Elite Pharmaceuticals Inc (OTCMKTS:ELTP) shares were up 5.56% on Friday to $0.0142 and flat in after-hours trading. Share prices have been trading in a 52-week range of $0.11 to $0.44. The company has a market cap of $104.55 million at 733.72 million shares outstanding.
Elite Pharmaceuticals Inc is a specialty pharmaceutical company that is engaged in the development and manufacture of oral, controlled-release products. In particular, it 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. Its segments include Abbreviated New Drug Applications for generic products and New Drug Applications for branded products.
Elite Pharmaceuticals Inc shares are down nearly 65% since the stock’s July highs after the US FDA turned down its application for SequestOx, which is an abuse-deterrent opioid. In its rejection letter, the FDA mentioned the drug’s potential for overdose which has not been sufficiently addressed in the pending new drug application. However, this could prove to be a minor setback in the company’s longer-term strategy, which has proven to be working so far.
Keep in mind that Elite Pharmaceuticals Inc has been developing a profitable generic brand operation whose revenues offset the development costs associated with creating these products or bringing them to market. In its earnings reports, the company lists revenues coming from manufacturing and licensing fees. The former accounts for majority of revenues reported, which came in at close to $2.6 million in the latest reporting period. Meanwhile operating expenses stood at $2.4 million for the same quarter.
Moving forward, the company plans on increasing its generics operations revenues across the coming 12 months, which would potentially bring much more manufacturing fees and revenues. The company just submitted an Abbreviated New Drug Application for Percocet, which has a market of approximately $700 million. Aside from that, Elite Pharmaceuticals Inc is aiming for at least one further generic to the FDA for approval every quarter between now and the end of 2017.
An approval could serve as a tremendous catalyst for a rebound, which could allow more investors to hop in the rally once it gains momentum. In other words, the recent letdown from the FDA simply offers a chance to buy the stock at much better prices before the uptrend gains traction.
On the daily time frame, it can be seen that the stock has yet to fill its gap from July to $0.30 and is currently trading near the lows for the year. Volume has dipped as investors are holding out for more clues on what the company has been up to for the past few months and what it has planned for the near-term.
A move past the $0.15 support zone could be an early signal of a return in bullish pressure, with momentum past the $0.20 level likely to draw more bulls to the fold. A break past the $0.25 level could open the door for filling the gap until the $0.30 barrier and a move up to the next ceiling at $0.35.
Keep in mind that Elite Pharmaceuticals is also shifting to what it refers to as a proprietary and trademarked abuse-deterrent technology which can make it difficult for drug abusers to take advantage of prescription pills. This technology has already been licensed to other specialty pharmaceutical companies so it’s application to SequestOx might also result to FDA approval later on, which might also serve as a catalyst for a stock price bounce.
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.
