Seeking Alpha Transcript from today's CC in its entirety:
Elite Pharmaceuticals, Inc. (OTCQB:ELTP) Q3 2022 Results Conference Call February 15, 2022 11:30 AM ET
Company Participants
Nasrat Hakim - President and CEO
Marc Bregman - CFO
Conference Call Participants
Operator
Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a listen-only mode.
Before management begins speaking, the Company has the following statement. Elite would like to remind their listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties and are subject to changes at any time, including, but not limited to, statements about Elite’s expectations regarding future operating results.
Forward-looking statements are made pursuant to the safe harbor provisions of the Federal Securities Laws and represent management’s current expectations. Actual results may differ materially. Elite disclaims any obligation to update or revise its forward-looking statements, except as required by law.
More complete information regarding forward-looking statements, risks, and uncertainties can be found in the reports Elite files with the SEC, which are available on Elite’s website at elitepharma.com under the Investor Relations section. Elite encourages you to review these documents carefully.
With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.
Nasrat Hakim
Thank you, Matthew. And good morning, ladies and gentlemen. Thank you for joining us today. My name is Nasrat Hakim. I am Elite’s Chairman and CEO. This is our earnings call. And our CFO, Marc Bregman, will give us a summary of the Company’s financials after which I’ll come back with a corporate update and answer some of the questions that we submitted to Dianne. Marc, you have the floor.
Marc Bregman
Thank you, Nasrat, and thanks to everyone for calling in today.
Yesterday, we filed our 10-Q for the quarter ended December 31, 2021. This is our third quarter of fiscal ‘22, as we’re on a March fiscal year. A copy of the 10-Q is available in our Investors section of our website at elitepharma.com.
Today, I would like to give an overview of the financials and some commentary as well. Starting with the income statement, we had sales of $9 million this fiscal quarter, up $2.9 million or 48% compared to last year. This is primarily due to strong sales of the generic version of Adderall. We posted an operating profit of $1.8 million, $800,000 over last year, due to stronger revenue and a slightly better margin. Year-to-date sales of $24.6 million were up $3.6 million from last year, again, due to strong sales of generic Adderall.
Costs were a bit higher due to increased product development and more headcount. However, due to strong sales, we came in with an operating profit of $4.2 million, $1 million higher than last year.
Turning over to our balance sheet. Working capital was $11.6 million, up $5.2 million from year-end. This is mainly attributed to positive cash flow combined with low debt.
This concludes our financial review. I will now turn it over back to Nasrat for an overview on the Company.
Nasrat Hakim
Thank you, Marc.
Today’s update will include a few comments about Elite financials, and also cover safety, research and development, commercial products before we go to Q&A.
Regarding safety, we are operating in a once in a lifetime pandemic. COVID-19 is a pandemic that is affecting all of us. It is affecting Elite, our suppliers, service providers, and sales and marketing partners. It is affecting our business as well as everyone else’s business in the United States and globally.
We are following local and federal guidelines, and the CDC’s recommendations. Most of our employees are vaccinated. We are still asking everyone to socially distance as much as possible. We are holding meetings via Microsoft Team and conference calls. For employees that must be in the same manufacturing suite, we have increased the airflow and ventilation. In addition to HEPA filtration in the rooms, we have installed UV lamps to ensure that if a virus and bacteria reached and air duct or a heating vent, then they will be killed before they enter someone else’s office.
My concern regarding the effect of the pandemic on our lives and business continues. All it takes is one missing component to bring manufacturing and shipping to a halt for us or any industry, whether it is computer, cell phone manufacturing, tablets, or capsules. To date, our commercial products have not been materially affected by the supply chain problems. But it has not been easy. I cannot say the same for our R&D pipeline, i.e. clinical trials. And I will say something about that later.
Regarding revenues and profits, market all the right numbers, revenues, profits and cash flow. I am very pleased with the direction the sales are going, and I hope our sales and marketing partners continue on this path. Less than two years ago, we did not have enough money for working capital. Today, we are self sufficient and profitable. We are on target to surpass last year’s performance. As a reminder, we went from $7.5 million in revenues to $18 million to $25 million. This year, we are poised to surpass that.
As I stated before, it seems as if our performance is inversely proportional to the stock price. The better we do the lower the stock gets. In 2018, when the revenues were only $7.5 million and we were operating at the loss, the stock was about $0.13. Today, we are closer to $30 million in revenues and profits, and our stock price is $0.03 to $0.04. It does not make any sense.
Regarding R&D, our profits will be invested in R&D. In order to diversify our products and support the Company’s growth, Elite continues to spend significant amount on research and development. It is our number one priority and number one focus. Our goal is to create a new set of products that are diverse enough that they stabilize the Company, such that in case we get the hit on one of the products such as Amphetamine IR or ER, the Company will not be materially affected. The more pillars we can add to stabilize the Company, the better it is for all of us.
Elite is pragmatic about how we add new products. We look at all alternatives, buying products or product rights, in licensing, co-developing products, contract manufacturing or developing products on our own. Elite has co-development products and co-developed products such as the ones we have with SunGen and Mikah, where the partners helped to fund the development, or they brought formulation expertise to diversify our risk and supplement our capital investment.
We currently have products filed under development and co-developed products. We continue to benefit from these projects. The results of the co-developed product for example is Amphetamine IR and ER. We got that with a partnership with SunGen.
In addition, Elite develops its own products. For that activity, Elite will own a 100% of the product, but Elite will also bear a 100% of the risk and the cost.
Currently, Elite is working on number of generic ANDAs. The products include, those that were mentioned before, such as the central nervous system product and co-development antibiotic tablet. The product line includes some products developed by partners and others by ourselves. Not all of these products will work out. Some may not pass stability or clinical trials and need to be reformulated. However, my belief is that many will, and they will become the foundation of the Company’s future.
Bottom line, many opportunities are currently being pursued and you will hear about them at the appropriate time. Once there is a material event, then we can discuss these products in more detail. Right now, all I can say is this. We have about a half a dozen ANDAs that we are working on actively. And we have about a dozen ANDAs on all various stages from early stage to clinical trials.
For 2022, we have two products under review by FDA, both are licensed products co-developed with partners. We expect approval for one during the first half of 2022.
Regarding our commercial product line, Loxapine was launched in June and it is marketed by Prasco under the Burel Pharmaceutical label. Loxapine continues to be on the FDA’s product shortlist, and we are expecting further growth from this product.
Isradipine and Trimipramine are being marketed by our partner Epic. They are interesting products because they are a very -- they have very limited competition. With Epic, we are seeing a little more profit and revenues for this product than we have before.
Amphetamine ER, and Amphetamine IR, these are products that are very competitive with lots of sales and marketing groups in the market. Frankly, they’re really tough to sell. But, our partner Lannett has done a good job at penetrating the market. Lannett received FDA approval for their own Amphetamine IR and ER. We’ll discuss later how that will impact both companies.
We have discussed NASDAQ on many calls before, and there is a question today about that. So, I will say a couple of thoughts about the uplisting to NASDAQ. A key goal for Elite is uplisting to NASDAQ, when the time is right. There are specific requirements that Elite must meet to qualify for the uplisting. We are working diligently to achieve them. We will continue to monitor our growth and income generation and will update you on the uplisting when the time is right.
To wrap up, Elite is executing on its growth plans, working on new product approvals and capitalizing on its commercial product line. Our sales and distribution partners are performing well. And we look forward to another profitable year.
Let’s go to Q&A. As always, you sent your questions to Dianne and she grouped them into the relevant subjects. So, we’ll first start with the pipeline.
Question-and-Answer Session
A - Nasrat Hakim
Not quite an accurate statement, so let me elaborate. We have updated you many times before about SequestOx. We filed it with the FDA and met all the requirements at the time. The FDA came back and asked for another study. So, the fed part will pass. We reformulated that and we ran study, a pilot, and we passed. We went back to the FDA and they had two more requirements that were too costly for us to proceed with. So, it is true. It is filed with FDA, but there are clinical work that costs millions of dollars that needs to be done to get to that point. So, we’ve asked for extension and still pending with FDA.
At this time, I have no intention of spending that kind of money for multiple reasons, not only the lawsuits. Regarding the ADT for OxyContin, we filed that product and then after we finished the clinical trials, passed the clinical trials performed the in vitro, which took about a year of seeing that it cannot be abused by household products, and we filed it with FDA as did everybody in the industry.
Well, Purdue was successful in convincing the FDA that everybody needs to go back and do an anti-abuse study, which is in insufflations, i.e. snort OxyContin and snort this product and show that they’re effective. And that’s where everybody stopped. If you have noticed, nobody has gotten an approval for a generic OxyContin. So, that is the study that is needed before we re-file this product. And I will say a couple of things about that in a couple of minutes with regard to another question.
Okay. Regarding Adderall, the question is, I read the 10-K, regarding an order states that two customers account for 90% of sales. I assume Lannett is a large part of that. Lannett has lost over $300 million over the last few years. Is this a potential problem for Elite?
The answer is, it has not been yet. They have always paid their bills on time. They have been a very good partner. But you are correct. When a company is losing money and hemorrhaging cash like they are, and the stock drops from nearly $30 to about $1 now, that is a problem for both companies.
Approximately what percentage of sales comes from the Amphetamine franchise?
We do not break down our revenues. We’ve answered this before.
How does the recent Lannett approval for the XR product affect our deal to their own product? Two more questions about Lannett and they pretty much say the same thing. So, I’ll answer that right now.
Lannett did get an approval for Amphetamine IR and ER. We have a two-year agreement with them right now. So, they will either continue with the two years and either choose to extend it later on or terminate it with an appropriate notice and make their own product. Because of the uncertainty, I’m not taking any chances. And I am looking for a partner, the thought’s on the table, starting our own sales and marketing group, finding a partner similar to Lannett to do the work for us. All options are on table, but we are taking this very seriously and working diligently in order to protect the Company.
Dexcel partnership. Can you provide the reason for just creating an SEC filing for Dexcel partnership announcement and not blasting the existing news channel for stocks?
That would sound lovely if it was -- Elite was only involved. Anytime you have a partner, you have to be respectful of the partner’s requests and needs and wants. Okay? They are a privately-held company who are trying to do a deal in a country where competition is very tough. And we are publicly-traded company. So, to compromise instead of blasting this all over the news and upsetting our partner, and actually it’ll not be very intelligent, because it hurts them from a business competition standpoint. We decided to do what is required by law. And what’s required by law is that we file an 8-K. So, I’ve heard this many times before, so let me elaborate a little more.
Let us assume, we are selling a product in Mexico and you’re the only one, and you hear about somebody else coming in. Well, you go ahead and lock-in all the pharmacies by telling them, I will not send you this product unless you have the right for a first refusal. So, you’re going to give me a chance every time they come to you to lower my price or adjust it. Okay. So, if you were the person who is getting into the market, the second person, you wouldn’t want anybody to know, so they will not take all of these precautions and AC out of the market. So, Dexcel is being very intelligent. It’s not worth it for us to publicize this by sending it all over the newswire and take away their competitive advantage.
Might the Dexcel agreement extend beyond generic Adderall IR?
We are a small company with limited number of products, but if they come to us and ask for any other product, the answer is yes.
With their global reach, are there expectation, Dexcel will be able to commercialize Elite’s product beyond Israel?
First, let’s start with Israel. Our commitment to them is in Israel. They are processing all of our paperwork, so they can sell the product in Israel. Once they are established, they are an international group and they may be able to take it to Europe. We have not discussed that part yet. We are only focused on part one. Once that’s completed and concluded, and we get all the legal paperwork through the Israeli Ministry of Health, and they get the product to the market, then we’ll talk about Europe. But, it is doable.
Why did the Dexcel partnership only include Adderall IR and not XR?
Well, because they had IR in their formulary in Israel and they don’t have the XR. I know that a company is working on the XR in Israel, and we are rooting for them to get approval, because this way then we’ll go in next.
Current filing, SunGen partnership, AND filings. You mentioned that Elite has a product filed under review with the agency and expected approval early in 2022, and that this product was co-developed with a partner. Is this product different from antibiotic that was filed with SunGen?
Yes.
What happened to SunGen and the response letter they needed to send to the FDA?
They actually sent it to the FDA, but it had complications. The problem with the SunGen product is of multiple faults. But the sticking point right now is that the API manufacturer is having some issues. Antibiotics are very, very tricky substances. They contain a lot of impurities. So, the FDA made some comment about the API manufacturer, SunGen responded. I read the response myself. I wasn’t extremely thrilled with it. So, the FDA may come back and ask more questions. I’m not sure that this is the end of that story. We’ll wait for the FDA right now to come back. But I’m not extremely ecstatic about the response, to be honest.
Have any more products been filed that have not been PRd, as you had stated that four will -- were targeted to be filed this year?
No, again, we had a partner product that we filed did not PR. The partnership was going on at the time. And we will let you know, once it gets approved.
Can you please provide an update to the status of the ANDA to be filed in 2022?
Okay. Let me read the next two questions, because all of them are about the same, but the second one is a little more comprehensive.
Nasrat has mentioned that Elite expected to develop and file a number of ANDAs over the next two calendar years, 2022 and 2023. The confusion is, and is the exact number, some believe it is four for each of the two years with others seeming to believe it is a total of four for the two years. The one four for each year, and one is four for both years. Please confirm, which it is.
All right. So, what I said is this. Read the transcript. I actually have it next to me. We are filing four ANDAs in 2022. Financing permitting, we will file four more in 2023. And the reason I was making sure I give it a qualifier is because of what’s happening with Lannett, the potential, and if we don’t have money for clinical trials, we’ll not be filing this. As I stated earlier, we are working on about a dozen ANDAs.
We are targeting filing for this year. We’re encountering delays. So, I’ll pause here for a second and explain the four we’re working on. The first product we’re going to file is an ANDA, it’s a generic product. However, because it’s a unique generic, you have to file an IND and do the studies in patients who actually have the disease. We were going to do this last year. Complications arose. It got delayed. Again, even now we’re struggling with it. We finally got the company who was doing the clinical trials to commit that they’ll try and run it within the next couple of months.
Now, because this is a product that you run in patients that actually have the disease, and because of COVID and the problems that are happening with patients not returning and discontinuation, so on, this study is going to take about 8 to 9 months. So, instead of filing, which we’re counting on Q2 of this year, since we started last year, we’re not going to be able to file, if we’re lucky, till Q4 of this year, 2022. If we’re lucky, and if they don’t come back with any changes.
Another product that we have been ready for almost a year and moving forward with, we needed an excipient. Okay? That’s what I was talking about earlier. You may have every single component, all 70, 80 of them to make a tablet or a capsule. But if a minor excipient is not there, you cannot move forward. So finally, we got that. Now, we are making the clinical lots, and now we got re-coordinate with the company run the clinical trials. These two were tremendously delayed. We wanted to run them last year, really. A third one that since I’ve already touched on Oxy ER, we decided to work on running one more clinical trial for ADT product.
And the first time we talked to the company, they are ready to run it sometime in Q2 of this year, then it moved to June, and now they are telling us they cannot run this study till September, October. And this is a company we are talking about in the U.S. This is not overseas. This is in the U.S. to run a study like that. The delay is till September, October. Well, when you run a study like that, they run it in September, October, they need a couple of months to finish it. Then, they need about 6 to 8 weeks to finish the reports and do a statistical analysis and compare and contrast and issue us a report. Then, we need a month to file. So, the filing is not going to take place till Q1 of next year, and all because of delays that are resulting really of the supply chain and COVID.
Again, we have not been materially affected on the commercial products. We have one that I’m watching closely and slightly worried about, but it has been really affecting us in clinical ,even clinicals that were running in the U.S. And we’re not talking about India. India is killing us. We are delayed by year almost in India, but even in the U.S., which is much more expensive, we are still counting some problems.
As it is mid-February, the gentleman continues. The development plan seems aggressive and you can you confirm that -- we’ll not say names RA has sufficient resources and capabilities to deliver on the aspirational goals?
Yes, I can. We have in our department four solid employees that work on regulatory affairs, medical affairs and pharmaco vigilance. And they can definitely handle the task. My problem has never been internally us dedicating resources, because all I have to do is hire a consultant, okay, to help us out. You can always hire a helping hand. The problem is collecting the data, conducting the clinical trials. Well, first, it used to be raising the money to do the clinical trials. Now, we have the money, but now we have the pandemic and we have other issues, right? So, we are still targeting four. They may be cramped toward the end of the year, at least three of them, one will probably be approved in first half of this year.
By the way, the four we are targeting do not have anything to do with the antibiotic tablet, that is left over from last year. So, we are not going to give ourselves credit for that. We are targeting really four products other than the antibiotic tablet, which I don’t know if it’ll materialize or not.
The next question is about Pfizer. In the last teleconference, Pfizer was mentioned five times. Is there any news relating to a potential deal with Pfizer?
Who actually sit there and counted that? And did you confirm that, Dianne? It’s five? I mentioned Pfizer in the context of showing the stockholders that we are serious about our anti-abuse profile. And we were really working with a third-party that was communicating on our behalf and also our business development, trying to initiate some communication. We don’t have a deal. If there was a deal, I would be calling you guys. We don’t have anything beyond thoughts in our heads that we are trying to comply with to figure out the best course for Elite.
Pfizer is blocking us because they get approval first for the extended release oxycodone capsule with anti-abuse that is very similar to ours. They got that. It’s been years now and their exclusivity run out. The problem is that, they never made anything. So, there is no product in the market for me to grab and run it against ours and go ahead and go to the market as a generic. There’s absolutely nothing. So, conversations always will work out that how do I deal with that? How do I get that data help me overcome that? How would Pfizer, are they willing to help for certain financial compensation to make something for us, so we can run it against generic? That’s why it was mentioned several times, aside from the fact I like the company, and I made quite a bit on their stock.
They’re doing a wonderful job for us in COVID as well, and really helping -- in addition to several other companies helping control this pandemic.
So, where are we? Production. Did Elite suffer from API provisioning in the last quarter?
We have announced many times we’ve not had any problems with the APIs to-date. Okay? And I’m not saying that could not happen tomorrow because somebody could run out of an excipient that goes into making the API, so they’ll call us with delays. But to-date, every single quarter we update you on that, we are doing very well commercially, thankfully, knock on wood, and hopefully things will stay that way. But, we are really suffering on the R&D front, which is really okayish because the income’s really coming from the commercial line right now.
The final question, this is like the fifth time or so that Dianne gives me this question. Somebody is really dying to know about the Florida office. What is the function of the Florida office? Functions as an office. For what purpose is Elite leasing office space in Florida? To have office for the employees who work in Florida? What type work is being done in the Pompano Beach property? Dianne? The work that’s being done is Elite’s business. As we announced before, this is a business office. Originally, we started the office because our CFO was going to live in Florida and so did regulatory affairs. Right now, Carter Ward’s no longer with us. So he’s not there. And Marc is happy being here in cold New Jersey. He’s sitting freezing next to me. But, we have the majority of the group and regulatory affairs, medical affairs on pharma divisions reside in that office. I hope that resolved the mystery of the Florida office.
And that brings the last question to a conclusion. Thank you all for joining us today. And we’ll talk to you soon. Thank you, operator. Thank you, Matthews.
Operator
Thank you, ladies and gentlemen. This concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
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