ImmuCell Corporation Price & Performance (ICCC)

Thank you, Debbie. Good morning and welcome to all. As conference call operator indicated, my name is Joe Diaz. I'm with Lytham Partners. We're the investor relations consulting firm for ImmuCell. I thank all of you for joining us today to discuss the unaudited financial results for the fourth quarter and the year ended 12/31/2024. Listeners are reminded and cautioned that statements made by management during the course of this call include forward looking statements, which include any statement that refers to future events or expected future results or predictions about the steps the company plans to take in the future. These statements are not guarantees of performance and are subject to risks and uncertainties that could cause actual results, outcomes or events to differ materially from those discussed today. Additional information regarding forward looking statements and the risks and uncertainties that could impact future results, outcomes or events is available under the cautionary note regarding forward looking statements or better known as Safe Harbor statement provided with the press release that the company filed last night along with the company's other periodic filings with the SEC. Information discussed on today's call speaks only as of today, Wednesday, 02/26/2025. The company undertakes no obligation to update any information discussed on today's call.

Please note that references to certain non GAAP financial measures may be made during today's call. 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 in order to better assist you in understanding its financial performance. With that said, let me turn the call over to Michael Brigham, President and CEO of ImmuCell Corporation, after which we will open the call for your questions. Michael?

Thanks, Joe, and good morning, everyone. The sales growth of 52% during both the fourth quarter of 'twenty four and during the full year of 2024 in comparison to the same periods of the prior year is huge for us. It should be noted that our performance during 2023 and the first nine months of 2024 was limited by production contamination events that led to a reduction in manufacturing output and delayed effective implementation of our investment in capital expenditures necessary to double our production capacity. This led to a period of short product supply to market as evidenced by our publicly reported backlog of orders. As a result, the 2024 results are compared to periods in 2023 when our production was limited. The absolute dollar value of the sales is more important to me than the period to period flux comparisons. To that end, the $7,800,000 in sales recorded during the fourth quarter of twenty twenty four suggests that we have achieved our goal of increasing annual production capacity to $30,000,000 or more per year. The results for the fourth quarter of twenty twenty four put us in a much stronger track as we enter 2025. We have not incurred another contamination event since April of twenty twenty four.

This is critical. It suggests that we have effectively remediated the problem and are keeping the bioburden within specification. When I look back, I see something that is now very understandable. After successfully running the same process for over thirty years, sudden growth is hard. We work with a high bioburden source material that being farm milk, we needed to better control quality at the source of this growth. We are doing that now. Similar challenges were incurred in our downstream processing as we pushed our well established process and equipment harder. We believe that the operational improvements implemented are allowing us to run more effectively at a higher output level going forward. To be successful, we must avoid future significant contamination events and equipment breakdowns and operate with good production yields. We pay our bills and drive our cash flows with gross margin dollars. To that end, gross margin increased by 125% or $1,600,000 to $2,800,000 during the fourth quarter of 'twenty four in comparison to the fourth quarter of twenty twenty three. And it increased by 105% or $4,100,000 to $7,900,000 during the year ended 12/31/2024, in comparison to the year ended 12/31/2023. We experienced some low gross margin percentages in prior periods as we dealt with low output and scrap costs related to the contaminations.

The 36.5% gross margin as a percentage of sales that we recorded during the fourth quarter of 'twenty four is a step in the right direction, but we still have some work to do to return to our target of over 40%. The increase in sales and the improvement in gross margin are important. I take nothing away from those accomplishments, but I would like to talk for a moment about EBITDA because the impact of non cash depreciation expense on our bottom line is significant. We created EBITDA of $1,300,000 during the fourth quarter of twenty twenty four, in contrast to negative EBITDA of $311,000 during the fourth quarter of twenty twenty three. The fourth quarter results were strong enough to create EBITDA of $1,100,000 during the year ended 12/31/2024, in contrast to negative EBITDA of $2,600,000 during the year ended 12/31/2023. That is a swing in the right direction of approximately $3,700,000 between the years. In order to improve our cash position, we effectively utilized our at the market offering, raising net proceeds of almost $4,400,000 during 2024. This helped us increase our cash position to approximately $3,800,000 as of 12/31/2024 from just $979,000 as of 12/31/2023. Switching topics a bit, I'd like to offer some comments about Retaine.

We remain poised and excited to revolutionize the way that subclinical mastitis is treated in today's dairy market with a novel alternative to traditional antibiotics without FDA required milk discard or meat withhold label restrictions. We are eager to find out what the market thinks of our new product. We can see the potential of achieving FDA approval of RETAIN after all these years of investment. The initiation of our previously disclosed controlled launch is pending FDA clearance of inspectional observations at the facilities of our contract manufacturer and the FDA's review of our non administrative NADA submission, which we submitted during early January of twenty twenty five. This submission includes all other information and product labeling, as well as our fourth submission of the CMC technical section responding to the minor non complex issues from the incomplete letter issued by the FDA in May of twenty twenty four. We have been in discussions with the FDA to seek an expedited review. After an investment of about twenty five years and approximately $50,000,000 in the development of this technology, we are committed to seeing RETAIN through regulatory approval and initiation of our limited distribution control launch strategy. But at the same time, we are reducing product development expenses as we await FDA approval of RETAIN.

We are also in the very early stages of exploring potential strategic options that could offset some of the product development expenses and enhance a mass market launch of RETAIN. As we work through what we see as the final stages of the regulatory approval process and our effort to bring RETAIN to market, we will remain focused on the commercial opportunity that we have with First Defense. That is the big picture from my perspective. With regards to the other financial results, the press release provides the unaudited P and L results and some unaudited summary balance sheet data. We plan to file our Form 10 K around the March with all the audited financial details and management's discussion and analysis. Lastly, I encourage you to review our corporate presentation slide deck. I believe it provides a very good summary of our business strategy and objectives as well as our current financial results. The February update was just posted to our website last night. See the Investors section of our website and click on Corporate Presentation or contact us for a copy. With that said, I'll be happy to take your questions. Let's have the operator open up the lines, please.

We will now begin the question and answer session. The first question comes from George Melas with MKH Management. Please go ahead.

Great. Thank you. Hi, Michael. Good morning.

Hey, good morning, George. How are you?

Very well. Thanks. So congrats on very good results for the quarter. And I want to ask a couple of questions, one on gross margin and the other one on inventory. So on gross margin, you achieved 36.5%, which is the best results in eight quarters. But like you said, in previous years, like from 'seventeen to 'twenty two to mid 'twenty two, you were consistently having gross margins in the mid to high 40s. So looking at the changes, there's been a few changes. Of course, product mix is different with a bigger share of Tri Shield. Salary costs, I'm sure have gone up, but so has pricing. So I'm trying to see what else accounts for the difference in the gross margin. And you're saying that your goal is 40%, sort of 40% plus. And what would it take to get there?

Yes. So certainly a lot of factors, but I think the biggest one is I don't want to rank them. I'll comment on a couple. You mentioned product mix. I totally agree with that. Simply, Tri Shield is more expensive to produce than the bolus. The bolus is a simple bivalent product, a single production train. The Tri Shield is trivalent and involves two production trains. So, Tri Shield product mix, but that's a negative, but the positive is Tri Shield is creating a heck of a lot of growth. The customers really love that broad spectrum coverage with the addition of rotavirus to our long standing E. Coli and corona. Then I sort of jump off to the 37% in the fourth quarter and I kind of put that in a condition of work in progress. So like you mentioned, way better than the past and still room to go. So 37% is that 24% pricing. So we've got a 25% price increase to help us and the rest we've got to get from yield and throughput. And those bad periods that we referred to were burdened by contamination, they were burdened by remediation process that slowed down our production.

So lower volume, all the impacts there. And that's what I see as I see that turn 24%, twenty five % that we're coming out of that without contamination, with higher production, with a price increase off a fourth quarter base of 37%. Does that make sense?

Okay. Yes. But can you provide a little bit more color on okay, so you're talking about really three factors, the mix, but that's not changing, the price increase that's impacting the gross margin and throughput. But throughput seems pretty optimal almost at this point. So what can you do from an operational perspective, you think? Or is there much to do from an operational perspective?

Well, first off, more of the same. I mean, we just have to continue that kind of reduction. It's a six month production cycle. We saw a turn here to the better in the fourth quarter. Now we're not projecting. Now we're managing a repeat, do more of the same, do it better. And I think the one factor we didn't talk about there, but it was related to contamination is yield. So one of our top priorities around here is the same work for more doses, to simply increase production yield. Biological processing is subject to a huge amount of yield variance. And I think we've made some steps and there's always room for more improvement on yield improvement.

And I always say yield George, I always say yield resumption. It's not like creating a new level of yield, doses per batch or whatever measure you use. It's getting back to the old yields. So it's really putting all of those factors into play in the second three months of this six month period ended March 31.

Okay. So, let me just ask a question on doses per batch. Is there much variation right now in doses to batch? Or has that sort of improved and is relative that is it within a particular a very small range? Or does it vary a great deal from batch to batch?

Yes. I will go with both. I mean, this is biological. This is cows. There's so many different factors. There's always going to be variance. But I think we've tried and knock off the bottom and try and get more repetition of the better batches. But we're always going to be dealing with yield I mean, that variance and just continual improvement. And that's what we've been seeing. That's related to the 37%.

Okay, great. Okay. So let me ask you just my second question on inventory. So one of the stories over the last two point five years is the big increase in inventory and almost all of that is WIP. So my understanding and I'll just tell you my story, but you tell me whether it's right or wrong, is that as you guys expected growth, you contracted for a lot of milk deliveries, but then there were these unforeseen events, the syringe shortage in mid 'twenty two, the contamination events, and you could not take that. You could not use that milk, but you still had to take it, it kept deriving, you froze it and that is basically most of the WIP. Is that kind of a correct story? How can you elaborate on that story?

Yes. I think, George, that's all fair. Certainly, growing your real estate or facilities and equipment, people, growing the schedule doesn't do you any good if you don't have more raw material coming in to feed the process. So, yes, we expanded farms, we expanded cows, we expanded colostrum collection. And then the slowdown meant that we didn't need it all at that time, but I wouldn't do it different. I wouldn't want to be short on Clostrum. And what I think one of the best so if that's a negative, which I see your point, a little negative on the cash flow or where we invest the cash, I think the offsetting and more than offsetting positive is what our really creative sales team is doing with that inventory. And we've talked about this a little, but it's in the development stage of basically a new format. So everything we've been selling, everything we've been making has been freeze dried and a very, very our intellectual property around our manufacturing process is to get a very purified, concentrated and specific antibody. Spray drying is going to be more of a bulk product. And this excess I hesitate to call it excess, but this level of colostrum enables us to explore that path.

A new product format, same concept antibodies, same antibodies, same disease, but just a different market segment being bulk feed rather than a four gram to six gram dose. So I hear your point on cash is king and we watch it super tight. But in this case, I think you can't grow without more incoming. And again, I just credit the sales team for initiating this new format. And over the coming quarters, we'll be able to report on the success or failure of that initiative.

Okay, great. And timeline, you think whether there might be some the new format might be in beta with some customers or you can give us Yes. It's a 25 thing that will inform our decisions for '26 and after. So, I think it's the nice thing here is we're not subject to a regulatory hurdle. So, this is going to be a no claim product. It's not a USDA claim product. So, that allows us to get to market faster, and that's what we're working on.

Okay, great. Okay, thanks a lot. Congratulations again.

Thanks, George. Appreciate it. At this time, there are no further questions. So this concludes the question and answer session. I would like to turn the conference back over to Joe Diaz for any closing remarks.

Thanks to all of you for participating on today's call. We look forward to talking with you again to review the results of the first quarter ending 03/31/2025, during the week of 05/12/2025. Have a great day. Again, thanks for participating.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.