ELTP jumped 24.55% up in the last trading session and closed the market at $0.0685 on a trading volume of 13.50 million shares. That share turnover exceeds six times the average, thus it is reflecting the significant event that the company reported about in the late afternoon on Thursday.
The press release said that the lawsuit filed by ThePharmaNetwork, LLC (TPN) against the company in August last year has been settled. TPN had alleged Elite Pharmaceuticals to have breached certain obligations related to a Product Collaboration Agreement from November 2006. Under the agreement, both companies had to work together on the development, commercialization, manufacturing and distribution of a generic pharmaceutical product called subsequently methadone hydrochloride.
Now the two companies have entered into a settlement agreement, pursuant to which the Collaboration Agreement was terminated and TPN got all rights to the Abbreviated New Drug Application (“ANDA”) for the Product approved by the FDA. In exchange, TPN made a cash payment of $500,000 to Elite. In addition, Elite deserves the right to develop, manufacture and sell a generic product containing methadone and similar to that developed by TPN.
The market excitement that the news brought on Friday was not enough for ELTP share price to break the $0.08 resistance, and unfortunately the stock also gets extreme reaction to the negative news from the company. At the beginning of the month, ELTP announced that the FDA intends to remove certain unapproved cough/cold and allergy related products from the U.S. Market, two of which are currently manufactured by the company. At that time ELTP dropped to $0.04 for share.
The financial state of ELTP also does not inspire confidence among investors. The company has over $5 million in current liabilities and only about $1 million in liquid assets. Also, the reported $5.86 million net income for the quarter ended December 31, 2010 was due mostly to changes in the fair value of certain derivative instruments of the company.
