Here's What The Latest Elite Pharmaceuticals Inc (OTCMKTS:ELTP) Announcement Means

We covered Elite Pharmaceuticals Inc (OTCMKTS:ELTP) at the start of last week, subsequent to the company's announcing that it had picked up the rights to an existing ANDA for an asset called Trimipramine. The root of our coverage was this: that we were (and markets were) waiting for news related to a study of what we like to call the company's moonshot asset – a drug called SequestOX – and that we would likely see a bit of a near-term selloff on nothing more than the fact that markets got news, but not the news they wanted. We also suggested that any selloff would almost certainly be temporary and that the news we were looking for could hit press near term.A few days later, we again got some news, this time related to SequestOX. Unfortunately, again, however, it wasn’t quite what we were looking for. In the release, Elite detailed the fact that the company expects to put out topline results from the study in question at some pint during July. Apparently, patient disqualification and subsequent subject recruitment issues extended the completion date for the study. Disappointing, but no real issue. It's the results that matter, not when they hit press.Fast forward to the start of this week, and again we've got a press release from Elite. This time, the news relates to a bioequivalence study (it's a bioequivalence study we're waiting on for SequestOx, but this one's a separate program) for an as-yet undisclosed generic drug that Elite is developing in collaboration with a company called SunGen Pharma.This isn’t a new collaboration. We first learned of the two companies working together to develop generics last year, when Elite announced that it and SunGen would join forces to develop four generic assets to target a market worth $3 billion annually (based on IMS data collating revenues from branded and generic assets already commercially available). As per the terms of the collaboration, two of the resulting assets will be marketed by Elite and two will be marketed by SunGen, with both companies sharing development costs for all four.So, as mentioned, we don't know what this recently announced asset is, but we know that the market for current commercial assets targeting the indication is worth $600 million. We also know that – as per the latest trial data – the drug is bioequivalent to the branded product in both fasted and fed studies. Shareholders of this company will be all too aware of the importance of establishing bioequivalence in both fasted and non-fasted (for the uninitiated, it's on this point that the SequestOx registration application fell down).The key thing about this development is that it feeds into Elite's bread and butter strategy. The reason we like this one so much is that – unlike many other biotechs of its market capitalization – the company has a generic portfolio that can generate revenues to help foot the bill for its development assets. We noted that SequestOx is a moonshot asset – that's not an entirely accurate description. We call it that because we think the company is undervalued at its current price based on the generic program alone. If it's moonshot doesn’t work out, there's still room for upside revaluation. The company needs only a fraction of the above referenced $3 billion market to bring in revenues at multiples of its current market capitalization. If it does work out (and it's looking increasingly like it might) then the stock will really take off.We're not saying it's risk-free. Sure, the generic assets foot the bill for the development programs, but there's still a shortfall, and shareholders have historically had to shoulder this shortfall on through dilutive equity issues. We are saying, however, that's it's risk mitigated, and at this end of the biotechnology space, that's a real bonus.Now, bring on July.We will be updating our subscribers as soon as we know more. For the latest updates on ELTP, sign up below!Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.