Elite Pharmaceuticals (ELTP) Monetization Of Novel Laboratories
how will Novel Laboratories be monetized?
By pennymagic
Mar 27, 2013 12:39:51 PM PDT
http://www.smallcapnetwork.com/Elite-Pharmace...id/1/id/1/
Shareholders of Elite Pharmaceuticals (ELTP.OB) believe there are many treasures to be revealed in the future, and one such mystery right now is the value of Elite's investment in Novel Laboratories. Imagine a 22-ton vault door as the entrance to a fortified safe filled with cash, owned by shareholders including insiders, and nobody gets to touch the money that's locked up inside. Now imagine monetization time and the vault contents finally get distributed to all shareholders. What is each investor's share of this treasure worth?
My previous article titled "Is Elite Pharmaceuticals (ELTP) Undervalued?" started a brilliant discussion with excellent due diligence by those commenting on the article, and a spotlight was shone on the unknown value of Novel Pharmaceuticals. It is currently estimated by some newer investors that the Novel investment is already priced in Elite's shares worth $.02. At a current ELTP share price of $.075, that means the 10% investment in Novel Labs comprises 25% of Elite's valuation. Other longer-term investors believe that Novel is at least a $350 million dollar company, compared to the $75 million above, giving a valuation of $.10 per share.
These are very different estimates, and remember, once the vault doors are opened, if Novel is worth more than $75 million dollars, than ELTP will spike immediately due to it's extremely undervalued share price currently. It's rare to find a stock without any speculation value. It's also very hard to believe the low estimates of $7.5 million for 10% of Novel Labs. In 2006 and 2007 when Novel was formed, "Elite initially contributed $2,000,000 to Novel in December 2006 and on May 15 and June 15, 2007, Elite contributed $2,000,000 and $3,000,000, respectively." So, more than 5 years ago, Elite's investment was worth $7 million dollars. Am I not to speculate that the investment is worth considerably much more now in 2013 ?
Based on the activity of Novel Laboratories including the number of generic drugs that they have in the market and the number of employees, I would feel comfortable to say that there has been consistent growth since 2007. "As of June 15, 2007, Novel has 30 employees, has identified 22 generic product opportunities and is actively developing 11 generic products." For comparison, Novel Labs currently has between 100 to 200 employees, according to various sources providing business and job data, and had $38 million dollars revenue in 2011. That's around a company employee growth of 5x since 2007, and as for revenue, most of Novel's products were pushed to market after 2011 based on the information provided in the FDA Orange Book.
Those 11 generic products that Novel planned on developing have all hit the market now. Here's a look at the number of FDA approvals for those 11 products, per year:
2009 2010 2011 2012 2013
1 1 4 4 1
Based on approval dates, the $38 million dollars revenue reported for 2011 was for 5 products. Since then 6 more products have been approved, developed and marketed. It's curious to see the employee number grow significantly, which leads me to believe that the next phase of Novel Labs is considerably more aggressive, and that there are many more drugs being developed along with the 11 ANDAs that have yet to be approved. Let's say the total of 11 products now bring in a revenue of $80 million, at this point in time not even considering the upcoming products, how much is Novel Laboratories worth?
Well, let's look at Dr. Veerappan's previous company, Kali Laboratories, that was sold to Par Pharmaceuticals for $135 million dollars. Kali had 55 employees and was a takeover target due to the numerous ANDAs that were currently awaiting FDA approval. The facility was 45,000 square feet, compared to Novel's 85,000 square foot facility. To sum up, Novel has at least double the employees and double the facility size. What happens if we double the sale price?
Novel Laboratories would currently be estimated at $270 million dollars.
Elite Pharmaceuticals 10% investment of Novel would currently be estimated at $27 million, which comes to $.077 per share. And, Novel's drug development is only ramping up. It's absurd to see Elite's current stock price being valued less than the Novel investment alone, when you realize that Elite is growing fairly rapidly itself with it's own products, ANDAs and innovative patents.
So, how will Novel Laboratories be monetized?
Let's first take a look at Novel's sister company, Gavis Pharmaceuticals. It's in the process of acquiring or merging with Wintac, an Indian company trading on the Bombay & Bangalore Stock Exchanges, whom Gavis states in their Offer Letter that they will take full advantage of Wintac's facilities. It seems as Gavis is moving out of 400 Campus Drive, the same address as Novel Laboratories. Gavis has 40,000 square feet within this building in Somerset NJ. It makes sense that Gavis would acquire a new facility while reverse-merging with Wintac in order to become more liquid on a stock exchange. This gives 40,000 more square feet for Novel Labs, which again shows how rapidly this company is growing. In order to gain insight into Elite's 10%, lets look at the other 90% of Novel. Dr. Veerapan's will either sell the company as he did with Kali Labs, or continue to grow Novel while creating more liquidity to monetize the company, as he is currently doing with Gavis / Wintac. I'm leaning towards the latter where Novel will reverse merge with a public trading company in the United States. Could that be Elite Pharmaceuticals?
Whether Novel merges with Elite or some other company, it will at least provide a better valuation for investors. The real question here is when the vault doors are opened, will ELTP shares spike one day in sudden amazement that their Novel investment was worth considerably more than what was valued in the share price?
Only time will tell. In the meantime, I've never seen a better investment opportunity. Cheers!
how will Novel Laboratories be monetized?
By pennymagic
Mar 27, 2013 12:39:51 PM PDT
http://www.smallcapnetwork.com/Elite-Pharmace...id/1/id/1/
Shareholders of Elite Pharmaceuticals (ELTP.OB) believe there are many treasures to be revealed in the future, and one such mystery right now is the value of Elite's investment in Novel Laboratories. Imagine a 22-ton vault door as the entrance to a fortified safe filled with cash, owned by shareholders including insiders, and nobody gets to touch the money that's locked up inside. Now imagine monetization time and the vault contents finally get distributed to all shareholders. What is each investor's share of this treasure worth?
My previous article titled "Is Elite Pharmaceuticals (ELTP) Undervalued?" started a brilliant discussion with excellent due diligence by those commenting on the article, and a spotlight was shone on the unknown value of Novel Pharmaceuticals. It is currently estimated by some newer investors that the Novel investment is already priced in Elite's shares worth $.02. At a current ELTP share price of $.075, that means the 10% investment in Novel Labs comprises 25% of Elite's valuation. Other longer-term investors believe that Novel is at least a $350 million dollar company, compared to the $75 million above, giving a valuation of $.10 per share.
These are very different estimates, and remember, once the vault doors are opened, if Novel is worth more than $75 million dollars, than ELTP will spike immediately due to it's extremely undervalued share price currently. It's rare to find a stock without any speculation value. It's also very hard to believe the low estimates of $7.5 million for 10% of Novel Labs. In 2006 and 2007 when Novel was formed, "Elite initially contributed $2,000,000 to Novel in December 2006 and on May 15 and June 15, 2007, Elite contributed $2,000,000 and $3,000,000, respectively." So, more than 5 years ago, Elite's investment was worth $7 million dollars. Am I not to speculate that the investment is worth considerably much more now in 2013 ?
Based on the activity of Novel Laboratories including the number of generic drugs that they have in the market and the number of employees, I would feel comfortable to say that there has been consistent growth since 2007. "As of June 15, 2007, Novel has 30 employees, has identified 22 generic product opportunities and is actively developing 11 generic products." For comparison, Novel Labs currently has between 100 to 200 employees, according to various sources providing business and job data, and had $38 million dollars revenue in 2011. That's around a company employee growth of 5x since 2007, and as for revenue, most of Novel's products were pushed to market after 2011 based on the information provided in the FDA Orange Book.
Those 11 generic products that Novel planned on developing have all hit the market now. Here's a look at the number of FDA approvals for those 11 products, per year:
2009 2010 2011 2012 2013
1 1 4 4 1
Based on approval dates, the $38 million dollars revenue reported for 2011 was for 5 products. Since then 6 more products have been approved, developed and marketed. It's curious to see the employee number grow significantly, which leads me to believe that the next phase of Novel Labs is considerably more aggressive, and that there are many more drugs being developed along with the 11 ANDAs that have yet to be approved. Let's say the total of 11 products now bring in a revenue of $80 million, at this point in time not even considering the upcoming products, how much is Novel Laboratories worth?
Well, let's look at Dr. Veerappan's previous company, Kali Laboratories, that was sold to Par Pharmaceuticals for $135 million dollars. Kali had 55 employees and was a takeover target due to the numerous ANDAs that were currently awaiting FDA approval. The facility was 45,000 square feet, compared to Novel's 85,000 square foot facility. To sum up, Novel has at least double the employees and double the facility size. What happens if we double the sale price?
Novel Laboratories would currently be estimated at $270 million dollars.
Elite Pharmaceuticals 10% investment of Novel would currently be estimated at $27 million, which comes to $.077 per share. And, Novel's drug development is only ramping up. It's absurd to see Elite's current stock price being valued less than the Novel investment alone, when you realize that Elite is growing fairly rapidly itself with it's own products, ANDAs and innovative patents.
So, how will Novel Laboratories be monetized?
Let's first take a look at Novel's sister company, Gavis Pharmaceuticals. It's in the process of acquiring or merging with Wintac, an Indian company trading on the Bombay & Bangalore Stock Exchanges, whom Gavis states in their Offer Letter that they will take full advantage of Wintac's facilities. It seems as Gavis is moving out of 400 Campus Drive, the same address as Novel Laboratories. Gavis has 40,000 square feet within this building in Somerset NJ. It makes sense that Gavis would acquire a new facility while reverse-merging with Wintac in order to become more liquid on a stock exchange. This gives 40,000 more square feet for Novel Labs, which again shows how rapidly this company is growing. In order to gain insight into Elite's 10%, lets look at the other 90% of Novel. Dr. Veerapan's will either sell the company as he did with Kali Labs, or continue to grow Novel while creating more liquidity to monetize the company, as he is currently doing with Gavis / Wintac. I'm leaning towards the latter where Novel will reverse merge with a public trading company in the United States. Could that be Elite Pharmaceuticals?
Whether Novel merges with Elite or some other company, it will at least provide a better valuation for investors. The real question here is when the vault doors are opened, will ELTP shares spike one day in sudden amazement that their Novel investment was worth considerably more than what was valued in the share price?
Only time will tell. In the meantime, I've never seen a better investment opportunity. Cheers!
