Elite Pharmaceuticals, Inc. (PNK:ELTP) Q3 2024 Earnings Call Transcript

Elite Pharmaceuticals, Inc. (PNK:ELTP) Q3 2024 Earnings Call Transcript February 15, 2024

Elite Pharmaceuticals, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals Conference Call. At this time, all lines have been placed on a listen-only mode. Before management begins speaking, the company has the following statement. Elite would like to remind their listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties that are subject to change at any time, including, but not limited to, statements about Elite’s expectations regarding future operating results. Forward-looking statements are made pursuant to the Safe Harbor provisions of the federal securities laws and represent management’s current expectations. Actual results may differ materially.

Elite disclaims any obligation to update or revise its forward-looking statements, except as required by law. More complete information regarding forward-looking statements, risks and uncertainties can be found in the reports Elite Files, with the SEC, which are available on Elite’s website at elitepharma.com under the Investor Relations section. Elite encourages you to review these documents carefully. With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.

Nasrat Hakim: Thank you, Matthew, and good morning, ladies and gentlemen. Thank you for joining us today. My name is Nasrat Hakim. I am Elite’s Chairman and CEO. This is our earnings call. Our CFO, Carter Ward, will give us a summary of the company’s financials, after which I’ll give a brief update and answer some of the questions you’ve submitted to Dianne. Carter, you have the floor.

A biopharmaceutical facility with technicians working on a manufacturing line of treatments and preventions.

Carter Ward: Thank you, Nasrat, and good morning, everybody. Thank you to everybody calling in today. Yesterday, we filed our 10-Q for the third quarter of our 2024 fiscal year. We have a fiscal year ending March 31st. So December 31st, 2023, is the third quarter of our 2024 fiscal year. It is available on elitepharma.com, sec.gov and any place else, you get your SEC filings. So please, if you haven’t seen it yet, I would appreciate you taking a look at that. I’m going to give you a little context and go over some of the more relevant areas of the financial statements. And along the way, we received a lot of questions. Thank you so much for all the questions. We really did get a lot last night, and I’ll do my best to answer all of them, as I go through.

So let’s start with the P&L. Total revenues for the quarter were $15.5 million. You can compare that to $9.3 million for December 2022 last year for that quarter and $14.2 million for the September 2023 quarter, the last quarter. Percentage-wise, that’s a 67% year-on-year increase, and it’s a 9% increase since the last quarter. And I got a lot of questions, and the answer to the question is, yes, Prasco shipment made in December is included in the revenue numbers. For the full nine months on our P&L, the revenues were $38.7 million for this year. You can compare that to $25.5 million last year. That is a 52% year-on-year increase. Our operating income for the quarter ended December 31st, 2023, was $3.5 million, compare that to $2 million for last year.

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Q&A Session

And — the last quarter, the September quarter was $1.9 million. So percentage-wise, it’s 75% year-on-year increase and 84% increase over September 2023 quarter. For the full nine months, our operating income was $7.1 million and that’s compared to $4.1 million for the full nine months ended last year, December 31st, 2022, percentage-wise, 73% year-on-year increase. Now whichever way you look at, our operating revenues, our operating profits, you’re only going to see significant year-on-year increases. The biggest change this year, as compared to last year, was obviously the successful launch of our Elite label in April of 2023. So 2022 numbers didn’t have this, 2023 does. It’s been very, very successful. And our P&L clearly demonstrates just how successful the Elite label has been.

The Elite label has boosted our growth. But even before that, our revenue streams were expanding, they were solidifying and growing before we even launched the Elite labels. Just to give you a little history, in 2019, our revenues were $7.6 million for full year, full 12 months. In 2020 — fiscal year 2020, it was $18 million. And then 2021, it was $25 million. 2022, it was $32 million and last fiscal year ended March 31st, 2023, it was $34 million. So that’s nice growth. And this year, with only nine months into our fiscal year, only three quarters there, we’ve already booked almost $39 million in revenues. And last year was a good year and for the whole 12 months, it was $34 million. So we’re already above last year’s full year results. No, there’s no doubting the importance of the Elite Label launch, but that’s — it’s just added more steam to the company that had already been moving steadily in a positive direction for more than four years.

Moving down the P&L. I want to talk about R&D and research and development and G&A, which is general and administrative expenses because both of them — they both give some insight into what we’re putting together. R&D, as I’ve said over and over again, R&D is the lifeblood of any pharmaceutical company, and we are no exception. We spent $1.4 million this quarter and $5.2 million up nine months on R&D, on Product Development. Nasrat, as he usually does, will speak more on Product Development. But from a finance perspective, we’re continuing to fund development of new products and more importantly, we’re doing it from cash flows generated by current commercial operations. I always like to see that. G&A expenses, general and admin expenses, they were up around $500,000, from last year’s December 2022 quarter.

This year was $1.7 million for the quarter versus $1.2 million last year, December quarter, now the increase is mostly due to hiring more people. The Elite Label operations, the launch, the operations and our expansion plans require a larger HR footprint, we need more people and more infrastructure. And it’s a good result because there’s more opportunities. There’s more jobs available here. So that’s always nice. As the growth continues, we expect to have better utilization of the infrastructure. So our utilization rates are going to increase, and we’re looking for improved efficiency of these costs, as compared to top line revenues. So you look at that in a proportion standpoint. I did get a question on the income tax benefit, down below the line, of $18.3 million for the nine months ended December 31st, 2023.

This is also going to answer, I had a similar question on the future tax benefits going forward, of our NOL, our net operating loss carryforwards. So I’m going to answer both of those together because they’re both related. Elite in the past was not profitable for many years, and we have built up large net operating losses, NOLs carry forwards on our tax returns that we filed with the IRS. Either tax deductions that we can take going forward as we become profitable or as we are profitable. Prior to this year, the tax effect of these tax deductions were fully reserved, meaning it was in our balance sheet, but we didn’t meet the criteria to demonstrate that we were going to be reasonably and consistently profitable in order to realize the benefit of these tax deductions, to be able to take these tax deductions.

Prior to this year, that was the case, so they weren’t there. Now we’ve been profitable for several years, and we meet the criteria demonstrating a reasonable expectation of profits going forward. So now these NOL carry forwards have a value to us, a real value in the form of tax deductions against real profits. So there was a partial release of this reserve in March 31st, the small amount, but the big release was this year in September of this year, the release was — the reserve was fully released. So now we’re showing that we have a future tax benefit, that we will be able to use going forward. So when that happens, you have to book an asset, which we have, we have a deferred tax asset on our balance sheet of $20.2 million. So there was a question about — what is the value going forward of these tax deductions.

There it is. It’s on our balance sheet. It will be there every reporting period, every quarter. You’ll see that. We do an evaluation every quarter on what’s the value there. Income tax wise as the tax rate changes, so will this. But as of December 31st, the value going forward is $20.2 million. And that’s a real deduction. We expect to be able to take in the years going forward. The flip side is when we release the reserve, we record essentially, it’s a tax benefit, it’s like a negative income tax, and that was $18.3 million, onetime benefit on our P&L statement. So moving to the cash flow. Our operating burn for the nine months ended this year, December 31st, ’23, was $5.3 million. Strong revenues, strong profits coupled with cash burn may not make sense at first, but it’s quite normal for companies with rapid growth.