Nasdaq2020, there is much to ponder in the cheaper IR ADF and here is what I can share...
Elite is a generic manufacturer and all generic companies (irrespective of industry) operate on a cost containment strategy; this as opposed to a company that produces novel products (as are approved NDAs) and operates on a differentiation strategy. This matters because it is the basis for all decisions for all elements of said company's value chain. As such, one of the criticism I have had of Elite (and repeated a number of times) is that, as a generic low cost producer, why submit an NDA (SOX is a novel drug)? It made no sense from a strategic perspective, as it was a costly effort.
Now, the answer was obvious...Elite thought it had the green light to the IR ADF market that no one occupied. Okay, I get it. However, we have seen Elite run into FDA barriers in trying to get SOX approved, even most recently with the added FDA hurdle. So, here is the question I ask...
Why continue to pursue SOX submission? Is it because they have a patented fix? The answer is a simple, No...
I believe they are taking SOX to a point before completing more costly trials and then they will put the effort on hold (if they have not as yet made that decision), all while pursuing the 90% cheaper IR ADF that is more in keeping with their operating strategy. Now, that is smart!!! In the meantime, they continue to file the ANDAs and getting approvals, which will bring in the cash to fund future R&D and, ultimately, could pay for further required SOX trials...after they have achieved CFP.
Except, why do that?
If they get the big ANDAs approved and have the products to compete in some $3-4 Billion drug markets, their revenues will allow them to make certain choices, one of which is to shelve SOX. Now, I know investors will wonder why they might do that and the answer is as simple as... Why pay for costly trials to get approval for one drug that would compete with another of your own drugs; one you produce more cheaply? That is nothing more than an unneeded escalation of commitment to their sunk costs; and it would be a monumental misuse of funds, not to mention a strategic error.
By the way, this is exactly the decision made by Melinta when deciding to shelve Solithromycin after having acquired the Cempra business. They knew it would compete with their approved drug Baxdela. So, they avoided needless additional and costly trials.
Thus, the matter should be a simple decision for Elite...really, it is nothing more than a risk balancing act. If they have a 90% cheaper IR ADF, pursue that and hold SOX in abeyance as an IP asset that would count in any valuation analysis by a potential acquirer, but may never need be trialed or resubmitted.
And, when you start adding up the product markets in which Elite would be competing, they would be an attractive takeover target as a bolt-on acquisition that would help address the lack of BP organic growth, largely given their diminished R&D investments and patent cliffs. Moreover if the wild card that is Isradipine comes to fruition, Elite will be acquired and sooner than otherwise would be the case.
AI
