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I am a long term value investor that looks for small Biotech companies that are highly undervalued and have game changing technologies.
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  • Elite Pharmaceuticals (ELTP)--Intellectual Property (IP) And The Right To Devise A Better Pain Killer!

    On May 22, 2012, Elite Pharmaceuticals (OTCQB:ELTP) announced the issuance of U.S Patent No. 8,182,836 entitled "Abuse-Resistant Oral Dosage Forms and Method of Use Thereof". I would argue that this was the single biggest event in the history of the company and yet the stock is sitting at .07 cents. Jerry Treppel the CEO made the following succinct comments last July about the event that sums up where the company is trying to head.

    "....first is on our excitement over the patent and why we view it at as such. The patent, just to be clear, is a generalized approach to how to develop an abuse resistant product. It's important to remember that it's not specific to any one product. It can be used basically for any opioid.

    "My vision is to create a line of abuse resistant opioid products using our patented technology. Push comes to shove, that's where the value -- the true large value of the Company is in the creation of that line of abuse resistant products. Nobody in management is working to see this Company grow by million-dollar increments."

    Devising a better painkiller is big business and about to get even bigger. On January 9, 2013, the FDA released its new draft guidance document, titled "Guidance for Industry: Abuse-Deterrent Opioids - Evaluation and Labeling". The document discusses what it will take for an opioid formulation to secure an abuse resistant label. The implications for companies that meet these expectations are significant and even more so for those that meet these requirements and have patented abuse resistant technologies.

    The FDA is becoming more proactive in the war against opioid abuse. The uncertainty and sticking point is whether they will block generic copies of earlier opioids that are more easily abused. The agency is under political pressure to do so. In a letter sent to the FDA in March, 48 state attorney generals called on the agency to require generic makers to produce tamper-resistant versions of opioid medicines.www.naag.org/attorneys-general-call-for-....php

    Additionally, there is a bill in the House of Representatives called the Stop the Tampering of Prescription Pills Act, or STOPP. If passed it would require the FDA to refuse to approve any new opioid product that did not use formulas resistant to tampering. Hal Rogers R-Ky one of the Congressmen who introduced the bill has been quoted as saying "If the FDA will not act boldly, then the Congress will." Clearly, political and societal pressure is only going to continue to mount to require pharmaceutical companies to develop abuse deterrent opioids.

    The reward for companies that are able to formulate newer opioid pain killers are immense. The problem is it is extremely difficult to formulate an abuse deterrent opioid that meets the FDA's official stamp of approval. Companies such as Pfizer (NYSE:PFE), Pain Therapeutics (NASDAQ:PTIE), Durect (NASDAQ:DRRX), Acura (NASDAQ:ACUR), and Endo (NASDAQ:ENDP) are continuing to experience this difficulty on a regular basis.

    Purdue's original Oxycontin garnered $3 billion dollars a year before the company took it off the market because it was so easily abused. Endo garnered $384 million dollars in 2011 on their Opana ER drug. It was expected to push upwards of $800 million before the FDA denied their citizens petition to block generic versions of it. The FDA decided Endo's tamper resistant formula doesn't prevent drug abuse significantly better than earlier versions that weren't designed to deter abuse. www.fda.gov/Drugs/DrugSafety/ucm351357.htm Acura had received an aggregate of $78.5 million in payments from Pfizer before Pfizer returned the rights to three of Acura's products it was developing using Acura's abuse deterrent technology.

    Further, based on guidance from a recent meeting with the FDA, Pfizer regarding Remoxy said, the company expects "years of delay" and "additional cost" to respond to concerns from U.S. regulators by no sooner than mid-2015, according to a letter Pfizer sent to Pain Therapeutics May 9th. www.sec.gov/Archives/edgar/data/1069530/... It seems Pfizer is also considering returning the rights of Remoxy to Pain Therapeutics.

    Thus companies have to show that there abuse deterrent technology deters abuse in meaningful ways. So far Purdue's OxyNeo has been the only product to gain the FDA's stamp of approval and yet ironically it is easily defeated with common household items such as a microwave or Coca Cola and lemon juice.

    It is with this backdrop that Elite Pharmaceutical investors are eagerly awaiting one of Elite's abuse-resistant products to begin human trials. The CEO said in February this event will happen in the near future. The company was waiting to secure funding prior to proceeding further. It did so last month by obtaining a $10 million dollar commitment from Lincoln Capital. Elite has two patents for their abuse resistant drug formulation ELI 216 but still needs a product on the market before it can access the multi-billion dollar pain management space.

    Elite's Intellectual Property (NYSE:IP) Implications

    As mentioned, Elite received a patent last May for their formulation and polymers used to sequester Naltrexone. It is the agonist/antagonist pharmacologic approach to abuse resistance. Pfizer uses a similar one bead approach with Embeda and their ALO-02 product in Ph3 trial. Elite uses a two bead approach that looks to be more stable and easier to scale up in large batches. It works by combining the agonist(Opioid) with an antagonist (Naltrexone) and should the drug be tampered with, it releases the Naltrexone and negates the euphoric effects of the opioid. The formulation is not abuse deterrent but abuse resistant as it proves resistant to cutting, grinding, chewing, and dissolving for injection. This patent expands the IP into methods of making a drug abuse resistant. They have additional patents pending to expand their IP in the abuse resistant space both in the US and internationally.

    Elite is developing for itself ANDAs and NDAs opioids based on its extended release and abuse resistant two bead technologies. It is also likely developing these technologies for other companies through various R&D contracts. It is thought that such an opioid is being developed for Mikah Pharmaceutical via Actavis as a NDA 505b2 product that may be a "better Embeda". Additionally, another undisclosed NDA is being developed likely for Epic and/or Actavis and may also be for an Abuse Resistant Technology (NYSE:ART) opioid. So the question is why did Actavis, the third largest generic drug company in the world, come to Elite through a "shell" company to develop a 505b2 NDA product? The answer is that Elite owns the IP rights to build a better Embeda that Actavis needs. Patented IP that Elite owns for 20 years.

    On a related note, as mentioned Purdue's original Oxycontin is now off patent. The FDA requires any approved generic oxycodone to carry abuse deterrent technology. Thus, Elite has the potential to be the first company to market a generic twice daily abuse resistant oxycodone. They also have the ability to license their technology to another company such as Epic. The same company that saved Elite from bankruptcy back in 2009. Elite has a partnership with Epic to develop 8 generic products. It would not be surprising that one of these generic products be an abuse resistant oxycodone product. As part of their alliance, Epic's president is handling chief scientific officer duties for Elite that entail product development and design. Purdue sued Epic over patent infringements on their original formulation of Oxycontin. If Epic plans to market an oxycodone product based on their Anda it will need to entail abuse deterrent/resistant technology. Technology it does not own. They will likely come to Elite for such technology.www.law360.com/articles/411658/purdue-hi...-suits

    Elite's abuse resistant and extended release technology is what the company was founded on. The company to date has spent in excess of $100 million dollars in R&D costs related to the development of these technologies. Here is where Elite's ART becomes a game changer. Every patented abuse deterrent/resistant technology is going to be different from other approaches, even if only slightly different, and therefore produce different effects. Given Elite's technology it has the potential to put out a branded one of a kind NDA Hydromorphone/Naltrexone product. So if the FDA continues to move in the fashion it looks like it is heading a company such as Actavis (NYSE:ACT), who owns the generic rights to every abuse deterrent/resistant product on the market except one, Embeda, would not be able to submit much of Elite's supporting data to the FDA.

    In essence, Actavis would not be able to use either Elite's manipulation and extraction studies or the clinical abuse potential studies used to obtain their NDA approval and abuse resistant labeling status. Even if Elite wanted to let Actavis use their reference listed drug (NYSE:RLD) data the FDA would not let Actavis. To move forward with their ANDA submission, Actavis would need to either license Elite's technology or come up with their own abuse resistant technology and see what the FDA would say about doing so? What the FDA would do in the latter scenario is unknown. As such, Elite by owning this patented technology prevents generic competition. It does so by preventing a generic manufacturer from replicating the data needed to present the same label as the RLD to the FDA.

    It is when you understand the immense financial value of Elite's patented Intellectual Property (IP) along with the aforementioned push to curb the nations' prescription abuse epidemic and depending on how Congress and the FDA move, it would seem Elite could easily be in the midst of the Perfect Storm that is already brewing in the abuse deterrent space.

    Elite has previously been given the green light to commence Ph3 trials with their signature once daily oxycodone/naltrexone product. Should Elite be able to pass Ph3 trails, this would be a Game Changer in and of itself. However, when you consider Elite's IP rights for their patented Abuse Resistant Technology (ART), its licensing potential, and the ability to put out multiple abuse resistant products, generic and branded, then the possibilities become absolutely staggering. This staggering possibility is better understood when you realize that shares bought now before trials begin have the real potential to set one up for a really nice financial windfall within the next few years. After all, Elite has technology that is going to give Purdue and Pfizer a run for their money in the abuse deterrent/resistant opioid space.

    "If you look at the abuse resistant market and you look at some of the problems that other companies have had in manufacturing their products on a consistent basis, we think one of the big advantages that we have is that we have a system that can be consistently manufactured over and over again with many different products. And we think that's attractive. We think that's very attractive."

    Jerry Treppel - Elite Pharmaceuticals, Inc. - Chairman and CEO

    I'll close with a link to how one investor thinks of valuing Elite in it's current situation.

    (You need to copy and paste the entire link into your browser to see the post.)

    investorshub.advfn.com/boards/read_msg.aspx?message_id=87679926

    Disclosure: I am long OTCQB:ELTP.

    Additional disclosure: These are solely my opinions and have come to me over considerable time through my own hard fought due diligence on the company....do not buy shares on my opinions. Do your own DD and make up your own mind related to ELTP.

    Jun 11 6:13 AM | Link | 4 Comments
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