Elite Pharmaceuticals, Inc. (ELTP) Q4 2017 Earnings Call Transcript
Published at 2017-06-15 14:00:00
Nasrat Hakim - CEO Carter Ward - CFO
Good afternoon, 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 this 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. Listeners 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, the uncertainties and pharmaceutical research and development decisions made by regulatory authorities regarding whether and when to approve drug applications as well as decisions regarding labeling and other matters that could have effective availability, commercial potential of Elite's products, competitive developments, the ability to successful in market in both new and existing products challenging to the validity and enforcement of Elite's patents, trends towards managed care and healthcare cost containment, government laws and regulations effecting healthcare, delays, uncertainties and ability to obtain necessary ingredients and or other factors not under the control of the 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 exact 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, other factors, including without limitation Elite's ability to obtain sufficient funding under the LPC agreement or from other sources, the timing and 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 and the Elite's ability to operate as an growing concern are discussed as Elite filings with Securities and Exchange Commission's including the reports on Forms 10-K, 10-Quarter, 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 this 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, Carter. Good afternoon ladies and gentlemen, my name is Nasrat Hakim, I am Elite's President and CEO. This is Elite's earnings call, so Carter Ward our Chief Financial Officer will give us a summary of Elite's financials. After which I will come back with an update summarizing Elite's accomplishments, work in progress and answer few questions that you have already submitted. So, Ward you have the floor.
Thank you, Nasrat and thanks everybody calling in today. Yesterday, we filed our 10-K, for the fiscal year ended March 31, 2017. The 10-K, is available on the investor section of our website, which is elitepharma.com. it’s also available wherever else you may get your SEC filings from. So if you haven’t seen the K yet please get a copy from elitepharma.com or one of those other sites. Those of you who have called in to prior calls know that when discussing the financials, I don’t like just talk about the numbers from the past quarter or the year just ended, but in addition I try to point out those items that are important to future financials and future results. So, I'm going to do exactly that today as well. The numbers, they tell us where we’ve been, but there is plenty of content in the 10-K, that also gives some insight into where we’re going. We’re going to start with the numbers first. On the P&L, our revenues were $9.6 million for the fiscal year -- fiscal 2017, that’s down from $12.5 million from the prior fiscal year, due to mass that’s a decrease of $2.9 million or roughly 23%. Those numbers are mathematically accurate, but they really do need to be put into context to be fully understood. So, we’re going to do just that. First, let’s drill down on the $12.5 million from last year, that number included a onetime nonrecurring $2.5 million milestone earned when we filed the MDA for SequestOx in January 2016, that was in last year's numbers and there is no comparable milestone this year. So that’s $2.5 million of the $2.9 million drop in revenues. The rest of the decrease was due to net decrease in overall manufacturing revenues, most specifically in Methodone contract manufacturing revenue. Now there is two things to keep in mind regarding this. First, Methadone is the one product that we manufacture on a contract basis. We don’t own the ANDA, we don’t own the label. It’s a type of business that was extremely important to us in the past, when we had very few commercial products and we needed the revenues to help fund our pipeline. But looking forward, this type of business is less important as the future of Elite lies in [technical difficulty] pipeline of generic and branded products that we own. So we’re moving away from contract manufacturing business and we’re focusing more on the development of our own pipeline. Now a short-term hit to revenues is inevitable, but it’s something that's part and parcel of positioning Elite with a product line that will provide far greater value to all of us. Secondly, last year was a record breaking year with regards to revenues on an across the board basis. In addition, to the heavy focus on contract manufacturing in the past. All of our products saw a significant revenue growth. This year, just now [indiscernible] in particular saw even more growth on top of that. But the other products were more in line with last year’s result, some where a little up and somewhere a little down. So the core business, excluding contract manufacturing was in line with the prior year’s record results. But when you consider that last year had a non-recurring milestone and the lessoning of the importance of the contract manufacturing and the affects from the decrease thereof, we did not meet the record revenues achieved in the prior year. So moving down the P&L. There is the most important item for us and that’s R&D expenses. So our biggest expense, it's our most important expense. R&D expense for this year was 8.3 million and that’s compared to 12.4 million for the prior year. Again, do the math its $4.8 million less in expense, it’s a 33% decrease. The takeaway here from this line item is really that. The number is not as important as what the money was spent on. Last year, most of the R&D money was spend on SequestOx, that’s a branded product, its ANDA filing, it's more expensive, the trial is more expensive, the activity is more expensive. This year, the lion's share of the R&D is focused on generic product development. Nasrat will talk more about that, but we filed ANDA’s for Generic Percocet and ANDA for generic Norco during the fiscal 2017. In addition, we have done significant development of the generic products that are partnered with SunGen and most recently, we receive positive top-line results for the trials that are currently being conducted for the first of these products co-developed with SunGen. So the R&D expenses, they will continue and they’re probably increased in the next fiscal year. And due to the number of products that we're working on now. The number of trials and the timing of the trials that we expect to run during this fiscal year ending in March of 2018. Just one more comment on the P&L and that would be our loss from operations, which was $7.4 million, that’s compared to $8.3 million last year. The loss decreased by almost a $1 million and that’s good. But the real takeaway here is what I really look for is that our operating loss was less than the total R&D spent. We had 7.4 million operating loss compared to an R&D spend of $8.3 million. That’s something that I was focused on, it’s shows that our commercial operations are contributing to R&D activities. Product development, as we said over and over again, is the lifeblood of any pharma company and that’s certainly true for us. But it’s important that our commercial operations also be self-sustaining and a net positive. So once again for this year, that’s the case and it’s a positive metrics, it something we're always hoping to achieve and we did it again this year. Moving to the balance sheet. Our cash balance at March 31, 2017, was $10.6 million, you compared that to last year’s $11.5 million. Working capital this year was $15.1 million. As of March 31st, then last year it was $12.1 million. So cash was a little down, working capital was a little up, but all-in-all our overall position has strengthened over the year putting us in a strong position to be able to finance our current and our forecast commercial and product development activities. Lastly on the balance sheet and I’ve gotten a few comments or questions on this in the last few days. This is one of those, what I call, where are we going items, and it really sticks out here on our balance sheet. That would be our inventory asset. Inventory rose from 3.3 million in 2016 to 6.4 million in March of 2017. So some of that extra inventory was for commercial operations, not too much of it though, but most of it was for product development. You have to keep in mid we’re developing multiple products at the same time. We’re running batches, there is trials, there is exhibit batches, tests validation batches all of that requires inventory. Some of that inventory is quite expensive as well. There is too active ingredients in particular which are expensive and we’re currently focusing on those products. So that’s resulting in an increase in inventory. This line item rather the increase in this line item as compared to the prior year, this is something that really gives you an insight of working on and what would be doing in the future. Now, I’d like to move away from the numbers and talk briefly about those items in the 10-K that I think will play a large role in our future financials and our future results. Nasrat is going to go into a lot of these in details, so I’ll keep my comments brief and at a high level and all of these items are disclosed throughout our 10-K. First let me start with the item that I really doubt Nasrat is going to mention, so I’m going to start with that and that’s in our 10-K there is an item 9-A, okay that’s management’s assertion of effective internal controls. There is also an auditor's opinion that agrees with that assertion and you know this may not seem much to a non-accountant or somebody who is not knowledgeable in the intricacies of surveying docks [ph] regulations, but it’s a major achievement. Something that small companies are usually not able to achieve due to the cost and the complexity and the resources required to comply. So this is a big milestone and it was, from my perspective, it was squarely in the critical path to the future NASDAQ listing that we’re all working towards. So we achieved that milestone and we moved one step closer to that NASDAQ listing in the future. Now there is still miles to go here, but we may have to maintain the vigilance and be very diligent in continuing to enhance and improve our internal control environment. But for sure this year we crossed the major threshold and that’s very important to the future of Elite. Next thing in the K I’d like to mention is the new $40 million equity line which we recently signed with Lincoln Park Capital. As I said before, commercial operations they do contribute, they cover themselves and they contribute to the R&D activities, but not at the level that’s required to finance the ongoing plans. So having this capital available to us, is also something that’s on the critical path of everything that we need to do to continue to fill our pipeline and see these products through the development to eventual commercialization. I appreciate, we all appreciate the confidence shown by Lincoln Park in what we’re doing here at Elite and we greatly value their support and the equity line and the access to capital which they provided. Next item in our 10-K is the acquisition of the Trimipramine ANDA and the marketing agreement with Dr. Reddy’s laboratories. We were able to step into an up and running product, a turnkey situation with manufacturing ongoing at Epic and marketing and distribution in place with Dr. Reddy’s one of the top generic marketers in the world. The turnkey situation and it’s a real positive for Elite’s future. Another item I’d like to mention is the co-development agreement with SunGen Pharma and we sign during this fiscal year. Nasrat, I'm sure will have to say on that, but there are a lot of synergies between each organization, our strengths and our assets, we sit well together and I expect that the products developed in partnership with SunGen will become a big part of Elite's success, so pay close attention to that and that’s in our 10-K. Just one other item I’d like to point out and that’s our own product and the progress which has been made this year. During this March 2017 fiscal year, we filed ANDAs for generic Percocet and generic Norco, so really big deal, those are big products. In addition, we’re addressing FDA comments relating to SequestOx and we’re conducting necessary trials and the activities to secure approval of this product. That’s all very important to us, this is important to us in ways that transcend finance. So, the term opioids, it’s all over the news now and they are very important for all of us for so many reasons. As disclosed in our K, we’re making good progress towards realizing this call of FDA approval and the commercialization of SequestOx. So, to sum it up. Our 10-K, we had revenues that we pulled back from 2016's record levels due to factors that are understandable and not entirely unexpected especially the $2.5 million milestone which was not recurring onetime. Commercial operations they continue to contribute to our operations and our balance sheet strengthen. And finally, this 10-K is full of some very significant items that will have a big role to play in Elite's future success. Now, our Chairman and Chief Executive Officer Mr. Nasrat Hakim would like to give an update and his comments.
Thank you, Carter. Thank you and welcome ladies and gentlemen. Let me start with a summary of Elite's accomplishments. First, the dosing of SequestOx Fed study is now complete. If you recall that is the study the FDA asked us to overcome the TMAX, it is complete. We are expecting to report top line results in July. SequestOx is Elite's instant release oxycodone product that uses our packet abuse deterrent technology. This key study was conducted to demonstrate that Elite's product can achieve an acceptable TMAX. We will go over in greater detail, the Fed study and the timing and the plan forward for SequestOx in a few minutes. Elite successfully completed a BE study for generic oxycodone this year as well. Oxycodone is the largest abuse deterrent product currently on the market. It has an IMS data of over $2.5 billion. As soon as we complete the required in vitro and [indiscernible] studies we will be filing a generic for oxycodone. I expect that that will happen this quarter. We successfully completed a BE study for a first of series of products that we have co-developed with SunGen. The SunGen agreement was executed less than a year ago and yet an important milestone has been achieved. This product competes in a market according to them IMS data of $600 million. We are targeting filing this application next quarter. Elite manufacturing expansion is complete as we prepare for the increased manufacturing volume for our future approved products. This quarter Elite acquired an approved ANDA that Carter just spoke about Trimipramine which is contact manufactured at Epic and sold by Dr. Reddy. We are excited to have Dr. Reddy as a partner on this product. This contract enables Elite to begin earning revenues almost immediately. Elite was granted a new European patent for its abuse deterrent technology. We filed a new ANDA in Q1 of 2017, an undisclosed product that has an IMS data of $40 million. We continue to aggressively develop new product and execute to continue to make -- and expect to continue to make announcements of successful BE studies and new ANDAs throughout the remainder of 2017. Our target remains three more ANDAs in 2017 for a total of four for this year. Let me address the program we’ve made on the corporate strategies first. While, Elite manufactures and sales finished on the suited product. Elite is really primarily a development company. We want to ensure that we have a high rate of revenue growth by aggressively developing new products. We filed with FDA and have under active review by FDA, three ANDAs. Each of the ANDAs is in the pain category, which reflects our strategy. We hope that SequestOx's NDA will be refilled relatively soon. We’ll know more once we receive the top-line results as I said next month. In addition, Elite has more ANDA filings targeted for this year. This kind of pipeline and the additional products that are well underway in development will fuel Elite's short and long-term growth. On the average Elite will continue to target one ANDA filings per quarter. This is obviously an aggressive target for a small company like us, but our accomplishments with respect to filing three ANDAs in the best three quarters demonstrates our commitment to execute on this plan. While, we did not file ANDA for the last quarter our target remains that we will add three more this year for a total of four. We are very pleased that the FDA has greatly reduced the review time for their ANDAs. What that means is that we can see pay back on our products that we just filed recently very soon. Review time has shrunk to about 10 to 12 months per ANDA, which means the applications we filed last quarter and the quarter before and last year, we could start seeing approval later this year. At this point for our growth, our revenues do not cover all the R&D spending and thus Elite had to execute on an agreement with Lincoln Park Capital to fund our growth. So let me talk for a second about the Lincoln Park agreement and the shares. Lincoln Park Capital provides the capital to develop the products that I just discussed. To permit a lead to execute the Lincoln Park deal, I agreed to exchange the Elite shares that I own, exchange them from common shares to basically [indiscernible] which is voting shares. This exchange provided Elite with the shares for the Lincoln Park deal. The deal was structured so that I will have to wait up to four years before I get my shares back, I am fully committed to Elite and to the development of the pipeline and I’m willing to wait until I get back my shares, because I truly believe, once we execute on this strategy the stocks that I get back will be much more valuable. FDA conducted and inspection of our facility. And it is an important part of our overall strategy to make sure that we strive for continues improvement. The results of the inspection was [indiscernible] and the inspectors were pleased with the progress we made in pharmacovigilance and it is our hope and expectations that very soon the warning later for pharmacovigilance will be lifted. We await the FDA’s repay and we will update you as soon as we hear from that. Regarding our pipeline, let me provide a quick overview. First for SequestOx. As I said, SequestOx is our immediate release Oxycodone using our patented abuse deterrent technology. The dosing for SequestOx sub-study is now complete. This study which began in March took a few weeks longer than we expected due to reasons that have nothing to do with the product itself. During the study, there were higher than expected rate of subjects who were disqualified either for missing a dose or for other reasons. Other subjects had to take their place therefore a delay of few weeks took place. Right now the study is complete and we will be notified of the topline results in June -- July. Here is the path forward for SequestOx. If the Fed BE study reduces the TMAX enough to be acceptable to the FDA then we will proceed with a combined fasted BE and a dose proportionate study and concurrently we will have a bridging study in Vitro for the category ones. We will definitely update you on all of that once we hear about the topline results from the clinical side. If all goes well, it is our expectation to refile the application around the end of the year slightly before or slightly after. So to wrap up, SequestOx, the FED study is the key study to determine the formulation modified addresses FDA's concern for the TMAX. We will update you as soon as we hear from the clinical side. Elite filed an ANDA in Q3 of last year for Oxy-APAB, this is a generic Percocet. As I said, it is really possible that we may get an approval this year. This is a product that has a market of $500 million. Although there are several generic players in the market, Elite hopes to capture just a small portion of this market which would be a significant addition to Elite’s revenues. Elite filed Hydro-APAB in Q4 of last year as well. This too is possible that we’re going to get an approval this year. The market for this product is about $1 billion and there are several generic players here as well but just like Oxy-APAB, Elite would be pleased with a small percentage of this market. Elite filed an ANDA for undisclosed pain product with a market size of approximately 40 million. This product has only four other manufacturers. We have this successful deal for Oxycodone generic that uses the physical approach for abuse deterrent technology. We expect to file this product this quarter, oxycodone has a market IMS data of $2.5 billion. Elite and SunGen have successful BE study for the undisclosed generic. This generic has a market IMS data of $600 million. We are working on many more products which will follow this mentioned previously. With our partner SunGen we are co-developing a product family that has a market size of 3 billion. That is the initial contract to SunGen before ANDAs have an IMS data of 4 billion on the initial contract. Elite is targeting filing three more ANDAs this year. We will report to you on these items as the year progresses. We received about 30 questions from the stockholders, many of them were repetitive so we categorized them into about 10. Carter will address about two or three of them and I’ll address the rest. A - Nasrat Hakim: The first question, as Elite share prices is not reflected on its business development and it has not increased on the OTC as might be expected with a need to free up shares, why was a reverse split not chosen as the means to avoid dilution. I'm not sure that the reverse split will do anything for dilution, but we’ll continue to bring the company into NASDAQ and attract institutional investors who would help attain a more stable share price. The statement sounds good, but the timing is wrong. I do agree that we should first have all the organic growth that we can and then we’ll have a reverse split if needed before we uplift to NASDAQ and that’s not given there. I also agree that that would attract institutional investors and it will stabilize the market, the share price. But, this process takes a very long time, we have to be compliance with [indiscernible], we have so many other systems to sell up before we go to NASDAQ and it will take at least a year of preparation and dedication and that will delay our development by that much time. And I'm not sure a reverse split and getting on NASDAQ would generate any revenue for Elite, so I'm not sure how that would help us. It is our intention to go to NASDAQ once we have the fundamentals. A stock reverse split does not do that much for Elite, but once we have the revenues we will definitely -- I'm looking forward to uplifting on NASDAQ. Why did [indiscernible] not tie his additional 20% shares to the approval of the SequestOx? Carter, do you answer that?
Yes, of course. There was another question we received related to that and that question was, a 20% dividend in four years will be very difficult for Elite to payout and why was this issued now considering what Elite has and has not achieved today. Those are the two questions that kind of fit together, first of all they are referring to this Series J convertible preferred stock that was issued in May and let me just give you the background here and tell you how the Series J works. Nasrat gave back to the company roughly 158 million shares that he held. Now, once we got those under 158 million shares back that allowed us to raise the $40 million in capital through the Lincoln Park equity line without that we would not have gotten the $40 million. What does Nasrat get for those shares? Well he gets Series J preferred shares which are convertible in four years' time back into the same a 158 million shares that he gave up. He is getting back exactly what he gave to us. For the next four years, he can't convert these Series J shares, he can't sell them, he can't do anything with them. After four years, Elite needs to give him back the same 158 million shares and then that’s the end of the transaction, there is no dividend, there is no 20%, he gets back four years from now exactly what he gave to us. One catch is that four years from now, we will require an increase in authorized capital in order to have the shares to give back to Nasrat. That requires shareholder approval and there is no guarantees of that. So, we don’t get an increase in authorized shares, and we’re not able to give Nasrat his shares back then and only then will the 20% dividend be relevant. And the 20% dividend is not retroactive, it will only begin to accrue four years in the future and then it will only accrue if we don’t give back the 158 million shares. Also keep in mind, there is question about how difficult it would be to pay the 20%, well that 20% is not necessarily paid in cash, if the situation four years from now is such that we don’t have cash available to pay this dividend than Nasrat will not receive cash instead he will receive more Series J cash -- more Series J preferred shares. So to summarize that transaction, Elite gets the 158 million shares which we turned into $40 million equity line. Nasrat get Series J shares which he has to hold for four years and can't do anything with them, we have four years to give him back his 158 million shares and if we do that, that’s the end of it. If after four years we’re not able to return the shares then the 20% dividend begins to accrue and that dividend maybe paid in either cash or more Series J shares depending upon the circumstances four years from now. And then there was a part of that question had to -- was relating to, why not tie this dividend to the approval of SequestOx? I’m kind of glad we didn’t do that, because we expect the SequestOx approval much sooner than four years. So I'd rather have the four-year timeframe, because that’s probably going to be longer timeframe than the SequestOx approval.
Thank you, Carter. Why acquire a drug with $2 million market for $1.5 million and 10% interest at this point, why not focus on trials and submissions for the ADT products and SequestOx, you want to take that too?
Okay. Actually its 1.2 million, he is talking about the Trimipramine ANDA. Keep in mind, we acquired a turnkey product here Trimipramine Maleate. The manufacturing is done by Epic currently, marketing and distribution is by Dr. Reddy’s. We don’t manufacture and we don’t market. We don’t use any resources and there is no issues related to using resources that we could use to focus on product development, because we’re not doing anything, all we do right now is, we get a check for the share of the profits. There is a stable and ongoing market, this product is already being sold. So we have a good idea of the return, it’s a cash positive deal from day one. Now the $1.2 million price was based upon projected cash flows that we're pretty comfortable with and the factor or the metric of Elite getting a full return on its investment within a three-year time period and anybody knows the industry that’s much better than industry norms, a three-year payback. So we’ll earned back, what we've spend the $1.2 million quicker than the industry average and we also have all the profits above and beyond that amount for as long as we own the ANDA. So it’s a really good deal for us, for Elite.
Thank you, Carter. Next question, why does inverter continued to increase? Carter already addressed that. We are focusing on multiple projects in R&D and when you’re dealing with opioids and anti-abuse, the raw material is very expensive and because we’re trying to tackle multiple projects at the same time, make exhibit batches and registration batches and clinical batches, we end up with the higher inventory than normal, okay? It will all work out itself sooner or later. Why the need for that much cash from Lincoln Park? Could a partnership with another large pharma not be obtained instead to reduce dilution? We need that much more cash because we’re working on that many potential product, which is a very good thing. And also what you guys call dilution, I call it change in the form of equity and it’s a lot better for us than having big pharma pay very little and own half of our profits. So if I’m to illustrate that with an example; If a product or a set of products could generate a $100 million in profit and they costs $10 million in order to develop, we get big pharma to pay for them, they’re going to want at least 50% of the profit. So if you look at it that way, you have $100 million borrower revenue and you have a billion shares outstanding on a BE of 20 [ph] your stock price goes to $2. If you get half of that on the same BE ratio, your stock price will be $1. The difference between the $1 and $2 is really $1 billion in shareholder value, it’s not 500 -- its not $50 million. So the effect that that revenue could have on us is huge compared to the little benefit that we get from big pharma. Now if we're involved in an R&D project where there is high risk, than you understand that high risk should bring your higher reward. But the projects we're working on, we know them very well and we are willing to put in the money ourselves and keep the profits for our shareholders. Does Elite think Percocet ANDA approval maybe soon and if so what can investors expect as far as time to get sales of Percocet ramping before time to market, right away, weeks or months? Yes, we’re hoping to get Percocet approval this year as I stated earlier and we are already working on sales and marketing team either for us or for jointly with their partner. We will let you know once we have that approval and we’ll start thinking then about the next step. Right now we’re still low with FDA to notify us of where we stand. Is the need for the latest cash influx from Lincoln Park Capital because Elite is now confident things will start rolling along with other ANDAs particularly ADF. Do you think the ANDAs will come and have a succession? Both the statements are true, this is why we’re having the cash from Lincoln Park Capital and there are great people, we love dealing with them and they’ve been very helpful to our company. And it is because we were expecting to file several products and get a lot of approvals hopefully over the coming year or two and translate that into profit for our shareholders. How quickly after it launches can Elite bring to trial on [indiscernible] that’s Pfizer’s product, generic given [indiscernible] 505 b(2) exclusivity. Pfizer got an approval for [indiscernible] over a year ago and they haven’t launched yet. We cannot do anything until they launch, I don’t know if they’re ever going to launch. So once they launch then we can give you a timeline because that profile is different than oxycodone. We ran a clinical trial against oxycodone when I first started here. First one was 16 subjects and it was the equivalent. But Pfizer’s maybe different in duration and lengths, we have to wait till they bring it up. So I cannot answer that specifically till Pfizer launches that product and then we'll take it from there. Couple of more questions. Given Pfizer’s legal expertise and the area of FDA protocol, can you give us a flavor of how this expertise has benefitted Elite to date? Dr. Jean Pfizer is a world-renowned expert in FDA law and he has worked very closely with us. Every time we have an FDA matter, Dr. Pfizer would come in on the premises, in person to Elite and stay here weeks at a time. I’m not going through all the details of the things he is helping us with but Dr. Pfizer is my right hand on FDA issues just like as Jeff Withnell is my right hand on financial issues. We have very good board member that are really dedicated. So the next three or four questions, all of them have to do with plans for sales and marketing, Percocet 700 million U.S. market, what do you expect to make from it? Percocet is -- I can’t give you sales projections today. We will wait till we get an approval first. Last question, what is the status of Elite’s relationship with Epic including, but not limited to, the agreement for Epic to pay Elite a total of $15 million at certain milestones.
They’ve already paid half.
So to that end yes, we have received $7.5 million from Epic. They have paid at every single milestone that they were committed to. The next $7.5 million will be due upon approval. So we have to file the application towards the end of the year and wait probably a few months for FDA to approve it if all goes well and then Epic will pay the $7.5 million. We have not amended the contract with Epic yet. We are working with them, they seem to be very interested. I met with their CEO, this may sound like a joke, but it’s not. Literally him and I met on Valentine’s Day, we had dinner on Valentine’s Day the last time was in February, negotiating the new contract and during that time, he expressed extreme interest in SequestOx and working with us and even moving our technology someday to China. So, our relationship with Epic is very good, they contract manufacture for us, they are sales and marketing, they are good partners, the CEO for PuraCap and I have very good relationship. Once we get to the point where we get an approval than I am sure they will pay the $7.5 million or they will make the decision then. That concludes our discussion today. We appreciate you and your support. And we will see hopefully in six weeks. Thank you, Katherine.
Thanks, everybody. Have a good day.
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.