ImmuCell Corporation (ICCC) Earnings Call Transcript & Summary

Good day, and welcome to the ImmuCell Corporation Annual Stockholder Meeting. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Michael Brigham. Please go ahead.

Okay. Great. Let's get started. Good afternoon, stockholders and investors. I'm pleased to welcome you to the 2021 annual meeting of stockholders of ImmuCell Corporation in the form of both a dial-in conference call and an audio webcast. I am Michael Brigham, President and CEO and a Director of the company. I would like now to take a role call and introduce you to the other directors, officers and employees of the company who are participating remotely today. Gloria J. Basse, Director.

Present.

Bobbi Jo Brockmann, Vice President of Sales and Marketing and a Director.

Yes, sir.

Dave Cunningham, Director.

Present.

Steve Rosgen, Director.

Hello, everyone.

Jonathan Rothschild, Director.

Present.

David Tomsche, our Chair of the Board. David, you may be on mute, but I know you're there.

I'm sorry. I'm present.

Yes, Thank you. Paul Wainman, another Director.

Good afternoon, everybody.

Great. And also, I'd like to -- also present with us today are the following employees: Joe Crabb, Vice President and Chief Scientific Officer.

Present.

Gustavo Scaffa, our Senior Director of Quality.

Present.

And Beth Toothaker, our Director of Finance and Administration and the voting inspector for today's meeting.

Present.

And Betsy Williams, our Vice President of Manufacturing Operations.

Good afternoon.

And John Zinckgraf, our Director of Product Development.

Present.

Okay. Also with us today is David Champoux, a partner with the law firm of Pierce Atwood, the company's legal counsel. David?

And lastly, also present with us today is Christian Smith, a partner with the accounting firm of Wipfli LLP, the company's independent registered public accounting firm. Christian?

Present.

Okay. Great. Thanks, everybody. I have asked some of those individuals who were just introduced to make various motions necessary to keep the formal part of the meeting moving after the formal part of the meeting is over. I would like to discuss Slide #9 to our updated May 2021 corporate presentation slide deck, which provides an overview of the company's business and is available under the Investors tab of the company's website at www.immucell.com or by request to the company. After that, we will have time for a brief and informal discussion to address any business questions or issues that you may have. Please note that only participants utilizing the dial-in conference call as opposed to the audio webcast will be able to ask questions. I will now begin to conduct the formal business portion of today's meeting. I ask the voting inspector to help get us started. Beth?

Sorry about that. As evidence that notice of this meeting was duly given, I have here an affidavit of American Stock Transfer & Trust Company, the company's transfer agent that notice of this meeting has been duly given and that a proxy statement has been furnished by the company to every holder of common stock of record as of April 15, 2021. There is also available for inspection here a complete list of the stockholders entitled to vote at this meeting. I will now report the number of shares held by persons attending this meeting in person or represented at this meeting by proxy. Out of the total of 7,735,992 shares outstanding and entitled to vote at this meeting, there are present at this meeting in person or by proxy the holders of approximately 5,613,461 shares, which constitute more than 72% of the outstanding shares entitled to vote.

Thank you, Beth. On the basis of the figures just reported by the voting inspector, I declare the presence of a quorum at this meeting. As Secretary of the company, I will now present to the meeting the minutes of the annual meeting of stockholders held on June 10, 2020. And I have a copy of those minutes with me unless there is an objection. I will now entertain a motion to waive the reading of the minutes.

Michael, I move that the reading of the minutes of the annual meeting of stockholders from June 10, 2020, be and is hereby waive.

I second the motion.

All right. Thank you, Steven and Joe. The proxy holder has voted in favor. Therefore, I declare the motion carried. I believe you have all received copies of the company's proxy statement containing a description of the matters, which you were asked to consider and act upon for this meeting. We will now proceed to those matters. Beth?

We ask that any stockholder who wish to vote their shares in person rather than by proxy, contact the company in advance of this meeting to facilitate remote voting. I report that no stockholders contacted the company to vote in this manner.

Okay. Therefore, let's proceed right to the voting. The first order of business is the election of directors to serve the company until the next annual meeting of stockholders and until their successors are elected and qualified.

I nominate for election, Gloria J. Basse, Michael F. Brigham, Bobbi Jo Brockmann, David S. Cunningham, Steven T. Rosgen, David S. Tomsche and Paul R. Wainman to act as directors of the company until the next annual meeting of stockholders and until their successors are elected and qualified.

I second the nominations.

Thank you, Dave, and Paul. I declare the polls are now closed. I ask the voting inspector to report the results of the voting. Beth?

I report that each of the 7 persons nominated for the office of directors has received a plurality of the votes cast at the meeting.

With that, I declare that Ms. Basse, Mr. Brigham, Ms. Brockman, Mr. Cunningham, Mr. Rosgen and Dr. Tomsche, Mr. Wainman -- and Mr. Wainman are elected directors of the company. The second order of the business is to consider a nonbinding advisory resolution on the company's executive compensation program.

I move the adoption of the following resolution resolved, that a nonbinding advisory vote on the company's executive compensation program be and it hereby is approved.

I second the motion.

Thank you, David and Steven. I declare the polls are now closed. I ask the voting inspector to report the results of the voting. Beth?

I report that of the shares present and entitled to vote on this matter 3,078,983 shares voted for, 45,245 shares voted against and 331,225 shares abstained. The shares voted in favor of this nonbinding resolution represent 89% of the shares that voted on this item.

Thank you, Beth. I declare that the nonbinding advisory vote on executive compensation has been approved. The third item of business is to consider a nonbinding advisory resolution on the frequency of the company's voting on the compensation page of the company's named executive officers.

I move the adoption of the following resolution result that a nonbinding advisory vote to conduct future advisory votes on the compensation paid to executive officers every year be and it hereby is approved.

I second the motion.

Thank you, David and Gloria. I declare that the polls are now closed. I ask the voting inspector to report the results of the voting. Beth?

I report that the nonbinding advisory resolution on conducting future advisory votes on the compensation paid to executive officers every year received a plurality of the votes cast at the meeting.

Okay. Thank you, Beth. I declare that the nonbinding advisory vote on conducting annual advisory votes on the compensation paid to executive officers every year has been approved. The fourth item of business is to consider and act upon the proposal to ratify the appointment by the Audit Committee of the Board of Directors of Wipfli LLP as the independent registered public accounting firm for the company for the year ending December 31, 2021.

I move the adoption of the following resolution resolved, that the appointment by the Audit Committee of the Board of Directors of Wipfli LLP as the independent registered public accounting firm for the company for the year ending December 31, 2021, be and it hereby is ratified.

I second that motion.

Thank you, Bobbi, and thank you, Paul. I declare that the polls are now closed. I ask the voting inspector to report the results of the voting. Beth?

I report that of the shares present and entitled to vote on this matter, 5,543,272 shares voted for, 12,684 shares voted against and 57,505 shares abstained. The shares voted in favor of this ratification represent 99% of the shares that voted on this item.

All right. Thank you, Beth. I declare that the proposal to ratify the appointment by the Audit Committee of the Board of Directors of Wipfli LLP as independent registered public accounting firm for the company for the year ending December 31, 2021, has been approved. At this point, I would like to take a moment to recognize the 20 years of service to ImmuCell's Board of Directors by Jonathan Rothschild, who did not stand for reelection this year. Looking back, we had sales of just $6.4 million in 2001 when he first joined our Board. At that time, we were just beginning plans to run our first animal studies of Re-Tain known as Mast Out at that time. While we produced and sold a topical wipe application of a very crude preparation of the active ingredient Nisin. We've come a long way since then. While we still have some very important work in front of us to achieve our objectives, I would like to publicly thank Jonathan for his guidance and friendship along the way. Thank you, Jonathan.

Oh, it was a pleasure to have served as a Director. And I'm still very much attached to the company and geared to our success.

Thank you. Great to hear, Jonathan. I appreciate that. So with that, I'm going to move to -- I believe that all stockholders received, along with the company's proxy statement, a copy of the company's annual report on Form 10-K for the fiscal year ended December 31, 2020. The annual report contains the audited financial statements for the year. I will be commenting on the current business of the company, following the adjournment of the formal part of this meeting. There being no other business to properly come before this meeting, then this completes the formal business of the meeting. A motion to adjourn would now be in order.

I move that the meeting be adjourned.

I second the motion.

All right. Thank you, David and Joe. The meeting is now adjourned. Next, I would like to review Slide #9 from our updated May 2021 corporate presentation slide deck and then open the floor to an informal discussion and Q&A session. Please remember that you must dial into the conference call line as opposed to the live audio webcast to ask questions. That phone number is (844) 855-9502 or toll free -- that's toll free or dial (412) 317-5499 for international access. Before doing so, I'd like to ask our attorney to provide you with the standard legal disclaimer. David?

During the course of this meeting, company representatives might make reference to future events or expected future results or predictions about steps the company plans to take in the future. It is important for you to understand that these so-called forward-looking statements are subject to significant risks and uncertainties and that the actual results or outcomes might differ materially from those projected or anticipated in the forward-looking statements. The company's most recent annual report on Form 10-K and its most recent quarterly report on Form 10-Q contain list and more detailed descriptions of risk factors that make the company's future performance uncertain as well as other cautionary statements that should be considered in connection with any such forward-looking statements. These won't be read aloud to you today, but please note that copies of the company's 10-K and 10-Q are available online or by request to the company, and the company encourages you to familiarize yourself with the types of risk factors that affect its business. To summarize, to the extent that company representatives make statements here today about future events or developments or expectations, please recognize that there are many, many factors that could keep these from happening in the way that those representatives might suggest or predict.

All right. Thank you, David. Our updated May 2021 corporate presentation slide deck provides that overview that I've mentioned of the company's business with a fair amount of detail. To view that, please go to the Investors tab of our website at www.immucell.com, or you can call (207) 878-2770, with extension 0, or send an e-mail to [email protected] for help. Jen will be very happy to send the slide deck directly to you. So please -- so in this virtual format, I'm not going to turn through all the pages with you, but I would like to discuss Slide 9, as I mentioned. The rest of the deck supports or is related in one way or another to this slide, which outlines the 3 most critical actions that we are engaged in. Number one is significantly grow sales of the First Defense product line. Our production supply has struggled to meet customer demand since 2018 introduction of Tri-Shield First Defense, which added a valuable rotavirus claim to our Legacy E. coli and coronavirus product, but it also requires almost twice as much production to produce each finished dose. This has changed our capacity model significantly as the Tri-Shield product demand has increased year after year. We had no backlog as of 12/31/2019, but we have been on backlog during most of the 18-month period from the beginning with -- from the beginning of 2020 to the present. Our production teams have worked tirelessly to convert colostrum to antibody powder, to finished goods utilizing 100% of the available equipment capacity. While backlog is a better problem to have than seeing product dating on our shelves, it is nonetheless a big problem when we do not get our customers everything that they want. So $3.5 million of the money we raised in March of 2019 has been invested to increase our production capacity from approximately $16.5 million to approximately $23 million in terms of annual sales value to fix this problem. I'm happy to report that this 18-month project is being completed in the coming weeks, on time and on budget. The new facilities we have created are built to contemporary CGMP standards with good material and people flows. Our expanded production staff is in place and excited to operate at this new capacity level. It goes without saying that our sales team that has done a fantastic job -- that has done fantastic work with this highly stressful job of allocating scarce product to customers that want more of it is poised and ready to get back to more normal sales growth initiatives with available inventory on hand. We expect to see some variability in our quarter-to-quarter sales result as we work out of backlog and distributors adjust their seasonal inventory levels, and we work to regain customers that may have adopted alternatives scours, preventive options while we were short on product. I need to offer this word of caution, our road to increasing production capacity and filling the backlog could be challenged by our ability to access all required raw materials and components. As is the case with most -- almost all manufacturers during this crazy pandemic time, we are experiencing challenges in this area. Then #2 is achieve FDA approval of Re-Tain. Our final of 5 major technical sections required for FDA approval of Re-Tain was submitted for review during the first quarter of 2021. That submission is subject to a 6-month review, so we expect a response during the third quarter of this year. First round approval is possible, but we are anticipating the need to respond to FDA inquiries and resubmit for another 6-month review. This would lead to approval and full market launch in second quarter of 2022, but we are dual planning for an initial limited launch during the fourth quarter of 2021 that could be quickly assembled if the approval came earlier. So #3 is prove market acceptance of Re-Tain. As with all new products, the market demand -- the market determines the value. Our goal here is to introduce a new product and create a new mastitis treatment market. We aim to demonstrate that our bacterias and Nisin can play a productive role in the treatment of subclinical mastitis in today's dairy industry by providing a novel alternative to traditional antibiotics. Re-Tain is a unique product targeting a condition that goes largely untreated today. It will take time for the market to understand, evaluate, implement and adapt Re-Tain, but our ability to treat this condition without a milk discard and/or a meat withhold is indeed novel. Okay. So let's follow the money. Over the last 5 years or so, we have used our public listing to raise about $26.7 million in equity. Of course, gross margin from product sales and bank debt are also important elements of our strategy to fund our growth, but let's focus on the equity for now. More specific details about how we have invested and are investing these funds are disclosed in our SEC filings, but I'd like to provide the following high-level summary. So during 2016 and 2017, we raised about $13.5 million, which was used primarily to build our commercial production facility for the Re-Tain drug substance. Then in 2019, we raised an additional $9 million that was roughly split between increasing First Defense production capacity to approximately $23 million in terms of annual sales value and bringing the drug product formulation and aseptic fill capability for Re-Tain in-house for operation in late '22 or early 2023. Then in April of this year, we raised an additional $4.25 million, which we were using primarily to fund the further expansion of our production capacity for first events from the $23 million to over $30 million. So back to my 1, 2, 3 of the most critical action items. Now as we come out of this 18-month period during which First Defense demand has exceeded supply. I see a huge catalyst in First Defense alone with an intriguing and fast approaching catalysts and the pending FDA approval of Re-Tain. In the end, it's all about executing effectively with both product opportunities: 1, 2, 3. So with that, I'd just like to thank you for your time and allowing me to share these thoughts with you and turn this over to the operator to start the Q&A.

[Operator Instructions]

Operator, are there any questions?

I'm not showing any questions at this time.

Right. Well, that being the case? This concludes the informal portion of our meeting. Thank you all for attending this virtual meeting. We look forward to speaking with most of you again to review our second quarter financial results sometime during the second week of August. Be well and be safe, have a great rest of the week. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.