Elite Pharmaceuticals CEO Nasrat (Tarzan) Hakim on Q2 2021

Elite Pharmaceuticals, Inc. (OTCQB:ELTP) Q2 2021 Earnings Conference Call November 17, 2020 11:30 PM ET Company Participants Nasrat Hakim - President & CEO Carter Ward - CFO Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on listen-only mode. Before management begins speaking, the company has the following statements. 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 expectation. 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, Kate. Good morning, ladies and gentlemen, and thank you for joining us today. My name is Nasrat Hakim, I am Elite's President and CEO. This is our earnings call. And our CFO Mr. Carter Ward, will give us a summary of our company's financials, after which I'll come back with the corporate update and answer some of the questions that you've submitted to Dianne. Mr. Ward, you have the floor. Carter Ward Thank you, Nasrat. And thanks everyone calling in today. Yesterday, we filed our 10-Q for the quarter and six months ended September 30, 2020. We're on a March fiscal year, so the September quarter is the second quarter of our 2021 fiscal year, the halfway point. The Q is available on the Investor section of our website, which is elitepharma.com, as well as sec.gov and the other websites that provide links to our filings. If you haven't gotten through the Q yet, please get a copy from elitepharma.com or any of the other sites. Today, I'd like to review some of the key parts of the financials, providing analysis, context and insight into the numbers. As always, we've received questions and comments from shareholders and Elite followers, and I'll do my best to address those questions that are related to the financials. So let's start with the P&L, where we reported another double digit growth in revenues that makes six quarters in a row, now where we have achieved double or triple digit revenue growth on a year-on-year basis. Revenues for the quarter ended September 2020 were $7.4 million, that's compared to $4.6 million for the September 2019 quarter, a $2.8 million or 60% increase as compared to the same quarter last year. The increase was driven by revenues from generic extended release Adderall, which was launched on March 30 of this year, and we also saw strong growth as compared to last year for generic immediate release Adderall. Our other products Isradipine, Phentermine and Naltrexone also continued their steady performance, contributing consistent and solid revenue numbers. The generic Adderall and Isradipine products continue to stand out both retrospectively as evidenced by revenues reported, and prospectively, with certain factors seeming to indicate additional future upside for these products. When you look at our generic Adderall products, you see products that with respect to Elite are relatively new in the market. We launched immediate release product just over a year ago, and launched the extended release product only about six months ago. Our alliance partner Lannett continues to do an excellent job penetrating the market and should continue expanding market share. With regards to Isradipine, which is a relatively small market, especially in comparison to Adderall, there are competitive factors which indicate a future upside, providing contributions to Elite's results above current levels. These factors are mentioned in previous calls and the results are clearly evidenced on our P&L statement. But the takeaway here is that these factors remain and they should continue to provide positive contributions prospectively. Moving down the P&L statement, we achieved an operating profit of $1.3 million for the quarter, that's compared to an operating loss of a $0.5 million during the September 2019 quarter, a $1.8 million turnaround in profits. It's also the second consecutive quarter with operating profits, which is a first relief. We should add to this streak as the year progresses. On a fiscal year-to-date basis, the six months from April to September, our operating profit was $2.2 million, compared to an operating loss of $1.6 million for the same six month period last year. That's a $3.8 million turnaround in profits since last year, and this has led to a significant strengthening of our financials. Our balance sheet working capital has almost quadrupled from $1.6 million to 6.3 million during the last six months. And our operations have generated a positive cash flow of $2.7 million this year, and you compare that to an operating burn of $300,000 last year. It's a $3 million improvement in cash flow and a much stronger balance sheet. That's the impact financially speaking of the increased revenues and the profits. So keeping all that I just said in mind, I want to talk about something else that was put in place during the quarter, and that's the new equity line with Lincoln Park Capital. We filed an 8-K and an S-3 in July, and the relevant purchase agreement, registration rights agreements, they're attached there. So you can review the documents in full, if you'd like. But I'm just going to give you a brief summary. To summarize, the Lincoln Park facility is a variable rate equity line. So that means that Elite has the right to sell shares to Lincoln Park, at a price that's dependent on and closely correlated to the ELTP trading price at the time. Now, I've received some comments regarding the $0.03 minimum price, which is defined in the contract, and that's just a minimum PPS, which is required for legal contractual purposes. It's not the price the shares will be sold. These shares will be sold at a price based on the PPS at the time, and the $0.03 minimum is irrelevant to that calculation. The agreement, like any agreement has minimum prices, maximum proceeds, effective dates, various other criteria, which are legal requirements of all such agreements. The $0.03 minimum has no bearing on the price of the shares to be sold to Lincoln Park, it's just a number put there to satisfy legal requirements. Most important thing to keep in mind with Lincoln Park, the most important aspect of the equity line is that, Elite determines when and if we want to sell shares to Lincoln Park. If our PPS is low as it is now, we don't have to and we won't sell shares to Lincoln Park. If we're profitable, cash positive and don't need the extra financing, as we are currently, we don't have to and we won't sell shares to Lincoln Park, no matter what the price is. The main purpose of this facility is to fund product development or product line expansion, which may not be otherwise financed from working capital. The growing revenues and strengthening financial position today are due to the products we have developed over the past few years. And that was made possible by the financing provided by the Lincoln Park equity lines. So since establishing this new facility, we have only done a single set of minimal shares sold to Lincoln Park, and that was done really solely for the purpose of ensuring the documents and mechanisms were in place and they were functioning for the new line. We have not sold any additional shares as we are able to adequately fund our operations, including current product development from current working capital and cash flows. However, our mid to long-term business plan requires the continued expansion of our product lines, either through in-house development or via acquisition. These activities are ongoing. They are robust, and they are required to achieve our goal of significantly increased earnings per share. Lincoln Park facility is the ideal resource available to us to provide significant funding if needed for this type of expansion. One more thing to note regarding the Lincoln Park facility is that, it's an equity line as opposed to a credit line. This means the funds received from Lincoln Park are not loans and they don't have to be paid back. There's no debt here. We look at the generic pharma industry and you'll see companies our size and much larger struggling under the mountainous weight of debt. Many such as Akorn and Mallinckrodt have filed for bankruptcy, leaving shareholders with nothing. We don't have this type of debt pulling us down. And our judicious use of the previous Lincoln Park facilities is a major factor in our growth and profitability today, while others much larger than us decline and disappear. Now, our chairman and CEO, Mr. Nasrat Hakim, would like to give an update and his comments. Nasrat Hakim Thank you, Carter, for this fantastic financials. Six quarters in a row is a serious achievement. Elite has been profitable for the last two quarters. Profits to-date have been used to build up working capital as we launched Amphetamine IR and ER. We have also invested in and will continue to invest capital in R&D. Two years ago, our revenues were $7.5 million, last year $18 million. This year, we've only covered two quarters and we're up to $15 million, that is an outstanding achievement over a very long period of time. It is my expectation that we're going to continue this trend for the remainder of the year. Revenues this quarter were $7.4 million and fiscal year-to-date revenues, i.e. the past six months for Elite have been $15 million. Revenues and income have showed a large increase over a year ago and are at record high levels. What are we going to do with the profits going forward? I'll address that later on in this update. But first, to safety. We are operating in a pandemic. COVID-19 is a pandemic that affects all of us, not only Elite but our suppliers, service providers, sales and marketing partners. We had to adjust doing business to fit into today's environment. We have implemented new rules and policies to ensure that our employees and associates are safe and they are protected and protecting each other. We are following local and Federal guidelines and the CDC recommendations. We feel an obligation to our employees, shareholders and patients to do our part to ensure that there are no shortages, drug shortages, and that we have business continuity. We've created an implemented employee protection plan that entails employee training that includes, daily temperature monitoring, social distancing whenever possible, wearing masks, appropriate attire, washing hands and proper hygiene. We also staggered the shift when possible to give people more space and less exposure. We limited the number of associates in the manufacturing suites to two and increased the air flow in the rooms. All non-essential employees have been given the option to work from home. I am very excited and encouraged by Pfizer and Moderna's success in creating a vaccine, and I look forward to returning to somewhat normal life in about a year. In the meantime, we need to remain vigilant and cautious to ensure the safety of our employees and our business continuity. And we hope our service provider, sales and marketing partners and API and raw material suppliers are doing the same. Our facility is in a good shape. We have a GMP, DEA compliant facility. We are spending hundreds of thousands of dollars this year to expand the facility, improve it and upgrade it. The upgrades are always ongoing, but the current project should be done by January 2021. Regarding Amphetamine API suppliers, we have enough API for the remainder of the year. And we have submitted our quota to the DEA for next year. Amphetamine ER was approved last December and was successfully launched in April. Lannett, our sales or marketing partner is doing a good job, and we expect this product to continue to add to our profit and revenue growth. Lannett is also our marketing partner for Amphetamine IR and they have been successful at capturing substantial market share. This product with Amphetamine ER is an important driver in our growth. Loxapine site transfer is already done and approved. We are waiting for API to launch. We expect to launch this product in Q1 of 2020. We have a marketing partner for Loxapine. And we are just awaiting as I said the API, it is coming from India and we're expecting it any day. The IQVIA data for Loxapine is $5 million. There are currently four and this including ours. Loxapine is currently on the FDA's product shortage list. The antibiotic tablets, a product that we developed with our SunGen partner, we have filed the application or the amendment in October. We are awaiting SunGen's decision and FDA's approval as to the next step. As soon as we hear that the FDA approved the product, we will meet with SunGen and decide on the next steps and update you accordingly. Elite is executing on its growth plan, getting product approvals, and launching new products. And our sales and marketing partners Lannett, TAGI and Glenmark are doing a good job. Regarding our development line, now that we finally are profitable what's the next step for Elite? Well, after ensuring that we have adequate facility, and most importantly, working capital, we will spend the rest of the money on R&D. And we may consider purchasing the new ANDAs, and I'll go into a little bit of detail on that. We are working on the central nervous system project that we have discussed previously. This project belongs to Elite with all its benefits and costs. They know how optimizing formulation, cost of the raw materials to manufacture the exhibit batches, conducting clinical trials and filing the product are Elites responsibility. We have resolved the issues with SunGen and this product is now 100% ours. Once we complete our evaluation of the viability of this product, we will inform you if we are moving forward with it. I expect to have an answer no later than our next Investors call. Elite continues to work on differentiating generics for future growth. Elite's focus is on solid doses forum products and that are differentiating and formulation that are a barrier to entry in formulation, such as extended release products, the product in which that we believe we have a competitive advantage due to our technology or facility. In addition to working on our own R&D projects, Elite will also continue to evaluate partnerships, contract development, contract manufacturing and in-licensing opportunities that we will update you on as key milestones evolve. Let me be clear regarding R&D. We are investing in R&D right now. Due to financials and what happened to SunGen, things slowed down. We will ramp up activities as money becomes more available. R&D is the lifeline of our company, and even though, we slowed down, we have never lost focus of taking care of the preliminary stages of development. These are the things that we do not usually advertise. In R&D formulation development cost a lot of money, scale up cost a lot of money, exhibit batches cost a lot of money. It is when we conduct a clinical trial and it succeeds that that product becomes viable, and we issue a press release updating you on it. We also may choose to buy ANDAs that fit our portfolio, if we choose. ANDAs that are already being sold in the market that are already making certain profit are more expensive than developing your own, but the advantage is you know that something is working, and you immediately get return on your investment. All options will be available because we now are a profitable organization. And we have a profitable portfolio because of the decisions and investments that we made a few years ago. So the investments we're making right now in R&D will show fruits over the coming couple of years. I'll switch to some Q&A that you've sent to Dianne, she group for us into multiple categories. Question-and-Answer Session A - Nasrat Hakim First regarding the pipeline. The following items were mentioned on the last conference call revisit update current status, Loxapine. Last call stated API would arrive approximately three months from the last call. That would make it mid-November. What is the status? We're still waiting for the API. But regardless, the contract is signed with the sales and marketing team, and we are planning to launch it in Q1 of 2020 that is next quarter. Carter Ward 2021. Nasrat Hakim 2021. Sorry. Antibiotic status, has SunGen filed response? Yes. Last call, we're expecting in October, we did file in October. What happens next? We really need to wait for our first FDA approval, which I'm certain of. But then what do we do with SunGen, which is much more complicated issue? We'll update you as soon as we know. CMS product. We have knowledge and know how are we moving forward with this? Yes, we are. We are exploring a lot of things. We're testing the formulation in vitro, in the test tube, putting it through rigorous testing that simulates a human before we spend a couple million dollars on our clinical trial. So we need to make sure we spend our money wisely. Once we vet all of that and we see a viable path, then we'll go ahead and let you know and we'll go ahead and/or I will conduct clinical trials and let you know. But right now we are actively working on it. But everything we're doing is in-house, trying to ensure that we have the highest chance of passing the formulation, using the least expensive methods. Okay. General pipeline topics. What is the latest on our pipeline and go forward strategy? Overall development pipeline is better than what the stockholders currently think. New development relationship with SunGen, Elite JV please speak to the CNS, which we just did. Okay. Regarding the general publics, all of them are about the same. The stockholders want to know what is our vision for R&D really, and going forward. And to articulate that there are about four or five things we're working on. Number one, as I mentioned, the central nervous system product, we're investing a lot of time and effort in that. Second, research and development for new products, we are in the early stages of those. We're looking into in-licensing agreements. We are always looking into partnerships, and we're looking to evaluate whether we could buy a new ANDAs. So these are the five things that are on top of the list right now. Including R&D in-house and continuing with the product from SunGen, there are also other opportunities of partnering with other companies or in-licensing with other companies or even buying an ANDA, once we have the right amount of money and the right product. Facility, how modern is Elite's manufacturing facility? Will there be a need for significant capital expenditure to maintain or replace all the recruitment? How big can Elite be based on their capacity? How much annual revenues are they are capable of generating? Annual revenues are not proportional to the facility size, that is really proportional to the product that you buy. So I want to address that, but for the rest of it, that's a very good question. Our facility right now is generating more than 300 million tablets and capsules, and we're only running one shift. So if we were on two shifts, or three, we can easily do three quarters of a billion, about 750 million. And we wouldn't have to do anything except maybe upgrade the packaging line or get another packaging line. Other than that, the blenders and encapsulate those and tablet process and the entire infrastructure is there, we can easily double or more than double what we're doing with the current site. Let's take couple more questions. Besides having to what I consider a fairly solid balance sheet and income statement and continued growth, is there anything else that you will not short term do legally and ethically to get the stock price out of its slot, a slot that has been in for years now? Or is Elite essentially at the mercy of the free market? Carter Ward Aren't we all? Nasrat Hakim It's a combination of the two. We are at the mercy of not only the free market, the manipulation that happens at the OTC. When we move mountains and bring in products that top notch companies have, such as Amphetamine and have six quarters of growth in a row and have two quarters of profitability which we've never seen before, have enough working capital to survive and thrive. And still we see the stock drop -- there is nothing you can do about that. Okay. There are certain people that are going to do what they are going to do, as long as we are on the OTC. Our goal is to obviously get off the OTC unless we merge with another company, the next logical step for us is to get into a major stock exchange. And we're working toward that. Can we do things in order to brief that up? Yes. Obviously, all of the small steps that we are taking quarter-by-quarter increasing profits, increasing revenues, increasing market share, coming up with products are sizzling away, and we're not getting credit for them, as it shows up on the stock. And the stock holders are not getting the benefits of this. And as I said, it's truly because I believe the stock is obviously being manipulated. However, there will be a point where it will be undeniable, when you have an earnings per share. And that's going to happen from multiple ways, buying new ANDAs, reacquiring the ANDAs that I spent millions of dollars to protect Elite by getting for the Amphetamine IR and ER, working on couple of other projects that we're working on getting the CNS product into the market. All of this will bring in enough money that nobody could manipulate people to sell their stocks and keep the stock down. There is a point where it's going to be undeniable, and as of now, I see us on that best. The third part is going to be for those who do not make it there. They're with us because they are being scared into selling at $0.05 on what have you. At what point will the company be marketing the organization to funds a new investors growth and stabilize share price, decrease the float? Because Elite is traded on the OTC, the securities prohibited by Wall Street banks and bankers from recommending us or even owning our stock. Okay. This is why the company is focusing on building strong fundamentals to move up the OTC and get listed on a major stock exchange. Frankly, we do not control the stock market, with the spot price is whatever a person decides to sell on that day, we only can control the execution of our business plan. We also cannot control the timing of press releases. We always faithfully hold quarterly conference calls with you guys to update you and all our stakeholders on the status of the day-to-day business activities. That does not even rise to the level of press release. The information we give our stockholders, I listen to a lot of CEOs. Nobody talks about day-to-day activity and the status of the site and the plant as we do in here. Last question is about the opioid. Can we get an update on whether the courts or where the court stand in relationship with the opioid lawsuits, such as Purdue Pharma and other companies? And how does that affect Elite? Is there any kind of timeline on where the dust will settle with these ongoing lawsuits? And then different question I'll get to that in a second. As to the first question, the lawsuits are ongoing. The latest was Purdue. And it was made very clear that this is not the last lawsuit. They already had the settlement and won, but they are going to continue suing. Mallinckrodt, as Carter indicated went bankrupt, filed for bankruptcy. Akorn, the last week of September, the court awarded it to the debtors and the stockholders they have zero. A company at one time was almost 40, 50 bucks is down to zero. It was about $0.20 or $0.10 and now its zero. Insys, same thing, the CEO is in jail. The opioid situation is very hard for a lot of people and it's not going to affect us because we're not doing that right now. We are being cautious, because we are trying to protect the company and get in products that are not involved in litigation. I'm a lawyer, litigations is my middle name. But you need to be smart enough to know, when to file a lawsuit, when to fight the fight and when to retreat. This is not a fight that we have the money or the background to win. So we shifted courses and we started working on other products, such as Amphetamine IR and ER and that has done extremely well for us. Last question, with Biden's win, will there be any impact on Elite? I don't see that, frankly, whether it was Trump or Biden, because Biden was in office for eight years with Obama before Trump, and didn't make any drastic decisions to hurt us, and neither has the present administration. So I don't think that that's going to be a factor. The main factor will be is to focus on the five things I mentioned. Our central nervous system product, because that's well into development. We need to make sure to figure out whether it's viable for clinical trials or not, continuing with the R&D, work on partnership and see if we can acquire other ANDAs. Okay. Congratulations on a great quarter. I am very happy for our stockholders, and I'm very happy for us all at Elite. Thank you all and have a wonderful day.

ELTP full faith and credit and ready to shine brightly

This is the dawning of the age of Elite Pharmaceuticals.  Today was a reporting of their quarterly, which was hit by the shutdown, so get in now while the prices are at the bottom.  This company has been rock steady for a long time running so what is keeping this so damn low?  Carter Ward, today stated:

"Revenues for the quarter ended September 2020 were $7.4 million, that's compared to $4.6 million for the September 2019 quarter, a $2.8 million or 60% increase as compared to the same quarter last year. The increase was driven by revenues from generic extended release Adderall, which was launched on March 30 of this year, and we also saw strong growth as compared to last year for generic immediate release Adderall."

60% increase in revenues but the same results as, historically, happens the day of a typical Elite conference call, a drop in pps.

Later we will take a look at the boards to see what the stock geeks are reporting, but right now looks like a discount.  

ELTP About To Catch Fire?

Just in time for the sun's low point in the sky, it's time for the big dance. ELTP usually shows up late to the party and sings on market down days so don't be surprised if we see a late 2020 run. Next week's earning's call should be a hit, but as noted on message boards everywhere, ELTP usually shows a run up on the week before conferences, then bottoms out post conference. 2020 is a different type of dance and I expect what we've seen in the past to be different this time around. Things have changed, and they lucked out that the nation is on adderall. Beast mode alert!