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EP

ELITE PHARMACEUTICALS INC /NV/ (ELTP)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2026 revenue was $36.3M, up 92% YoY, driven by lisdexamfetamine and growth in Elite-label generics; operating income rose 136% YoY to $8.2M, while gross margin compressed sequentially as supply increased and pricing normalized .
  • Sequentially, revenue declined vs Q1 ($36.3M vs $40.2M) as expanded DEA quotas increased supply and price competition, plus one-time wholesaler stocking fees on lisdexamfetamine weighed on margins .
  • No formal quantitative guidance was issued; management expects pricing to stabilize and continued growth from brand-to-generic conversion for Vyvanse and steady share in amphetamine IR/ER; FDA approved Ropinirole ER (Requip XL) post-quarter, providing a near-term launch catalyst .
  • Balance sheet strengthened: working capital reached $75.1M, operating cash flow YTD rose to $19.9M; debt continued to decline and related-party loans were fully repaid in June 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Strong YoY growth: revenue +92% to $36.3M and operating income +136% to $8.2M, with performance led by lisdexamfetamine and Elite-label generics .
    • Market-share and portfolio breadth: internal lisdexamfetamine market share ~8%; amphetamine IR at 19% share and broader amphetamine ~12% according to IQVIA, with several smaller high-margin products contributing .
    • Balance sheet and cash generation: working capital rose to $75.1M; operating cash flow reached $19.9M for six months, while non-current liabilities declined and debt-to-cash metrics improved .

  • What Went Wrong

    • Sequential margin compression: gross margin fell to 39% in Q2 from 68% in Q1 due to increased supply/price competition and one-time wholesaler stocking fees; revenue fell sequentially to $36.3M from $40.2M .
    • G&A elevated: G&A expenses rose to $4.0M vs $2.3M YoY and $3.4M QoQ, reflecting sales administration scale-up and compliance costs across 50 states and Puerto Rico .
    • Derivative warrants and tax rate volatility: large non-cash swings from warrant valuation impacted below-the-line items and effective tax rate; though EPS was $0.01 in Q2 vs $(0.01) in Q1, these items complicate comparability .

Financial Results

MetricQ2 FY2025 (3M ended Sep 30, 2024)Q1 FY2026 (3M ended Jun 30, 2025)Q2 FY2026 (3M ended Sep 30, 2025)
Revenue ($USD Millions)$18.88 $40.21 $36.32
Gross Profit ($USD Millions)$8.20 $27.23 $14.07
Gross Margin (%)43% 68% 39%
Operating Income ($USD Millions)$3.48 $21.70 $8.21
Net Income ($USD Millions)$(11.04) $(5.88) $13.70
EPS (Basic, $USD)$(0.01) $(0.01) $0.01
EPS (Diluted, $USD)$(0.01) $(0.01) $0.01

Revenue type breakdown:

Revenue TypeQ2 FY2025Q1 FY2026Q2 FY2026
Manufacturing Fees ($USD Millions)$18.23 $39.78 $36.20
Licensing Fees ($USD Millions)$0.66 $0.43 $0.13

KPIs and concentration:

KPIQ2 FY2025Q1 FY2026Q2 FY2026
Operating Cash Flow ($USD Millions)$4.60 (six months YTD) $14.78 (three months) $19.88 (six months YTD)
Working Capital ($USD Millions)—$67.10 $75.12
AR Concentration (Top 2/3 customers)70% (2 customers) 77% (3 customers) 88% (3 customers)

Notes:

  • Sequential margin pressure reflects increased indirect sales mix via wholesalers and intensified competition in lisdexamfetamine after quota expansion .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2026No formal guidanceNo formal guidance providedMaintained (no numerical guidance)
Pricing/MarginsNear-termN/APricing expected to stabilize; margins pressured by competition and one-time stocking fees now pastQualitative stabilization
Product LaunchesQ1–Q2 FY2026Ropinirole approval pendingFDA approved Ropinirole ER; launch planned Q1–early Q2Raised (new approved product)
Corporate ActionsFY2026Evaluating M&A/uplistingM&A remains primary focus; multiple parties engaged; valuation confidentialMaintained focus

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2025)Previous Mentions (Q1 FY2026)Current Period (Q2 FY2026)Trend
Lisdexamfetamine dynamicsLaunch success; 8–10% share amid 13 competitors; price pressure; quotas Continued growth; direct vs indirect sales mix supports margins 8% internal share; volume +6% QoQ; pricing competition increased; one-time stocking fees impacted COGS Stabilizing volumes; pricing normalizing lower
DEA quotasNavigating tight quotas as advantage —DEA relaxed quotas; Elite received full allocations, but so did competitors Neutralizes prior advantage; more supply/competition
Sales mix (direct vs indirect)Emphasis on building label presence Higher direct mix boosted Q1 margins Indirect mix increased in Q2; lower margins typical Mix shift lowers margin QoQ
Amphetamine IR/ER shareIR ~20%; ER ~16% (11% Elite label, 5% partner) IR/ER steady; partner phase-out noted IR ~19% share; broader amphetamine ~12% Defending mature share
Pipeline & approvalsAnticoagulant BE success; Oxy ER P-IV path; Ropinirole under review Anticoagulant ANDA filing planned Q1 2026; Oxy ER litigation ongoing FDA approved Ropinirole ER; Oxy ER litigation motions ongoing; anticoagulant filing timeline remains Q1/Q2 Pipeline progressing
Tariffs/macroChina tariffs not material to APIs ——Stable
R&D spend/timingCosts flexible by stage Elevated activity in prior periods R&D down YoY; timing/activities vary Timing-driven variability
M&A/uplistingM&A primary; uplisting secondary M&A focus continues Active M&A outreach; site visits; valuation confidential Ongoing strategic review

Management Commentary

  • “Lisdexamfetamine… we have maintained an 8% market share according to our internal data… Lisdex volume grew 6% this quarter compared to last quarter according to IQVIA. Price competition… increased, and as Carter indicated, that's what led to the situation we're in” .
  • “We increased our volumes, but we sold at lower prices… there are more than 10 suppliers… and that creates downward pressure on prices… typical generic business model with higher prices at first, and they eventually stabilize” .
  • “When you first stock up a new product with a wholesaler… there are one-time stocking fees… resulting in higher COGS and lower margins… we are past that now” .
  • “Working capital as of September 30 this year was $75 million… current assets increased from $58 to $86 million, while current liabilities decreased… Elite has low debt… debt continues to decrease” .

Q&A Highlights

  • R&D expense decline: Q2 R&D $1.4M vs $2.0M prior year due to timing and focus; development continues .
  • G&A increase: Q2 G&A $4.0M vs $2.3M prior year and $3.4M Q1, driven by scaled sales administration and compliance across all states/PR .
  • Headcount: 65 employees; scaling operations with lean staffing .
  • Inventory: $18.2M vs $19.4M Q1; decline due to timing, not demand signal .
  • DEA quotas: quotas relaxed; Elite received allocations, as did peers, increasing supply and competition .
  • Legal: Oxycodone ER (OxyContin) ANDA remains under litigation with Purdue; motions to dismiss filed; 30-month stay extension contested .
  • Strategy: M&A is primary focus; multiple parties engaged; valuation details withheld to protect negotiations .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY2026 EPS/Revenue was unavailable at time of analysis due to data access limits; we cannot benchmark a beat/miss. We will refresh when access resumes and adjust view accordingly.

Key Takeaways for Investors

  • Near-term trading: Expect margin stabilization now that one-time wholesaler stocking fees are behind and pricing normalizes; sequential revenue/margin pressures are tied to quota-driven supply and competitive pricing—watch mix shift back toward direct sales .
  • Medium-term thesis: Lisdexamfetamine and amphetamine IR/ER anchor a durable base; Elite’s dependable supply and lean structure underpin strong operating leverage despite pricing pressure .
  • Pipeline catalysts: FDA approval for Ropinirole ER adds a new product; watch for anticoagulant ANDA filing (Q1/Q2 timing) and progress on Oxy ER litigation; each could add optionality .
  • Balance sheet strength: Rising working capital and operating cash flow with decreasing debt support strategic flexibility (M&A/uplisting) and resilience through competitive cycles .
  • Risk monitor: Competitive intensity in lisdexamfetamine (10+ suppliers), elevated AR concentration among top customers, and warrant derivative volatility impacting reported EPS/tax rates .
  • Strategic optionality: M&A remains the key corporate catalyst; valuation and buyer engagement are progressing, though timelines remain uncertain .
  • Execution focus: Continued defense of amphetamine IR share (~19%) and broader amphetamine (~12%), plus careful prioritization of launches (Ropinirole, Methadone) to balance volume vs margin .