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ELTP > SEC Filings for ELTP > Form 10-Q on 14-Nov-2012All Recent SEC Filings

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Form 10-Q for ELITE PHARMACEUTICALS INC /NV/


14-Nov-2012

Quarterly Report


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2012

COMPARED TO THE

THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2011

(UNAUDITED)

The following discussion and analysis should be read with the financial statements and accompanying notes included elsewhere in this Form 10-Q and in the Annual Report on Form 10-K for the year ended March 31, 2012. It is intended to assist the reader in understanding and evaluating our financial position.

This Quarterly Report on Form 10-Q and the documents incorporated herein contain "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this Form 10-Q, statements that are not statements of current or historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "plan", "intend", "may," "will," "expect," "believe", "could," "anticipate," "estimate," or "continue" or similar expressions or other variations or comparable terminology are intended to identify such forward-looking statements. All statements other than statements of historical fact included in this Form 10-Q regarding our financial position, business strategy and plans or objectives for future operations are forward-looking statements. Without limiting the broader description of forward-looking statements above, we specifically note, without limitation, that statements regarding the preliminary nature of the clinical program results and the potential for further product development, that involve known and unknown risks, delays, uncertainties and other factors not under our control, the requirement of substantial future testing, clinical trials, regulatory reviews and approvals by the Food and Drug Administration and other regulatory authorities prior to the commercialization of products under development, and our ability to manufacture and sell any products, gain market acceptance, earn a profit from sales or licenses of any drugs or our ability to discover new drugs in the future, are all forward-looking in nature. These risks and other factors are discussed in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by law, the Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Any reference to "Elite", the "Company", "we", "us", "our" or the "Registrant" refers to Elite Pharmaceuticals Inc. and its subsidiaries.

Overview

We are a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, using proprietary know-how and technology, particularly as it relates to abuse resistant products. Our strategy includes improving off-patent drug products for life cycle management and developing generic versions of controlled-release drug products with high barriers to entry.

We own, license or contract manufacture four products currently being sold commercially, as follows:

ˇ Phentermine 37.5mg tablets ("Phentermine 37.5mg")

ˇ Lodrane DŽ Immediate Release capsules ("Lodrane D")

ˇ Methadone 10mg tablets ("Methadone 10mg")

ˇ Hydromorphone Hydrochloride 8mg tablets ("Hydromorphone 8mg")

We own the following products which have been approved for manufacture by the United States Food and Drug Administration ("US-FDA"), but for which commercial production has not yet begun:

ˇ Phentermine 15mg capsules ("Phentermine 15mg")

ˇ Phentermine 30mg capsules ("Phentermine 30mg")

Please note that the launch of commercial production of Phentermine 15mg and Phentermine 30mg (together, "Phentermine Capsules") has been delayed as a result of the sole supplier of the active pharmaceutical ingredient ("API") approved for the Phentermine Capsules restricting the amount of API available to Elite. The supply restriction also prevents us, and our sales and marketing partner, from meeting growing demand for the phentermine 37.5 mg tablets and is also expected to restrict sales of this product (see below). We believe that the supplier is wrongfully limiting supply. We are negotiating with the supplier to obtain an adequate supply of the API until we can obtain a new supplier. If we are unable to timely resolve this dispute in a reasonable manner then, unless and until we are able to obtain adequate amounts of API, we will not be able to sustain or grow the sales of the generic phentermine products. We have begun to qualify an alternative supplier, but qualification of an alternative supplier, due to FDA requirements, will entail a significant amount of time and could be expected to take 12 months or longer. Please see Part II; Item 1A: "Risk Factors".

Please refer to the Current Report on Form 8-K filed with the SEC on October 15, 2012 for further details, with such filing being herein incorporated by reference.

We have purchased the following approved generic product, with the transfer of the manufacturing process from the facilities of the previous Abbreviated New Drug Applications ("ANDA") holder to our facilities in Northvale, New Jersey (the "Northvale Facility") being currently on-going:

ˇ Naltrexone HCl ("Naltrexone Generic")

Please note that this transfer to the Northvale Facility has been significantly delayed, as a result of the Company being notified by the U.S. Food and Drug Administration (the "FDA") of its reclassification of our CBE-30 supplement to a prior approval supplement. The transfer of the manufacturing process of naltrexone is a prerequisite to the commercial launch of this generic product. We believe that the commercial launch of this generic product will be a material event and any delays in such launch will have a significant and adverse effect on the Company's operation and results.

Elite has executed a license agreement with Precision Dose, Inc. (the "Precision Dose Agreement") and a manufacturing agreement with The PharmaNetwork LLC (the "TPN Agreement").

The Precision Dose Agreement provides for the marketing and distribution, in the United States, Puerto Rico and Canada, of Phentermine 37.5mg, Phentermine Capsules, Hydromorphone 8mg, Naltrexone Generic, and certain additional products that require approval from the FDA. Phentermine 37.5mg tablets were launched in April 2011. Hydromorphone 8mg was launched in March 2012. Phentermine Capsules were approved by the US-FDA on September 28, 2012, but not yet launched. Naltrexone Generic has not yet been approved by the US-FDA for manufacture by Elite.

The TPN Agreement, executed on June 23, 2011, provides for the manufacture and packaging by the Company of The PharmaNetwork's methadone hydrochloride, 10mg tablets ("Methadone 10mg"), with the Methadone 10mg to be marketed by TPN's wholly owned subsidiary, Ascend Laboratories, LLC. The FDA has approved the manufacturing of Methadone 10mg at the Northvale Facility and the initial shipment of Methadone 10mg occurred during January 2012.

In addition, Elite also has an undisclosed generic product filed with the FDA that is awaiting review and for which Elite retains all rights.

The Company also has a pipeline of additional generic drug candidates under active development.

Additionally, the Company is developing abuse resistant opioid products, and once-daily opioid products.

On May 22, 2012, the United States Patent and Trademark Office ("USPTO") issued U.S. Patent No. 8,182,836, entitled "Abuse-Resistant Oral Dosage Forms and Method of Use Thereof with such patent providing further protection for the Elite's Abuse Resistant Technology.

The Northvale Facility operates under Current Good Manufacturing Practice ("cGMP") and is a United States Drug Enforcement Agency ("DEA") registered facility for research, development and manufacturing.

Strategy

Elite is focusing its efforts on the following areas: (i) development of Elite's pain management products; (ii) manufacturing of a line of generic pharmaceutical products with approved ANDAs; (iii) development of additional generic pharmaceutical products; (iv) development of the other products in our pipeline including the products pursuant to the Epic Strategic Alliance Agreement and other partners; (v) commercial exploitation of our products either by license and the collection of royalties, or through the manufacture of our formulations; and (vi) development of new products and the expansion of our licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other collaborations.

Elite is focusing on the development of various types of drug products, including branded drug products which require new drug applications ("NDAs") under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent Term Restoration Act of 1984 (the " Drug Price Competition Act ") as well as generic drug products which require ANDAs.

Elite believes that its business strategy enables it to reduce its risk by having a diverse product portfolio that includes both branded and generic products in various therapeutic categories and to build collaborations and establish licensing agreements with companies with greater resources thereby allowing us to share costs of development and improve cash-flow.

Commercial Products

Phentermine 37.5mg tablets

On April 7, 2011, Elite made the initial shipment of phentermine HCl 37.5 mg tablets to TAGI. This triggered a milestone payment under the Precision Dose Agreement. Phentermine 37.5mg tablets is now a commercial product being distributed by our partner, TAGI.

A Current Report on form 8-K was filed on April 7, 2011 in relation to this shipment, such filing being incorporated herein by this reference. Please also refer to the Current Report on Form 8-K filed with SEC on September 10, 2010 and Quarterly Report on Form 10-Q, filed with SEC on November 15, 2010 for further details on the Precision Dose Agreement, such filings being herein incorporated by reference. Please see the discussion above concerning certain delays due to issues with the sole supplier and refer to the Current Report on Form 8-K filed with the SEC on October 15, 2012 for further details, with such filing being herein incorporated by reference.

Lodrane DŽ Immediate Release capsules

On September 27, 2011, the Company, along with ECR Pharmaceuticals ("ECR"), a wholly owned subsidiary of Hi-Tech Pharmacal ("Hi-Tech") announced the launch of Lodrane DŽ, an immediate release formulation of brompheniramine maleate and pseudoephedrine HCl, an effective, low-sedating antihistamine combined with a decongestant.

Lodrane DŽ is promoted and distributed in the U.S. by ECR, Hi-Tech's branded division. Lodrane DŽ is available over-the-counter but also has physician promotion. Lodrane DŽ is the one of the only adult brompheniramine containing products available to the consumer at this time.

Lodrane DŽ is marketed under the Over-the-Counter Monograph (the "OTC Monograph") and accordingly, under the Code of Federal Regulations can be lawfully marketed in the US without prior approval. Under the Federal Food Drug and Cosmetic Act ("FDCA"), FDA regulations and statements of FDA policy, certain drug products are permitted to be marketed in the U.S. without prior approval. Within the past few years, the FDA has revised its enforcement policies, significantly limiting the circumstances under which these unapproved products may be marketed. If the FDA determines that a company is distributing an unapproved product that requires approval, the FDA may take enforcement action in a variety of ways, including, without limitation, product seizures and seeking a judicial injunction against distribution.

Elite is manufacturing the product for ECR and will receive revenues for the manufacturing, packaging and laboratory stability study services for the product, as well as royalties on sales. The current U.S. allergy market exceeds $3.5 billion.

A current report on Form 8-K was filed with the SEC on September 27, 2011, with such filing being herein incorporated by reference.

Methadone 10mg tablets

On January 17, 2012, Elite commenced shipping Methadone 10mg tablets to ThePharmaNetwork, LLC and its wholly owned subsidiary, Ascend Laboratories, LLC. (together, "TPN") pursuant to a commercial manufacturing and supply agreement dated June 23, 2011 between Elite and TPN (the "Methadone Manufacturing and Supply Agreement"). Under the terms of the Methadone Manufacturing and Supply Agreement, Elite performs manufacturing and packaging of Methadone 10mg for TPN. Please refer to the Current Report on Form 8-K filed with the SEC on January 17, 2012 for more details, with such filing being herein incorporated by reference. For details on the commercial manufacturing and supply agreement dated June 23, 2011 between Elite and TPN, please refer to Exhibit 10.71 of the Annual Report on Form 10-K filed with the SEC on June 29,2011.

Hydromorphone 8mg tablets

On March 13, 2012, Elite commenced shipping Hydromorphone 8mg to TAGI Pharma. This triggered a milestone payment under the License, Manufacturing and Supply Agreement with Precision Dose. Hydromorphone 8mg is now a commercial product being distributed by our partner, TAGI Pharma. Please refer to the Current Report on Form 8-K filed with the SEC on March 13, 2012 for more details, with such filing being incorporated herein by this reference. Please also refer to the Current Report on Form 8-K filed with SEC on September 10, 2010 and Quarterly Report on Form 10-Q, filed with SEC on November 15, 2010 for further details on the Precision Dose Agreement, such filings being herein incorporated by reference.

Approved Products

Elite is the owner of the following approved Abbreviated New Drug Applications:

ˇ Phentermine HCl 37.5mg tablets ("Phentermine 37.5mg")

ˇ Hydromorphone HCl 8mg tablets ("Hydromorphone 8mg")

ˇ Naltrexone HCl 50mg tablets ("Naltrexone 50mg")

ˇ Phentermine HCl 15mg capsules ("Phentermine 15mg")

ˇ Phentermine HCl 30mg capsules ("Phentermine 30mg")

Phentermine HCl 37.5mg tablets

The ANDA for Phentermine 37.5mg was acquired pursuant to an asset purchase agreement with Epic Pharma LLC ("Epic") dated September 10, 2010 (the "Phentermine Purchase Agreement"). Current reports on form 8-K were filed on September 10, 2010 and February 4, 2011 in relation to the Phentermine Purchase Agreement and the Phentermine ANDA, with such filings being incorporated herein by this reference. Please also refer to exhibit 10.7 of the Quarterly Report on Form 10-Q filed with SEC on November 15, 2010, such filing being incorporated herein by this reference. Please see the discussion above concerning certain delays due to issues with the sole supplier and refer to the Current Report on Form 8-K filed with the SEC on October 15, 2012 for further details, with such filing being herein incorporated by reference.

Hydromorphone HCl 8mg tablets

The ANDA for Hydromorphone 8mg was acquired pursuant to an asset purchase agreement with Mikah Pharma LLC (the "Hydromorphone Purchase Agreement"). A current report on Form 8-K was filed with the SEC on May 24, 2010 in relation to the Hydromorphone Purchase Agreement, with such filing being herein incorporated by reference. For further details on the Hydromorphone Agreement, please refer to Exhibit 10.4 to the Quarterly Report on Form 10-Q, filed with the SEC on November 15, 2010, and incorporated herein by reference.

Transfer of the manufacturing process of Hydromorphone 8mg to the Northvale Facility, a prerequisite of the Company's commercial launch of the product, was approved by the FDA on January 23, 2012. However, please note that the completion of such transfer had been significantly delayed as a result of the FDA's reclassification of the Company's CBE-30 supplement filing to a prior approval supplement filing. As a result of the delays caused by this reclassification, the Company recorded an impairment of the Hydromorphone 8mg ANDA in an amount equal to the entire purchase price of the acquisition. A current report on Form 8-K was filed with the SEC on June 6, 2011 in relation to this issue, with such filing being herein incorporated by reference. This impairment was recorded and is included in the Company's audited financial statements as of March 31, 2011 and presented in the Annual Report on Form 10-K filed with the SEC on June 29, 2011 and incorporated herein by reference. For further details on this issue, please also refer to the Current Report on Form 8-K and filed with the SEC on June 6, 2011, with such filing being herein incorporated by reference.

Naltrexone HCl 50mg tablets

The ANDA for Naltrexone 50mg was acquired pursuant to an asset purchase agreement with Mikah Pharma LLC (the "Naltrexone Purchase Agreement"). A current report on form 8-K was filed on August 27, 2010 in relation to this announcement, such filing being incorporated herein by this reference. Please also refer to exhibit 10.5 of the Quarterly Report on Form 10-Q filed with SEC on November 15, 2010, such filing being incorporated herein by this reference.

Transfer of the manufacturing process of Naltrexone 50mg to the Northvale Facility is a prerequisite of the Company's commercial launch of the product and is currently in process. However, please note that the completion of such transfer has been significantly delayed as a result of the FDA's reclassification of the Company's CBE-30 supplement filing to a prior approval supplement filing. As a result of the delays caused by this reclassification, the Company has recorded an impairment of the Naltrexone 50mg ANDA in an amount equal to the entire purchase price of the acquisition. This impairment was recorded and is included in the Company's audited financial statements as of March 31, 2011 and presented in the Annual Report on Form 10-K filed with the SEC on June 29, 2011 with such filing being herein incorporated by reference.

Phentermine 15mg and Phentermine 30mg

Elite received approval as of September 28, 2012 from the US-FDA for Phentermine 15mg and Phentermine 30mg. These products were developed by Elite. The commercial launch of Phentermine 15mg and Phentermine 30mg has been delayed due to the sole supplier of the API approved for these products restricting the amount of such API available to Elite. Please refer to the Current Report on Form 8-K filed with the SEC on October 15, 2012, with such filing being herein incorporated by reference.

Contract Manufacturing of Isradipine and Phendimetrazine

On June 1, 2011, Elite executed a Manufacturing and Supply Agreement (the "Isradipine/ Phendimetrazine Agreement") with Mikah Pharma, LLC ("Mikah") to undertake and perform certain services relating to two generic products:
Isradipine Capsules USP, 2.5 mg and 5 mg ("Isradipine") and Phendimetrazine Tartrate Tablets USP, 35 mg ("Phendimetrazine"), including (a) developing and preparing the documentation required for the transfer of the manufacturing process to Elite's facility and the appropriate regulatory filing for the ANDA, and (b) manufacturing finished dosage forms appropriate for commercial sale, marketing and distribution in the United States, its territories, possessions, and commonwealths in accordance with the requirements of the Isradipine/ Phendimetrazine Agreement; Elite is required to perform, at its sole cost and expense, all Technology Transfer, validation and qualification services (including: equipment, methods and facility qualification), validation and stability services required by Applicable Laws to commence manufacturing Isradipine and Phendimetrazine for commercial sale by Mikah or its designees in accordance with the terms of the Isradipine/ Phendimetrazine Agreement. During the term of the Isradipine/ Phendimetrazine Agreement and subject to the provisions therein, Mikah is required to purchase from Elite and Elite agrees to manufacture and supply solely and exclusively to Mikah, such Isradipine and Phendimetrazine as Mikah may order from time to time pursuant to the Isradipine/ Phendimetrazine Agreement. Mikah will compensate Elite at an agreed upon transfer price for the manufacturing and packaging of Isradipine and Phendimetrazine. For the Isradipine product, Elite will also receive a 10% royalty on net profits of the finished Product. The payment is to be calculated and paid quarterly. Elite will also receive a onetime milestone payment for each Product for the work associated with the Technology transfer. The milestone payment shall be made upon the successful manufacturing and testing of the exhibit batch. The Isradipine/ Phendimetrazine Agreement has a term of five years and automatically renews for additional periods of one year unless Mikah provides written notice of termination to Elite at least six months prior to the expiration of the Term or any Renewal Term.

Development activities related to Isradipine have been discontinued. For further details, please refer to the section below titled "Discontinued Development - Israpidine"

Discontinued Products - Lodrane 24Ž and Lodrane 24DŽ

On March 3, 2011, the FDA announced its intention to remove approximately 500 cough/cold and allergy related products from the U.S. market. The once daily allergy products manufactured by Elite, Lodrane 24Ž and Lodrane 24DŽ (the "LodraneŽ Extended Release Products"), were included in the FDA list of 500 products. After this announcement by the FDA, the Company's customer for the LodraneŽ Extended Release Products cancelled all outstanding orders and manufacturing of the LodraneŽ Extended Release Products has ceased. The shipments made during the quarter ended June 30, 2011 consisted solely of quantities that were in production at the time ECR cancelled all outstanding orders. There were no shipments of the Lodrane Extended Release Products subsequent to those that were made during the quarter ended June 30, 2011.

A Current Report on Form 8-K was filed with the SEC on March 4, 2011 in relation to this announcement by the FDA, such filing being herein incorporated by reference.

ECR (the owner and marketer of the LodraneŽ Extended Release Products) initiated a formal approval process with the FDA in 2010 regarding the LodraneŽ Extended Release Products and issued a press release on March 3, 2011 stating that they will continue to actively pursue approval for the LodraneŽ Extended Release Products. In addition, on April 29, 2011, ECR filed a Petition for Review with the United States Court of Appeals for the District of Columbia, petitioning such court to review and set aside the final order of the FDA with relation to the LodraneŽ Extended Release Products. The Company has received no further information from ECR with regards to the status of the Petition filed.

The LodraneŽ Extended Release Products were co-developed with our partner, ECR, and the Company was receiving revenues from the manufacture of the LodraneŽ Products and laboratory stability study services, as well as royalties on in-market sales.

During the three months ended June 30, 2011, Elite made its final shipments of the LodraneŽ Extended Release Products. Elite's revenues for the manufacturing these products for the three months ended June 30, 2012 and 2011 were zero and $252k, respectively. In addition, the Company sold to ECR, at cost without markup, all raw materials related to the manufacture of the LodraneŽ Extended Release Products which remained in stock subsequent to the final shipment of the LodraneŽ Extended Release Products. Revenues from the sale of these raw materials totaled approximately $221k. As manufacturing of the LodraneŽ Extended Release Products has ceased, there will be no further manufacturing revenues derived from the LodraneŽ Extended Release Products unless and until such products receive the necessary approvals from the FDA.

Please note that there can be no assurances that such approvals will be granted or that future manufacturing revenues will be earned by the Company from the manufacture of the LodraneŽ Extended Release Products, should such approvals be granted by the FDA.

Royalties on in-market sales of the LodraneŽ Extended Release Products earned during the three months ended June 30, 2012 and 2011 were zero and $150k, respectively. While Elite's manufacturing of the LodraneŽ Extended Release Products has ceased, the sale of such products in the US market was still permitted by the FDA until August 30, 2011. The Company earned royalties on any in-market sales that occurred up to that date.

Contract laboratory services for the LodraneŽ Extended Products will continue, on a residual basis, as such services consist of stability studies that must be performed over certain defined time periods. These revenues are expected to be significantly less than laboratory service revenues earned in prior periods.

Discontinued Development - Isradipine

Isradipine was one of two products in an agreement with Mikah Pharma that was intended to be transferred to Elite for manufacture. (Phendimetrazine was the second product) Preliminary production batches of Isradipine at Elite, using the equipment provided in the agreement, did not produce acceptable product. Mikah and Elite therefore mutually agreed in an amendment to the agreement to discontinue transfer of the Isradipine.

Products Under Development

It is our general policy not to disclose products in our development pipeline or the status of such products until a product reaches a stage that we determine, for competitive reasons, in our discretion, to be appropriate for disclosure and because the disclosure of such information might suggest the occurrence of future matters or events that may not occur.

Abuse Resistant and Sustained Release Opioids

A once-daily oxycodone formulation was developed by Elite, using its proprietary technology. An investigational new drug application, or IND, has been filed Elite has completed two pharmacokinetic studies in healthy subjects and has scaled up the product. We are looking for a partner for this product

The abuse resistant opioid products utilize our patented abuse-deterrent technology that is based on a pharmacological approach. These products are combinations of a narcotic agonist, in a sustained-release formulation intended for use in patients with moderate to severe chronic pain, and an antagonist, formulated to deter abuse of the drug. Both, agonist and antagonist, have been on the market for a number of years and sold separately in various dose strengths. Elite has filed an IND for the product and has tested the product in a series of pharmacokinetic studies. Products utilizing the pharmacological approach to deter abuse such as SuboxoneŽ, a product marketed in the United States by Reckitt Benckiser Pharmaceuticals, Inc., and EmbedaŽ, a product marketed in the United States by King Pharmaceuticals, have been approved by the FDA and are being marketed in the United States.

Elite has developed, and retains the rights to these abuse resistant and sustained release opioid products. Elite has currently chosen to develop these products itself but expects to license these products at a later date to a third party who could provide funding for the remaining clinical studies and who could provide sales and distribution for the product. The drug delivery technology underlying the sustained release products was originally developed under a joint venture with Elan which terminated in 2002.

According to the Elan Termination Agreement, Elite acquired all proprietary, development and commercial rights for the worldwide markets for the products . . .

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