Shares of Elite Pharmaceuticals Inc (OTCMKTS: ELTP) appear to have hit a critical resistance level if a recent pullback is anything to go by. The stock has found the going tough, after failing to breach the $0.10 resistance level. The upside action appears to have run out of momentum.
ELTP Share Price Analysis
However, the stock remains a bounce back play on stabilizing above the $0.09 support level. Elite Pharmaceuticals has endured a tumultuous run after succumbing to short selling pressure in 2018. After shedding more than 40% in market value last year, the stock did start the year on a roll and consequently rallied by 40% to the critical $0.10 level.
After coming under pressure in recent weeks, the company might have to serve new catalysts if bulls are to continue pushing the stock higher. One of the developments that could help fuel the upside action includes the signing of a strategic marketing alliance with Lannett for generic Adderall.
Revenue growth prospects is another development that could help fuel the upward momentum in the stock. In addition, positive clinical trial results could go a long way in strengthening investor confidence in the stock.
Price action indicates the stock is flirting with critical support at the $0.09 level. A sell-off followed by a close below the critical support level could leave the stock susceptible to further drops, probably back to the $0.07 mark, which is the next support level.
About Elite Pharmaceuticals
Elite Pharmaceuticals casts itself as a specialty pharmaceutical company engaged in the research development and manufacture of orally administered controlled release drug delivery system. The company also owns and licenses various generic and oral dose pharmaceutical products.
Growing Generics Portfolio
The stock’s market activity could receive a boost on the company entering into a license, supply and distribution agreement with Lannett Company. Under the terms of the agreement, Lannett is to become the exclusive U.S distributor for two generic products that Elite Pharmaceuticals is developing in partnership with SunGen Pharma.
“The alliance with Lannett will provide broad market access for our generic products. We are excited about the opportunity and look forward to working closely with Lannett to launch this product in the next few weeks,” said Nasrat Hakim, President, and CEO of Elite.
Elite and SunGen Pharma have filed an Abbreviated New Drug Application with the U.S Food and Drug Administration for a generic version of a branded antibiotic drug. The branded product for which the two are developing a generic version generated sales of $94 million for the 12 months ended September 30, 2018.
The new generic drug would bring to three, the number of ANDA that Elite has filed in partnership with SunGen. The Food and Drug Administration approved the first ANDA last year.
“We are pleased to have another ANDA filed with the FDA through our partnership with Elite as we work on the launch of the recently approved generic Adderall®,” said Dr. Jim Huang, Co-CEO of SunGen.
The Adderall generic version paves the way for Elite and SunGen to flex their muscle in a market worth millions of dollars, given that the branded version generated sales of $365 million as of September of last year.
With the new generic drug, Elite Pharmaceuticals revenue base should receive a boost after a stellar performance in Q3. The company generated revenues of $2.7 million, representing a 6% year-over-year increase. Elite attributes the increase to the launch of methadone products and the sale of Isradipine and Naltrexone.
Elite Pharmaceutical is investing a good chunk of its funds on research development as it seeks to come up with new drugs to meet unmet needs. In Q3, the company spent about $2.5 million on R&D expenses. The company has filed five ANDA with the FDA affirming its robust product development pipeline.
Elite Pharmaceuticals has continued to underperform even on showing improved levels of efficiencies in coming up with new generic drugs. After recent stagnation in the market, ANDA approval should go a long way in strengthening investors’ confidence in the stock, which should trigger the upside action.
Revenue growth is another development that underscores underlying growth and one of the reasons why the stock deserves a higher valuation in the market. The serving of new groundbreaking catalysts should go a long way in fuelling the stock’s upside action.
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Disclosure: We have no position in ELTP and have not been compensated for this article.