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Elite Pharmaceuticals, Inc. (OTCBB: ELTP) Shows that Strong Leadership Can Overcome FDA Setbacks as Specialty Pharmaceutical Company Builds Momentum

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Often times it’s what a company does when they face adversity that defines their future and for Elite Pharmaceuticals, Inc. (OTCBB: ELTP) it looks as if the specialty pharmaceutical company dedicated to developing and commercializing oral controlled release product formulations has answered the bell. Earlier this year there were serious concerns about the company’s future due in large part to an FDA decision to remove approximately 500 cough/cold allergy related products from the U.S market, among them a pair of drugs, Lodrane 24 capsules and Lodrane 24D capsules, manufactured by ELTP and marketed by ECR Pharmaceuticals, a wholly owned subsidiary of Hi-Tech Pharmacal.

To their credit ELTP didn’t discount the significant impact that the FDA’s decision would have on the company’s revenue. In fact ELTP Chairman and CEO Jerry Treppel stated in the company’s most recent quarterly filing, “Everyone at Elite labors with the knowledge that much of their efforts of the past two years which engineered an unprecedented corporate turnaround, has been hampered by the loss of the Lodrane products.” Acknowledging the fact that they had suffered a serious setback showed the company wasn’t afraid to be honest with their shareholders and may have won them some new investors.

What made Treppel’s comment all the more meaningful was what he followed it up with, “Nonetheless our employees are helping the company move forward to what we hope is an even brighter future.” Rather than play the victim role Treppel insisted the company would continue their efforts to bring new products to the market.

On Tuesday ELTP, along with ECR Pharmaceuticals, announced the launch of Lodrane D, an immediate release formulation of brompheniramine maleate and pseudoephedrine HCl, an effective, low-sedating antihistamine combined with a decongestant. The obvious difference between the recently launched Lodrane D and the pair of drugs removed from the market is in that while Lodrane D is an immediate release formulation Lodrane 24 and Lodrane 24D capsules were an extended release antihistamine formulation.

As was the case with Lodrane 24 and Lodrane 24D, ELTP will manufacture Lodrane D for ECR and receive revenues for the manufacturing, packaging, and laboratory stability study services for the product, as well as royalties on sales.

Their ability to find a solution to a pressing problem is impressive to say the least and recognizing that the current U.S. allergy market exceeds $3.5 billion ELTP knew they had to find their way back onto the shelf. It shouldn’t be lost on investors that given the removal of so many cough/cold allergy related products from the U.S. market the quick turnaround by ELTP and ECR now makes Lodrane D one of the only adult brompheniramine containing products available to the consumer.

Judging by Tuesday’s trading activity that fact wasn’t lost on investors as ELTP saw volume top 11.2 million and shares hit a high of 0.104 before closing at 0.100, well above Monday’s closing of 0.075. The upward trend continued into Wednesday as shares hit a high of 0.125 before closing the day at 0.115 on trading volume that surpassed 7.8 million. Given the fact that ELTP had hit a low of 0.060 just last week, the turnaround has validated the company’s commitment to move forward and grow.

Of course that growth is more than just Lodrane D as Treppel has said the company will “continue to build and leverage Elite’s technologies through our product pipeline, partnerships and ventures as we continue to systematically meet the milestones we have set for ourselves.”

That would include the development of ELI-216, an abuse resistant oxycodone product, and ELI-154, a once-a-day oxycodone product, both of which could generate substantial revenue for ELTP as a pain management therapy. ELTP has been in discussions to license its once daily oxycodone product, ELI-154, to a European marketing partner while scaling up the development of ELI-216. ELTP has retained the rights to these two products but has said “they expect to license these products at a later date to a third party who could provide funding for the remaining clinical studies, including a Phase III study, and who could provide sales and distribution for the product.”

Along with their own pipeline ELTP remains committed to their strategy of assisting partner companies in the life cycle management of products, to improve off-patent drug products, and develop generic versions of controlled release drug products with high barriers to entry. They already have already received FDA approval for one Abbreviated New Drug Application (ANDA) for phentermine HCl 37.5 mg tablets, the generic equivalent of the Adipex-P(R) 37.5 mg tablets, and with a licensing agreement and a manufacturing and supply agreement in place with Precision Dose, Inc., whose wholly owned subsidiary TAGI Pharma, Inc. will distribute the product ELTP has entered a market that generated about $40 million in sales in 2010.

ELTP has a pair of ANDAs in the process of a manufacturing site transfer, both of which are products they have partnered with TAGI Pharama on, and a fourth ANDA is currently under review by the FDA, also part of a TAGI Pharma partnership.

It goes without saying that the loss of Lodrane 24 and Lodrane 24D will be reflected in ELTP’s income statement but the fact that they bounced back to put a product on the market in Lodrane D is a positive sign to shareholders. In addition, Hi-Tech Pharmacal has said they will remain determined to gain FDA approval for both of those products pulled from the market and if they are able to gain such an approval it would be a substantial revenue generator for ELTP.

When we covered ELTP back in March the company was spinning from the FDA decision and shares were trading around the 0.0595 and 0.0600 level. Despite the negative news we pointed to the positive approach that management was taking to restore the company’s standing and it has been that approach that has made their comeback possible and made ELTP an attractive prospect for investors.

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