From a Post RE: Elite (eltp)

The following is a post from one of the message boards with some good Elite DD.  Here ya go...

Elite Pharmaceuticals is a manufacturing company. Previous management ran it as a mostly R&D shop pouring 10s of millions of dollars into their technology. This includes R&D, settlement with the original inventor, and ultimately some dilution to keep the company out of bankruptcy. The company on the brink of bankruptcy in 2009 changed management and began on a more stable path.

The plan?

Focus on manufacturing generics while continuing to move forward with their unique and powerful patent pending pipeline. This would allow for profitability, partnerships with top notch partners and a long term future. There were offers from companies to buy out Elite but ultimately the company found solid enough ground to maintain their ownership and move forward.

Management and ownership

Elite has a unique relationship with Epic Pharmaceuticals. Go to their website and see who they are. Epic has over 200 employees. Epic and Elite share board members and the Chief Scientist. These folks own very large quantities of Elite stock. Jerry Treppel, Elite CEO takes a minimal salary and receives the rest in stock. I also am pretty sure he was a large investor in Elite prior to the stock price demise in 2009 and has taken this role to help ensure that investment pays off. Recently, there have been numerous stock purchases by Elite Insiders. Go read the form 4s!!

Also in the most recent conference call, it was established that Elite is not looking for a reverse split and fully intends to get back on the big boards without this being needed. Calls to IR reveal, they are actually targeting the Nasdaq which means dollars per share.

Epic has purchased ANDAs for Elite. Epic has warrants for huge blocks of Elite stock that can be exercised to ultimately own a majority of Elite. Over 100 million shares I believe at .065. In the recent agreement with Epic, all in the SEC filings, Epic continues to use Elites facility which is either in the process or has already completed a large expansion. Elite will gain 15% of the profits of 8 drugs made by Epic at the Elite facility. This is just Elite collecting a large check and riding Epic who stands to benefit the most from the increase in PPS. Elite’s facility is on the front page of Epics website. Epic has a bunch of FDA approved ANDAs on the FDAs March approval list. Elite has the drugs below noted as well.

ANDAs for Phentermine, Hydromorphone as well as a yet to be disclosed two drugs have been assigned over to Elite from Epic. A gastro intestinal drug is in the works. These drugs along with Naltrexone have domestic sales in excess of 120 million dollars. That is just domestic. Elite’s distribution here is TAGI which can distribute worldwide.

Phentermine was shipped a few weeks ago. Note the stock price rise from this and the Epic deal as well as well as the incredible volume that followed. Also Phentermine received tons of press recently as an effective and possibly preferred diet drug that limits appetite. CNN, MSNBC ran info on this drug on the front pages of their websites.

Hydromorphone and Naltrexone are knocking on the door with a launch pending status. Elite’s facility is an FDA, DEA “state of the art” approved shop that has been making drugs for years. That is no easy feat. Shareholders are reaping the benefits of the millions poured into the facility during the companies R&D stage.

Other drugs coming out:

Go to the Elite site and review their pipeline. Epic is going to develop and provide additional ANDAs to Elite. Elite has done some classified R&D work with Mikah Pharma in exchange for an ANDA Naltrexone. Will work for ANDAs!!! What I still wonder about is, what were they working on? Remember this is a wonderful R&D company that is now fully using their manufacturing facility to be profitable which based on their last statements, have already achieved.

Elite’s technology:

Elite’s specialty is extended release and abuse resistant drugs. They have received and have multiple patents pending regarding this technology. Remember the 10s of millions of dollars they spent that almost put them out of business? That is what it was spent on. Also PH1 and Ph2 trials completed. PH3 is pending to begin with the approval of the patent. Also a European partnership is in the works per the last conference call. WIPO has assigned patents internationally. Go to the WIPO site and read what that means.

Oxycontin – If you watch the news you know how popular this drug is. It is billions of dollars and highly abused. Elite is using their technology to market this drug first although the technology works for other abused drugs and regular drugs as well. Both a 24 hour version and abuse resistant versions.

Elite’s Pharmacological approach – Elite uses Naltrexone to offset the ability to crush the Oxycontin and get high. Remember the ANDA they got from Mikah that is pending launch? That’s right; it’s the same Naltrexone drug. It is used to treat alcoholics and addicts with a high degree of success as it prevents the brain from receiving the ability to absorb the higher concentration of the Oxy.

The pending patent is based on Elites ability to do this effectively and in their own proprietary manner. It can be used with other Opiates. Hydromorphone (Dilaudid) an opiate has similar abuse problems. Yep, again, the same drug noted above pending launch by Elite. Could an abuse resistant Hydromorphone drug be in the works? It would make sense wouldn’t it? Not hard to connect these dots.

Elite’s 24 hour Oxy – Elite has been able to successfully maintain blood plasma levels sufficient for a 24 hour version of this drug. Google 24 hour Oxycontin and see if anything comes up. Elites got this one and the patent is pending. Imagine being able to take one pill per day to maintain relief from pain. Take it before you go to bed every night.

This tech also works on other drugs. These are billion dollar drugs. Imagine one that is also abuse resistant. It could easily become the pain drug of choice. Doctors can feel safer prescribing it as well and patients can maintain their relief from pain without risk of abuse!

The patents for both of these can be found on the Patent website. They are in their 3rd or 4th round of review which is common for pharmaceuticals. Go read them, but I warn you, they are dry and in legal language that takes several readings to begin to understand the arguments. Elite IR has noted to me that the attorneys representing Elite are some of the best in the business.

Recently Elite has been put in articles alongside Pfizer and other major players as the key companies in this field. It is a multibillion dollar field. Little Elite has 100 million float shares and a max count if everything was exercised and then sold by Epic of about 300 million.

Epic has no reason to do this. They are the ones that are going to benefit the most, including some of their executives. They would lose money for no reason. Also consider this; every dollar that Epic puts into Elite, is likely an expense and taken off their tax liability. As Elites PPS goes up, so does Epics wealth. So, effectively they increase their value with tax free dollars. I am pretty sure about this but I am not a tax accountant to be fully transparent here.

Recently generic and abuse resistant drugs have been in the news for a few reasons. There is a major problem with the abuse of prescription drugs especially opiates like Oxycontin. Also the cost of health care is driving the importance of generic drugs. Elites timing couldn’t be better.

So, it can’t all be good right? Elite stands to lose their main revenue source (Lodrane) with this drug, time released and 24 hour versions. Marketed by ECR through HITK, this was a 3-4 million dollar revenue stream. The FDA in March set out a timeline to pull these drugs off the shelves in 6 months. ECR has been working with the FDA since 2010 to keep this drug on the shelves. The main ingredients have been in service for over 45 years and they were not pulled for safety reasons per the ECR CEO e-mail posted on the Yahoo website.

ECR is also working through Congress to keep it on the shelves while they get the FDA all the information required for an NDA. This is going to cost ECR ~5 million dollars and they are spending it. Why? Because it is worth ~15 million to HITK. There has been discussion about keeping the instant version on the shelves as well as a relabeling of the product. This could end up being a “lemons into lemonade” situation. If ECR gets the NDA, they could take advantage of their new increased market share and reduction in the number of competitors.

Note what happened to the stock price when Lodrane was pulled. The stock price dropped back to .04 for a few days or so. I doubled down. The stock then proceeded to blow up with increasing volume as the Epic news rolled in alongside Phentermine shipment news. Lodrane revenue is replaced and Epic ensures Elite will march forward regardless.

Other negatives I have read

1) Dilution – As explained above, Epic would never dilute at the current PPS. First of all they could never dump that many shares. The form 4 would cause a complete sell off as well. That would be committing suicide. Talk about killing the golden goose!!! Any sell off would be reported in the SEC docs.

2) Trellus (Insider selling) Trellus helped finance Elite as explained above. They own ~ 20 million shares. They sell a very small portion of their shares about once a month. My understanding is it is to pay bills. They are way underwater on Elite. Note they haven’t sold during the recent run up. They are holding for the long term. Trellus not really selling despite the run from .04 to .26 tells you they think that better times lay ahead.

3) Lodrane – Addressed above.

4) There is no money in pain medication. One of my favorites

5) There is no money in generics. Just silly and not worth addressing.

6) Elites facility is not FDA approved. They have been used to manufacture drugs for years and are also DEA approved.

7) Bankruptcy – This fear was in 2009 and the deal with Epic ensured this will not be the case.

8) It’s a scam/pump and dump – This Company only puts out real press releases and delivers info via their SEC documents. Their IR person is easily available for discussion. They laid out an outstanding business plan and have been executing it on queue.


9) They are in default – My understanding is you can call of the creditor/manager of the debt and find out that this is not the case. Bridget Schessler is the name I believe. Again, see Epic agreement as well.

10) It takes years to get a drug through the FDA – That’s true, except Elite has been working on this for years and again, 10s of millions of dollars spent. They are closer than ever!

11) Not a profitable company. Elite says they just had their first profitable quarter. Also keep in mind Lodrane is still on the shelves. A good quarter should be forthcoming. I didn’t even get into all the milestone payments they are due for meeting their obligations to HITK and Epic.

Conclusion
The story of Elite is one to root for. A company with outstanding products, R&D, technology almost goes out of business. Then through new management, hanging on by the skin of their teeth they put together a sensible business plan to profitability all the while focusing on their patents. They reach profitability, have Epic backing them and are closer than ever to delivering what they set out to do ~10 years ago.

Their products are in the news, mentioned alongside companies like Pfizer. They are also undergoing a substantial expansion of their facilities. What I have written above is qualitative and actually not everything to be excited about but it helps to understand what is going on with this company and why the stock is moving and likely to move again soon.

However, go do your own research. Go read the documents. Focus on what the company has delivered to the SEC and to their investors. Listen to their last conference call and presentation. Call Dianne with IR. It is not a case of “if” with this stock, it is a matter of when and how fast and how high. I own ~400k shares with a handful to trade so I can increase my total share count. This is my analysis. This is what I believe to be real.