Elite Pharmaceuticals, Inc. (OTCMKTS:ELTP) Hopeful After Press Release
During the last month Elite Pharmaceuticals, Inc. (OTCBB:ELTP) had quite the unpredictable run on the stock charts, from trim dollar volumes and almost no changes for a week, to large drops, just to rise again the next day. Seemingly, this movement continues, this time with a positive development for ELTP. Yesterday the ticker gained 13% in share price, closing at $0.386, and registering a dollar volume of $758,000, almost the amount of the previous three days combined.
The last time the company had a significant rise was April 14, and they couldn’t sustain it, despite some meaningful positive developments. On that day ELTP announced a financing deal with Lincoln Park Capital Fund, LLC (LPC) for up to $40 million. We remind you that Amarantus Bioscience Holdings, Inc. (OTCBB:AMBS), another biotech startup, forged an agreement with LPC last month as well.
The agreement with ELTP carries some restrictions, namely that there is a limit of 800,000 shares that LPC may buy on any given day, that the total sum of such share purchases cannot exceed $760,000, and that LPC is not allowed to own more that 9.9% of ELTP‘s common stock. The money would be reportedly used by ELTP to develop its products and for “general corporate purposes.”
It should be noted that the nature of the company’s products is such that long and costly research goes hand in hand with them. Additional funding may be more of a necessity, rather than an opportunity for bigger things, as it may seem at first. ELTP‘s products are, at best, a long-term investment. In the immediate future it is likelier to bring the company more liabilities than returns. ELTP‘s last reported financials, for the quarter ended December 31, 2013, seem to support this possibility:
- cash: $1 million
- current assets: $3.9 million
- current liabilities: $12.5 million
- revenues: $1.6 million
- net loss: $1 million
Traders may also want to keep in mind that at the beginning of April, ELTP stated its intention to increase authorized shares from 690 to 995 million on the day of its annual shareholder meeting in May. The company still hasn’t reached the old limit – authorizing a much higher one may be a hint for future dilution.
As always, doing one’s own due diligence is mandatory. Investors should do their own research in order to make an informed decision and avoid getting caught with stock that is rapidly dropping.
