Elite Pharmaceuticals, Inc.
Q3 2021 Earnings Call Transcript

Published: 17 Feb 2021

[Operator:]

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 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.

[Nasrat Hakim:]

Thank you, Paul. 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 CFO, Mr. Carter Ward, 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. Mr. Ward, you have the floor.

[Carter Ward:]

Thank you, Nasrat. And thanks everyone as always for calling in today. Yesterday, we filed our 10-Q for the quarter and the nine months ended December 31, 2020. We're on a March fiscal year, so the December quarter is the third quarter of our 2021 fiscal year. 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 seven 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 December 2020 were $6.05 million as compared to $5.05 million with the December 2019 quarter, so that’s $1 million increase or 20% as compared to the same quarter last year. The increase was driven by revenues from generic extended release Adderall, which was launched on March 30th of this year. We also saw strong growth as compared to last year for generic immediate release Adderall and generic Dantrolene capsules. Our other products Isradipine, Phentermine, Phendimetrazine and Naltrexone also continued their consistent performance, with continuing solid contributions to revenues. While Phentermine, Naltrexone and Phendimetrazine do provide a stable revenue as they've done for many years now. It's the generic Adderall, and Isradipine products that continue to stand out as the growth driver, both retrospectively as evidenced by revenues reported and prospectively, with certain factors seeming to indicate additional future upside for these products.

[Nasrat Hakim:]

Thank you, Carter. I’m going to cover a five points. The first is a safety update. Second is research and development. Third, commercial and current products; fourth, recapping financials, and fifth Q&A. Regarding safety, we operate in a pandemic. COVID-19 is a pandemic that is affecting us all. It is affecting Elite. It's affecting our suppliers, service providers and sales and marketing partners. We are following local and Federal guidelines and the CDC recommendations. We created an implemented employee protection plan that includes employee training, daily temperature monitoring, social distancing, wearing masks, appropriate attire, washing hands, proper hygiene, et cetera. We also staggered the shifts 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 airflow in the manufacturing rooms. In addition to hyperfiltration, we installed UV lamps to ensure that if viruses and bacteria reach an air conditioning or a heating ventilation or duct, then they'll be killed before they end up in someone else's office. All non-essential employees have been given the option to work-from-home, because safety measures are very high at Elite. Why I update you on safety every quarter? Because these safety measures protect the employees, which protect the business continuity of this company and that protects the shareholders and the patients. Regarding research and development. Now that we are cash positive, our first priority was to secure enough cash to cover working capital and facility maintenance. We have achieved that. The second priority is research and development.

[A - Nasrat Hakim:]

You've sent quite a few questions to Dianne. And we group them as always, because many of them are duplicates or address the same issue. The first focus on the new hire, Dr. LePree, discuss the addition of Dr. LePree to Elite's team and reason for hiring? What he will do for the company? What he will do in his new position? Another question, last month Elite announces hiring of Dr. Jason LePree to bolster Elite to develop a new products and facility improvement. Can you provide additional insight to a layperson about the type of work Dr. LePree will be doing for the company? Is Dr. LePree in-charge of starting new projects or continuing other projects? Is the hiring/rehiring of the new employee related to renewal or continuation of cluster stocks? I've addressed most of the issue about Dr. LePree. Dr. LePree’s hiring was 100% to boost our R&D pipeline. As I stated before, the partnership with SunGen was wonderful for both of us. But when we parted ways, all we had to do is bring in an R&D formulator. What they had to do is create an empire new company. All they had really is R&D. We had everything else, except for which we did before. But we tapered that down, because they took on that role. So Dr. LePree will be filling that role. He will be evaluating the products that we already have, such as the central nervous system product. And as I said, we will be moving in few weeks and running a clinical trial to evaluate that product. So Dr. LePree will decide if you need to run an IV, IVC in vivo, in vitro coloration, change the formulation or find it to be successful and move forward. His responsibilities also include, looking at all the things we have done at Elite, when we worked on projects, but never took them to clinical trials, because we didn't have any money, okay? Less than a year ago, as Carter has updated everybody, we barely have money for working capital. Now that we have money, we will start working on testing these things that we've done before. And third, he will outline and new ideas and new products from scratch and start testing them, and see if they are viable as well. So his role is everything that you've outlined here he encompasses all of it. Even though Dr. LePree was with us before when we worked on SequestOx and he is very knowledgeable in ART technology. That's not his function here. And that's what we're going to be doing, and I'll talk about that a little later some more. Next sets of questions are about the share buyback and mergers and what have you. So can you please come up with a plan that would stop dilution or reverse dilution like pay the CEO in cash not in shares, as much as I would love that, that would help the lead because if a lead pays me in cash, they will not have that cash both in clinical trials and R&D. Okay. Paying me in share does not hurt their cash flow and then they can invest more on R&D, which brings better value for the stockholders. Have the CEO buy shares in the open market? Okay. I'm getting the shares from Elite. And this way, Elite will keep the cash. But if Elite gives me money and I go ahead and buy shares on the open market that would hurt Elite, because they don't have any money. And I'm at the same point having the same shares. So it's really is in Elite’s best interest, not mine, for them to pay me in shares. And a proposal on buying back shares every quarter, same thing that is really a very smart idea. However, we don't have a ton of money. If we invest this money in something that will bring a return on investment, such as Amphetamine IR and ER, we made a big investment in that and look what's happening right now. If we invest in new products and we hit the right product, we’ll do very well. If we buy back shares that does not affect the company much, it may increase the share price a little bit. But that does not generate revenues, or profits. An email from a long time shareholder EH, I chose to answer this question. I usually don't do that, because I really want to make a point beyond the question. The question is about rumors of possible merger, and also selling shares in private deals. Can you promise me to abandon it? Don't believe all the rumors here. I've been with this company for seven, eight years now and not getting paid except in shares that I don't see because Carter keeps them actually.

[Carter Ward:]

We haven’t issued the shares for many years.

[Nasrat Hakim:]

If obviously, I want to sell my shares in a private deal, I would have done that long time ago. I have a commitment to this company. We have gone through a lot with the FDA and the ART technology and the chain environment and what's happening in China, what happened in SunGen, and we still prevailed. We are now at the point where I would like us to be. But we definitely are, as costs are articulated in a million times better place than most companies, at least we kept the lights on even though Elite was never profitable till recently. And we have enough money to continue with R&D without having to worry about that. Because, if we had the – the same thing that happened to a company like Acorn, that borrowed a billion dollars to buy new products and when they did not materialize, ended up bankrupt. And the low-end the stockholders lost everything. Okay. That – the same thing would have happened to us. We diluted the shares, yes, we brought in more partners. But today, the company is safe. And nobody can say, we're going to go to bankrupt and lose everything, okay. Development products, somehow this central nervous system product disappeared from the pipeline, please provide more detailed information as to the pipeline of the company, or this will be a blow to the morale of the investors? As emphasized earlier, this is a very important product for us. And it's the first of block of lobbyists taken on. Now what you saw is Dianne is trying to update our website. So we have the pain products, which we needed to remove, because we don't want to be a part of the lawsuits. And second, this was a part of the co-development products with SunGen. And we’ve removed those as well, okay. We will state something different on the website soon as soon as we're finished upgrading it. New partnerships, can you disclose any new partnerships? When it's relevant, and when it's time I can. I can just do that because somebody asked me. However, we have a partner that we signed with for sales and marketing, but since we have not gone to the markets with the product, we haven't disclosed them. We will do that when we launch the product. Adderall and Mikah, could you address that?

[Carter Ward:]

Okay. There was a question about, right about the Adderall and the Mikah, and the question was, let me see, does Mr. Hakim have a plan to allow Elite to acquire the profit split portion of the Adderall product that Mikah acquired from SunGen? So, first, let's take a – take a step back. SunGen, when we were developing the product, SunGen invested a few million dollars along with the Elite to develop the products. I mean, that's what it costs to develop these products. So, in return for that, we each get a share of – an equal share of the profit splits that are earned. So SunGen then offered their rights to their portion of the profit split to Elite. Now, at the time, we were not able to fund such an acquisition, so we had to decline their offer. And then Mikah bought the rights from SunGen, the same rights on the same terms that were offered to Elite. So, which was a good thing for us, because it's better that Mikah holds it than somebody else that doesn't really have our best interests in mind. So we hope in the future that Elite will be able to acquire these rights, when we're able to do it. And it's just better for us that the rights are held by Mikah. It's easier to deal with Mikah, obviously, as opposed to some other party because Mikah does have Elite’s best interest in mind, and a true third-party would not. So that's where we stand on that.

[Nasrat Hakim:]

Thank you, Carter. The last question is on the ART technology and SequestOx. I'm going to – not going to read all of them. I'll just go ahead and jump straight to the answer. We are not and we will not be working on the ART technology in conjunction with opioids. Let me repeat that. We're not going to do that in conjunction with opioids. I'll give you a simple example. You probably read already last week, McKinsey, a consulting firm. All they do is give advice. Just about every company I've worked for, they bring in McKinsey to give them advice on how to run their company. And these guys do absolutely nothing except give verbal advice. They have never made a pill, a pain pill or any pill in their life. They just got fined $500 million or settled $570 million with a couple of states, because they alleged that they contributed to the opioid pandemic by giving advice to Purdue. Purdue an ethics advice, but because they hired them, and these guys give them advice, they got $570 million in settlement. There is a second settlement that's going on right now also against McKinsey for another $600 million. And that barrier will cover like four of the states. That's over $1 billion for giving advice. So this is why I asked them to remove any reference to opioids. I don't want to get frustrated into this. Even though, anybody that would sue would know we're going to win, because we never sold opioids, but they go through the motions, so they can drain you out, the insurance company settled with them. And I don't want to be there.

[Carter Ward:]

Won’t give any advice either?

[Nasrat Hakim:]

Exactly. Okay. Now, our anti-abuse technology can be utilized for the agonist, antagonist products and approach. Okay? For example, it doesn't have to be opioids. It can be an agonist, antagonist, such as methylphenidate, or even amphetamines. Now, I'm not saying we're working on that or not. We're not going to discuss this. All I'm telling you is, if the product shows potential, then we will work on it. When we worked on it with the opioids, and it shows tremendous potential and we knew that we can contribute to solving the opioid pandemic, we learn from the FDA and the government that they had no interest in buying a branded product, so they can get the generic quote for their VA and other people. So that was really disheartening. So we're not going to jump in and start spending millions of dollars on utilizing the excellence of our technology on non-opioids yet, still we study the market. We're not going to hire McKinsey. We'll hire somebody like McKinsey. Tell us if there is potential, if there is, we'll invest in it. If not, it's a great technology. We have great patents on it. And it's there in our back pocket, but not for opioids now. Now, where do the opioids come in? With other foreign markets, such as China. For example, before all of this happened, I was in the middle of negotiations with a parent company for PuraCap on making the Naltrexone bid here at Elite and shipping it to China, because it's a non-control. Actually, it's antagonists. And there, they will do the opioid part, okay. And things change, and they couldn't get any money out of China after that. And whatever happens, things died out. But that would be something we'll be interested in. If you find a company in China or in Europe or India where you don't get sued, and our technology is really viable and proven, then we'll go ahead and invest in it.

[Carter Ward:]

That was the last question. And thank you all for coming today. Have a wonderful day. And thank you for your participation.

[Operator:]

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.