Elite Pharmaceuticals Inc (OTCMKTS:ELTP) Shares Ready for Upside Breakout

Elite Pharmaceuticals Inc (OTCMKTS:ELTP) shares were up 1.29% on Friday to $0.152 and flat in after-hours trading. The company has a market cap of $111.45 million at 905.66 million shares outstanding. Share prices have been trading in a 52-week range of $0.11 to $0.42.

Elite Pharmaceuticals Inc is a specialty pharmaceutical company that is principally engaged in the development and manufacture of oral, controlled-release products. In particular, the company develops and manufactures generic products, products using controlled-release drug technology, products utilizing abuse deterrent technologies, and it develops and markets generic controlled-release and abuse deterrent pharmaceutical products.

The company has two segments: Abbreviated New Drug Applications for generic products and New Drug Applications for branded products.  It owns approximately six different approved ANDAs. Its product SequestOx is an immediate-release Oxycodone Hydrochloride containing sequestered Naltrexone, which incorporates five milligram, 10 milligram, 15 milligram, 20 milligram and 30 milligram doses of oxycodone into capsules. It is used for the management of moderate to severe pain where the use of an opioid analgesic is appropriate.

In its earnings conference call, Elite Pharmaceuticals CFO Carter Ward summarized the results as showing ound operations, in line with expectations, strong financial position and a few items that will be significant to future financials. In particular, he is referring to the ANDA filing generic version of Percocet and the development agreement entered into with SunGen Pharma during the quarter. However, he mentioned that these future items aren’t reflected in the latest numbers yet.

In terms of the numbers, cash at September 30 was $12.6 million, up more than $1 million since the beginning of the year. Working capital was $14.5 million, also up $1 million during the quarter and is a $2.5 million improvement since March 31. He also highlighted the rise in inventory from $3.3 million at the beginning of the year to $5.6 million at September 30 and the fact that the balance sheet is no longer showing negative equity.

Gross revenues were $2.7 million for the quarter and $5.9 million for the past six months. Quarterly revenues are down 7% on a year-over-year basis but year-to-date and six-month numbers are up 17% compared to the same period a year ago due to shipment schedules. To be specific, Elite Pharmaceuticals had shipments that went in June and October, consequently not being factored in the September quarter. He added that their generic products Naltrexone, Phentermine, Methadone and Isradipine are performing well.

Also notice when you look at our revenues, we are consistently at an annual run rate above $10 million. This is further evidence of our financial showing that our generic business is providing the solid foundation. We say all the time it is one of the key components of our overall strategic plan,” Ward concluded.

R&D expense was $1.3 million for the quarter, and $2.8 million for the six months ended September 30, down $4.2 million and $6.6 million for the quarter and for the six months of 2015 due to the nature of their R&D activity. In the same time last year, their R&D was focused on SequestOx, a branded NDA product, and this year they are working on developing various generic products, both with SunGen and a few on their own.

As for P&L, Elite Pharmaceuticals reported quarterly operating loss of $1.2 million and a six month operating loss of $2.4 million, but explained that this should be viewed in conjunction with their R&D expenses.

The generic business is a net positive on our P&L. It covers our own costs. It covers its overheads, and it also provides contribution to the cost of product development,” he added.

DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.

 

Author: Edward Tarpin

Edward Tarpin likes fishing, beer and small caps with healthy balance sheets. He can usually be found somewhere in between a 10Q and a 10K, and is the go to guy for risk management driven portfolio construction.

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