ImmuCell Corporation (ICCC) Earnings Call Transcript & Summary

Thanks, Marliese. Good morning, and welcome, everybody. Like Marliese said, I'm Joe Diaz, and I work with Lytham Partners. We serve as the investor relations consulting firm for ImmuCell. I appreciate all of you being here today as we go over the unaudited financial results for the quarter that ended September 30, 2023. Before we get into today's discussion, I want to start with a caution about forward-looking statements. Listeners should keep in mind that anything management says during this call includes forward-looking statements, and those cover any statement referring to future events or expected future results, or predictions about steps the company plans to take in the future; such statements aren't guarantees of performance and are subject to risks and uncertainty that could cause actual results, outcomes, or events to differ materially from those discussed today. You can find additional information about forward-looking statements and the risks and uncertainties that could impact future results, outcomes, or events under the cautionary note regarding forward-looking statements or the safe harbor statement provided in the quarterly report on Form 10-Q that the company filed last night, along with the company's other periodic filings with the SEC. Any information discussed on today's call speaks only as of today, Tuesday, November 14, 2023. The company undertakes no obligation to update any information discussed on today's call. Please note that we may reference certain non-GAAP financial measures during today's call. So you can better understand its financial performance, the company included definitions of these terms, as well as reconciliations of these figures, to the most comparable GAAP financial measures in last night's press release; with that said, let me hand the call over to Michael Brigham, President and CEO of ImmuCell Corporation, and after that we will open the call for your questions. Michael?

All right, thank you, Joe, and good morning to everybody. To start with the financials: according to last night's press release, there's no revision to the product sales figures we initially announced on October 5. That release additionally contains the complete unaudited P&L numbers along with certain unaudited summary balance sheet information. We likewise submitted our Form 10-Q for the quarter that closed September 30, 2023 last night. I won't use our time here to walk through those financials in extensive detail. Our non-GAAP earnings before income taxes, depreciation, and amortization — EBITDA — is also included in last night's press release. Kindly turn to page five of that release. You'll notice a significant swing of -$3.6 million, moving from positive EBITDA of $1.3 million across the nine months ended September 30, 2022, to negative EBITDA of $2.3 million across the nine months ended September 30, 2023. That negative EBITDA swing essentially corresponds to a $3.8 million rise in our net loss, going from $826,000 across the nine months ended September 30, 2022, to $4.6 million across the nine months ended September 30, 2023. That larger net loss was, in turn, mostly driven by the $4 million drop in gross margin, which fell from $6.7 million across the nine months ended September 30, 2022, to $2.6 million across the nine months ended September 30, 2023. Reacting to this cash loss, we assumed additional bank debt in July, trimmed certain discretionary spending, and put a freeze on several planned capital expenditure projects for now. All of this is regrettable yet unavoidable. Our intense focus is on finding our way out of this difficult position by raising production and sales. To succeed, we need to steer clear of major contamination incidents and equipment failures going forward. So what exactly is happening here? Let me attempt to address that. I'd direct you to a disclosure located on page 29 of our quarterly report, or page 31 of the EDGARized version submitted to the SEC, titled Production Capacity Increase, Production Contamination, and Related Events, where we go over several of the major obstacles we've encountered during the last 12 months that fed into our present financial results. So following considerable effort and some notable delays, we had finished, by the close of 2022, all the facility upgrades and new equipment installations — among them freeze dryer number 4 — that are required to lift our estimated full production capacity to roughly $30 million per year. Right when we started operating at that elevated capacity level in early 2023, we had to reduce production in order to remediate a contamination event tied to our incoming raw material. Simultaneously, freeze dryer number 2 ceased functioning, necessitating a six-month repair, which brought us back down to three operating freeze dryers. As of early July 2023... We're back to running four freeze dryers, and we now think these contamination events are mostly, though not entirely, behind us. The amount of completed goods we turned out rose consistently, going from roughly 3.3 million up to 4 million, then climbing again to 5.3 million across the first, second, and third quarters of 2023, in that order. What we're aiming for is output carrying an estimated sales value of around $6 million each quarter, which annualized works out to roughly 80% of the approximately $30 million we estimate as our full production capacity. During the third quarter, our output hit about 89% of the target we set for the quarter; data has guided us as we work through this short-term production issue. Every batch we make gets tested as a matter of routine by the quality control team at the start, the midpoint, and the conclusion of the manufacturing process. Gains made across the manufacturing process since we saw how deep the contamination problem ran in January are enabling us to return to producing at full capacity. We think the operational enhancements put in place will let us operate more efficiently at a greater output level moving ahead. Even with this major pull on our resources, we managed to make our third submission of the CMC technical section for Re-Tain to the FDA in August; a submission of this kind gets a six-month review period from the FDA. As we disclosed on page 35 of our quarterly report, or page 37 of the EDGARized version, as filed with the SEC, the FDA let us know in late October that they had refused to review our August submission, citing a misunderstanding regarding where and by whom we intend, intend to have our drug product formulated and filled. The FDA believed our plan involved bringing those services in-house, something we might do later on, post-approval, instead of sticking with our contract manufacturer, which remains our plan right now. Reacting to that notification from the FDA, we refiled our submission in November. We're communicating with the FDA to clear up this regrettable miscommunication, though should we not reach an agreement, the anticipated response date from their review might slip beyond February 2024, which marks six months from the August submission date, potentially to as late as May 2024, which marks six months from the November resubmission date. Either way, we stay ready and thrilled to transform how subclinical mastitis gets treated in the dairy market of today through a novel substitute for traditional antibiotics, featuring zero milk discard and zero meat withhold claims. As I mentioned, the past 12 months have proven quite difficult for us, no question. We've put in tremendous effort to tackle these difficulties and keep moving ahead. Given our responses and the progress made, I feel optimistic about what lies ahead for us in upcoming quarters. Finally, I urge you to go through the press release and the quarterly report we filed last night. Kindly also take a look at our corporate presentation slide deck. In my view, it offers quite a solid overview of our business strategy and our objectives, along with our present financial results. A November update went up on our website just last night. The investor portion of our site is available for you to check out, where you can select Corporate Presentation, or you can reach out to us and we'll send one over. Having said that, I'm glad to answer any questions you may have. Marliese, please go ahead and open the lines.

All right, thanks. I appreciate it, Marliese, and I want to thank each of you for joining us on this call. We're eager to speak with you once more when we go over the numbers for the entire year that wrapped up on December 31, 2023, at some point near the end of February 2024. Once again, thank you for spending your time with us. Enjoy the rest of your day.

That brings an end to our call. We really appreciate you joining us for today's presentation. You're welcome to close out the line now.