Good to see you post and a spot on post at that. Let's do a little math to drive the point home that Nasrat would benefit greatly from an increase in the p/s. And, since we are doing math, let's see about approximating the cost for Elite of acquiring the SunGen slice of the portfolio now in the possession of Mikah.
I have read many missives that malign Nasrat, acting as if he is trying to steal from Elite and give to himself at Mikah to the expense of Elite's shareholders. How narrow a perspective, one that is absolutely missing some key facts. So, let's talk about what the math factually tells us...
I will start with Nasrat mentioning that Elite knows the value of the Mikah SunGen holding and it is a matter of waiting for Elite to have sufficient funds. Now, as an aside, I would point out Elite could raise the money by selling shares to LPC (diluting) because the new agreement means the p/s only needs to be above 3 cents to be able to execute...and, yet, Nasrat does not want to do that. How do I know, because they have not done it. Okay, let's move along before I lose my interest in discussing the issue...
The salient question is...What might it cost Elite to acquire from Mikah the SunGen portfolio? Well, based on my review of the licensing fees vs. manufacturing fees over the past three fiscal years, I can guess that IR & XR are bringing in about $3.5 M per year in licensing fees. The bulk of the revenues are from manufacturing fees. If we do a little prospecting with our math, Mikah should be generating similar numbers. And, while some may argue that Elite would pay a high price for the SunGen portfolio, that fails the test of true self-interest. If, as has been argued, that Nasrat is all about making himself rich and screwing the shareholders, I would argue that if he wants to make himself very rich, Mikah should sell the portfolio to Elite because, even if the company paid Mikah $10 M, if the impact of the revenue enhancement and increased profitability moved the p/s a mere 5 pennies from where it is now, Nasrat's holdings of Elite would increase $13.5 M or $3 M more that the cost to Elite.
The bottom line should be obvious...
Nasrat's best financial future lies with the success of Elite. He has made the company profitable and, as was clear from the description of their strategic intent to file and get approved 4 new drugs in each of the next two years, the valuation of the company will increase substantially. Eventually, as is true of all companies that are profitable and have a trailing p/s, the p/s will catch up. But, even if it does not, the value of Elite in the event of an M&A would increase substantially and that is the basis of the price that would be paid for Elite, not the market cap.
