ImmuCell Corporation (ICCC) Earnings Call Transcript & Summary

Thanks, and welcome, everybody, on this morning's call. The operator already mentioned this, but I'm Joe Diaz, calling in from Lytham Partners. Our firm serves as the investor relations consultant to ImmuCell. I want to express appreciation once more to each of you who has joined us today as we review the unaudited financial results covering the second quarter that closed on June 30, 2025. A reminder and a word of caution to those listening: remarks delivered by management over the course of this call contain forward-looking statements. That category covers any statement touching on future events, anticipated future results, or forecasts regarding actions the company intends to undertake down the road; such statements should not be viewed as guarantees of performance, and they carry risks and uncertainties that might lead actual results, outcomes, or events to diverge materially from what gets discussed today. For further detail on forward-looking statements and the risks and uncertainties that might affect future results, outcomes, or events, you can consult the cautionary note regarding forward-looking statements — more commonly called the safe harbor statement — which appears with Form 10-Q and the press release the company filed last night, as well as the company's other periodic filings with the SEC. Everything addressed on today's call reflects information only as of today, Friday, August 15, 2025. No obligation is undertaken by the company to update any information addressed on today's call. Be aware that certain non-GAAP financial measures may be referenced on today's call. To help you better grasp its financial performance, the company included definitions of those terms, plus reconciliations of those figures, against the most comparable GAAP financial measures in last night's press release. Having said all that, I'll now hand things over to Michael Brigham, who serves as President and CEO of ImmuCell Corporation, for his opening remarks. Michael?

Alright, thanks Joe, and good morning to all of you. So yes, I'd like to begin with a handful of remarks. At ImmuCell, we find ourselves in the middle of a highly favorable shift at this moment. The money we put toward expanding manufacturing capability for the First Defense lineup, so that it can sustain at least $30 million in yearly revenue, has now been finished. Certainly, this ran past the schedule we'd set, since the effort ran into particular contamination incidents along with other difficulties; even so, it's behind us, and things look solid from here onward. As for the extremely lengthy development path with Re-Tain, we're now kicking off investigational product use studies meant to gauge market acceptance in the field across the second half of the year. Naturally, we'd rather have commercial sales backed by an FDA approval, but we like to say that our payment will come in the form of data. That data is going to shape how we look at strategic alternatives and what lies ahead for this product, even as we keep expecting the FDA approval. So with that, I'll now hand things over to Tim Fiori, our CFO, so he can go through some second quarter financial highlights. Following that, I want to share a handful of thoughts from a strategic angle. And after that, we'll open up the call for your questions. So, Tim?

Appreciate that, Michael. In Q2 of 2025, product sales rose 18%, which works out to $972,000, compared with Q2 of 2024. For the first six months of 2025, product sales were up 14%, or $1.8 million, versus the first six months of 2024. Looking at the trailing 12-month period that closed on June 30, 2025, product sales grew 22%, or $5.1 million, against the trailing 12-month period that closed on June 30, 2024. That stretch of higher production output let us clear out our order backlog entirely and restock inventory and distribution. Back when supply was tight, we frequently — we would often send product straight to key customers so they stayed supplied. These days, we've gone back to shipping solely through our standard distribution channels. Restocking the distribution pipeline following a lengthy backlog probably gave sales a short-term lift. Since we don't anticipate this inventory rebuild happening again, sales could soften somewhat in the second half of 2025. We also saw some solid gross margin gains across the first half of 2025. As a percentage of product sales, gross margin climbed to 44% in Q2 of 2025, versus only 22% in Q2 of 2024. Gross margin rose to 43% across the first half of '25, against only 28% across the first half of 2024. Gross margin rose to 37% for the trailing 12-month period that closed on June 30, 2025, against only 26% for the trailing 12-month period that closed on June 30, 2024. For us to keep succeeding, we need to win back customers lost while product supply was short, and grow market share, all while running without major contamination events or equipment breakdowns, and also deliver robust production yields. I want to spend a moment on adjusted EBITDA, since noncash depreciation expense weighs heavily on our bottom line. Just to be clear, adjusted EBITA, unlike adjusted EBITDA, adds back stock-based compensation expense, which is another noncash expense included in net income as calculated under GAAP. We generated adjusted EBITDA of $1.4 million, $3.7 million and $5.3 million during the 3-month, 6-month and 12-month periods that closed on June 30, 2025, respectively; those strong results stack up very well against adjusted EBITDA of negative $619,000, negative $161,000 and negative $370,000 during the 3-month, 6-month and 12-month periods that closed on June 30, 2024, respectively. Those strong results helped us grow cash to $6 million as of June 30, 2025, up from $3.8 million as of December 31, 2024. One last thing — you may have caught our press release Tuesday night regarding the refinancing of a portion of our bank debt. We managed to lower our interest rate and dodge large balloon payments that had been due in the third quarter of 2026, replacing them with a new 5-year note payable through the third quarter of 2030. With that, I'll hand the call back to Michael. Michael?

Okay, thank you, Tim. We're really zeroed in on the business opportunity in front of us with First Defense. It's encouraging to watch the new formats we've launched gain momentum, and at this stage the First Defense line ought to be viewed as a family of connected offerings with broader applications and greater appeal. The turnaround in our finances comes through in the strong adjusted EBITDA figures Tim mentioned a moment ago. Clearing out that order backlog has ranked among our top business priorities for quite a while. We continue to concentrate on bouncing back from the turmoil created by the extended supply shortfall while also gaining more market share, aiming to establish a path for growth over the long haul. Turning to Re-Tain, we anticipate that producers will get enthusiastic about spotting and addressing cows during the subclinical phase using Re-Tain, which would deliver a meaningful animal welfare gain. The reason is that animals carrying subclinical mastitis frequently receive no treatment and then advance into the clinical form of the disease. After cows reach that level of illness, they need antibiotics and might not survive or could be removed from the herd. Whether this product succeeds will hinge mostly on how well we can roll out treatment protocols so that the Nisin given to treated cows doesn't disrupt starter cultures employed in certain milk processing techniques for producing things like cheese and yogurt. A key hurdle for us is determining the best treatment approaches and milk processing methods to steer clear of those problems. The next point matters a great deal to me personally. Our hope is that milk processors will join us in this assessment so we can assist the dairy sector in bettering the health of particular ill cows that typically receive no care, and simultaneously raise both the amount and the standard of milk produced, plus bring down abortion rates. We think that treating cows with subclinical infections might elevate industry best practices. It's routine for cows to receive traditional antibiotics that are likewise used to prevent specific human diseases, which represents a mounting public health worry in our society and a live matter with the FDA, mainly due to accumulating proof that such excessive use of traditional antibiotics fuels antibiotic resistance and the emergence of superbugs — pathogens immune to those antibiotics. Our bacteriocin offers an alternative to those traditional antibiotics relied on in human medicine, since our active ingredient, Nisin, isn't utilized in human health care. Re-Tain wouldn't add to this major public health problem and might assist the industry in meeting a key sustainability goal — namely, the excessive use of antibiotics that carry medical importance for human health care — while simultaneously boosting both the quantity and quality of milk from treated cows. Although — pardon me. Although sustainability goals demand cutting back on antibiotic use in food-producing animals, no new FDA-approved mastitis treatment has come to market in years. Looking at the broader picture, we're bringing to market a completely novel category of antimicrobial as an animal drug — a bacteriocin that doesn't drive resistance to antibiotics used in human medicine, which makes it a more socially responsible option. Traditional antibiotics could continue to be the industry's way of addressing this highly significant disease, but getting a bacteriocin such as Nisin to market requires innovation. Our product, we believe, aligns very well with the direction the industry will take over the next several years. So although we stayed mindful and prudent regarding how much cash went into inventory carrying a short expiry date in case market launch slipped, we did accumulate inventory across '22 and '23 to back potential initial sales of Re-Tain. During the second half of 2025, our plan is to deploy that on-hand inventory — which now has a comparatively brief shelf life — in investigational product use studies, gathering field-level market feedback on product performance alongside Michigan State University; from the investigational product use, we do not expect any sales or gross margin to arise. Even though the FDA granted a zero milk discard period for Re-Tain back in 2018, out of an abundance of caution we chose to put a short discard period in place for these studies; the reason is that Nisin levels that are well regarded as safe for adult human consumption may affect certain milk processing applications. Should we ultimately determine that milk processors require a milk discard period at launch, we still expect it to be considerably shorter than the ones tied to traditional antibiotics available on the market today. On top of that, discarded milk has frequently been used as feed for calves, and we believe this discarded milk would be far healthier for calves than discard milk loaded with antibiotics; completing the investigational product study along with data analysis during the first quarter of 2026 is our objective. Simultaneously, we are cutting product development expenses and examining potential strategic options for our novel technology. Our go-to-market approach for Re-Tain has shifted in reaction to FDA approval delays and cash constraints. A full commercial launch won't move forward until three key conditions are satisfied: one, FDA approval is secured; two, a validated aseptic fill solution exists; and three, sufficient cash is on hand to manufacture commercial inventory; in the interim, three key projects hold our focus, namely: One, running the infield investigational product use trials, which might yield valuable insights into how producers view the product's benefits and fold the product into their herd health protocols; and two, assessing strategic options that might offset a portion of cash requirements and make a mass market launch of Re-Tain possible; and three, exploring alternative uses for the Re-Tain manufacturing plant and equipment; this disciplined approach is meant to safeguard shareholder value, guarantee regulatory compliance and underpin a successful market entry. So finally, I'd encourage you to take a look at our corporate presentation slide deck. It offers, in my view, a very solid summary of our business strategy and objectives, along with our current financial results. We put up an August update on our site just last night. You can find it by going to the Investors area of our site and selecting Corporate Presentation, or you can reach out to us and we'll send you one. Now then, we're glad to answer whatever you'd like to ask. Nick, please go ahead and open the lines.

For my first question, you mentioned that sales in the second half are lower since you've largely burned through the backlog. Could you tell us what organic growth would have been if we took out the advantage from backlog sales during the first half?

Tim here. No, I don't believe we'll call out a specific figure. What I would say is that the backlog as of March 31, 2025 stood at $4 million. During the second quarter, we have worked through that backlog, with a portion of the orders canceled and the majority fulfilled; and that's really all we can say. I don't know, Michael, whether you...

Absolutely, Tim — I believe your point is correct. Our attention remained squarely on GAAP sales as they leave our facility. Naturally, our sales organization talks with distributors and works to keep their inventories filled, yet we lack reporting obligations or reported figures for that channel. So yes, GAAP out our door is what we hold to, though we participate in enough of those conversations to flag this as something worth watching. This is basically a one-time situation. In my view, that outcome will become clear across Q3 and Q4. The long-term strategy, I do believe, remains sound, but we have to make it past this bubble.

Okay, and could you fellas provide an update regarding Re-Tain? From what I recall, in the 10-Q for the first quarter, you'd noted a facility inspection had taken place, and I believe a 483 was issued. My understanding is that you replied to it. Has there been any further communication with the FDA about this? Alternatively, is it possible to offer any thoughts on what's causing the hold-up in a possible approval?

No, that's a fair question, Andrew. To be clear, this breaks down into a couple of parts. First is the ImmuCell part, where the drug substance gets produced. Our inspection was successful. There's no 483 for us. We've remained in that favorable status for a good while at this point. What's difficult — and quite maddening — is that we rely on a CMO to do the filling, putting our drug substance aseptically into the tubes, and that CMO needs to clear up F 483 inspection observations. I share your wish, likely even more strongly, that I could provide a schedule for that. It's deeply frustrating. This situation has persisted for more than 12 months. I'm certain they're putting in serious effort, yet I can't say when things will conclude, whether they'll succeed or whether the FDA will sign off on that success. It's a pending inspection they're driven to close out, not only for Re-Tain but for additional items in their portfolio; and it stands as the last barrier to FDA approval. We're keen to see it settled, though it's nearly entirely beyond our influence, with the FDA and the CMO both at work on it.

All right, that clears things up. You also noted that you're holding some inventory that, from the sound of it, is nearing its expiration date, so it'll be directed toward your investigational purposes. Could you say something about the volume of that inventory set to lapse during, say, the latter six months of this year that would go toward investigational use?

Sure — not as tube counts, and definitely not as a dollar figure, since, as I said, no sales will come out of it. But here's the answer: every bit of it. This is product made in preparation for a commercial launch; every bit will go to investigational purposes; no revenue will result. And as I believe I said, returning to a commercial launch would call for fresh production, and so far we haven't committed cash to that, since our view is it's preferable to secure the approval, finish the investigational work, and then evaluate what strategic options we have. And that will truly have — yes, Tim, go ahead on the P&L effect.

Right, so the inventory tied to Re-Tain has already been expensed, meaning you won't see any P&L impact going forward.

Correct.

All right. Could you perhaps give us a few illustrations of the kinds of things — you brought up — you brought up several occasions, you're putting in the press release, exploring certain strategic alternatives. For instance, what could be a few of the various shapes that, that might sensibly take?

Yeah. So I'd say the number one priority would be — we're a fairly small firm with a fairly small sales force, and that force is extremely, extremely concentrated on First Defense. So bringing in a bigger marketing organization that could — we'd hope they would examine our investigational study data and become enthusiastic and then assist us with that launch monetarily and in the barn, introducing a very different, a very novel, a very new approach to treating a disease state subclinical mastitis that isn't treated today. So we'd be seeking financial backing and marketing backing to move this to the next stage. And we like to think we'd be a manufacturer; but that — those talks are truly open and truly flexible regarding what shape that takes, but conceptually, it would be monetary backing and introducing a novel product to commercial launch demands a lot of time in the barn and a lot of time with producers. And so some combination that delivers us that commercial launch with reduced financial exposure grounded in good data we hope to obtain from this study during the second half of 2025.

Is it possible that a distributor wouldn't really be the right partner, simply because they have the channel to move product but don't bring the know-how or expertise on the production side, or perhaps aren't even ready to commit money?

Right. It sounds like you've basically answered that yourself, and I'd say your answer is correct. What I mean is, the distributors we work with matter enormously. They're vital; they perform very well for us. To a large extent our sales force gets leverage from them, and clearly at this moment that's true when it comes to bringing First Defense to market. However, when it comes to making sales and shifting how things are done and teaching the industry and collaborating with milk processors and providing financial backing, well, the line is open, but my sense is that isn't probable. My sense is this will come from someone strategic rather than a distributor.

For my final question, I believe you've also brought up before the idea of increasing capacity from 30 to 40. What does the schedule for that depend on, more or less?

Right. So the timing remains something we keep assessing. What we previously announced hasn't changed at all — basically, that initiative is paused. In the Q, there's some information disclosed regarding the comparative expense of shifting from backing $30 million in revenue up to $40 million or so. Still, I don't think there's any update on when that would happen.

In my view, this is a hugely significant call for both management and our Board, and getting the timing right matters greatly. We'll simply monitor it through the back half of the year, purely to confirm the cash flows line up. So being above 30 makes us quite pleased, and we're highly confident that we'll have to be above 40 before too long. Thus, rigorous review and ongoing deliberation — timing is paramount, and cash flow is paramount.

All right. Perhaps one final item regarding First Defense. The impression is that the sales force may have been pulled in different directions, yet at this point, or more lately, they are more focused. Could you share your view on how that is likely to benefit that line of products, First Defense?

Yeah. If something has been pulling our salespeople in different directions, my guess is — I believe what you may be alluding to is the way a sales force goes about selling a product that is in limited availability. As a result, they were quite torn, having to handle numerous highly frustrated distributors along with customers who were unable to obtain what they required; they therefore did whatever they could to handle that constrained supply, yet that takes attention away from fresh business, fresh territories, fresh customers, out of sheer necessity. We did not — we were not able to — bringing in fresh business would merely have enlarged our backlog. So there is a wonderful reversal right around June 30, as we move into the third quarter, when at present, they feel sure that we hold sufficient, more than ample stock, go after the customers we might have shed while supply was short, go after fresh business wherever it can be located, dairy, beef, fresh territories; they are once again doing what they enjoy, and that is selling.

Is part of this — maybe I'm picking the wrong term — essentially restoring your standing with customers? But I imagine a chunk of it — the capacity to clear that backlog doesn't just begin on June 30. My hope is that it aids that effort. Still, perhaps you could discuss a few of the difficulties around... you know.

Yeah. Honestly, I'd say quite plainly — and quite candidly — that our name took a hit when we failed to provide what the market expected. People grew annoyed with us. And efficacy is what counts. They're after this product since it outperforms the competition; so sure, they were upset; that's exactly what pulled our sales force off track, handling all that irritation; yet now that the expansion, the capacity build-out, is finished, that chapter, that period, has ended, and we simply refill with — previously we couldn't be counted on to supply, but from here on we're set to deliver daily. So return to us, because efficacy is what counts, and that's the way we're recovering that product performance.