A Bright Tomorrow

Jul. 29–The tiny white sugar beads stocked at Elite Pharmaceuticals Inc. might be mistaken for the nonpareils sprinkled on chocolate candy.

But in the hands of the Northvale company, they are the beginnings of a potentially valuable medicine: an abuse-resistant form of the OxyContin painkiller.

The idea is to put in a capsule identical-looking beads sprayed with either the ingredient in OxyContin or another medicine that can counteract OxyContin’s effects if crushed.

Drug abusers commonly crush the drug before ingesting it to get high.

Though still in early study, the abuse-resistant OxyContin is perhaps the jewel in the portfolio of Elite, a small, publicly traded company that specializes in technology that controls the release of medicine. Elite also is at work on a once-a-day version of OxyContin, which works over 12 hours.

The development of the pain treatments is part of a renewed focus at Elite, which has undergone a transformation since a 2003 power struggle that led its founder and CEO to leave.

Since then, Elite’s new management team cut in half the number of projects in development to make the most of its resources; flirted with a merger; and, with a partner, brought its first drug to the market.

“We transformed the company … into a more dynamic drug-delivery asset,” Bernard “Buddy” Berk, Elite’s CEO and chairman, said in a recent interview.

Elite, which has a market value of about $50 million, presented its story at the Banc of America Securities Specialty Pharmaceutics Conference on Thursday — which may indicate growing investor interest.

To be sure, Elite has never been profitable. For its most recent fiscal year ending in March, the company reported a net loss of $5.9 million and it expects to incur “significant losses” this year, according to its annual SEC filing submitted in June. After raising $6.6 million last year through a private placement, the company says in its filing that it has enough cash to get through next March. The company has not said when it plans to be profitable.

But within Elite, optimism about its assets and prospects abounds. Elite’s technology controls the release of medicine to improve products, such as by reducing the amount of pills patients must take.

David Maris, a specialty pharmaceuticals analyst with Banc of America Securities, said the company could have some “solid hits” with its oxycodone products, while its controlled-release technology could provide protection in the hotly competitive generics area.

Maris does not cover Elite and, as such, cannot provide investment advice, but acknowledged that the company was promising enough to invite to the conference.

“With any company this size, how they execute on the first few products is going to determine their level of success later on,” Maris said.

The company owns a two-story plant where it has the capability to manufacture tablets and capsules, and is registered with the Drug Enforcement Agency to work on controlled substances.

Berk is a pharmaceutical industry veteran whose experience included a top sales and business development position at Par Pharmaceuticals, a specialty drug company based in Woodcliff Lake. He was leading a pharmaceutical consultant firm when Elite hired him, initially as a consultant.

In June 2003, a conflict between the board and Atul Mehta, Elite’s founder and CEO, spilled out into the public. Mehta resigned and sued the company for $1 million. Mehta received $400,000 in a settlement last year, according to the company.

Under Berk, the company moved to cut back the number of research projects.

“It was a question of resources,” Berk said. “The company just had a dwindling cash position.”

Last fall, Elite’s partner ECR Pharmaceuticals launched a once-a-day allergy drug, Lodrane 24, the first drug using Elite’s technology to hit the market. Elite reported about $150,000 in manufacturing and royalty fees from ECR in its recent SEC filing.

Lodrane represents some immediate revenue, while Elite’s longer-term projects develop. The company has struck partnerships with companies to develop three generic drugs, including a version of the heart drug Cardizem CD.

Elite briefly flirted with a merger with Nostrum Pharmaceuticals a few years ago, and Berk’s employment agreement, which ends in July 2006, provides salary and stock option incentives to complete a strategic transaction, such as a merger. But that clause will not influence deal-making, he said.

“I’m there to move the company forward, to do the right deals,” Berk said.

The once-daily and abuse-resistant versions of OxyContin are being developed as brand-name drugs.

Purdue Pharma took in as much as $2 billion in annual sales from OxyContin, which is intended to provide pain relief over 12 hours. Abusers circumvent the slow release of OxyContin by crushing it, then swallowing, snorting or injecting it for an intense high.

In its abuse-resistant capsule, Elite combines beads of oxycodone — the ingredient in OxyContin — with beads of naltrexone, often prescribed for narcotic addiction. Naltrexone binds to the same molecular target, blocking the effects of oxycodone, according to Elite.

Elite coats the naltrexone so that the drug is not released so long as the beads remain intact. However, if crushed, the naltrexone releases. Because addicts will not be able to differentiate between the oxycodone and naltrexone beads, their attempts to get high will be thwarted.

“You take away the incentive for the abuser to use it, steal it,” said Chris Dick, Elite’s senior vice president of business development.

Elite plans to start a second “proof of concept” study soon. Under a process that is more speedy for branded drugs that are versions of already marketed products, Dick said the abuse-resistant product could begin a large-scale trial as soon as next year. Should it progress, Dick said, the plan is to eventually partner with a larger company to help commercialize it.

Several competitors are vying for the abuse-resistant market, using different approaches. Pain Therapeutics Inc.’s Remoxy, which is in late-stage testing, is formulated as a sticky capsule designed to make it difficult to be broken down for abuse.

Last year, Elite agreed for $150,000 to give Purdue exclusive rights to evaluate Elite’s abuse-resistant technology. However, Purdue did not negotiate a license with Elite, leaving the Northvale company to talk with other potential partners. Elite continues to talk with a range of companies in the pain-treatment area.

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