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Elite Pharmaceuticals' Stock Up Despite Q2 Earnings Decline

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Shares of Elite Pharmaceuticals, Inc. (ELTP - Free Report) have gained 12.2% since the company released its earnings for the quarter ended Sept. 30, 2024, outperforming the S&P 500 index's decline of 2% during the same period. Over the past month, Elite Pharmaceuticals' stock plunged 8.5%, contrasting with a modest 0.6% gain for the S&P 500.

Financial Performance Overview

Elite Pharmaceuticals reported revenues of $18.9 million for the three months ended Sept. 30, 2024, marking a 33.4% year-over-year increase. This robust growth was primarily driven by the Elite label product line. For the six months, revenues reached $37.7 million, a 62.9% rise from the previous year.

Gross profit for the quarter improved to $8.2 million from $6.4 million, reflecting a 27.1% year-over-year growth. The gross profit margin was 43% during the three months ended Sept. 30, 2024, compared with 46% during the comparable period of the prior fiscal year. The decrease is due to increased labor costs resulting from manufacturing personnel overtime hours incurred to ensure the production and supply of products in response to increased demand.

The gross profit for the six-month period was $16.7 million, reflecting 48.9% growth from the comparable period in 2023. The gross profit margin was 44% during the six months ended Sept. 30, 2024, compared with 48% during the comparable period of the prior fiscal year.

Operating income surged 80.9% to $3.5 million from $1.9 million in the prior-year period, signaling improved profitability due to scaling operations and cost efficiency. The six-month operating income surged 108.3% to $7.3 million from $3.5 million in the previous year. 

However, net loss for the quarter was $11 million against a net income of $14.9 million in the year-ago period, mainly due to a $12.8 million non-cash expense related to changes in derivative financial instruments. The net loss for six months was $10.4 million against a net income of $16.1 million in the comparable prior-year period.

The loss per share for the second quarter of fiscal 2025 was $0.01 against the earnings per share (EPS) of $0.01 in the year-ago period. For the six months ended Sept. 30, 2024, the loss was $0.01 against the EPS of $0.02 in the comparable 2023 period.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Other Key Business Metrics

Elite Pharmaceuticals reported a significant improvement in operating cash flow, generating $4.6 million in the six months ended Sept. 30, 2024, against a $2.9 million cash burn in the prior year. This positive trend reflected better inventory and receivables management. The company ended the quarter with $9.6 million in cash, up from $7.1 million since March 31, 2024. Working capital also increased to $32.4 million as of Sept. 30, 2024, from $26.9 million as of March 31, 2024.

The revenue increase was driven by the Elite label product line, which reached a steady market presence. Recent product launches, such as generic methotrexate sodium 2.5 mg tablets in August 2024 and generic version of Tylenol with Codeine (acetaminophen and codeine phosphate) 300mg/15mg, 300mg/30mg, and 300mg/60mg tablets in October 2024, are expected to contribute positively in future periods.

Elite Pharmaceuticals Inc. Price, Consensus and EPS Surprise

Elite Pharmaceuticals Inc. Price, Consensus and EPS Surprise

Elite Pharmaceuticals Inc. price-consensus-eps-surprise-chart | Elite Pharmaceuticals Inc. Quote

Management Commentary

CEO Nasrat Hakim emphasized Elite Pharmaceuticals’ robust financial position and pipeline, projecting continued growth. The company plans to launch additional products, including generics for Norco, Percocet, and Dolophine, within the coming months. Management noted the ongoing expansion of manufacturing capacity to accommodate increased demand, aiming for operational efficiency that could enhance gross margins.

CFO Carter Ward highlighted the non-cash nature of derivative liabilities, which increased due to stock price appreciation, clarifying the impact on reported losses. He also emphasized that Elite Pharmaceuticals’ investments in new facilities and products are fully supported by internally generated cash flows.

Factors Influencing Results

The significant year-over-year revenue and profit growth were attributed to the Elite label's success and the strategic focus on niche generics. However, the bottom line was adversely impacted by non-operational factors, including changes in derivative liabilities linked to stock price fluctuations. Cost management remains a priority as the company scales production capacity.

Other Developments

Elite Pharmaceuticals completed the acquisition of three ANDAs from Nostrum Laboratories in June 2024 for $900,000. These acquisitions include generics for Norco, Percocet, and Dolophine, which are nearing commercial launch. Additionally, the company is preparing to operationalize a new packaging and warehouse facility, which is expected to significantly enhance production capacity starting January 2025.

Elite Pharmaceuticals also secured regulatory approval in Israel for its generic version of Adderall, marking a step toward international market expansion. A launch is anticipated in early 2025 through its partnership with Dexcel Pharma.


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