Seems Like Elite Pharmaceuticals Inc (OTCBB:ELTP) is no Longer a Hit
Mr. Nasrat Hakim took Elite Pharmaceuticals Inc (OTCBB:ELTP)’s helm back in August and a few weeks later, his company had turned into one of the most interesting stocks on the OTC Markets. A few optimistic press releases and an article on Seeking Alpha pushed the ticker from $0.07 per share all the way to $0.15 and ELTP looked like the perfect investment opportunity in the small cap pharmaceutical world – a blend of extremely exciting products in the pipeline and solid, revenue-generating, FDA-approved treatments that are already on the market.
Now, two months later, things don’t look quite so bright. In fact, out of the fifteen sessions since the start of the month, only two ended in the green. ELTP has dropped from around $0.12 to $0.105 and while the fall isn’t particularly spectacular, the increased trading volumes are resulting in quite a lot of grumpy faces.
As is often the case, the slide could be due to a number of factors, but we’re quite sure that some of the reasons are to be found in the recent Form 4’s published by Epic Pharma LLC, Epic Investments LLC and the people running those two entities. If you have a quick look at the filings, you’ll see that quite a lot of stock was sold on the open market by ELTP‘s partners and looking at the message boards, we can see that some investors are baffled by the reasons for Epic’s move. Whatever the motives, the selling has depressed the price to levels that have not been experienced for over a month.
But do Epic have any reasons to doubt ELTP‘s future success? Well, we have always said that Elite is an operating entity that shows a lot of potential when compared to other small cap pharmaceutical companies. The figures in the revenues section of their latest 10-Q (an 82% increase year-over-year) prove the point to some extent. Even so, there are still some problems. Here’s how things stood as of September 30:
- cash: $766 thousand
- current assets: $3.2 million
- current liabilities: $11 million
- quarterly revenues: $1.1 million
- quarterly net loss: $9.6 million
The biggest problem is quite obvious – the liabilities. When you check out the 10-Q covering the previous period, you’ll see that the current portion of the debt has grown by no less than 120% in just three months. The operating expenses still outweigh the gross profit and changes in the fair value of derivatives has now turned the net income into a substantial net loss.
On the bright side, Mr. Hakim said during Monday’s conference call that the next phase of the trials for the opioid resistant products should start in the coming weeks and projections say that as soon as they hit the market, they will give the revenues another huge boost. The only trouble is, deadlines are nowhere to be found and the new trials will probably result in even greater R&D expenses.
It’s clear that ELTP is not for the faint of heart. The optimism flying around back in September suggested that success is just around the corner, but right now, it’s becoming clear that this is not strictly the case. There is a chance that they’ll make it and it’s up to you to decide how big it is.
Another pharmaceutical company also registered an exciting session yesterday. Life Stem Genetics Inc (OTCBB:LIFS) shifted more than 1.97 million shares adding another 6% to its price. You should bear in mind, however, that LIFS‘ ascend is fueled by a rather big pump, which is why a violent correction seems all but inevitable. This, by the way, is more or less what happened to Fresh Healthy Vending International Inc (OTCBB:VEND) – another expensive promotion.
