ImmuCell Corporation (ICCC) Earnings Call Transcript & Summary

Thanks, Nick. Good morning, everyone, and welcome. Like Nick mentioned, I'm Joe Diaz with Lytham Partners, the investor relations consulting group representing ImmuCell. I appreciate all of you taking the time to be with us today as we go over the unaudited financial results for the quarter that closed on March 31, 2024. Those listening should be aware and cautioned that anything management says during this call constitutes forward-looking statements, which means any statement referencing future events, anticipated future results, or predictions regarding steps the company intends to take going forward. Such statements aren't guarantees of performance and carry risks and uncertainties that might lead actual results, outcomes, or events to differ materially from what we discuss today. Further details about forward-looking statements and the risks and uncertainties that could affect future results, outcomes, or events can be found in the cautionary note on forward-looking statements or the safe harbor statement included with the press release and the Form 10-K the company filed last night, as well as the company's other periodic filings with the SEC. Everything discussed on this call reflects information only as of today, Wednesday, May 15, 2024. The company assumes no obligation to update any information discussed on this call. Please be aware that references to certain non-GAAP financial measures may come up during today's call. To help you better understand its financial performance, the company has included definitions of these terms, along with reconciliations of these figures to the most comparable GAAP financial measures, in last night's press release. Having said that, I'll now hand the call over to Michael Brigham, President and CEO of ImmuCell Corporation, and afterward we'll open the line for your questions. Michael?

Thank you, Joe, and good morning to all of you. What I have to share is a tale of things going quite well alongside some frustration. Regarding Q1, I'd like to discuss 2 financial disclosures that, in our view, illustrate what could be a pivotal moment for the company. To start, product sales rose 111% in the first quarter of 2024 versus the first quarter of 2023; additionally, sales climbed 33% across the trailing 12-month period that closed on March 31, 2024, measured against the trailing 12-month period that closed on March 31, 2023. So once more, 111% quarter-over-quarter, 33% trailing 12 over trailing 12; this gain stems mostly from production output — by executing and refining a multiyear investment aimed at expanding our production capacity, we generated $7.2 million worth of production in the first quarter of 2024, which annualizes to $28.7 million, or roughly 96% of our $30 million full capacity estimate. That production level continues to be our aspirational goal, though we don't anticipate repeating or surpassing it on a consistent basis. The $7.3 million in sales booked during the first quarter of 2024 marks an all-time quarterly sales record for us. Our next best quarter was $6 million, booked in the first quarter of 2022. Second, thanks to those robust sales, we turned earnings before interest, taxes, depreciation and amortization, or EBITDA, of negative $1.6 million for the quarter ended March 31, 2023, into positive EBITDA of $377,000 for the quarter ended March 31, 2024. Gross margin as a percentage of product sales went from 9% for the quarter ended March 31, '23 to 32% for the quarter ended March 31, 2024, yet that still falls well short of our 45% target. Cash is tight. In response, we've frozen certain capital expenditure investments for now, though we have no draw outstanding on our $1 million line of credit, which remains available to us until September of 2025. That's the big picture. As for the other financial results, the press release offers the complete unaudited P&L results along with some unaudited summary balance sheet data. In addition, our Form 10-Q contains all the unaudited financial details plus management's discussion and analysis. I'll now use our time on this call to walk through all of that in detail. I'd like to add that data has guided us as we remediate the contamination events that have recently plagued us. Improvements made across our production process are enabling us to return to full production. We believe the operational improvements put in place are enabling us to run more effectively at a 100 output level going forward. To succeed, we must steer clear of future significant contamination events and equipment breakdowns and operate with good production yield. So we will stay focused on the commercial opportunity we have with First Defense. Yet, as frequently happens when seeking regulatory clearance, we find ourselves disappointed by still one more hold-up from regulators as we try to launch Retain. Regarding our third vein submission, the FDA just sent us a CMC technical section incomplete letter. Through that incomplete letter, the agency raised a few small inquiries concerning what we filed, meaning a fourth CMC Technical Section submission will be needed, and that type of review normally takes 6 months. Still, the FDA said this resubmission might be able to go through a shorter review window, since the outstanding items aren't complicated. What matters most for timing, though, is that the FDA additionally insists we hold off on resubmitting the CMC Technical Section until the inspectional observations at our drug product contract manufacturer's facilities get resolved. Because the facts and circumstances here are unusual, we're collaborating with the FDA and our drug product contract manufacturer to secure an expedited review; that's simply how this process goes, and we keep pushing ahead. Even so, we stay ready and eager to transform subclinical mastitis treatment in today's dairy market through a novel option区别于 traditional antibiotics, without FDA required milk discard or meat withhold claims. So finally, I'd urge you to check the press release along with the quarterly report on Form 10-Q we submitted last night; I'm also glad for you to look at our corporate presentation slide deck. In my view, it offers quite a solid overview of our business strategy and objectives, plus our present financial results. A May update went up on our website just last night, so visit the Investors section of our site and select corporate presentation, or reach out to us for a copy. Having said that, I'm glad to answer your questions. Operator, please open the lines.

To start, Mike, it's definitely a relief to see sales come in for the quarter. Keep it going.

Yeah, I feel the same way. It's really exciting. Thank you.

About the shelf and the offering — can you explain how that works with respect to the market, and how you arrive at setting or permitting a particular amount at any given time?

Right, Frank — the ATM's flexibility strikes me as one of its major advantages. So what I'd tell you can shift from one day to the next, one week to the next, one month to the next. The key thing that sets the ATM instrument apart from the traditional — the more traditional offering is that the traditional offering, frankly, would have come out at a big discount to market. With this vehicle, we're able to essentially monitor the market and tweak things as needed — that's the downside. Raising money takes much longer this way, since you're basically taking small bites out of the market. So we examined that quite closely at year-end and as we moved into the first quarter, weighing pros and cons, and more or less concluded this was a fine chance to bring in a modest amount of money without that larger discount we'd expected. Still, I suppose the brief response to what you're asking is that it comes down to management discretion — really Board discretion — on a day-to-day basis.

All right. So certain shares were actually authorized and then sold?

That's right. I probably ought to have worked that into what I said earlier, though our disclosures do cover it. Both sets of financial footnotes show it. One footnote deals with the equity section, and another covers the subsequent event. Beyond that, right at the start of the MD&A — so really those 3 spots all restate the identical detail: $300,000 in gross proceeds has been raised.

All right, I noticed that. And regarding whether you reveal — or do you actually, at the point when you're either selling or not selling?

So, the Board — the Board, acting through me, relays instructions to the banker and establishes limits for both the quantity and the price. And I believe that via our quarterly — I'm certain that via our quarterly reports, we'd disclose what came out of that engagement and that activity.

Well, it was definitely a quarter with a lot going on, both good and bad. Great job on the operations side. But I have to admit, I'm a bit puzzled when it comes to retain. Could you take us through what was found in the inspection? How does this process work, and what's the timeline to move it forward?

Yeah. To be honest, it's ongoing, it's happening right now. Nothing has been decided yet. There will be plenty of discussions going on that we won't be involved in. That's happening straight between the FDA and Norbrook. That said, Norbrook keeps us very well informed. We'll receive updates on where things stand, but how they choose to respond is up to them. I'd also mention, this is a large organization. They've got other products, so they have reasons beyond just retain to make sure this gets resolved properly. Once that happens, the FDA will decide how fast they look at it, how quickly they — and what comes out of that review. So it's annoying that we can't give you a clearer answer, but right now we simply don't have one. This is all very recent.

All right. So when are we going to get word from the FDA that they aren't proceeding with the approval?

Yeah. It came exactly when we thought it would, correct, at the 180-point mark, and that was — well, I believe we had even put out disclosure on this, which is May 10.