirements/
My mistake, it is an aggregate revenue of $11 M in the three years prior to the application. Thanks for the clarity.
There are a couple of things that are incorrect...
I suggest checking the conference call transcripts to see that Nasrat has NOT constantly complained about manipulation of the p/s. Of late, I have been the person to make it clear that a profitable company should not see its p/s sitting in a trough - ergo, it is being manipulated and I provided the link in support. If missed, here it is...https://www.griproom.com/fun/10-signs-your-stock-is-being-manipulated
Elite has had its best financial performance ever, but that does not mean it qualifies for a Nasdaq listing. In fact, Elite has only met the earnings requirement for the last two years. To be approved for uplisting requires 3 years of consecutive earnings equal to or exceeding $11 Million BEFORE submitting an application and that means Elite needs another FY of revenues exceeding the baseline. That should end the discussion of uplisting now, but since I am here, let me clarify further.
A R/S at this time makes no sense. In truth, whether the p/s responds to the future drug development and earnings increases does not affect the value of the company that would be the basis for M&A. I realize there is a general belief that the market cap drives the true value of a company, but that is not the fact. Here is a link to help...https://www.investopedia.com/ask/answers/122314/what-difference-between-market-capitalization-and-market-value.asp
And here is a quote to provide context...
If I can shift metaphors - I believe the caterpillar we know as Elite will become a butterfly before end of calendar year 2023.
Thank you for the compliment. Yes, my former success combined with my education has given me a great deal of knowledge about business that enables me to translate some of the actions by Elite. Again, recognizing that no one on the outside can ever know what is taking place inside the company nor the complete basis for executive decisions, as we lack a true understanding of what dynamics are in play. I thought I made this clear and it is why a continued attack on Nasrat's decisions lack grounding in business reality. Inferring he is somehow seeking to cheat shareholders is misleading at best.
If it is not obvious that, in the EOY CC, Nasrat laid out a clear and definitive path for the future, including a full explanation of the process of drug development and the strategic plan for the next two years that comport with a number of clear catalysts, there is not much more I can say because it is lost in translation. As such, I guess we will see what transpires. But, if I were to bet on analysis it would be from a holder of a doctorate in business with global business experience. After all, when you go to a primary care doc with cancer the expectation is they would send you to an oncologist. Metaphorically, I am the business version.
Let's think for a moment...look at the four listings and what do you see? That little circle R means registered trademark. That does not mean the sum of the generic market. Only Vyvanse remains unencumbered by generic competition. For the other three, multiply their market share by the number of total entrants in their generic pool.
When drugs go off patent the novel drug, at best, is able to maintain an equal share as long as they adjust the price to compete with generics. In any event, if we believe there are eight competitors (Including Elite) in the Adderall market that makes the prorated market roughly $1.6 Billion. So, the point is the same...Vyvanse has a market size and patent expiration that makes it attractive to a generic drug produced by Elite.
Context is important. When that "once a quarter filing" was announced by Elite the money came from selling shares to Lincoln Park Capital and we know that the company had problems doing that not because of LPC but because the p/s was below the price needed for them to sell according to the contract. This is why the new LPC deal lowered the basement price from 10 cents to 3 cents. That effectively eliminated the effort to squeeze Elite financially, which is reason enough to be happy as investors. But, the context has changed and now Elite's product development will be financed by the cashflow born of the profits of the company. Just like big firms that are profitable. A big distinction...and...
...The reason I know this distinction is from working as a business executive with global responsibilities for a Fortune 50, not being isolated in some technical setting. It is very different being an executive in a Fortune 50 firm, with a budget that far and away exceeded that of Elite, as I traveled the globe to help the business. Speaking of context, that is a BFDifference. But, as the SVP of Finance once told me, if you have to explain such differences, why bother?
Just doing a little research and ran into something interesting…
https://www.drugpatentwatch.com/p/tradename/VYVANSE
Drug patent watch said that by analyzing the patents and regulatory protections for Vyvance, it appears that the earliest date for generic entry will be February 24, 2023. This may change due to patent challenges or generic licensing.
What is interesting about that is it would allow Elite to target Vyvance as one of their four generic submissions in 2023 and here is why that might be a very good thing…
OMG, you are right. I guess the dissertation I was reading at the time got autofilled. Crazy and thanks for letting me know...I am still laughing, truly. Okay, now that I am composed, let me add the link that I should have (I am still laughing at that, too funny...I checked and this is the right one).
https://www.griproom.com/fun/10-signs-your-stock-is-being-manipulated
I believe I have argued about manipulation more so than the CEO. In case there is need of a link, I have one and it speaks to the many issues Elite is facing with its share price. As to its business, that is what matters most because it is profitable and that is what gets bought or merged at a price divorced from the emotions of the day to day p/s movement. Rather, it is the third party evaluations that matter to pricing a company, not the market...every business executive knows that.
Oh, yeah...here is the link I have offered before...http://digitallibrary.usc.edu/digital/collection/p15799coll89/id/446388/rec/1
Always glad to help. I see it has been posited that the poison pill is a placebo. This, of course, is wrong when one applies the scientific method of analysis (empiricism)...as this clearly shows...
I had not forgotten the request. I wanted to see the FY 2021 results which offers more clarity on how to value the company in myriad ways. But let me begin with this...
Let me take the long version of the short way around providing a valuation analysis for Elite TODAY, but we have to begin with their poison pill.
Let me say this clearly, just as I am not responsible for Elite's business success nor what is happening with its manipulated p/s, I can provide clear analysis as to what Elite should be worth - today. But, then all I would get for it would be the same old responses and I have better things to do with my time and, the professor in me suggests to the global business executive in me...why bother?
Of course, unless it combats the nonsense...Hmmmm!
Sorry, it absolutely means that Elite is a successful business that is profitable and can now pay its own way. No need to tap LPC, they will pay for their own R&D and product development. I see what the company is doing and there is nothing I am worried about from their end. How the company is valued is what matters, not the daily p/s.
Although I have said this before, it is worth repeating...How a company is valued in any M&A consideration is the result of third party analysis and has zero, ZERO to do with the p/s at the time.
India is not a third world country, it is a second world nation. Now that we have that correct, what about clinical trials there?
A common motivation for foreign companies doing research in India is relatively lower cost as compared to comparable research elsewhere. India is a single nation with a large, diverse population. Many potential research participants in India had not previously had medical treatment, and clinical trials get better data from such people. India also has a well-trained workforce and many research sites which meet international good clinical practice standards. India's national health system provides a lot of care in large urban hospitals. This centralization is also favorable to conducting research.
Clinical trials in India had increased pre-pandemic by more than 5X since 2008 because of government support, given the need to meet its demand, as India has 20% of the world’s illnesses. A number of big-name pharma, including J&J, have done and/or are doing clinical trials in India, which is seeking to increase the number of trials in country because of their medical and financial benefit.
The global Contract Research Organization (CRO) market size was estimated at US$ 34.5 billion in 2018 and is projected to reach US$ 55.3 billion by 2024, growing at a CAGR of 8.2% during 2019 to 2024. (Paraxel, a Boston based global CRO (contract research organization) operates in five of India’s cities.)
Indian clinical trials market size is expected to reach US$ 3.15 billion by 2025. It is projected to register a CAGR of 8.7% over the forecast period. And India is a democratic nation as opposed to China. So, their transparency is greater and there is less concern the intellectual property is stolen or compromised, as is so often the case in China.
Always glad to clear up confusion.
And, yet, the share price is not under control of Elite. It is up to people to buy or not. I suggest that the reason people are not buying is because they know little about how business operates and, as this board should make clear, are little focused on investing. It is all about the quick win. Like with the meme stocks for whom the traders know nothing about business fundamentals, only if it makes sense to jump on the wagon.
Since I am here, I will take this opportunity to do what an admin suggested...
The section of the board that you are responsible for has a message that is not about facts, as are the others. I was told to ask you to remove it, so that readers, upon entry to the board, can see fact based material and then allow the posts to impress them or not about Elite. So, I am asking it be removed and, in the manner of asking, it is in keeping within the TOS guidelines.
Interesting convergence of facts for Elite investors to consider are the nexus between the lease termination date of October 2023 for the Florida office space, the poison pill ending November 2023, and Nasrat becoming 62. (Just in case one is wondering, 62 is the age senior executives like to hang it up and enjoy what remains of their life, free from the daily grind.)
So plan for two more years of business development...
Nope... Nothing is crushing the company. As to the p/s, I thought I was clear that it is being manipulated. What else might explain a near 3X return in revenues versus dilution?
Here is the link...https://seekingalpha.com/filings/pdf/14931880
Please share the data that provides evidence that this is more than mere opinion...
I have answers and expanded explanations...that also frame my questions, thoughts, and observations…
What is the ROA for FY2021?
If we recall, I said this before…
The Return on Asset (ROA) performance in pharma ranged from (-)18.2% to (+) 11.6% and the average for pharma is + 6.6%. Where does Elite shake out on that ratio? Based on my math from the 3rd Q 2021, Elite’s ROA is 8.5%. Not only is it positive but it is greater than the pharma industry average!
Then we have Carter Ward’s take on relevant ratios we see additional reasons that we can consider Elite successful as a business…
It depends on what growth means...
LCI has more than Elite's large market IR & XR, it has its own version of Concerta. So, not exactly apples to apples. But even that fails to grasp the reality...if LCI says that not as many scripts are being written one can extrapolate that would mean the increases are not as large as they might have been absent the pandemic. So, Elite's drugs likely were undersold based on projections. In fact, if one takes the time to look at Elite's revenues over the past two Q's, you would find the size of manufacturing suggests a larger than realized commercialization revenue (such proportional relationships are informative).
It is a truism across the range of product markets that those products with larger market shares are often more negatively impacted, the pandemic constricting what might have been even higher growth. When considering CNS drugs and the school closing issues combined with fewer doctor visits - all facts - there is little doubt that Elite's IR & XR were likely limited in their growth. What I expect to see with Q4 is an increase over the previous Q3 that is reflective of the economy opening up and people, having been vaccinated, getting out. Normalization will mean more scripts. However, I would not expect a significantly larger impact until Q2 2022 is reported in November.
I have been busy and little inclined to post or respond to posts directed my way. Yes, I will provide ELTP a list of questions, observations, and suggestions. Yes, I will get around to offer a perspective on what they are worth...but think it wise to wait to see what the numbers look FY 2021. I think it a fools errand to guess what their numbers will be because the full weight of the pandemic seems beyond the reach or grasp of investors, who look at the prorated market share portion of Elite's commercialized products and think that is an easy capture. It is not. And the impact of the pandemic is little understood because of myriad reasons. So, what is the reality? Why not ask Elite's most important partner LCI? Of course, this is a metaphorical ask...but if seeking an answer, it is there amidst LCI's most recent quarterly report...page 8 https://seekingalpha.com/filings/pdf/14931880
I trust we all know the reason that the valuation in 2013 was real…the valuation HAD to have been done to establish the poison pill. Elite simply could not have created the poison pill without a valuation, that is a fact. By the way, the poison pill is mentioned in the 2020 Annual Report, for those interested. The reason for the inclusion of the poison pill discussion in the 2020 Annual Report was to make sure it was clear that neither Nasrat nor LPC could engage in a hostile takeover of Elite – as was erroneously inferred. The poison pill was also identified in the 2014 Annual Report.
As to the three points ($0.40, $2.10 and $2.75) of value identified by the 2013 valuation analysis - clearly, they no longer apply as the basis for valuing what is now a profitable company would require a new valuation analysis in the event of Elite uplisting, being acquired or merging with another firm…or creating a new poison pill when the current one expires in November 2023. Such a valuation would recognize that Elite has significantly greater total assets now than in 2013, even in the face of an increased O/S.
For LCI to do an all-stock deal for Elite is not currently possible. LCI does not have sufficient authorized shares, let alone outstanding shares, to do a reasonable deal. Reasonable being the operative word, it is based on the prospect of Elite gaining the prorated market shares (or the prospects thereof) for all their current drugs as well as the CNS ANDA they are supposedly working on - which is what Nasrat is counting on. LCI would have to increase their A/S, which is currently at 100 M, to about 300-400 M; not really a problem in and of itself, if LCI can sell the idea to approving shareholders that this is what it will take to get them to the $ 1 B in revenues by 2023-2024. Further, the acquisition of Elite would come with synergies - aka, a reduction in expenses, as I have explained before. So, the net profit margins would be greater for Elite than they are now. In truth, M&A will occur when companies believe they have the ability to achieve an ROI within 3-4 years. Given the CAGR of CNS drugs and an increased pipeline, that is entirely possible for LCI with the acquisition of Elite.
While we might watch what LCI does with its A/S, it remains they could do what they did before, assume debt. However, if such a tie up is to occur, I still expect it would be a combination of cash and stock (likely to still require an increase in A/S). What the percentage of each may be is a TBD. For those Elite shareholders wanting a simple all cash deal, that is unlikely with LCI. But if given stock in LCI all one needs do is sell it. Of course, if everyone sells at the same time this will drive down the p/s, which means a decision to sell or not. That much is obvious.
You understand it correctly...
Here is the key phrase...