Nasrat Hakim - President and Chief Executive Officer Carter Ward - Chief Financial Officer

Good afternoon, ladies and gentlemen, and welcome to the Elite Pharmaceuticals' Conference Call. At this time, all lines have been placed on listen-only mode. And before the management begins speaking, the company has the following statement. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including those related to the effect, if any, on future results, performance or 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, delays, uncertainties, inability to obtain necessary ingredients or 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 the FDA require of Elite in order to obtain approval of the NDA. These forward-looking statements are not guarantees of future action or performance. These risks or other factors, including, without limitation, 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 and intellectual property protections and defenses, are discussed in Elite's filings with 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, Myles, and thank you, ladies and gentlemen, and welcome to Elite's conference call. My name is Nasrat Hakim. I am Elite's President and CEO. As always, Mr. Carter Ward, our Chief Financial Officer will present the financials for this quarter. And I will come back with an update and closing comments. Mr. Ward, you have the floor.

Thank you, Nasrat. And thanks as always to everyone calling in today. Yesterday, we filed our 10-Q, for the quarter ended June 30, 2017. As you know, we're on a March fiscal year. So the June quarter is the first quarter of the 2018 fiscal year, the fiscal year ending March 31, 2018. 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 elitepharma.com or one of those other sites. First quarter investor call, it's the one that's less than two months since our last call, the one for the 10-K. But there is still plenty to talk about. I'm going to briefly take you through some of the key parts of the financials, as always talking not just about the numbers from the past quarter, but I'm also going to also try to point out those items in the financials that are important to Elite's future financials. So, first, let's go through the numbers and let's start with the P&L. Revenues for the June 2017 quarter were $1.7 million, as compared to $3.2 million in the comparable quarter of last year. That's a decrease of around $1.5 million. So if we just look purely at the numbers and drilling down into the revenues, this decrease is due to two products, Methadone and Naltrexone, both of them being below where they were in 2016. I have a few comments on this. First, Methadone; Methadone is the one product that we manufacture on a contract basis. So that means we don't own the ANDA or the label. Compared to our other products, this is the business which is least within our control. While contract manufacturing was important to us in prior years, when we were just beginning to develop our own products and put the pipeline together, it's much less important to our future and there is some uncertainty about its volume and that may continue for the next few quarters going forward. And also, the contract manufacturing - the contract for the Methadone manufacturing expires this year. It's important to keep in mind, and as Nasrat will discuss, our resources are being increasingly focused on our generic and opioid pipeline, and preparing for the launch of the generic products already filed with the FDA, as well as the generics which are licensed currently to Epic that will be coming back to Elite in late 2018, when that license expires. Our business is moving away from revenue streams such as contract manufacturing that are so dependent on third parties. So in short, while contract-manufacturing revenues relating to Methadone were a big part in the decrease in revenues, our business is also moving away from this type of revenue stream that is dependent on third parties. Now the other product related to the drop in revenues is Naltrexone. That's a wholly different story. Naltrexone sales are down this year so far as they have failed to duplicate the strong performance of 2016. This is a product that we own and we license out its marketing, so we have more control and more input with it than we do with Methadone. Generic Naltrexone is also an important product in treating opioid addiction and opioid overdose. So we remain committed to it. Moving down the P&L statement, R&D expenses were almost $2 million this year compared to just over $1.5 million from the June 2016 quarter. Once again, just as important as the actual number is what was actually done to incur these expenses. And a lot was down during this quarter. First of all, the resources which were previously utilized for contract manufacturing were allocated to product development. Instead of making Methadone batches, these resources were used to run batches in products which are under development. In addition, we extended our lab and regulatory personnel to support this greatly increased product development activities. We've also increased overall staff and headcounts to support product development. The level of product development activity is the highest that I've seen since I've been here. And I've been with Elite since 2009. During this quarter alone, we filed an ANDA at the beginning of the quarter, which will be relevant next year. We had a successful bio study for one of the products being co-developed with SunGen, which was a big deal and will be very important to us in the future. We also had another patent granted for our abuse deterrent technology. And we ran a lot of batches, lab test, analysis and generated critical data required to develop a wide and diversified product pipeline, all of that is important to Elite's future. Subsequent to June 30, we added four additional products being co-developed with SunGen and also an entire line of products based on a unique drug delivery platform for extended release products which are also being co-developed with SunGen. And all of this is significant. So there is a lot going on in Elite's R&D. And these costs will continue. Now, some of the costs, some of the R&D costs included the SequestOx biostudy. Results of the biostudy were clearly not as anticipated. Nasrat will talk more about this study. And I'll add a little context from a finance perspective before I close today. But, first, I wanted to move on to the balance sheet. Now, we got some questions on the balance sheet, specifically on inventory, the warrants and mezzanine equity. So I'll go over each of these, and hopefully, answer the questions and add some clarity. First, inventory, where the questions I received had to do with the size and the remaining shelf life of our inventory. So inventory was, at June 30 of this year was $5.9 million. And that's compared to $6.4 million as of March 31. Now, as I mentioned in our last call our inventory includes quite a bit of extensive raw materials that are being used in product development. It's not just commercial materials in our inventory. Inventory is decreasing and will continue to decrease as these materials are used for R&D. Most of what we have on hand now is not expected to be around come year-end. There are also no issues with expiration as these materials have datings that are well in excess of the projected usage. Next is the warrant derivative liability, where I received questions relating to the nature of this liability. That is a very understandable question that is somewhat technical and it is complicated. But the most important thing to keep in mind with regard to the warrant derivative liability is that unlike other liabilities, unlike accounts payable or loans payable, this is a liability that will never, never require us to make a cash payment. GAAP accounting requires that we value the warrants at the end of each quarter and we record them at that value as a liability. Now, small-parties liability is related to warrants issued almost seven years ago, and these warrants will expire by April of 2018 at the latest. Now, those warrants are valued using the Black-Scholes valuation model. The bulk of the warrant liability is related to the warrants that were issued couple of months ago in May in connection with the Series J preferred shares. Now, these warrants cannot be exercised for at least three years and they have significant additional restrictions and risks. As a result, they are valued using a Monte Carlo Simulation. But the takeaway here is that, regardless of the value shown on the balance sheet, Elite will never be required to pay cash to retire this liability. This liability will be retired by either warrant exercise or warrant expiration. There is no cash payment. Finally, I had similar questions on the Series J preferred shares, which again, I totally understand where these questions are coming from. Similar to the warrants, the Series J preferred shares, they cannot be converted for at least three years, and they also contain significant restrictions and significant of the risks. Though the Series J preferred was valued using a Monte Carlo Simulation as well. But unlike the warrants, revaluation on a quarterly basis is not required, subject to the occurrence of events, which are considered improbable. So we're only going to revalue if these improbable events become probable. So Note 11 to our financials gives a thorough analysis of the accounting for these instruments. You can take a look there. But the key thing to keep in mind is that the Series J is a contingently redeemable preferred stock for which redemption is improbable. Now, what that means is that there will never be any cash payment for redemption or retirement of these preferred shares. So I hope that answers everyone's questions. Thank you for asking them. I always appreciate questions. Finally in closing, there is a part of the 10-Q, which I don't recall that I've specifically mentioned before, may have in the past, but I just don't recall it. But - and that would be the Item 2 of the 10-Q. Item 1 is the financials, and I usually spend my time with you going over that. I always find that financials are good at telling you where you've been. And whereas, I am usually more interested in where we are going. That's where Item 2 comes in. There is a lot in Item 2, but the biggest takeaway of this section in my opinion are the disclosures relating to product development and the broad diverse product line that is being created. In short, our pipeline falls into three baskets. First, we have the abuse deterrent products based on the proprietary technology, our proprietary technology, and that includes the SequestOx. Second is Elite's own diverse line of generics. Some of these products are on the market already, and then that's what makes up our current commercial operations and revenues. In addition, there are three ANDAs already filed and under active review with the FDA that fall into this basket. And then also several other products in various stages of development that we expect will result in more ANDA filings over the near and mid-terms. And the third basket are the products that are being co-developed with SunGen, also quite a big basket. All these baskets are significant, whenever you want to go and look beyond the pure numbers of our financials, and get a good understanding and better understanding of what we are putting together. So we want some insight into this, and better insight into where Elite is going, go to Item 2 of our 10-Qs and our 10-Ks as well. So now, our Chairman and our Chief Executive Officer, Mr. Nasrat Hakim, like to give an update, as well as his comments [ph].

Thank you, Carter. And welcome again, ladies and gentlemen. We've received a lot of questions from you for this conference call. So, before I give my summary update, I'm going to take on some of these questions first. Some I will not elaborate too much on, because I'll do that later on when I'm giving the update. Quite a few of the questions as you'd expect were on SequestOx. How close or far off was the actual reformulation and the recent study, the reformulation for SequestOx? The reformulation was an improvement, but not sufficient we believe to satisfy the FDA. Okay. Is it possible to fix, at what cost and time? We are evaluating our options right now. We are doing a lot of lab work, working with two consultants. And we hope that we will identify a solution and a path forward soon. Will Elite pursue a resubmission? We need to successful Fed BE first and then we will proceed with that. Is PuraCap Epic still the licensee? Are they still in negotiation? Yes, Epic is still the licensee. We are right now focusing on evaluating the right path forward for us to resolve this issue. Epic is negotiating and engaged with us. We've received several phone calls from them, offering their help and we made the announcement regarding the fat study. Should Elite drop IR, instant release, and just do an ER product? An interesting question, because the next question says, should Elite drop all other products and focus only on the IR. So I'll try and answer both. First, regarding dropping the IR and just focusing on the ER, I don't find that to be necessary. When we assess the Tmax, we know that it does not apply to the ER products. And our ER products and pipeline are moving forward. And we are pursuing ER formulations. As a matter of fact, most of the money is in the ER extended release formulation, not the IR. But we are still working hard to resolve the IR problem, and I will give you an exact detail of where we stand with that and the history of that in few minutes. Regarding the warning letter, what is the status of the warning letter? Nothing new, the FDA came into Elite. They conducted a full inspection that had several branch. They looked at the previous commitments we made from the previous inspection. They look at the warning letter commitments. They evaluate us for general GMP, and two, three approval inspections. All these five resulted in [two item 483] [ph] that have nothing to do with warning letter. The inspectors that went through all the attributes of the warning letter, told us that we have met our commitments. We have responded. All the responses are with FDA, and we just await their final decision. I believe it will be favorable. Obviously, the fact that they did not write us up on anything, will tell you it's going to be favorable. But FDA sometimes moves a little slow. Will the warning letter hold up approval for our ANDA filings? Okay. We would definitely need the warning letter resolved before the approval starts to coming in. Regarding Loxapine and Dantrolene, what is the status of the transfer? Loxapine and Dantrolene, as we've announced many times before, were licensed to Epic to re-launch and they have not done so. The license of these products reverts back to Elite next year. So we have started proactively working on transferring the products to Elite, starting with Dantrolene first. Is Elite still on track to file three additional ANDAs for this calendar year? What is the expected timing? We started our aggressive program of filing one ANDA per quarter in Q3 of 2016. We filed one then and we filed another one in Q4, and a third in Q1 of 2017. We missed Q2 of 2017. We are scheduled to file one in Q3 of this year, so it's going to happen way before the end of this quarter and we are scheduled to file another one in Q4 by December. Upon Percocet and Norco AND approvals, how soon will Elite launch and who will do the sales? We are still working out the strategy for sales; most likely either doing it ourselves or through a JV. Both options are being seriously considered and negotiated, as the strategy we pursue will determine how and when we launch the new product. We are not amassing large quantities right now, because you never know if there are any delays from the FDA and you do not want the product to become short-dated. Opioids and the press, there is a lot in the press about opioids and a lot of government discussions. Can you comment on that? Are opioids obsolete or here to say? Opioids are definitely here to stay. They are not obsolete and they are thoroughly the best way to relieve pain. We all lose track of the fact that we make these trucks for the patients for those who have cancer or have a chronic illnesses that are suffering and they need these drugs in order to grab on function like a human being, and then take a shower and live a normal life. Because of all the press and the government's intervention, we're focusing more on a segment of the population that abuses these drugs. Yes, we need to do that. We need to figure out a way to make sure that that segment does not have access to the drugs and does not fall victim to it and become addict. But we cannot lose sight of the fact that our primary focus is the patient. Opioids are the best remedy for pain and they are definitely here to stay. We are very proud to be playing a small part in this, in resolving this epidemic that we have. Hopefully the government will cooperate a little and let us play a larger role. Generics to Purdue, Oxy APAP [ph] hard shell, would Purdue Pharma sue Elite? How will Elite handle this? Unfortunately, litigations are a necessary part of doing business in the pharmaceutical industry. So we are prepared for that and our VP of Legal is one of the most experienced lawyers in this area. Our VP of Legal worked with me at Alpharma and he was in charge of patent - the patent department at Alpharma. He was the one that was defending Alpharma's ADF product today, it's Pfizer's, and he has been working with ADF and in the ADF area for many years. Okay. I'll start with the summary of SequestOx, and try and answer some more questions throughout my presentation. SequestOx is our Elite abuse deterrent instant-release Oxycodone with Naltrexone formulation. SequestOx, as I have updated you before, has been through a lot of testing and clinical trials. We ran all the studies that the regulations called for, and the additional studies that were requested by FDA. First, if you recall, we ran a HAL study, that's the clinical trial for a Human Abuse Liability study. That was completed with a great success. The HAL study showed that Elite's R technology works as a deterrent to snorting, chewing, injecting and abusing the narcotics. Our product, if manipulated, will render the opioid ineffective. For IRs and ERs, that technology is rock-solid and it has been proven, not only by us, but also by Pfizer, who possesses the same technology, in EMBEDA and then also in their Oxy ER with Naltrexone that they have not released yet. After the Human Abuse Liability study that was successful, we moved on and we completed successfully a Phase 3 efficacy trial of a 163 subject. Why is that important to mention? Because Elite does not choose what these people ate. These are 163 people, a subject that, patients that had bunionectomy surgery, and were managed by healthcare professionals. So whatever they ate at the end of the day had no effect on the pain relieving effect of our drug. The efficacy study was a success. We also completed a withdrawal study after that. Then we ran a fasted bioequivalence clinical trial that passed all attributes, the area under the curve, the Cmax and Tmax. We are on fed study with a light - what we call light meal, a light meal fed study comprises the subjects eating a bagel with cream cheese, a yogurt and orange juice and having SequestOx sprinkled on applesauce. That study also passed the area under the curve Cmax and Tmax. They were all bioequivalent to the brand. We are on fed study with heavy fatty meal. And we were not bioequivalent to the brand. That's when the FDA issued their complete response letter and asked us to reformulate to meet the fed clinical trial. We met with FDA after that and presented options. As a result of that meeting, they asked us for another fatty meals study, fasted study, PK study and an abridged version of the in vitro study, Category 1 study. We ran the fed study first. The results of the fed study for SequestOx were announced on July 7. The modified SequestOx formulation evaluated in this study did improve the pharmacokinetic results on the fed conditions. But in our opinion was not enough to satisfy FDA. That is why we paused. We did not want to proceed with the fasted study, PK study and in vitro study that cost a lot of money, just to prove something that we already know, when the FDA's main concern and only concern is the fat study. We must adequately address the PK parameters under the fat conditions first, and once we do, then we will proceed with other studies and then after that with the filings. We are now reviewing alternatives to further improving the PK study under fat conditions. One of your questions, one gentleman sent an old saying that people that created the problem cannot possibly solve it. While maybe that's true, we hired a professor, Ph.D. in Pharmaceutics, and also a formulator that worked at Elite long time ago that actually was responsible for our patterns to help us solve this problem as well. The FDA has granted us 12-month extension for resubmission. One of my main concerns was if we missed this date by December of this year, which we will - that we will end our PDUFA fee and then we'll have to pay another one. We communicated with the FDA and they give us a 12-month extension. Now we can file any time in 2018 up to and through December 31, 2018 without asking for another extension if needed. And if the results are valid, we can proceed within that timeframe without paying another PDUFA fee. The expected path forward for SequestOx is, first, we are reviewing the alternatives to figure out, what is the best way to resolve the issue with the fat study. Obviously, the easiest way with that have been labeling, take this product have an hour before a meal or two hours after a meal. The FDA did not want that, so we are trying to resolve the issue scientifically and that's taken a little bit of time. So we are looking at several options, and we will continue to work on that until we resolve this issue. Then we will evaluate the most promising alternative, but this time, we're going to start by doing expensive testing in vitro. It's a lot cheaper and give us a lot better idea on more options. And then we will evaluate the best results and conduct a pilot study. Then we'll be ready for pivotal study. We will continue working on SequestOx and update you, when a pivotal fatty meal study takes place. Regarding the remainder of our pipeline, Elite has four ANDAs filed with FDA, which are currently under review. Three of these ANDAs related to pain products and include Oxycodone APAP, a generic for Percocet, Hydrocodone APAP, a generic for Norco. These are competitive products. These are products that are in a competitive market, but the market has revenues of approximately $700 million for each of these products. The third product is our undisclosed generic, which is - which has a market size of about $40 million. There are only four players in that market. There is no additional information concerning these products yet. Once we hear from FDA, we will definitely let you know. We will update you when there is new information or reports. The next filing that will take place that we will submit within this quarter is generic OxyCoton. This generic, using Elite's know-how, which provides a physical approach to abuse deterrent technology. We have performed a successful BE fast and fed and Category 1 in vitro analysis successfully for this product. And expect to file it this quarter in Q3. OxyCoton is the largest abuse deterrent product in the U.S. market with approximately $2.5 billion in sales. Our SequestOx instant release has an IMS Data for all of the generics in the market of about $400 million to $500 million. Percocet is $700 million. Norco is $700 million. OxyCoton is $2.5 billion. Even though SequestOx is a very important product for us, because it was the very first one we started with that validated our technology that we ran the HAL studies on, that we are very excited about. It truly is today. This is not four years ago now. Today it is a small percentage of the product that we are working on. It will constitute in revenues less than 1% of the products we are working on today. Again, we are going to solve this problem, and we are going to keep working hard at it. But SequestOx itself is a very small product among the three baskets that Carter just covered. After the filing of OxyCoton, we are expecting to file an ANDA that we give co-developed with SunGen. We passed the fast and fed BE, and we have the samples on stability, and we expect to file it in December of this year. The IMS Data for this product, a $600 million. Again, the first of SunGen's products, the market is a lot bigger than SequestOx's market. And this is the smallest of the first four that we are running for SunGen. Actually, we started with the smallest one, and that is much bigger than SequestOx. We recently announced the purchase of Trimipramine and execution of an agreement with Dr. Reddy's Laboratories. They will be handling the sales and marketing for this product, and this product has an IMS Data of about $2 million. We also announced two very important extensions to our collaboration with SunGen since our last call. First, we have four additional products that we've added to the original contract in 2016. And second, we have a new agreement on a platform technology that has about 16 products in it and we're starting with five. So why do we have two different agreements, because the first agreement is focused on products that are a niche. SunGen will come to us with the proposal that this product we have the formulation, we know what to do, we want to get it to clinical trials, do you have the equipment training, can you help us with it, and would you accept it based on the IMS Data. While, the second one is really one simple technology, one very complicated technology, but one really fascinating technology that has a lot of products that applied to the same technology. So we need to separate the two. The first one will continue growing every time we find a unique product. The second one, we've already signed the contract for everything that applies to that technology. We are very pleased with the progress that we have made with our co-partner SunGen and on their projects and our projects. And we have one product for which the successful BE was conducted and will lead to the filing later this year as I mentioned. Further, we have many other valuable products that are progressing rapidly right now. At Elite, when we were manufacturing a little more, the number of [entries that I remember on our study] [ph] was about 13. And now, we're up to 50 and growing. And the reason we're growing even though the manufacturing part is not our primary focus and small, is because of all of these projects that are going to lead us within the next couple of years to becoming a seriously viable company. Our pipeline is something that you wouldn't see at a company our size. As a matter of fact, I do not believe a lot of companies that are much bigger than us have this kind of a pipeline. FYI, the total market size of the pipeline products that we are co-developing with SunGen is $6 billion. All Elite needs is about $50 million in profit for our stock to go to dollar land, do the math. For our future growth, Elite pipeline will be the driver. We want to ensure a high rate of revenue growth by aggressively targeting one ANDA filing each quarter. Okay. As I stated earlier, out of the last four quarters we have submitted three ANDAs. We are scheduled to submit one this quarter and one in the quarter after. We are continuing this aggressive schedule. First, because we have huge pipeline in order to keep up with it and second because this is the way of the future. Our product fillings lead to approval, approvals on launches and revenue growth. But the approvals on launches take time. So I see a lot of questions. We haven't even got an approval and people are asking me about revenues, and say, how you're going to sell and all that. I need you to be patient. Frankly, I'm reminded of Pfizer who got an approval for an outstanding product, Oxy ER with Naltrexone anti-abuse. $2.5 billion market and a giant of a company, year-and-a-half later they have not launched yet. It takes time to line these things up. In the meantime, we see some unevenness in our revenues from our existing products from quarter to quarter that happens when you are a small company and when you are contract manufacturing. Things may continue this way till next year. But within couple of years, once we have our own products, all of that will dissipate. We are constantly working on improving our quality systems which we are upgrading on regular basis. We have no other updates, except the last of the inspection was favorable and all issues were addressed we hope at a succession. We are also constantly working on our financial systems and procedures and addressing Sarbanes-Oxley Regulations. Despite our small size, we now meet the extensive Sarbanes-Oxley requirement to state in our regulatory filings that we are effectively at our effective internal control, that we have effective internal control, and adequate checks and balances on our critical procedures and systems. We have also removed the ongoing concerned language in our filing. We have diligently upgraded our systems to assist in our growth and to prepare us to the eventual uplisting in NASDAQ. To support our aggressive growth, that requires capital. And we have in place Lincoln Park Capital agreement. This agreement provides capital as needed to support investments in our pipeline. The Lincoln Park Capital and the Lincoln Park deal are of exceptional importance to Elite and it is the means by which we are going to become successful. Finally, we have completed the expansion of our manufacturing facility in preparation for our new product approval and launches. Dianne will be taking some pictures hopefully and putting them online. It is a beautiful facility. This concludes the update on our pipeline and the key corporate strategies. Thank you for your continued interest and support of Elite and we look forward to talking to you in the fall. Thank you, Myles.

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 -: