Why ELTP is worth over $50 Billion Dollars and will never reach that valuation
Wolvshammy on reddit
With the most recent Earnings Call on Feb 14th, 2025, and the CEO ending the call saying that we are exploring buyout options, the longs have been in a frenzy discussing possible valuations. I have given many opinions on my conservative view of a buyout scenario for ELTP in the past. This time, I'm going to do it a little different. I'm going to list ALL of the actual factors in my own personal valuation, and, even though one of the factors you will read below should be a strong factor in adding $50 Billion in value for ELTP, I'm also going to explain why it won't be included at a 1:1 value in the purchase price I expect us to get offered.
1. The Hard Numbers:
A good chunk of ELTP's value will come from it's current sales and, reasonable estimates on sales of drugs that are already approved.
Since building its own sales team, it has skyrocketed to top dog in the Generic Adderall space. To do that in such a short time speaks volumes about Kirkov's ability to drive a sales team. Although my initial estimates were more conservative, I am now upping my expectations based on the CEO giving us some hard numbers on market penetration combined with the fact that our newest Generic Approval (Vyvanse) is in a shortage situation.
Lastly, the brand new, 90,000 sq ft manufacturing and packaging plant was just approved on Feb 8th or 9th, which should quadruple production and packaging outputs.
Current revs this year from Adderall: $70+ million (based on CEO stating we will hit at least that - guaranteed.)
Expected revs this upcoming year from Vyvanse: $473 million (11% of $4.3 Billion IQVIA market for this drug)
Assuming an Operating Profit Margin of 45% (Gross Profit Margin is currently 50%,but a new acquiring company would have their own R and D department). Selling and General Admin Expenses does still seem fair to have in here, although there should be synergistic cost savings.
Profit: $244.35 million
Value at a 5% Cap rate: $4.887 Billion or about $4.57 Per Share
Another common method is to take an industry multiple of Revenue:
Value at 7x $543 million revenue = $4.88 billion or about $4.57 Per Share
2. Future Approvals
ELTP has multiple submissions pending approval. When purchasing a company, you would take these assets and apply some aleatory value to each one - usually based on both the length of time since submission, combined with a review of the history of the company's approval rate on such submissions.
Let's discuss each, and why the recent ruling in the Purdue vs Accord case is a potential boon for ELTP.
Concerta: 1.2 Billion IQVIA Market Value. The issue with this one is that companies have had trouble producing a high quality bioequivalent in the generic market. I would assess this at 25% approval percentage in an acquisition setting. Multiplied using formulas above: $30 million
Oxycontin/Oxycodone: Purdue filed litigation against Elite Pharmaceuticals regarding the Generic equivalent ANDA they had filed. In a savvy move, the CEO, with his experience as an attorney, came to an agreement with Purdue Pharma for both sides to stay their dispute until Purdue's concurrent litigation against Accord for similar patent claims were settled. Since both Accord and Elite are pursuing generic versions of Oxy, this move allows ELTP to avoid costly litigation while benefitting from Accord's efforts to move the ball forward. Recent developments in that case are not looking good for Purdue. I would assign this as a 50% approval percentage in an acquisition setting. Values of this market vary widely, but, I am using what should be a conservative estimate of an $800 million market for this approval. From formulas above: $88 million
Value of various BE and ANDAs combined with R&D value: $32 million
Value to share price based on 7x Revs = $1.05 Billion or another $.98 Per Share
3. Political Landscape and Tariffs
I believe that part of the reason for Nasrat Hakim moved the M&A timeline from August 2026 to now is because he saw a Perfect Storm forming. This is investment analysis - let's leave politics to the side. Whatever your personal likes or dislikes, this is an unprecedented time, at least in our lifetimes, in our political landscape.The recent promise to put a 25% tariff on imported drugs provides a dual opportunity for value for ELTP. Firstly, it makes ELTP able to compete more effectively in our domestic market. Secondly, and most important, is that is make ELTP a much more attractive target for an international company to laser in on for acquisition. Not only does it decrease the boiling temperature of the market, it increases the value of the company by 25% - but not just for the production of our current pipeline, not just our future pipeline, but ALL of the drugs that the acquiring company already has the rights to produce. For example, if Company A wants to target us, and they are producing $2 billion in drugs that they sell to the US per year, it would save them $500 million per year just to acquire us.
Conservative value add to share price = $500 million or another47 cents per share
4. Technology
SequestOx is an investigational drug developed by Elite Pharmaceuticals, Inc. (ELTP), combining oxycodone hydrochloride (an opioid painkiller) with naltrexone (an opioid antagonist) in an abuse-deterrent formulation intended for the management of moderate to severe pain. The idea behind this combination is that naltrexone would block the euphoric effects of oxycodone if the drug is tampered with (e.g., crushed for snorting or injecting), thus reducing its potential for abuse.
In 2016, ELTP receive a CRL Letter from the FDA (go back to the drawing board). This is mostly old news, but in 2017 Elite did complete an additional bio equivalent study to correct the items listed in the FDA CRL. This has been shelved for the last 8 years due to the costs to complete the work, but the technology is valuable for a company with the funds available to put a bow on this.
Conservative value add to share price = $200 million or 18.7 cents per share
5. $50 Billion Elephant in the Room
Ok, if you hung in with me this far, here is the $50 Billion value. Cumulative Opioid Settlements: Across all opioid-related lawsuits (not just Purdue), companies like drugmakers, wholesalers, and pharmacies have agreed to over $50 billion in settlements since 2017. ELTP's CEO was skewered for changing directions with the company in light of all the potential for litigation. He stated that we were too small to survive a single lawsuit at that time. What was once something he was attacked for, is now something he should be lauded for.
So where is the value proposition? Any company selling these drugs needs protection. What company wants to insure a pharma company with that level of exposure? They won't. The only option a company has with that type of a risk is to self-insure. What better way to self-insure than to complete the Sequestox technology discussed above? If a law firm goes to pursue a claim against any company that buys ELTP and has that technology, what will the jury be forced to consider in court? That they specifically produced a drug that made it impossible, or at the very least, exceedingly difficult to abuse. That's a $50 Billion value in liability protection. Now, nobody insures for 100% of the default amount. So the question is - what is that insurance worth? About 1/100th value based on other insurances.
Value add to share price = $500 million or another 47 cents per share
Total Value of ELTP $7.13 Billion or approximately $6.68 per share
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