Elite Pharmaceuticals Inc (OTCMKTS:ELTP): Here's What We're Looking For Next

Elite Pharmaceuticals Inc (OTCMKTS:ELTP) is down just shy of 55% on its May highs and 45% of the last 12 months. The company currently trades for a market capitalization of just a $82 million. We have set it numerous times and we will set again – at these prices, Elite looks dramatically undervalued as compared to its peers. ELTP Daily ChartThe company just put out a press release highlighting the fact that will present data for ELI-200 at PAINWeek 2017 National Conference held in Las Vegas, Nevada, USA September 4 – 8, 2017. ELI-200 is the scientific name for its lead abuse deterrent product, SequestOx, in the upcoming presentation could go some ways towards rebalancing the undervaluation.For those new to this company, our bull thesis is relatively straightforward. On one hand, this is a small biotechnology company that has an asset under registration application with the FDA, and a large portion of its forward valuation is rooted in the successful outcome of said application. On the other, however, this is a contract when factoring company with nine commercial products being sold, four products under review pending approval by the FDA and a spate of additional approved products pending manufacturing site transfer. The company generated just shy of $10 million in revenue last year and more than $12 million revenues a year earlier.With the approval of the pending applications (the generics, not the abuse deterrent opioid product), revenue potential rises exponentially towards triple digit millions of dollars annually – and that's with a conservative estimate of market penetration.Right now, markets are valuing Elite based on the first and described above and are pretty much ignoring the second. For us, it's the generic operations and the contract manufacturing arm that is where the real value lies in and, as just mentioned, it's not being priced in at all as things stand.So that's our bull argument – what are we looking for from the upcoming presentation?SequestOx picked up a complete response letter earlier this year and the company set out to overcome the issue with a bioequivalence study. The study didn't go great and Elite took a hit on the release of the results. It's waiting on some feedback from the FDA currently and so the program is sort of on hold. While we understand the markets disappointment with the bioequivalence outcome, we don't see it as prohibitive an approval longer-term. It's more of a bump in the road for the program than it is terminal.From the presentation, then, we're looking for management to reinforce this fact. Many abuse deterrent assets have hit snags in very similar areas and, when side-by-side, the technology that underpins the abuse deterrent side of SequestOx is far superior to many of the others in the space. It's also, and this is where things get really interesting, very easily transferable to other asset types. The system is basically a bead type system, so all Elite has to do to turn an abuse deterrent naltrexone and oxycodone hydrochloride into an abuse deterrent Percocet, for example, is switch up the active compound in the mixing machine.An approval for SequestOx, therefore, has dramatic ramifications outside of just this one asset in that it could quickly lead to an extended asset portfolio – not just quickly, very cheaply.Cash on hand as of the end of March came in at a little over $10 million and with the SequestOx program on hold (combined with the CMO revenues) this should last through to early 2018. Beyond that, there's a good chance we will see an equity but it's far from prohibitive to long term appreciation.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on ELTP, sign up below!Image courtesy of Melanie Tata via FlickrDisclosure: We have no position in ELTP and have not been compensated for this article.