Without question, you have done a nice job of finding the rare nugget of information that helps inform Elite shareholders. And, while I agree you first brought the up matter of the December 2018 agreement, what was missing was an analysis of what that meant. This is something I provided when I listed the following from the December 2018 agreement between two parties (Elite and Mikah). It says in part:
1. The Parties will collaborate to transfer the formulation and methods to Elite’s facility and to file the product.
2. Mikah will be responsible for API costs.
3. Mikah will be responsible for the cost of the BE studies.
4. The parties will negotiate in good faith a Manufacturing and Supply Agreement to produce the Products in which Elite will have the right to contract manufacture Product at cost plus [**]% (cost of materials, labor, and allocable overhead costs per GAAP including GDUFA facility fee).
5. Elite shall be responsible for the filing and prosecution of the ANDA with the FDA and Mikah shall own any ANDA filed and/or approved.
6. Mikah shall pay Elite for services rendered at cost plus [**]%. Services hours shall be tracked by Elite with appropriate signed offs. Out-of-pocket expenses will be charged at the invoiced cost.
OBTW: Because they would comprise a single company if merged, that contractual language is unnecessary and inconsistent with that if the action was by merged parties.
The number one reason listed as a material event is a merger or acquisition, and it would require an 8K. Yet, nowhere do we find any 8K that mentions a merger. Rather, what we have is the December 2018 AGREEMENT mentioned in the 2019 Annual Report. And, just to be clear, a merger would have created one balance sheet and one checkbook. Thus, Mikah would not have funds separate from Elite to make that deal with SunGen. It would simply not be possible. Further, throwing around terms like “lying to shareholders” is entirely unacceptable, as it is an opinion lacking evidence.
Separately, as I pointed out in a post in September 2018, HUNAN JINGFENG PHARMA had acquired New Jersey-based Sungen Pharma LLC through its subsidiary for $250,000 and invested another $4 million into the company. At the time, I saw Hunan Jingfeng as having the potential to acquire Elite. However, as a result of the 2019 tariffs and 2020 pandemic, Hunan has seen its revenues take a 90% hit as of last Q and they are struggling financially, and it is why SunGen is unable to get funding going forward, which affects their drug development and threatens their partnerships with Elite and Athenex. It is why Hunan Jingfeng is selling assets – including the SunGen solid drug portfolio (it may sell its injectables to Athenex, their partner in that business). Hunan needs money and did not want to mess with selling shares, not to mention that, in so doing, the dollar amount of the shares they received would likely decrease because they would have sold Elite’s shares immediately, thus affecting Elite’s p/s with the instant dilution.
However, because Elite was unable to swing the deal, this meant that Hunan Jingfeng wanted SunGen to shop its assets to other companies. While I can only speculate, the Actavis relationship that led to that between Nasrat and SunGen’s founder likely led to the deal that Mikah was able to make. As Nasrat stated, “After Elite rejected the offer that’s how Mika ended up with the enders (ANDAs) by stepping in. It is my hope that eventually Elite will end up with these two products.”
So, yes, Nasrat was fundamental to the deal on both ends. And, the points serve to further make it clear that Elite and Mikah, while in a contractual agreement, are NOT merged. But going forward, based on what Nasrat said on the CC, this will serve Elite and its shareholders well. Remember, a merger is not required for one company to license its drugs to another.
That is enough for now, I need to work out.
N2K
