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Executives

Nasrat Hakim - President and CEO

Carter Ward - Chief Financial Officer

Doug Plassche - Executive Vice President, Operation

Analysts

Elite Pharmaceuticals, Inc. (OTCQB:ELTP) F3Q2014 Results Earnings Conference Call February 18, 2014 3:00 PM ET

Operator

Good afternoon, ladies and gentlemen. And welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a listen-only mode and we will open the floor for your questions and comments following the main presentation. (Operator Instructions)

Before management begins speaking, the company has the following statements. This conference call contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Including those related to the effects if any on future results, performance or other expectations that may have some correlation to the subject matter of this conference call.

Listeners are cautioned that such forward-looking statements involve risks and uncertainties including without limitation, beliefs, uncertainties, inability to obtain necessary ingredients and other factors not under the control of Elite, which may cause actual results, performance or achievements of Elite to be materially different from the results, performance or other expectations that may be implied by these forward-looking statements.

These risks and other factors, including without limitation the company's ability to obtain sufficient funding under the LPC Agreement or from other sources, the timing or results of pending and future clinical trials, regulatory reviews and approvals by the Food and Drug Administration, and other regulatory authorities, intellectual property, protections and defenses, and the company's ability to operate as a going concern as discussed in the Elite's filings with the Securities and Exchange Commission, including its reports on Forms 10-K, 10-Q and 8-K. Elite undertakes no obligation to update any forward-looking statements.

With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and CEO of Elite Pharmaceuticals. Sir, the floor is yours.

Nasrat Hakim

Thank you, Tom, and thank you ladies and gentlemen for joining us today. Our update will be structured in the following manner. Our Chief Financial Officer, Carter Ward will present Elite financials, followed by an update from our Executive Vice President of Operation, Doug Plassche on the status of the site and manufacturing. Then I will make my final comments before we go to question-and-answer.

Carter, you have the floor.

Carter Ward

Thank you, Nasrat, and thanks everyone for calling in today. Last Friday we filed our 10-Q for the quarter ended December 31, 2013 on a March fiscal year. So the December quarter is the third quarter of our 2014 fiscal year.

Financials are available online at elitepharma.com, as well as sec.gov and all the usual sites like Google, Yahoo!, MSN Money and OTC Markets. Just come back from the long holiday weekend so hopefully most of you had a chance to review our financials.

We also issued a press release this morning, announcing the successful results from the first pilot bioequivalence study for our twice-daily abuse-resistant oxycodone, as well as the supplements that are being prepared in relation to the manufacturing sites transfers for the first group of the generic products that we recently acquired. You haven’t seen the press release, it’s available on elitepharma.com.

So getting back to the finance update, those of you who are regular listeners to these investor calls, will know that the common theme that I express is that our financials don’t just tell us how we did in the quarter, but they also give us insight into the seed being planted for the future.

While how we did portion of the financials, it’s clearly showing that those seeds from the past starting to bear fruits. Let’s start on the P&L statement and the thing that really jumps out, that would be our revenues.

Our revenues this quarter were almost $1.7 million as compared to less than $700,000 for the prior year. Now no matter how you look at it, revenues are up significantly. They are up by more than 150% as compared to last year, they are up by 90% if you look at the total of the first three quarters of our fiscal year, revenues are even up almost 50% compared to the September quarter and that September quarter was also really strong with regards to revenues. So it’s clear the revenues are heading in the right direction.

Strong growth in our revenues comes from the combination of three factors. First, are the products launched in prior year, specifically, Hydromorphone, Phentermine tablets and Methadone. Revenues from each of these continued to grow and they are performing well just as we expected.

Second, are the products launched this year itself, this fiscal year, Phentermine capsule and naltrexone. These products are relatively young in the market but they have been doing well and their contribution to our revenues is not insignificant.

The third factor is the 12 products which we acquired last August. These products have already begun bearing fruit in the form of revenues. During this quarter, we signed a manufacturing and licensing agreement with Epic Pharmaceuticals and have earned $600,000 in milestone so far.

This is clear example of the seeds from the past bearing fruit in the present and this is just the beginning for these products, which we expect to generate increasing and very significant revenues in the future. The acquisition of these 12 products is an important part of our strategy to create a strong commercial foundation and is already making a noticeable contribution to revenues.

As per today's press release, you will see that we expect to file the CBE-30 for Isradipine in March and that we expect our partner Epic Pharmaceuticals to file CBE-30 for Dantrolene, Loxapine and Hydroxyzine by this June. So we are definitely moving forward nicely with the commercialization of these products. Revenues are importance to us and we are on scheduled to meet our goals.

Moving down the P&L, the next thing that speaks out is research and development costs. R&D expenses were $1.3 million, which is a $1.1 million increase or 441% on year-on-year basis. If you compare R&D expenses for this quarter with the September quarter, you will find the 51% increase. So like our revenues it's pretty obvious that we're spending more than ever on R&D. In fact, the $1.3 million spent on R&D was greater than our $1.2 million operating loss.

I want to say it another way, we spend nothing on R&D we would have had an operating profit. This is the second consecutive quarter, where this holds true. But modest short-term profits aside, product development and specifically the development of a full line of abuse-resistant opioid products is our future.

In the past two months we have initiated pilot and pivotal clinical trials for the first two of these products. We announced the successful outcome of the pilot study today and the pivotal study is still ongoing. There is significant an increasing product development activities ongoing throughout our factory and lab, so the cost will naturally be up.

Nasrat will have much more to say on this subject but from a financial perspective this is what we should be spending on. R&D is the lifeblood of any pharmaceutical company and the abuse-deterrent product line being created is really spectacular.

Before moving on, I just wanted to add a few comments about the financing of our product development activities. While we will not be disclosing specific products here today, we do have more than 15 products that utilize our abuse-deterrent technology on our debt chart. We want to commercialize all of them and we want to do it as quickly as possible.

Technology is there and it is found. The successful clinical studies bear this out. Commercializing these products just takes money and time, and as usual the more money we have the less time it will take, pretty much as simple as that.

So what are our plans with regard to financing all of this? Well, as Nasrat mentioned in the past, there are ongoing and substantive discussions with multiple companies who have a keen interest in our products and technologies. Generally these types of discussions concern some sort of partnering relationship with the means by which product development activities can be financed.

That is certainly something of interest to Elite but if the other party feels that they are the only source of financing available to us, they will view that as negotiating leverage and that’s something that's clearly not in our best interest.

Therefore important to have other sources of finance which we produce to either develop the products for ourselves or at a minimum put us in a stronger negotiating position with these potential partners. And in either instance, we expect the result to be a better deal for Elite and our shareholders.

Now the most viable of these other financing sources are the recently created Series I preferred shares which I’ll discuss in a little while and an equity line similar to the Lincoln Park equity line which was set up last year and has been a such a great help to us currently.

Now, you need to know that both of these options require an increase in the number of authorized shares, which must be approved by our shareholders. We do get a lot of inquiries on the subject and it is something that we are evaluating.

Now let’s talk about Series I. Hopefully I can provide some clarity. Series I is convertible into common stock. It’s partly pass with common which means that even though it’s call preferred stock, it still only equal and not senior to common stock.

It also includes voting rights on an as converted basis. Now that means that you can vote as a common shareholder without actually owning common stock. Series I was created to address two purposes. The first was to create a means by which Nasrat Hakim and our Chairman, Jerry Treppel, could vote the shares underlying the convertible notes payable, which had been issued to them.

Nasrat invested $10 million in Elite and Jerry invested $600,000. There weren’t enough available shares to give to them. So instead they agreed to accept the convertible note payable in stock or cash. Since we need the cash, we all have the stock, they canceled their note and received Series I share, which allows them to vote like a common shareholder and ensures that Elite doesn't have to pay them cash.

Each of them received Series I shares which converted into the same number of common shares as the note payable which they are canceling. We received comments about discounts being given and that's just not the case. This is why Jerry Treppel received only $420,000 of Series I shares and payment of the $600,000 note to them. We did different conversion prices. He had to receive less Series I shares in order to have the same number of underlying common share.

The second purpose of the Series I was to provide a viable alternate source of finance. There are 500 Series I shares authorized, and only 104 of these shares have been issued. The rest are available, having such an option is certainly a positive for our future.

One last thing of Series I and in fact, the Series I doesn’t issue of authorized common shares not being available. That is something that we will eventually have to address. But having this Series I allows us to address the issue in a timeframe that works best for Elite and our shareholders.

Finally, I wanted to talk about the stockholder rights plan. I mentioned this in our last call. So we've been receiving inquires on it. So now it’s a good time to get to comment in a little more detail.

The stockholders rights plan is often referred to as a poison pill. It’s something that management typically adopts when they feel their company is significantly undervalued and susceptible to a hostile takeover. It’s a legal mechanism, which forces an acquiring person to negotiate in good faith and it provides protection to all the other shareholders of the company.

Last summer when our stock was at $0.10 and even lower and knowing what we were working on, we all felt we weren’t a $0.10 company and thought that other parties would soon come to the same conclusion and that they would seek to buy us on the cheap and then transfer the value away from the rest of our shareholders.

That’s the classic situation, why you need a stockholder rights plan. So what do we? We engaged the prominent consulting firm in the field of company and stock price valuation. These are consultants who are viewed as authorities on the subject. They have written the leading textbooks on the subject and they worked regularly with the investment community.

They conducted a thorough study with lengthy interviews and due diligence. And then they finally issued a 30 page report which confirmed our opinion. The report shows a conservative valuation, a most likely valuation and a best case valuation. And I can tell you the conservative valuation was $0.40, most likely was $2.10 and the best case valuation was $2.75, all of these on a fully diluted basis.

So that’s $0.40, $2.10 and $2.75 and that’s not future value, that’s the present value today. Future value will be more. Now these valuations are based on the Elite executing its’ strategic plan and we’re on schedule as you can tell by our financials.

The creation of a sound commercial base is occurring as evidenced by the rapidly growing revenues and our product development is continued and accelerated. You read the stockholder’s rights plan, you will note that we used the most likely valuation the $2.10 number as the value assigned to the Series H shares included in that plan.

Now the valuation was needed for the creation of the plan but more importantly $2.10 is what independent experts in the field have calculated as the most likely value of our stock today. With such a spread between the current price and the underlying value, having this stockholder’s rights plan is invaluable.

Today based on our stock price rising from $0.10 to the current level, I think we drove $0.40 today. It’s clear that many of you know we’re not a $0.10 company. However we hear at Elite field, we’re much more than a $0.30 or even a $0.40 company as well.

So with that I’d like to introduce our Executive Vice President, Mr. Doug Plassche, for an update on operations.

Doug Plassche

Good afternoon. I will be quite brief. I’ll focus on three key areas. One is really building what I’ll call our infrastructure quality compliance regulatory position. We’re focused on improving facility, utility, operating equipments, as well as our DEA systems which is really our life blood. So there's a number of activities going on in all those areas including automation, technology and basic physical improvements.

On the commercial business, there is no issues with meeting the demand and the good new is in the rest of the year the demand actually shows an increase and we’re positioned to deliver all those products on time.

Isradapine which has been mentioned a couple of times should be filed in March and we’re preparing either to launch at a small scale which we filed the submission batches at or hopefully a large scale which we have the piece of equipment being delivered next week.

In the fourth quarter and early this year, extensive activity in R&D pretty much I think unprecedented in time of Elite in terms of the number of batches manufactured placed on stability and tested. And it's been alluded to the first product, actually been on stability before the end of the year. And we’re targeting a December 2014 submission. Around the same platform, we have a number of products which we had done initial trial batches on a small scale and all the results were promising and we intend to now manufacture those with the submission scale.

It’s quite a complex list of products given all the strengths in different varieties, but with as Carter said with the right financing, we have the team here to execute those in a very timely fashion. So that’s pretty much my updates and I will turn it back over to Nasrat.

Nasrat Hakim

Thank you, Doug. I’m very proud of the progress Elite has made today at all levels. First, we are creating strong fundamentals for Elite by maximizing our profits by negotiating better API pricing, whether it’s for Phentermine or other APIs and recipients by investing in the infrastructure equipment and hiring a new personnel by introducing the new products that we have been discussing, Isradapine and Dantrolene and Hydroxyzine and Loxapine here and through our partner at Epic and also by working on future genetics.

The future of genetics will not be anything like what we have now. A lot of our products are recent but in my opinion, there are more like the breadcrumbs of the pharmaceutical industry. Our future genetics, we will be going after seriously viable products. As Carter mentioned on fully diluted basis, our midpoint or our likely scenario will structurally add about $2.10 that is not because of the products that we have today. It is because of our ART technology.

Our packaging patented ART technology is fantastic. Our announcement regarding the mega pilot study for the [BID] was really a main factor and moving forward with that product. The results were excellent and the reason I say it’s in mega pilot is because we started with 16 patients and we did a full way crossover, therefore we had 64 subjects, that’s not normal for a small little pilot study.

The second set of clinical trial results for the undisclosed anti-abuse product will be available around the first week of March. This is a full DE study, and we will issue a press release towards the end of first week of March or beginning of the second week with the result which I trust will be successful. The next step after getting successful DE study is to be engaged in a human anti-abuse liability study. We have already initiated that.

In concert with FDA guidance, there are three tiers for that study. There is a snorting study, oral study and IV study. These are very intricate studies that in the entire United States there is only one left that conduct this kind of study and all of the Americas there are two, one in Canada and one here in Salt Lake City. It’s a very specialized area and it is very expensive.

The snorting study is the greatest concern for FDA because it’s the easiest way for people to abuse narcotics or opioids. All they have to do is crush the opioid and snort it. Our ART technology would shine under these conditions because as soon as you crush the bead, the naltrexone would run the opioid ineffective and nobody can abuse the product using their method.

The oral is taking several doses. You can control that and maybe crushing it and the IV is a lot more elaborate where you have to extract everything out of the opioid and inject it. In concert with the human anti-abuse liability study that we have already initiated, we are concurrently working on in vitro study. The in vitro study will comprise the in vitro means and test tube in the lab. It will comprise some scientists, trying to use household products to see if they can abuse your products so they can give you advice.

That’s also like a chief study. It turns a $0.5 million to a $1 million as well, so all of these studies add up and when you have an appetite like mine and more than a dozen products that you would like to go a clinical phase with, this gets to be expensive. So that will lend itself to us, trying to find a partner or financing in the manner of what Carter was talking about.

So the third thing I would like to update you on it is partnership. We are actively pursuing a partner. We have Jerry Treppel, our Chairman and I had a meeting with the company yesterday, actually on Presidents Day. Another major pharmaceutical company, very viable and one of my favorite were coming to see us and we had to delay it by couple of weeks due to the snow. But the discussions with a partner are very viable. We cannot depend just on that. We need to make sure that we have a Plan B and Plan C to ensure that this company is going to deliver on all the products.

I hate to see us and hear, do products one at the time and go serially and take several years. I really would like us to figure out the best way for financing and doing concurrently, so this way we will maximize a return for the stockholders, okay.

Once again, I’m very proud of the Elite team and I will tell you something personal. My family made these coffee mugs for all Elite employees and the Board of Directors, which had the Elite logo on them and underneath the logo it said, this is our year. And so far it definitely is shaping up to be that way.

Now, we are opening for questions.

Question-and-Answer Session

Operator

Thank you very much. (Operator Instructions) We will take our first question from the line of Steve. Steve, your line is live.

Unidentified Analyst

Good afternoon, gentlemen.

Nasrat Hakim

Good afternoon, Steve.

Unidentified Analyst

I first want to congratulate on the great job you have done over the last few years and particularly in the past six months. It clearly is paying off for the company and the stock. My question is, at this point in time in the history of the company you’ve come back from the break of bankruptcy. You’ve garnered enough from the smaller drugs to cover operations. And looks like soon, the research and design costs relating to the ART products.

You’ve inked the funding deal with Lincoln Capital, I put the point in their place and you’ve also reinitiated ART studies after a 7 year hiatus. Now, we come to those preferred shares that you had mentioned and the need for a partner. Can you comment on the new preferred iShares and particularly on the attached voting rights? I realize most or often the preferred shares do not carry voting rights. What’s the relationship between the voting rights and the potential partnership?

Carter Ward

On the voting rights, they just vote on an as-converted basis, so one for one. So if we had preferred shares, series iShares., they convert into 1,000 common shares. You get a 1,000 vote and if you had converted those into common stock. There really as far as preferred share goes, they are one of the least of the preferreds since they are highly positive to common, they are not senior at all.

The option that they give to us is just another means of financing. We can issue these shares. People are interested in the future of the company and it’s just the mechanism by which people can invest in the company when we don’t have authorized shares to give them. Like I said, it doesn’t address the issue of not having enough authorized shares, but it enables us to bring financing in now from interested parties and deal with the authorized shares in the future when it’s in our best interest to do it.

Nasrat Hakim

And, Steve, regarding the issue of voting, let me articulate it this way. It’s a matter of fairness. Jerry, our Chairman loaned the company $600,000. Jerry could have gone out on the open market and bought $600,000 worth of shares that he can do with whatever he wants anytime he wants. Instead in support of the company and they can use chance on the company, he decided to invest these $600,000 into our shares because we are going to have enough authorized, we gave him enough, okay.

So now he has a note that he cannot even cash out or do anything with and even have voting rights, the least we could do is try and get people who are investing cash into the company instead of buying stock in the open market is the ability to have a voice in the company. So he had done a great service to us. We could have given him the money. However, we must saw the use of nickel price. He was very kind to us and in return we added reporting as a fairness. If anybody else in the future wanted to buy some of these shares, then they will also have the same opportunity to be able to look.

Unidentified Analyst

I guess my assumption was that the voting rights make it look, I want to say it looked very promising for potential partnership and the more interested in buying those shares because of the voting rights. Is that an accurate assumption?

Carter Ward

Yeah, I would say so, I mean that’s the only real advantage to Series A that they provide these voting rights because they are not senior in any respect, there is no preferences given other than voting on an as converted basis.

Nasrat Hakim

Now one more thing even though what was you just described on corporate answer to not aware number one or preferred means, we much rather find a partner so this way it will be an undiluted event for our stockholders. If we do not find a partner that has a really decent marketing capabilities and a viable and treat us fairly, then there are other options. The joint venture going headed by ourselves, there are many other options. And as long as you create options and you will not push back against the volume let’s say.

So this is one of the options we are thinking of. However, I want everybody at the sound of my voice to know now that we have gotten the results of the ID and the undisclosed is coming next, I know ask something tangible in my hand except to just my word and my contacts in the industry I will be hitting the road in order to ensure that we get a partner but that partner must be on our terms or at least very fair to our stockholders.

Unidentified Analyst

Makes sense. Makes perfect sense. The question if I might, can you comment on Epic’s recent sale of shares over the last month or so, is this to cover their milestone payments to Elite?

Nasrat Hakim

Let me comment on that, even though Epic really will be in the best position to do that, but I will make an exception. I looked at the paperwork that we have through Carter and Dianne, Epic first the directors, Dr. Nigalaye and [Jay] have never sold a single share of the shares they personally owned. Second, the company, as a company has the right to sell 1% per quarter of the shares they own and they have not fully exercised that right. Epic is a company that’s running a lot of bioequivalences and biostudies themselves and also made an investment. So yes, they have sold some shares, wanted to raise money to pay us or to go ahead and pay for some of their biostudies, I am not sure, but all I know is that, what I know for sure is that they definitely are not exercising as much as they can or they are capable to under the law.

Unidentified Analyst

That’s what I had part. I just wanted to ask for clarification. One last quick question from you Nasrat, I ask you to speculative a bit. But given the recent court case or a federal judge rule that Teva did not infringe upon any of Purdue Pharma’s valid patents related to OxyContin, if that court cases upheld, how will this impact at least intellectual property rights if at all?

Nasrat Hakim

I don’t think it is practice at all. Technology is profoundly different, okay. They use a typical approach and the phase wasn’t that strong, actually it’s just thought that it’s infringing but he didn’t think it was material, but ours is totally different. It’s a pharmacological approach that does not even resemble what the case was about.

Unidentified Analyst

Okay. I was kind of just curious in terms of -- and I know that Pfizer has to pay pretty royalty fees on their technology, I was just wondering…

Nasrat Hakim

I will give a different speculation though. There will be very few players in this market because the anti-abuse is a huge market and in order for you to get in, you have to have patented technology. If you start right now, you are not going to get in 14 years from now, well partners with somebody that does. So we are in a great shape and need to be dancing with the (inaudible) of this world and the Purdue’s of this world and the Pfizer’s of this world and I really welcome that because at the end of today it will be a very few players and ton a billions of dollars.

Unidentified Analyst

Sounds very nice. Appreciate your time gentlemen. I will call through the floor so somebody else will ask the questions.

Nasrat Hakim

Thank you, Steve.

Operator

(Operator Instructions) Our next question comes from the line of Chris. Chris, your line is live.

Unidentified Analyst

Can you hear me?

Carter Ward

Not very well.

Nasrat Hakim

Yes, speak up a little Chris, we are having trouble.

Unidentified Analyst

All right. Two-part question. First one is quick, the investor rights documentation, can that be found online anywhere?

Nasrat Hakim

Yeah, that’s filing, that’s in 8-K or 8-A, I think that was back in November, you go to sec.gov, you go to all these places, you’ll see it.

Unidentified Analyst

Okay. Second part, the Lincoln Park, the $10 million funding commitment, what’s the status on that, Nasrat? Can you disclose how much has been borrowed and are you going to look to exhaust that first before you move ahead and look for additional funding?

Nasrat Hakim

Well, it’s already in place, so that as far as exhausting it or utilizing it that would be the way to go. If you look at our statement of changes in stockholders deficit, it’s F-4 of our financial statement, you will see that through December 31. We had utilized roughly, trying to just give you the -- it was roughly around $4 million.

Unidentified Analyst

Okay.

Nasrat Hakim

Sorry, $3.5 million as of December 31, and we have been drawing down since then.

Unidentified Analyst

Okay. All right. That’s it for me.

Nasrat Hakim

Thank you, Chris.

Operator

Our next question comes from the line of Craig. Craig, your line is live.

Unidentified Analyst

Gentlemen, obviously congratulations on the progress so far. I actually had several questions. You could take any of them at any order. When you discuss the three valuations that reduced or generated or developed in and coming up for the shareholders rights plan, I was just curious we go from $0.40 to two-tenths to [275], if you could articulate what was the principal factor, the difference between $0.40 and two-tenth on the valuation. I am curious as to what the make up of that was. That’s one question.

Secondly, if you could give a little guidance for that suite of products that is throwing off the $1.5 million in revenue or you able to give any guidance for fiscal 2014. And then the two other questions, one short though, what the status is of any patent so far on your proprietary delivery system? And regarding the potential partnerships that you are talking about and talked about on Presidents Day, would you be looking ideally for marketing and royalty type of an agreement with the big strong partner or are you looking for something along different lines?

Nasrat Hakim

Okay. Let me start from the bottom, I can hear number two, but I will start with the partnership. I am a very, very open-minded person. A partnership to me is a case where you look at what are the stockholders going to be getting. If somebody wants to just market the product, it will talk, not my preference, I need somebody putting some money into the company so I can do multiple trials. If somebody wants to pay me something cost, pay for the clinical trials, payments upon filing and approval and go for a certain split, I am open-minded and the amount of money will determine what the end is.

I have no issue with any of that. I have no issue starting a joint venture and we have done that before at other companies I have worked for. And I have no issue going myself with this is my least favor, even though we can do it because that’s would mean, I’ll have to slowdown some of my R&D ambition and right now I’m feeling by having him run about at least half a dozen anti-abuse formulation for us to move forward with. So the bottom line is anything that is buyable that make sense, that’s in the stockholder best interest, I will evaluate.

With respect to the patent, yes, we have a third patent regarding the all -- I have signed all the paperwork if they receive. It has been allowed this about a month ago…

Doug Plassche

More than that.

Nasrat Hakim

More than that, so I expect within the next couple of weeks it will be issued. Once it issued, we will issue a press release, usually we wait till it issued. The fact is when it’s allowed, it’s almost as good as done, it’s a matter of paying fees and a little bit of timing, the process we have changed at the U.S. PTO and moving a little slower, so this one will be coming soon, okay. The second question, Carter, if you can take that, I didn’t hear what it is?

Carter Ward

The valuation?

Unidentified Analyst

Yeah. I mean, [two-tenth of 275] is one thing but $0.40 to the two-tenth, I’m curious is to what assumptions were in that, that cause that, was it simply the approval of these products and was the $0.40 based on non-approval. I mean, I’m just trying to understand the gap there.

Nasrat Hakim

I honestly don’t know, even though I step in few of the meetings but the experts who were there. Carter, maybe you can answer.

Carter Ward

Yeah. Craig, you have to understand the scope we’re looking at, the nature of these valuation it encompass not just our products or our cash flow, our future discounted cash flows and revenue projection. But they also took into account various macro factors that would have to do with the overall economy, the interest rates, whether the timing of approvals, whether or not we got approvals.

Just the general direction of the stock market as a whole, where financing was coming, what financing would be available, as far as investment bankers are concerned. So the $0.40 they called that, the most pessimistic, where everything was falling apart, things weren’t working as we thought. They are trying to take the most conservative approach. The economy was tanking, no money was available, slowing down our product development, problems with the FDA, you name it, that’s the worst case scenario, okay.

Unidentified Analyst

Okay. Well, that’s kind of we’re always getting to. In other words, I felt that that was probably pretty much, so you’ve answered that question. Can you give us any guidance as to fiscal year 2014 as to the present suite of products and what kind of growth we can expect in revenues?

Carter Ward

You’re talking about the current products?

Unidentified Analyst

Yes.

Carter Ward

Something we generally haven’t been giving that type of information out.

Nasrat Hakim

Let me do this, I don’t have exact numbers for you, but let me give you couple of numbers for. It’s rather been which we’re filing and notice we said we’re filing the CBE-30 next month, okay. And then it goes into FDA and they’ll decide how fast the 30 days accounted. That product is a $6 million product and there is only 1 player into market, that’s Actavis. Dantrolene is about $12 million to $13 million product and there is one play in that market.

So once they get approved, we can give you projections on what you could make. Right now we need to get through the FDA approval hurdle and start working on that direction on filing and all of that. We’ll get the next question probably sometime midyear.

Unidentified Analyst

Okay. Lastly in your press release this morning, you mentioned that the study that show particular trial of the product shows superior results compare to our product. I was curious if you could identify that product and the company. And lastly what type of increase in outstanding shares would you be seeking on the common and when do you think that proposal would go to the common stock holders?

Nasrat Hakim

With respect to the company, the reason we wrote it down even though we know the company’s name and have their data is because the legal team asked us to so we now reportedly verbally when we couldn’t do it in writing.

Carter Ward

Yeah, you’re talking about with regards to potential increase in authorized shares, is that correct?

Unidentified Analyst

Correct, yes.

Carter Ward

Well, that’s something that we’re currently evaluating and we haven’t made any decision yet on that and so the decision will be made shortly. And when that happens, it will be announced to the public.

Unidentified Analyst

Well, gentlemen, thank you very much and obviously congratulations on everything that you’ve all accomplished so far. We appreciate your hard work.

Carter Ward

Thanks you very much, Craig.

Operator

Our next question comes from the line of Stanley. Stanley, your line is live.

Unidentified Analyst

Congratulations gentlemen. (Inaudible) that stock is finally moving. Just two questions. What is the success of this trial mean to Elite, that’s number one? And number two, how will it generate additional revenues going forward?

Carter Ward

Okay. As to the first question, this is a huge. It validates the company and technology and Stanley as you heard me say earlier, I have talked to several international pharmaceuticals company and believe me it was all a best of solicitation. A Chairman or CEO would call be or I’ll be talking to a colleague who is CEO of the company and they will become really interested.

I have not been pushing because I needed something in my hand that’s tangible to put company's reputation and mine on the line. I want us to first go through these trials. So the first step is the one that we went it through right now, which I’m very happy with the results. And the second will be, the results will get them on. That is huge for us, okay. That really validates the company’s technology.

On a large scale, a BE study, we’ve never done a BE study on nine debuts in the history of this company. So, next month and about two and a half weeks, we are going to have the results for the first time on a full bioequivalency on our ART technology. Okay, got it? The second thought was about the revenues.

Unidentified Analyst

The second thought was, how will this generate additional revenue going forward to the late quarter?

Carter Ward

Okay. Well, having the data, the most likely scenario is having the data and the proof of the product working. There’s only a lot of interest with potential partners and so probably what’s going to happen in the short run or short to medium-term is that the fact that we’re able to demonstrate clinically that this product works will lead to a partnership deal. Right now, there is a lot of discussions and a lot of interests. And I’m just saying, okay, well, you are going to have some results in the next two to four weeks, so let’s see how it works.

Unidentified Analyst

Okay.

Carter Ward

So that’s going to be the catalyst. We are not able to get a good deal or a fair deal. This just brings us further down the road to commercializing the products ourselves where the money would be greater but the timeframes would be longer.

Doug Plassche

Carter, I spoke you to several times about the possibility of reverse stocks split, that’s still something that we might be looking at going forward. This could affect number of shares outstanding. It really holds back other recreations from looking at your stock.

Nasrat Hakim

Let me add on Carter’s behalf, because I feel very strongly about this point. Someday, we may have a reverse split. Today, I’m absolutely certain, if we have a reverse split because again everybody is looking at us, as if we are already a fully functional, commercial manufacturing company, they are going to start looking at the fundamentals and the stock will start to gravitate back to a penny start.

I will not do that to the stockholders. We will have some kind of a reverser split once the stock gets to a dollar, once we have a partner, once we finish, one we file and I do believe on the rate we’re going, we’re going to be filing an application this year. And we’re going to be launching by the end of next year. So that’s when we start to have fundamentals, then I feel more comfortable then yes, we’re going to protect the stockholders. And if I have a reverse split then the institutions will take over and will take it further. But at this time, it doesn’t make any sense to me.

Unidentified Analyst

Okay. Thank you so much.

Carter Ward

All right, Stanley. Thanks a lot.

Operator

Our next question comes from the line of Neil. Your line is live.

Unidentified Analyst

Yes, my question was just answered. Thank you.

Carter Ward

Okay, Neil, have a nice day.

Unidentified Analyst

Thank you.

Operator

Our next question comes from the line of Joe. Joe, your line is live.

Unidentified Analyst

Hi, Carter, I guess this question is to you. I’m just curious if there are any limitations to the shareholder in regards to the poison pills? Specifically, are the number of shares that could potentially be purchased by a shareholder be limited to a specific number?

Carter Ward

Well, terms that we have to keep in mind that the poison pill only comes into effect if somebody acquires, I believe it’s 15% and then may refuse to negotiate terms with the company. So we are not aware of any situation where such thing actually happens in corporate history but what happens is if the poison pill does come into effect, there are rights attached to the shareholders. It’s a complicated calculation but basically it allows the shareholders to buy a number of shares at half the ongoing market price. The number of rights they get is proportion also the number of shares that they own and it gives them the right to purchase those same number of shares at half the market price.

Unidentified Analyst

Okay. So they would be limited to whatever they hold at the time that the poison pill would be in effect, at half of the cost?

Nasrat Hakim

Yeah. I mean so this is how it works. It creates a lot of dilution which makes it very unattractive for what’s called an acquiring person. This is a person trying to do the hospital takeover. That person does not get these rights. They are excluded from these rights. So they would be buying, offering or trying to buy up the shares, you know at something around market or even above where as everybody else would be able to buy it half the price.

Unidentified Analyst

And this would be triggered at 15%?

Nasrat Hakim

Well, at 15% and after I think 10 trading days, there is a bunch of things that have to happen.

Unidentified Analyst

Okay.

Nasrat Hakim

And mind you we have not found a single situation where this is actually come in to play. Now that it hasn’t happened but it’s very, very rare if it does and we were unable to identify a case where a poison pill was actually trigged.

Unidentified Analyst

Okay. Great, thank you so much, sir.

Nasrat Hakim

Okay. You are welcome.

Unidentified Analyst

Take care.

Operator

Our next question comes from the line of Matthew. Matthew, your line is live.

Unidentified Analyst

Good afternoon guys. First of all, congratulations to you for all of your hard work and terrific quarter. A few quarters in row you guys, the company has been fantastic. Now my questions revolves around Nasrat which you noted earlier before, fixed product that you had Doug working on is about 15 of recent term product that you kind of have in the Q that you are looking at. Can you compare Elite’s product development time lines and cost to some of the other technologies out there like [1V Technologies] and Pfizer using some of the physical approaches. Is it cheaper, is it more efficient because I see that as a bit of a differentiating factor, Nasrat if you could put on that?

Nasrat Hakim

Thanks. I don’t have data for other companies but I do have data for the clinical entity that we deal with because they deal with the same ones. The cost, other than for raw materials, the cost is identical. Now when you conduct a BE study, they brought samples and all the analysis of standard price, when you conduct anti-abuse study which I talked about earlier, the snorting and the IV and the oral, that cost is about $5 million if you do all three whether we do it or Pfizer does it. And as I said there is only two labs in the entire America, one in the U.S. and the one in Canada that perform this.

So all the costing in getting the product to the market, barring the raw materials is identical. Which material is more expensive, I am not sure. I think for Pfizer for example they use Naltrexone and say it’s the same for -- it may be a little cheaper because they are using polyox but overall it doesn’t have material impact.

Unidentified Analyst

Okay. And then the fixed products and 15 products and the QOB is different, coupled with different ADIs or the different strength of similar ADIs?

Nasrat Hakim

No actually, these are all different ADIs, with different technologies. Let’s say the twice a day and once a day get count twice but we have several molecular entities. We have a minimum of five which you can probably guess all of the opioids and in addition to making them in different configuration.

Unidentified Analyst

All right. I think that’s all I had. Thank you very much.

Nasrat Hakim

Thank you.

Operator

Our next question comes from the line of Andrew. Andrew line is live.

Unidentified Analyst

Gentlemen, first of all I want to say congratulations on all of your success that you are holding for a while and good to see that the stock has finally start to move up. All my questions have been answered except I just have a small one regarding your five commercial products pending site transfer, how if at all will that affect the stock price?

Doug Plassche

Its financial. Okay. You can take it.

Carter Ward

I wish I know how things affected the stock price. I could tell you how it affects the company. And that is, I mean obviously when the products -- when the site transfers are approved, there are various milestones that will be generated and in plus there will be sales in the market and we get our share of the profit from those sales. So we are talking about a very important revenue to the company, very significant revenue for the company. It’s a big deal for the company, it’s very important for the company and I would imagine that this would be viewed positively by the investors.

Unidentified Analyst

And how should you anticipate any of these site transfers to be happening in the next 12 months?

Carter Ward

Well, yes all of them are within the next 12 months, we are probably get a file, the Isradapine in the month of March itself, and the other products, so they are probably all go before June.

Doug Plassche

We are filing CBE therapy and/or -- within the steady base we have the right to launch unless we hear otherwise from FDA. So if we file MRs, we could possibly have products in the market by the end of April let’s say but again unless there will be a FAS well, hold off (inaudible) something else that’s why we are not giving you exact date.

(Inaudible) has given us a very nice project plan which shows that they intend to file all the others by June and they have already hired, I believe, head of sales and marketing in order to start selling these products. So once we get over the FDA hurdle, then we will give you better prediction.

Unidentified Analyst

Okay. Thank you very much gentlemen and congratulations again.

Doug Plassche

Thanks Andrew.

Nasrat Hakim

Thanks Andrew.

Operator

The last question comes from the line of Brian. Brian, your line is live.

Unidentified Analyst

Good afternoon gentlemen and thank you for all your efforts so far. I have a question regarding Isradapine, I guess, we are under the assumption or I was under the assumption that Epic would be manufacturing these and according today’s release, it looks like Elite will be manufacturing. Could you touch on that?

Also, Doug, could you touch on capacity of the facilities and we are -- with that if we are looking at may be doing a second shift. We know that there is, you have some applications out there, you are looking for some more help inside the production facilities. If you could touch on that, also how many employees are currently employed and Carter if you could may be touch on the dividend that go along with the Series I, I have a couple of questions on that, just I am not sure what’s going on with those. So if dividends will be offered what’s the scenario there?

Carter Ward

The last one is easy, there are no dividends in the Series I.

Unidentified Analyst

Okay, so…

Carter Ward

You want me to work backwards.

Unidentified Analyst

Yes.

Nasrat Hakim

Let me take one of them. With respect to Isradapine, you are correct. Initially we wanted Epic to run all the product but now it’s becoming obvious for all of you guys, we really did not wanted distraction. I wanted to focus on the anti-abuse technology because we are working on a lot of products and here is the diagram I disclosed here anti-abuse product.

However, in Isradapine, I chose to make an exception for the following reason. We had the machine here because I contracted with Elite to start making the product for me. And we bought another machine which we had also ready to go because of the ease of making the product at this facility. And we can do it so much faster than transferring it to Epic mobile equipment over there, we decided, let’s go and have this done and obviously I was right because we have done before they are, their target is June and we have done right now. So this was a win for us. We pick this up because this was a low-hanging fruit and it was successful.

Unidentified Analyst

Does that also mean that you get a larger percentages of sales?

Nasrat Hakim

Well the contract address is exactly what we do in all of that. I can go into detail but the contract addresses if we make it, if they make it and what happen and all that stuff.

Carter Ward

We would get a margin on the manufacturing.

Unidentified Analyst

Sure.

Doug Plassche

Yes and regarding staffing and capacity, we are nowhere near capacity even at a single shift and right now I think we have 30 people total.

Unidentified Analyst

Okay.

Doug Plassche

I am sorry? 31.

Nasrat Hakim

32

Doug Plassche

32 with the new hire. Okay. And we really only have one open position for more of an R&D technician to help us with the new products. Yes, so I don’t see any problem with capacity. We shouldn’t have to add a second shift unless Isradapine takes over the whole market just from a pure processing time. We may have to have a scale within the second shift.

Nasrat Hakim

These are the full times employees.

Doug Plassche

Right.

Nasrat Hakim

So we have consultants who also bring in lab people but the consultants will convert once several things happen and so on.

Unidentified Analyst

Okay gentlemen. Thank you.

Carter Ward

Okay Brian. Thanks for your time.

Nasrat Hakim

Thanks for your time. Ladies and gentlemen, I would like to thank you very much for joining us today. It’s a very good day for Elite. We will update you in March. We are not going to call in another conference but we will definitely issue a press release regarding the BE study.

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