Elite Pharmaceuticals Inc (OTCBB:ELTP) Remains Shaky

A couple of months ago, trading for Elite Pharmaceuticals Inc (OTCBB:ELTP) was pretty uneventful. The number of shares changing hands rarely exceeded 1 million and the price rarely breached the $0.08 barrier. The ticker displayed some signs of waking up when the new CEO, Mr. Nasrat Hakim (who has decades worth of experience in the pharmaceutical business) took the helm but the value still refused to make any sort of noteworthy jump in the right direction.

We expected to see Mr. Hakim’s appointment really affect the ticker since with him, he brought a total of twelve products that have already gone through the tedious FDA approval process. Unfortunately, apart from the increased trading volume, the news didn’t really cause that much of a stir price-wise.

Since mid-September, however, ELTP has literally been on fire. Four consecutive green sessions between September 17 and September 20 pushed the ticker to its 52-week high of $0.168 with dollar volumes well above the $1 million mark. The reason for the jump was a press release that informed investors about the first shipments of the Naltrexone Hydrochloride 50mg tablets. This is indeed a major milestone for a small cap pharmaceutical company, but it was all too clear that the effects of the new developments won’t last forever. Predictably, a correction followed and over the next couple of weeks, ELTP turned into something of a roller coaster. A slide followed a surge in the right direction in an almost perfect pattern and the ticker was proving to be a great illustration of just how volatile penny stocks can be.

On Tuesday, ELTP came up with another major announcement. They have signed a licensing deal with their partners, Epic Pharma, LLC, according to which Epic will acquire the license to manufacture and sell twelve generic products owned by ELTP. In exchange, ELTP will receive a licensing fee which will be estimated as a percentage of the gross profit as well as some milestone pavements.

This really is a major announcement since, over the years, one of the major problems for ELTP has been the colossal operating costs. If you take the latest financial statement, for example, you’ll notice that during the three months ended June 30 they spent more than $1.1 million while total revenues hovered around $721 thousand. With the new contract, it will be Epic Pharma who will worry about manufacturing and marketing costs which means that ELTP will have a better chance of finally becoming a profitable venture.

Investors know that and a few hours after the press release came out, the ticker was flying high. ELTP opened the session above its previous close, briefly touched $0.15 per share after which it settled down to finish the day at $0.1445. With the magnitude of Tuesday’s press release, a few more sessions in the green wouldn’t have been surprising but it seems that ELTP is simply reluctant to show any sort of consistent movement in the right direction. Yesterday, it slid down by about 6% and while this might not seem like much, it means that all the gains from Tuesday have been wiped out.

This, coupled with today’s choppy ride (an hour after the opening bell ELTP has fluctuated a lot and is around 5% below yesterday’s close), shows just how unpredictable the performance is when more eyes are pointing at the ticker. Of course, when the company comes up with a financial statement showing us that they are, indeed, close to (or, even better, they have already achieved) profitability, the value will probably rise significantly, but, until then, the inherent volatility is definitely something you need to keep in mind while considering your options.

Another company that seems to have something going for it, yet fails to put on a solid performance is Sigma Labs Inc (OTCMKTS:SGLB). As you can see from the chart on the right, it too was on an upward trend during the last week or so, but, just like ELTP, it slid yesterday finishing the session at $0.13 which is 9% below Monday’s value.