ImmuCell Corporation (ICCC) Earnings Call Transcript & Summary

Thanks, Betsy. Hello everyone, and thanks for being here. I'm Joe Diaz, as Betsy mentioned. I work at Lytham Partners, and we serve as the investor relations consulting group for ImmuCell. We appreciate you taking part today as we go over the unaudited financial results covering 2021's second quarter. Before we go further, I want to point to a caution about forward-looking statements in connection with today's discussion. Those listening should keep in mind that remarks from management on this call contain forward-looking statements, which carry risks and uncertainties, and those could lead to actual results differing materially from what we talk about today. You can find more details about those risks and uncertainties in the cautionary note on forward-looking statements — also called a safe harbor statement — that came with the press release issued last night, as well as in the company's quarterly report on Form 10-Q. Having said that, I'll hand things over to Michael Brigham, ImmuCell Corporation's President and CEO, and once he's finished, we'll take your questions. Michael?

Okay, thank you, Joe. I’m grateful for the chance to share a few updates about what’s happening at ImmuCell. The press release and the Form 10-Q quarterly report we put out last night contain the main financial highlights and all the specifics. As you probably know, on July 7 we released a press release about our preliminary top line sales results. We’ve been making these optional announcements to give investors a very timely look at what I consider the most critical measure of our operations and financial performance, which is product sales early in the reporting period. I have no changes to that very strong previous disclosure. Once again, product sales rose 53% in the second quarter of 2021 and increased 10% for the first 6 months of the year compared to the same periods of the prior year, respectively. We’ve bounced back from the first quarter sales decline and remain on track to report positive sales growth for the full year 2021 over 2020 as projected. The $4.5 million in sales we recorded during the second quarter implies an annualized production rate of roughly $18.2 million. We’re clearly making solid progress toward our stated goal of raising our annual production capacity from about $16.5 million to about $23 million and clearing the First Defense order backlog. Because of our growing production capacity, we shipped 11% more product in the second quarter of 2021 than in the first quarter of this year, and we cut the backlog of First Defense orders to approximately $1.3 million as of the end of last week. I’m very pleased to report that our gross margin as a percentage of product sales recovered to 46% in the second quarter of 2021 compared to just 39% in the first quarter of 2021; we expected this improvement because the costs incurred to expand our production capacity were spread across the increasing output during the second quarter. This higher level of sales helped us report net income of $141,000 during the second — during the quarter — the second quarter of 2021, in contrast to a net loss of $766,000 during the second quarter of 2020. At this stage in our development, I believe we should focus on our cash flows more than on our bottom line as reported under GAAP. Page 4 of last night’s press release offers a look at some non-GAAP financial measures and the impact of certain noncash expenses on our financial results. We reported increases in EBITDA during both the 3-month and 6-month periods ended June 30, 2021, to $843,000 and $1,101,000, respectively, compared to the same periods in the prior year, but the most complete measure is the statement of cash flows in the financial statements to our quarterly report. Full details about the capital expenditure investments we’re working on can be found in our quarterly report in the MD&A section under Liquidity and Capital Resources. Out of the $10.7 million in cash we held as of June 30, roughly $7.6 million is expected to go toward finishing the projects we've identified. First defense-related activities account for about $5.3 million of that investment, while the remaining $2.3 million is earmarked for Re-Tain; that would leave us with approximately $3.1 million in cash for other uses. Finally, a few words about Re-Tain, our new treatment for subclinical mastitis in lactating dairy cows, which requires neither a milk discard nor a meat withhold and is presently under FDA review and approval. The path to FDA approval for Re-Tain has been lengthy and costly, yet we are close to finishing the necessary work; our goal is to show that Nisin, our bacteriocin, can serve a useful function in treating subclinical mastitis within today's dairy industry by offering a novel substitute for traditional antibiotics. We aim to achieve market acceptance of this new product concept as we build a new product category. In the end, any new product's value is set by the market, and Re-Tain will be no exception. During the current quarter, we anticipate putting out a press release announcing the FDA's response to the last of 5 major technical section submissions; whether we can begin an initial limited market launch of Re-Tain around year-end will hinge on that response from the FDA. Still, it must be stressed that the timing and the outcome of the FDA's review cannot be predicted. So to wrap up, I urge you to look over the press release and the quarterly report on Form 10-Q that we filed last night. In addition, please take a look at our corporate presentation slide deck, and an August update was just posted to our website last night. In my view, it offers a very solid summary of our business strategy and objectives, along with our current financial results. So visit the Investors section of our website and click on the corporate presentation; having said that, I'll gladly take your questions. Let's have the operator open up the lines.

Michael, I'm attempting to get a handle on what you anticipate sharing in July regarding Re-Tain. Does that hinge on the FDA?

Absolutely, 100%. So, as you're aware, 4 technical sections were submitted before and have been finished; the 5th one is the single section still under review, and we continue to anticipate a reply during the third quarter. Once that reply arrives, we certainly plan to disclose what their review found.

All right. Regarding First Defense, you require an additional machine in order to keep expanding that product line further. It sounds — well, it's been tough given everything happening with COVID. So you're expecting that during the quarter that closes in September?