Elite Pharmaceuticals Inc (ELTP)

[no2koolaid]

This misunderstands the fundamental nature of products and commercialization strategy. Allow me to offer a perspective born of experience...

According to McKinsey research, only about ¼ of a firm’s growth comes at the expense of competitors; that is, a firm steals market share. This means it is essential for a company to determine where and how to compete. This usually requires a company chooses one of three strategic approaches: 1) pushing into new markets; 2) focusing on promising products or services; or 3) acquiring existing businesses that enable one or both of the aforementioned.

It is clear that the pain med market, in general, and the opioid pain med market, in particular, are growth markets (4% CAGR) because of factors well known to those on the board...aging of the global population, increased education, improved access to healthcare, better diagnostics, and the corresponding desire to age well. If we add to these environmental factors the socio-political-legal-regulatory matters influencing the products being offered, most assuredly those in the opioid pain med market, we know there is coming a tipping point that threatens the current market leader (Purdue) and others within that have traded on the past. That tipping point is the disruptive technology we know as abuse deterrent formulations.

Now to be certain, there are a number of companies with varying approaches, all of which the FDA has the ability to approve as ADFs. Contrary to some, but as an ELTP investor, I think this is great. I also think it is very good that Purdue and Pfizer are seeking to inform and educate the "unwashed masses" about ADFs. These are essential stepping-stones. Every firm seeking to develop ADFs benefits from these actions and it is a given in the world of strategy that the most important thing about a new market is that the potential consumers (and these are more the healthcare professionals than end users) understand how the products being offered will meet their therapeutic needs, whether real or perceived. The educational efforts of Purdue and Pfizer benefit toward that end because they are credible sources (even with Purdue's legal issues notwithstanding). But, what will matter for those seeking to compete within the market is not that they have the best ADF, rather, it is that the market is neither mature nor requires stealing market share from others to enable an individual firm to gain share. Moreover, it is a fundamental aspect of Porter’s Five Forces Model of Strategic Analysis that substitutes remain one of the means for business success...http://www.quickmba.com/strategy/porter.shtml.

The idea that an IR opioid could not be substituted across product lines defies reality. Just as water is a substitute for cola (and why both Pepsi & Coke of have invested in and acquired that commercial asset) so it is that SequestOx can serve as an ADF substitute for non-ADFs across the IR opioid line. To argue otherwise fails to grasp the strategic nature of product commercialization, irrespective of type. Further, while pricing will be an issue, there is the matter of perceived value and it is a strong influence on consumer decisions...http://www.businessdictionary.com/definition/perceived-value-pricing.html. This is why there must be a stronger commercialization structure for Elite than is currently in place...IMO. What does that portend for the future? Ah, that is a question for another time.

Always glad to set the record straight on strategic matters.