Nasrat Hakim - President and CEO Carter Ward - CFO

Good day, ladies and gentlemen, and welcome to the Elite Pharmaceuticals' Conference Call. At this time, all participants have been placed on a listen-only mode. Before the management begins speaking, the Company has the following statements. This conference contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Including those related to the effects, if any, on future results, performance or other expectations that may have some correlation to the subject matter of this conference call. Readers are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, Elite's ability to obtain FDA approval of the transfers of ANDAs or the timing of such approval process, delays, uncertainties, inability to obtain necessary ingredients and other factors not under the control of Elite, which may cause actual results, performance or achievements of Elite to be materially different from the results, performance or other expectations that may be implied by these forward-looking statements. These forward-looking statements may include statements regarding the expected timing of approval if at all of SequestOx by the FDA, the steps Elite may take as a result of the CRL, and the actions of the FDA may require of Elite in order to obtain approval of the NDA. These forward-looking statements are not guarantees of future action or performances. These risks and other factors, including, without limitation, guarantees of future action or performance. These risks and other factors including without limitations Elite's ability to obtain sufficient funding under the LPC Agreement or from other sources, the timing or results of pending and future clinical trials, regulatory reviews and approvals by the Food and Drug Administration and other regulatory authorities, intellectual property protections and defenses, are discussed in Elite's filings with the Securities and Exchange Commission, including its reports on Forms 10-K, 10-Q and 8-K. Elite is under no obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. 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.

Thank you, Samantha. Good morning, ladies and gentlemen. My name is Nasrat Hakim. I am Elite's President and CEO. This morning Carter Ward, our Chief Financial Officer will give us a summary of Elite's financials after which I'll come back with an update and final comment. Mr. Ward, the floor is yours.

Thank you, Nasrat and thanks to everyone calling in today. On the February 9, on Thursday we filed our 10-Q for the quarter and the nine-months ended December 31, 2016. We're in a March 31 fiscal year, so that makes December 31 the third quarter of our 2017 fiscal year. The 10-Q is available on the investors section of our website, which is elitepharma.com; or wherever else you may get your SEC filings from. If you haven’t seen our Q yet, please get your copy from one of those sites. At our last Investor Call I pointed out that our financials demonstrated sound commercial operations along with some items that will be significant on future financials. The financials for this quarter can be summarized as clearly a continuation of these characteristics. Commercial operations are sound and meeting expectations with revenues up both on a quarterly and a year-to-date basis, we have strong cash in working capital positions, product development continues on schedule with another product filing being achieved this quarter, we had success on a pivotal bioequivalence trial, we had a positive FDA meeting providing the path forward for SequestOx along with the continued development of other products that are in our active development pipeline. All of these are very positive factors moving Elite forward in the execution of our long-term strategic plan. Nasrat will have more to say on product development and strategic plans and I'll give you the finance perspective on these. As usual I received questions on the financial's, I’ll try my best to answer those questions as well as I go over the financials today. So let's start on the P&L statement, revenues were $2.3 million for the quarter and $8.3 million for the nine months ended December 31, 2016 and that's compared to $2.2 million and $7.3 million for the quarter and nine months of the prior-year. That's a 6% increase for the quarter as compared to last year and a 13% increase for the year-to-date as compared to last year. These are solid revenue numbers. I received a few questions relating to my comments last quarter regarding the timing of shipments. Specifically I had mentioned that some shipments had just missed the September 30 cut-off last quarter, so the answer to those questions is yes. Those shipments were reflected in the December quarter's revenues but on the flipside the end of the December quarter we had a hold on to some finish inventory and not should to a customer due to a quota issue that the customer had. So they ran out of 2016 quarter, we had a wait until January to ship. So that had a negative effect on revenues, had us holding more inventory than we would otherwise have held. None of this is material and all of its pretty normal in our industry. These are the types of timing differences from quarter-to-quarter but over the course of a few quarters they all leave enough. Moving down the P&L statement, operating expenses where we had research and development cost of $1.5 million for the quarter and $4.3 million for the nine months ended December 31, 2016. That's down from $3.2 million and $10 million for the comparable periods of the prior-year, the difference here being due to the timing and nature of clinical trials conducted over the last two years. Last year that was the height of the SequestOx development and the trials. That's an NDA branded product which required extensive efficacy trials this year, development activities are mostly related to generics and those have a lower cost profile as compared to the development of branded products. We expect R&D cost to continue at higher levels than currently and this is due to the timing of product development activities and the cost of related trials and studies. One last point on the P&L statement and that would be the general and administrative expense line item which was essentially unchanged year-to-year. G&A expenses were 700,000 and 2.1 million for the quarter and nine months ended December 31, 2016 this year and this is virtually unchanged from the 700,000 and 2 million in G&A expenses in the prior-year. I won't talk too much about G&A expenses usually but the takeaway here is that revenues are growing, product development activities continue, new products are being file and trials and bio studies ongoing and all of that is being managed within the same overhead structure. We're always looking to cut costs and be more efficient and here is the metric that demonstrates we are getting more out of our overheads than ever before. Now let's move on to the cash flow statement. And on the cash flow statement the line that I focus on is the net operating cash flows which this report were a net cash burn of $3.8 million that's for the nine months ended December 31, 2016. Now that number needs to be put in context specifically by noting that our R&D spend which was $4.3 million or around $0.5 million more than the overall operating burn and also the $2.7 million increase in inventory over the nine-month period. So increases and inventory they have a negative effect on cash flow, so this also serves to increase our cash burn. I've gotten questions on the increase and inventory and I'll address those questions shortly when I move on to the balance sheet but as far as the cash flow is concerned take away here is that contribution of our commercial operations is being demonstrated by the fact that our cash burn is less than what we spent on R&D and that we also had a pretty big build-up of inventory to finance, once again another example of sound commercial operations. And lastly onto the balance sheet. As of December 31, 2016 we had cash on hand of $13.3 million and working capital of $15.9 million. Both of these are up since the beginning of our fiscal year cash is up by $1.8 million, working capital is up by $3.8 million. This provides us the critical mass to continue scheduled product development activities. We’ve always said R&D is the lifeblood of any pharma company and that's true for us as well and we are in good shape financially to support these activities. Now further down the balance sheet is inventory. As of December 31 we had $6 million of inventory and that’s a $2.7 million increase since March 31, 2016. So, I received a few questions on the increase in inventory and here's a few factors in play. First of all keep in mind that inventory as of September 30 was $5.6 million so this score didn't see that big of an increase in inventory, the increase in inventory is really something that's been gradual and steady over the course of the nine months so, keep that in mind. Second is our commercial operations which have grown since last March that requires more inventory and combined with the fact that some of these materials, commercial materials are quite expensive and have long lead times so, we have to plan for that and that results in a higher dollar value of inventory. Third is R&D, there is a lot going on in R&D right now, multiple products under active development means we're busy making batches and consuming materials. Some of these materials are also expensive and they have long lead times as well and it's very important that we have adequate stocks on hands we want to keep the R&D moving. And last is something I mentioned earlier regarding the delaying of shipments to a customer due to a quoted issue. We were ready to ship finished goods on hand but they didn’t have quota. So, we had a hold on to the finished products until January, so it’s been shipped now In isolation this is not really that large an amount but these were finished goods in inventory, valued at fully loaded costs, so it did increase our inventory to some degree. Further something is up, our December financials are continuation of the last few quarters. Commercial operations are sound, product development continues on schedule and with financial resources on hand and available to support as needed. Now our Chairman and Chief Executive Officer and President Mr. Nasrat Hakim would like to give an update and his comments.

Thank you, Carter. First I'll start by summarizing Elite's accomplishment for this quarter, then Elite's short-term strategy, an update on the warning letter, our pipeline including SequestOx and other projects, at SunGen and I'll answer some questions that were submitted to Dianne. Summary of the quarter, our financials for this quarter and the year-to-date are good. Elite is tracking at approximately $10 million for the year. At the meeting on SequestOx was very positive. We are moving forward and expect to resubmit later this year. Details will be discussed later on in this update. Elite continues to meet my goal of one and the each quarter. This quarter we filed Hydro-APAP, last quarter was Oxy-APAP. The biggest abused deterrent product on the market now is oxycodone and we successfully completed both Fed and Fed BE studies for a generic version of oxycodone. The SunGen product agreement we only find this the previous quarter but we have made a great progress to-date. We are on track to file two of these products in about 12 months from now. The expansion of the facility is now complete. We do continue to add equipment to supplement our capacity. We made another key addition to our management team with hiring of Dr. Catherine Hedrick. She is an MD and will oversee our Medical Affairs and Regulatory Affairs Department. Elite strategy and the general business environment during the past 12 months, our generic business have been profitable if the R&D cost is excluded. Strategically of course we want to fund our expensive pipeline and by doing this ensure a high rate of growth in the future. R&D spending will continue. There will be a lot of R&D spending this year. We are engaged with multiple clinical trials. Elite has a substantial pipeline that will fuel our growth and profitability when we begin to get approvals for this product. Approval time for generics are coming down. We are seeing review time around 12 months. This means the filings we are making now we expect to add to our growth a year from now. Our objective is to be profitable enough to also cover our R&D spending. Our pipeline is moving us to that point. Regarding the warning letter, we have responded to the FDA regarding the pharmacovigilance issues and we have received the deploy and acknowledgement. We used an outside group to formulate the response and recommendations, the outside group also assisted us in implementing the recommendations. Among the changes, we have also hired an MD as I just discussed to enhance the Medical Affairs Department. Regarding our pipeline, I will start with SequestOx. We are pleased with the past meeting with the FDA on SequestOx. We issued a press release, the day after the meeting summarizing the discussions and as promised, we followed up with another press release when the final meeting minutes were issued. The stock did not respond to the second press release for reasons that are now really clear to me, so let me go through - go over our meeting and our past forward for SequestOx. Elite developed and proposed a three simple formulation modifications supported by lab studies, in vitro studies. Anyone of the three we believe will address at the AHT [indiscernible]. The FDA agreed that any of the three proposed modifications would be a minor change. This makes our path to resubmission clear and straightforward. The pass is as follows; we have to chose one of the three formulations and proceed with it and we have done so, complete a Fed BE study to demonstrate that the modification achieved its objective, this is key and this study will be initiated this quarter. If the Fed study is successful, we will then complete the combined fasted BE and dose proportionality. The other work required include a category one in vitro lab work and stability study. We view this outcome as very positive because it requires only a BE study and not an efficacy study, the cost and time to complete the required BE BA studies is much less than efficacy and follow-up less expensive. We are expecting we can complete the two PK studies and resubmit by year's end. Regarding our other products, Elite has been filing one ANDA per quarter, Elite filed oxycodone APAP last quarter as a generic to Percocet. Percocet and its generic capture about $500 million market that are a number of generics on the market but Elite hopes to capture just a small part of this market and this amount can be significant addition to Elite's revenues. I will remind you to that FDA position is that APAP provides intranasal abuse deterrent due to its irritation of the nose, nasal passages. So we do not expect APAP products to replace these combination products anytime soon. Elite also filed hydrocodone APAP this year or this quarter. It has a very high market value of $1 billion, the IMS data is about a $1 billion for Hydro-APAP. There are a number of generic players in the market but too like Oxy-APAP, Elite wants to capture just a small part of this market and this can be significant addition to Elite's revenues. We have made the great progress on the generic front on oxycodone. Oxycodone is a $2.5 billion market. We announced recently that we completed a successful first and third BE studies for a generic oxycodone. This is an extremely important step in the development. We will complete other steps including category 1 testing and stability and we expect to file this year. Oxycodone is an abuse deterrent opioid and we may - and you may wonder whether we use our proprietary pharmaceutical pharmacological abuse deterrent technology for this generic. We did not. Oxycodone uses the physical abuse deterrent approach, so we were required to do that as well to develop a generic foray. The pharmacological approach however can be used and is being used for us to create Oxy products. That would be Pfizer's TROXYCA. Elite expect to develop a generic for TROXYCA as soon as Pfizer launches the product. SunGen co-development, SunGen is an important partner for Elite. We signed a co-development agreement with them the previous quarter and we have made tremendous progress since then. The products that we are co-developing have large market opportunities, a total market size IMS data of about $3 billion for all four products. Two of the products are expected to enter clinical trials later this quarter and early next quarter. Our target is to file the first product approximately 12 months from now. To wrap up, Elite expects to continue to file four ANDAs in 2017, that is on average one and after quarter and of course some of these products will be the ones we talked about and some would be ones we have not discussed due to competitive reasons. Some of you sent – I have some questions, so I'm going to take quite a few of them now, starting with the first group regarding SequestOx. The question is, can you provide a little more insight on the work studies needed to resolve the issues cited in the CRL within SequestOx. Okay, I have already covered that. The issue was simply a Tmax that the FDA wanted us to overcome and we created a three different path for that. They said pick one and move forward with it and we did exactly that. Was delay formulation for SequestOx done prior to the December meeting with FDA? Most of the in-vitro work was done prior to the December meeting with FDA, yes. How long will the steps needed for SequestOx take? It will take few months, it will take as long as takes a BE first on Fed Study in order for us to turn over to that part of the application to come or go to refile. Does the company have to resubmit the entire application with the additional information and will the FDA have to review the entire application and you have to pay $2.3 million? No, we don't have to resubmit the entire application. We don't have to pay another fee. All we have to do is just submit the work that they requested it. BE study, with a FED study and have bridged version of the category 1 anti-abuse. Will the FDA require Elite to repeat the abuse studies? Not the held studies, only the laboratory part and small part of it. Will the FDA required Elite to repeat the Phase 3 study? No. How much will these additional studies cost? About $2 million to $3 million. Do you have the money to fund these studies or do we need to raise the money? The answer is yes to both of them. We have the money and we need to raise money. Due to the ER abuse resistant products need to be reformulated like SequestOx? The answer is no. Okay, just a reminder for everybody. An extended release is taken twice a day and it is for chronic use. So when somebody is sick, they need to take their painkiller all the time. So you take it let's say at 7 in the morning and 7 at night to cover you for the whole day. So, in the FDA's eyes whether there is a food effect or not for oxycodone or any other drug, the patient have the responsibility to take medicine at specific time. So, they take in the morning if it is something that doesn’t go well with food, they take it before they eat and they take it again in the evening. The reason that they - the FDA made a big deal about the Tmax in our case is because there is a delayed effect when you take oxycodone with food. That is also to even for the brand oxycodone. Historically, the FDA or the Doctor and the pharmacist will tell the patient to take the product an hour before food or two. The FDA is thinking if somebody eats and then they are in pain, they don’t get the effect within 20 minutes, then they go ahead and take a second or a third dosage and end up with that. This has never historically been the FDA's policy or anybody's policy because usually you take rescue medication, you will take in case if you eat and you cannot take oxycodone, you will take a prescription strength Ibuprofen, okay. So this is not an issue that the FDA is going to expand I believe to ER or the rest of the industry. It was a unique thing in this very specific case that they thought about two years after they give us green light to move forward. So there will be no real formulation for any of our ER products or anybody in the industry that for the reasons I just explained. Would the focus primarily on SequestOx, there has not been much discussion on the other ADT drugs and the pipeline. Has the development of other ADT products been shelved until SequestOx is on the market or are they still being developed? Actually they are still being developed, okay, we don't have to spend a lot of money on clinical trials to see the landscape but we do a lot of formulation work and stability work and the solution work in-house on multiple formulations, this has never stopped. Pfizer still haven’t launched TROXYCA have to wait for them to launch, so you can file [indiscernible] right now. Yes we need to compare our products to theirs and theirs is different from oxycodone, so we're going to have to wait for them to file for us to have an access to their profile. And this is more from a stockholders given me advice on using roxycodone like Pfizer did, so we can overcome Pfizer's three year exclusivity that doesn’t happen, this is unrealistic, exclusivity will be given for company that makes a specific dosage for them and a specific type. So if you made the capsules, somebody else can make a tablet and it will be 505(b) 2 and you will get your own exclusivity. But Pfizer is making a capsule of roxycodone with Naltrexone, we cannot make another capsule and say let's waive their exclusivity because we used roxycodone as a reference's to drug, it doesn't work that way. A question on Dantrolene and Loxapine, what is the status of the site transfer for Dantrolene and Loxapine? I'm disappointed with how slow things are moving, so we are in discussions of moving the products to Elite. The Epic has been caught up with the transition and the whole bunch of other stuff and we are a little more nimble than Epic, so we are going to work with them on transferring these products over here and I will update you about that in next meeting. Are we waiting - maintaining our existing agreement on our generic pipeline with Epic? Yes. Status update on renegotiation - renegotiating the license agreement with PuraCap in regards to SequestOx? It's ongoing, we will have multiple meetings with them and we will see what happens after we get the BE study results for the Fed. All right last question, what part of the business do you think is being ignored that has more upside potential than the investors or analysts are giving it? That's a good question. The last meeting I spoke about the three basket strategy, the first one is that we are an ADT company and that is the bottom line. Elite specialty is ADT and that's one basket and that's a major basket for us. But we are also working and have worked with SunGen on products that are of tremendous value to Elite, as well as our own generic, Oxycodone generic is a huge and will be huge for Elite but nobody seems to be given the value needed for these two projects, the SunGen project and the oxycodone project. With that, I thank you all for coming today. Samantha?

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation. Q -: