Elite Pharmaceuticals Inc (ELTP)

[no2koolaid]

Again, it is about understanding business, which means understanding data...

Yet, without any specific data in support, it was alleged the opioid drugs Elite sold to Nostrum would have garnered $100 M in revenues. That is unmitigated bullshit and a number pulled out of thin air. But, I did the math before showing that was incorrect. Since math is not sticky and seems to be misremembered, let’s do this a bit differently…

At peak, the prorated aggregate market share for the owner of all four drugs sold to Nostrum in November 2019 was between $30-$50 M. Since it takes 3-5 years to achieve peak revenues and, thus, achieve proration, even if commercialized they are still not at peak. More importantly, there is the question of what peak looks like.

The FDA's predicted levels of medical need for the United States was expected to decline on average 36.52 percent for calendar year 2021 and continue to decline. According to the DEA, these declines were expected to occur across a variety of schedule II opioids including fentanyl, hydrocodone, hydromorphone, codeine, and morphine. A little math would see that the alleged opioids would be reduced by the decline the DEA referenced. Then there is the fact that Elite’s partnerships at the time, including Glenmark, clearly did not want to sell opioids from Elite. Absent a partner to sell the drugs, there is no revenue. Relatedly, as to the fact that there has been litigation that seems unending and that companies continue to endure, cannot be easily dismissed by anyone.

And here is what is being said…

Four drugmakers are set to face trial on Monday in a lawsuit by several large counties in California that are seeking more than $50 billion over claims the companies helped fuel an opioid epidemic by deceptively marketing addictive painkillers.
The case against Johnson & Johnson, Teva Pharmaceutical Industries Ltd, Endo International PLC and AbbVie's Allergan unit is one of the thousands of lawsuits by states and local governments seeking to hold pharmaceutical companies responsible for the drug crisis.
More than 3,400 similar lawsuits are pending nationally over the opioid epidemic. The only other case to go to trial in the opioid litigation resulted in the state of Oklahoma in 2019 winning a $465 million judgment against J&J, which is appealing.

Other cases are slated to go to trial in the coming months, creating new pressure for the companies to reach settlements.

The nation's three largest drug distributors - McKesson Corp, AmerisourceBergen Corp and Cardinal Health Inc - and J&J have proposed paying a combined $26 billion to resolve the cases against them. The proposed deal has not been finalized. Here is a link…
https://www.yahoo.com/finance/news/j-j-others-face-california-124200184.html

Just in case it is not obvious, the amount mentioned exceeds the legitimate U.S. opioid pain med market projections. So, at what point can we say the complaint that Elite sold valuable revenue generators is nonsense? Indeed, at what point will the complaints recognize that it is unlikely Elite would have been able to pursue the ADHD market with its 8.5% CAGR and estimated sales of $13.9 billion in 2024? This is not a moot question. Elite did not have the financial capabilities of doing both. Amidst all the complaining about dilution, this should be obvious.

There are always choices that need to be made and, since Nostrum has yet to list those “valuable” opioids as being commercialized, exactly how might have Elite, without a clear partner, have sold them? I have asked for an answer to that question and it has been avoided - repeatedly! What magical thinking provides an answer to how a company can sell a product without commercialization capabilities. This is not an example of - If we build it they will come. These are generic drugs that are sold based on price. Perhaps, just perhaps, Nasrat understands this and did not believe Elite could compete on price. (I am being ironical.)

Then there is the little drug that Elite bought from Mikah for $1.2 M – Trimipramine. According to IQVIA in 2016, it had an available market of $2 M. But that can be misleading. What is Trimipramine?

Answer: The Food and Drug Administration (FDA) approved these tricyclic antidepressants to treat depression:
• Amitriptyline.
• Amoxapine.
• Desipramine (Norpramin)
• Doxepin.
• Imipramine (Tofranil)
• Nortriptyline (Pamelor)
• Protriptyline.
• Trimipramine.

This means the market is bigger than the $2 M mentioned five years ago. Still, if Elite were able to garner an equal prorated market share and continued to sell through this date, an estimate of the revenues over the ensuing years would be in the range of $700,000 - $800,000. Suggesting that, in 2-3 years more years, Elite would be at more than breakeven for what it paid. That is an Internal Rate of Return just about any company would be happy to have. Or is IRR not something understood? I imagine that is part of the problem, “investors” unaware of what business measures and how it can be used as a means to show value.

It remains that the share price is stagnant NOT because of business realities that show a company with profitability. I think emotion and momentum is all that matters on the OTC and the MMs know this.

The obvious follow-up question revolves around the belief that Elite must uplist to the Nasdaq and to do that means a reverse split. Now many shareholders would be fine with that. However, the facts related to uplisting are not that simple and if they were, Nasrat would have pulled the trigger some time ago because, while a reverse split reduces the outstanding share count, it does not change the authorized share count. So, the most recent increase in A/S that was approved would have been unnecessary to cover the Series-J and to overcome running out of A/S. Why, then, did Elite ask for the increase?

Which is why I have said that Elite (the company we know) will not uplist. By the way, that does not mean the little inclusion in the new CFO job description of uplisting is not true, it is just not what everyone thinks it means. Why is that? It remains that the only way Elite gets to the Nasdaq is through a merger or being acquired.

SINCE I HAVE TIME LEFT, LET ME ANSWER THIS QUESTION....055 cents per share. With all due respect, does any of what’s being said matter when the stock is so low and continues to drop.

MY ANSWER...MY POINTS ABOUT A LACK OF BUSINESS UNDERSTANDING ARE MADE! A MANIACAL FOCUS ON SHARE PRICE NOT ON BUSINESS. A LITTLE RESEARCH WOULD SHOW THAT PROFITABLE BUSINESSES WIN ON SHARE PRICE AND IT IS NOT ABOUT TIMING IT IS ABOUT BUSINESS DEVELOPMENT.

ASKING - ARE WE THERE YET IS AS TEDIOUS AS IF ASKING IT IN THE BACKSEAT OF A CAR ON A LONG ROAD TRIP. NO, ELITE IS NOT THERE YET AND A DAILY DRUM BEAT OF THE LITTLE VARIATIONS OF THE SHARE PRICE DO NOT CHANGE REALITY...BUSINESS REALITY.