Elite Pharmaceuticals Inc (ELTP)

[Dante Fantasia]

First, thanks Nasdaq for the PM. Appreciate the email and my very best wishes back at you for all to go well.

Ok--to the business end: After first reading the last PR (SOx trial) and subsequent financials wanted to make a few quick comments. Upon first hearing and seeing progress on the SOx front per the new small trial, I was initially very encouraged. It was not simply the positive results (obviously too low of statistical power to generalize (you could do a Fisher's Exact but that's a lame chi-squared IMO)--though showing statistical significance was not their goal at this stage) but surprised progress was indeed being made. And after a long period of cynicism, which I have been quite open about, honestly felt a surge of cautious optimism in seeing it is still seriously still in play. However, the 10q kind of changed that…a lot. Per the financials themselves, meh, about what I thought, no glaring surprises really. The small and expected loss aside, I thought the most important thing was not the “financials” themselves, but rather this caveat that I have not seen garner much attention:

To date, the Company received payments totaling $7.5 million pursuant to the 2015 Epic License Agreement, with all amounts being non-refundable. An additional $7.5 million is due upon approval by the FDA of the NDA filed for SequestOx™, and license fees based on commercial sales of SequestOx™...There can be no assurances of the success of any future clinical trials, or if such trials are successful, there can be no assurances that an intended future resubmission of the NDA product filing, if made, will be accepted by or receive marketing approval from the FDA, and accordingly, there can be no assurances that the Company will earn and receive the additional $7.5 million or future license fees. If the Company does not receive these payments or fees, it will materially and adversely affect our financial condition.

Thus clearly, ANDA's and all, getting SOx through the FDA is not just desirable, but absolutely necessary going forward. And as we were given granted then blew a second chance, and managed to be given a third, it seems pretty apparent that if we blow it this time, it may be close to game over for the Dollarland Express. Likely the company would not go under (especially if a few revenue-generating ANDA's go through), but it does appear that Nasrat still, bluster aside, does not see the ANDA's as the real pay dirt, or quite possibly still “breadcrumbs.” The company itself may remain solvent, especially if cut R&D, but I can't see any hope of growing into a large cap from a small generic company (emphasizing generic opioids) with this much dilution (and more to come), w/o the ADF approval. The only good thing is we have bought time before the next real BE, submission (if positive), and decision.

Thus, there is some “pop” possibility on approval of 1-2 of the current ANDA's, but until a real picture of actual sales/revenue etc., such pops are likely to be fleeting (e.g. a Conix-style pop) and/or small; any "home run" (Dollarland) is absolutely contingent on SOx 1) approval and 2) subsequent success.

It is very clear the risk of this stock has significantly increased given the importance of the Epic milestone necessity, while the increased(ing) dilution has not led to an equivalent reward commensurate with the risk. If rejected, as stated by the company itself (and not as a generic safe-harbor clause) re-gaining an “ongoing concern” status would tank the price in a huge way. For anybody with open eyes, the FDA is still very deep in bed with BP. Gottleib and Trump have changed nothing, and opioid supervision under Kellyanne Conway’s guidance? I’m not trying to be political at all, but KC as opioid czar? Lol. Yes, the FDA has gotten faster at reviewing ANDA’s, but the way I’ve been reading it, SOx is now an NDA. And, we are under the gun per submission by end of 2018, else a hell of a lot more money (half the milestone) just to re-submit…so it’s a rush job. And if we read the trial results correctly, seems we are going with an entirely new formulation, not the 2-bead, so again more unknown, more risk. Best, best case scenario, we get approved sometime in 2019, and then must begin production, marketing, etc. Very likely pushes out revenue from SOx until 2020. So, as we now wait for more SOx developments, and the higher risk it engenders, we are dependent on some of our ANDA’s being approved, and such approvals “soon”


While the FDA is indeed going faster with assessing ANDA’s, exactly what is the FDA’s priority of getting more OxyContin on the street? Even with an ANDA approval or two, remains the question of how successful and profitable such ANDA’s would be. Simply making inferences as to the “market size” does not, in any way, provide insight into how much penetration we would make; we can’t assume anything like “if only we got 2% of the market…” or the like. The space is far too competitive for the BP’s to simply allow a new entrant without a fight for every inch of such profitable share. And BP’s are not our only concern anymore. As Investin aptly pointed out, there are now many competitors with ADF oxy emerging. It will take a lot of money as will the SOx trials…and where will such money come from? LPC/dilution. Furthermore, all the other ANDA’s have timelines that as others have shown can take years before approval.

Last, the opportunity cost of having held this over the last 5 years while the market was smoking was incredibly high. Personally, I don’t keep a lot of my portfolio in the market, and what I do are mostly in ETF’s and some Fidelity funds in my IRA. In total (not individually) the money I had in those has more than doubled over the time. Personally, I simply held too long to this and regret not selling following the initial CRL.

For me, it’s time for an exit. No mas. Had enough. I “gave it a chance” and not waiting several years more with dead money that could indeed go far further down particularly if any more trouble with SOx testing/approval. There are some very interesting companies that seem far more compelling (in need of more personal DD) and actually on the upswing for good reason. To be clear, I provided this rationale as stating my own reason for moving on, but have no inclination to “lecture” others to do the same; to each their own. Having held for so long while the market soared while this did nothing but flounder and decline is humbling, and see no justification for hubris. This has been a waste of time and ultimately a losing pick. If/when ELTP actually can demonstrate something concrete—which they have not done for over 5 years—then I may be inclined to take another bite of the apple, even if I have to pay more (“chase”) than today, and in the meantime, put this money to real work instead of “waiting” for the next PR, which could come in a month or year. The Epic warning demonstrates that the risk of a big hit looms if SOx fails again. Thus, personally, am beginning to ease out, and aiming for maybe two weeks. Have some extra time until the next round of home repairs next week, so will be making a few final posts FWIW.

In the meantime, my best wishes to all. Don’t confuse my negativity for bitterness towards anybody. There are a lot of very fine people here IMO, regardless of opinion. If anything, when I sell, it's usually a good sign, lol. While I consider the opinions of others in my DD, all decisions I made by myself, based on my own DD, and am responsible for my own losses, just as I am with gains in others. I hope all who stick with this make a ton of money.

Maz