ImmuCell Corporation (ICCC) Earnings Call Transcript & Summary

Thanks, Debbie. Morning, everyone, and welcome aboard. Like the operator on this conference call said, I'm Joe Diaz, and I work at Lytham Partners. Our firm handles investor relations consulting for ImmuCell. I appreciate each of you taking the time today to go over the unaudited financial figures for Q4 along with the full year that closed on December 31, 2024. A reminder and a caution for those listening: anything management says on this call may count as forward-looking statements, meaning any remark touching on future events, anticipated future results, or predictions regarding steps the company intends to take down the road. Such statements don't guarantee performance, and they carry risks and uncertainties that might make actual results, outcomes, or events turn out materially different from what we discuss today. You can find more details about forward-looking statements and the risks and uncertainties that might affect future results, outcomes, or events in the cautionary note on forward-looking statements — commonly called the safe harbor statement — that came with the press release the company filed last night, together with its other periodic filings with the SEC. Everything we talk about on this call is accurate only as of today, Wednesday, February 26, 2025, and the company isn't obligated to update any of it. One more note: we may reference certain non-GAAP financial measures today. To help you better grasp the company's financial performance, definitions of those terms and reconciliations of those figures against the most comparable GAAP financial measures were included in last night's press release. Having said all that, I'll hand things over to Michael Brigham, ImmuCell Corporation's President and CEO, and once he's done, we'll take your questions. Michael?

Appreciate it, Joe, and hello to everybody on the line this morning. A 52% jump in sales for both the fourth quarter of '24 and for the full year 2024, measured against the matching stretches a year earlier, is a massive deal for us. Worth keeping in mind is that what we delivered across 2023 and the opening 9 months of 2024 was held back by contamination incidents at production sites, which cut our manufacturing volume and pushed back the productive rollout of the investments and capital expenditures we require in order to double capacity. That produced a stretch of the year when there was too little product reaching the market, something our publicly reported order backlog makes clear. So the 2024 figures line up against periods in 2023 when output was constrained. For my money, the raw dollar amount of the sales matters more than how one period stacks up against another. On that note, the $7.8 million of sales we booked in the fourth quarter of 2024 tells me we've hit our objective of lifting yearly production capacity to $30 million or more. What we posted in the fourth quarter of 2024 leaves us on far firmer footing as we move into 2025. No further contamination incident has happened since April of 2024. That point is essential. It indicates we've fixed the underlying issue properly and are holding bioburden inside the specification. Looking backward, something now strikes me as quite clear. Having run an identical process successfully for more than 30 years, a sudden surge is difficult. The source material we handle carries a high bioburden — farm milk. We had to get better at controlling quality right where that growth begins. That's what we're doing today. We ran into comparable difficulties further downstream as we drove our long-proven process and equipment beyond earlier limits. Our sense is that the operational fixes now in place let us run more efficiently at a greater output level from here on. Staying successful demands that we dodge any future major contamination incidents and equipment failures while achieving solid production yields; gross margin dollars are what let us pay our bills and fuel our cash flows. Along those lines, gross margin climbed 125%, or $1.6 million, reaching $2.8 million in the fourth quarter of '24 versus the fourth quarter of 2023, and it climbed 105%, or $4.1 million, reaching $7.9 million across the year ended December 31, 2024, versus the year ended December 31, 2023. We saw a few weak gross margin percentages in earlier periods while coping with low output and the scrap costs tied to those contaminations. The 36.5% gross margin on a percentage-of-sales basis that we posted in the fourth quarter of '24 marks progress in the right direction, yet there's still work ahead before we're back at our target of over 40%. Both the sales gain and the gross margin improvement matter a great deal. I don't want to diminish what's been achieved, but let me spend a moment on EBITDA, since noncash depreciation expense weighs heavily on our bottom line. Our EBITDA for the fourth quarter of 2024 came to $1.3 million, versus negative EBITDA of $311,000 in the fourth quarter of 2023. Looking at how we closed out the year, the fourth quarter was strong enough to get us to $1.1 million in EBITDA for the twelve months ended December 31, '24. Compare that to the year ended December 31, 2023, when EBITDA was negative $2.6 million. So year over year, we moved about $3.7 million in a positive direction. On the cash side, we leaned on our at-the-market offering and it worked well for us, generating net proceeds of close to $4.4 million across 2024. As a result, our cash position stood at roughly $3.8 million on December 31, '24, up from just $979,000 on December 31, 2023. Switching gears, I'd like to share a few thoughts on Re-Tain. We remain ready and enthusiastic about changing the way subclinical mastitis is handled in the dairy industry right now, using an innovative non-antibiotic option that has no label requirements from the FDA for discarding milk or withholding meat. We're keen to find out what kind of reception our new offering gets in the marketplace. It's possible, we believe, to secure FDA approval for Re-Tain after so many years of putting money into it. When our previously announced Controlled Launch begins depends on the FDA clearing inspectional observations at our contract manufacturer's sites and on the agency completing its review of the nonadministrative NADA submission we filed in early January of 2025. Everything they submitted is in there, including how their products are labeled, and it also contains our fourth CMC Technical Section filing, which addresses the small, noncomplex matters raised in the FDA's May 2024 Incomplete Letter; we've been talking with the agency about getting a faster review. Having put roughly 25 years and somewhere near $50 million into building this technology, we remain dedicated to guiding Re-Tain all the way to regulatory clearance and to kicking off our Controlled Launch approach with limited distribution. However, we're cutting back on what we spend for product development while we wait for the FDA to approve Re-Tain. We've also just begun, at a very early point, looking into possible strategic alternatives that might help cover a portion of those product development costs and support a mass market launch for Re-Tain. While we move through what we consider the last phases of the regulatory review and work toward getting Re-Tain into the market, our attention will stay on the commercial opportunity First Defense gives us; that's the big picture as I see it. Turning to the rest of the financial results, the unaudited P&L figures along with some unaudited summary balance sheet data can be found in the press release. Our Form 10-K, containing the audited financials along with management's discussion and analysis, is expected to be filed near the end of March. Before we wrap up, I'd encourage everyone to check out the slide deck for our corporate presentation. From my perspective, it gives a good picture of where our business is headed strategically, what we're aiming for, and how our financials currently look. The February update went live on our website just yesterday evening. You can find it by visiting the Investors section of our site and clicking on Corporate Presentations, or simply get in touch with us and we'll send a copy your way. With that, I'm happy to take any questions you may have. Operator, please open up the lines.

Congratulations on the really strong results this quarter. I have a couple of things I'd like to ask about, one regarding gross margin and another regarding inventory. On gross margin, you hit 36.5%, the strongest outcome in 8 quarters. Yet as you noted, during earlier years, from '17 through '22, until mid-'22, your gross margins stayed consistently within the mid- to high 40s. So when we look at what has shifted, obviously several things have changed. The product mix looks different now, with Tri-Shield accounting for a larger portion. Salary costs have certainly risen, I'm sure, though pricing has risen too. So I'm attempting to figure out what else explains the gap in gross margin? And you're stating that your target is roughly 40% plus, and what would it require to reach that?

Yes; certainly many factors are at play, though I believe the largest one is — actually, I'd rather not rank them. Let me address a few. You brought up product mix. I completely agree with that point. Put simply, producing Tri-Shield costs more than producing the bolus. The bolus is a straightforward bivalent product, made on a single production train. Tri-Shield, being trivalent, requires 2 production trains. So Tri-Shield's share of the mix is a drawback, yet what's positive is that Tri-Shield is driving an enormous amount of growth. Customers genuinely appreciate that broad spectrum coverage, since rotavirus has been added to our long-standing E-coli and corona; after that I sort of move to the 37% figure for the fourth quarter, and I tend to view that as a work-in-progress situation. So as you said, far better than before and still with room to improve; so 37% reflects '24 pricing; so a '25 price increase will assist us, and everything else has to come from yield and throughput. And those poor stretches you brought up were weighed down by contamination. They were weighed down by a remediation process that decelerated our production, meaning lower volume, along with all the consequences of that. And that's where I believe we stand. I believe that turn from '24 to '25 means we're emerging from that without contamination, with greater production, with the price increase building off a fourth quarter base of 37%. Does that make sense?

Yeah. Could you give us a bit more detail there? Alright, so you're describing essentially 3 elements: the mix, which isn't moving; the price increase, which is hitting the gross margin; and throughput, which almost looks as good as it can get right now. So operationally speaking, what options do you have? Or is there really much left to do on that side?

Well, to start with, keep doing what we've been doing. Basically, we simply need to carry on with that type of reduction. The production cycle runs 6 months. During the fourth quarter, we saw 1 turn go in the right direction. At this point we aren't forecasting; we're now handling a repeat, continuing the same approach, executing it better. And I believe the one element we left out there had to do with contamination, which is yield. So a leading priority for us is the same work producing more doses — quite simply, raising production yield. Biological processing is prone to an enormous degree of yield variability; and I think we've taken some steps, and there's consistently opportunity for further gains in improving yield. And I'd say — you would always call it yield resumption; it isn't about establishing a new level of yield doses per batch or whatever metric you apply, it's returning to the previous yields. So it's really bringing all those elements into play, during the second 3 months of this 6-month period that ends March 31.

All right. I've got one thing I want to ask about, and it concerns how many doses come out of each batch. At this point, does that number swing around a lot? Has it gotten better, so that it lands inside one fairly narrow band? Or is the gap between one batch and the next pretty wide?