Elite Pharmaceuticals, Inc.
Q1 2022 Earnings Call Transcript

Published: 17 Aug 2021

[Operator:]

Thank you for holding. We sincerely appreciate your patience. Please stay on the line and we'll be back in a moment.Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a 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 expectations. 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 Cate, and good morning ladies and gentlemen, and thank you for joining us today. My name is Nasrat Hakim, I am Elite 's Chairman and CEO. This is our earnings call, and our new CFO, Marc Bregman, will give us a summary of the 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. Marc, you have the floor.

[Marc Bregman:]

Thank you, Nasrat, and thanks to everyone for calling in today. Yesterday, we filed our 10-Q for the quarter ended June 30th, 2021. We're on a March fiscal year, so the June quarter is our first quarter of fiscal 2022. A copy of the 10-K is available in the Investor section of our website at elitepharma.com. Today I'll give an overview of the financials and some commentary as well. As always, we receive questions and comments from shareholders and Elite followers, and we will do our best to address those questions today. Starting with the income statement. We posted sales of 7.1 million this fiscal Quarter, down 6% compared to the same time last year. Manufacturing revenue was down due to the timing of shipments as Lannett was building inventory last year. Although this was slightly offset by better sales of our other products and stronger licensing fees. Again, our largest product remains the generic version of Adderall for which we have a strong partner in Lannett. Despite lower sales, however, we posted an operating profit of 1 million, which is 100,000 higher than last year. This is due to a stronger margin of 14% compared to 11% last year. We posted a net income of 2.4 million for the Quarter. This included a positive fair value adjustment on our derivatives and a sale of past tax benefits. Debt income after adjusting for these one-time or non-cash benefits on both years was 919,000 for the Quarter, 130,000 higher than last year. Now turning over to our balance sheet, our working capital continues to grow to 8.5 million up 2.1 million from year-end. This is directly due to cash flow from operations combined with low debt. So to reiterate, although sales were lower simply due to timing, a strong margin resulted in income growth versus last year. As I mentioned in the last call, we continue to have revenue growth in an organic base, but it is the generic Adderall that continues to stand out as our main growth driver. Elite is strong and growing. With that, I'd like to turn it over to Nasrat to give an overview of the Company.

[A - Nasrat Hakim:]

Thank you, Marc. Our last conference call was only 8 weeks ago. During that call, I outlined Elite's goals for the next two, two-and-a-half years. In today's update, I'll make a few comments about Elite's financials, then I'll update you on safety, manufacturing facility and commercial products, our R&D pipeline, and then we'll go to Q&A. As Marc stated, our revenues for this quarter were $7.1 million. If you recall, last quarter we were in the $4 million range, the last quarter ending in March of 2021. That wasn't because sales declined, that was because Lannett sold what they had in inventory, and did not replace it all. Why do I think that? Because the profit split we got from the quarter before, where the sales were in the $6 million and $7 million range, was about the same. So that team determines how much the sales are. Depleting the inventory is a standard practice in the pharmaceutical industry, sometimes they build it and you see the effect Marc talked about, and sometimes they deplete it when they reach equilibrium and they have money. Depleting it is a standard practice in the pharmaceutical industry and a fast way to raise money for the Company too, but it does have its downside as well. The bottom line from all of this is the following, the sales, and profit from Amphetamine IR and ER are solid and getting better. As you know, revenues from the last 3 years went up from $7.5 million to $18 million to $25 million dollars. Two years ago, 18 million in revenues was the best year ever for Elite. Last year when we earned 25 million in revenues, that became our best year ever. I believe that the current year is shaping up to be our best year ever yet in revenues and profit split. You would think that higher revenues and profits would lead to higher stock prices, I understand a lot of things about this business, but I do not understand the rationale for Elite's stock movement. It seems to be inversely proportional to our performance; the better we do, the worst the stock gets. The stock was higher when we were broke and had to sell shares to survive than it is now when we are profitable, self-sufficient, and self-sustaining. As I updated you before, if you look at the genetic sector as a whole, you'll find that the stock price of the majority -- not all, the majority of the companies have been depressed over the past 5 years. I looked at and compared 5 stocks this morning

[Marc Bregman:]

Sure Nasrat. Well, Elite continues to carefully allocate our development capital, to use it wisely, however, we have done for example, on agreement with SunGen when developing new products. The deal with Mikah is modeled after that agreement. It allows Elite to execute a greater number of development projects, with the support of another party. Although we give out part of the profit through profit splits, it allows us to do a greater number of projects and diversify our risk. In a difficult and highly competitive generic industry, diversifying risk is very important, and this is why we do this.

[Nasrat Hakim:]

Thank you, Marc. The next question says it's financial in nature. And this is an interesting question, I'm not going to read the whole thing, I'll read a part of it. A number of shareholders are now worried that your strategy has now pivoted from your original goal to list Elite on NASDAQ to taking Elite private. Perhaps this is crazy speculation? Yes, it is. That said, shareholder discussion centers around your controlling interest of both Elite and Mikah and that by taking Elite private you could then merge both companies and sell both companies as one entity, leaving shareholders with nothing. If this is a crazy question Marc, please tell us on Tuesday's conference call. This is not crazy, this past crazy a few miles ago and got into the insane sort of fire proportion. I enjoy as much as the next guy reading about conspiracy theories and fake news and all of that, but this is silly. So let me officially and unequivocally state. Taking Elite private has not been discussed at all, ever, by me, by the Board of Directors, by Dianne, by Marc, by Chris, by anybody at Elite. As a Public Company, Elite would be required to go through an extensive process to go private. I lived through that at Actavis one time. And again, this has not been discussed. And why hasn't it been discussed? Because nobody brought that to my attention that, "If we do this, it benefits Elite shareholders." None. Elite stock is subject to the volatility of being on the OTC. The price is down right now. Our strategy to get it up is to develop, file, and launch new products to increase our revenues and profits, and shareholders s' value. All this conspiracy stuff you hear about taking Elite private and depriving the stakeholders or having majority control, is not true. Our focus on Elite is to make Elite profitable, and get us to a place where the stock price is less volatile and less subject to manipulation. And manipulation doesn't mean somebody is doing something illegal, a lot of people do manipulate the stock legally. One form of manipulation is with the folks from Robinhood. You can buy a stock or 2 or 5 stocks, you can spend $5 of Elite's money, or of your money to buy Elite share, and try to feel how people want to sell it and start taking it down. We are always open to evaluating opportunities that make financial sense for Elite. And we do have a ton of partners right now. We have Prasco, and Lannett, and Mikah, and TAGI, and Epic. We have a lot of partners, we need products. Are you still on track for a NASDAQ move in 2022? Let me say this, moving to NASDAQ continues to be an objective as discussed in past calls.