Full Year 2020 ImmuCell Corp Earnings Call
Good morning, and welcome to the <unk> Corporation reports fourth quarter fiscal year 2020 financial results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity of task.
Question I ask the question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Joe Diaz from partners. Please go ahead.
Thank you Greg good morning.
And welcome to all of as Craig indicated my name is Joe Diaz I'm with Lytham.
Partners, where the Investor relations consulting firm for Amy So are we.
Thank you for joining us today to discuss the unaudited financial results for the year ended December 31, 2020, and I'd like the preface. This discussion today with the caution regarding forward looking statements listeners are reminded that statements made by management. During the course of this call include forward looking statements are subject to risks and uncertainties.
That could cause actual results could differ materially from those discussed today.
Additional information regarding the risks and uncertainties is available under the cautionary note regarding forward looking statements provided with last nights press release.
With that said, let me turn the call over to Michael Brigham President and CEO of maybe Michel Corporation, after which we will open the call for your questions Michael.
Thanks, Joe I appreciate the opportunity to provide some updates on what is going on at the Michelle it's on.
The exciting very exciting time here the press release, we disclosed last night covers the key financial highlights for the year ended December 31, 2020, we expect to file our form 10-K, providing much more detail around March 30th.
As you May know, we issued a press release covering our covering our preliminary topline sales or was the sales results on January 7th we have been making these optional filings to give investors a very timely look at what I view as the most critical measure of our operations and financial performance early in the reporting period.
There has been no change to our previously disclosed sales results product sales were up 12% for the year ended December 31, 2020 in comparison to 2019. This growth is very important for us and it comes with consistent market share gains as well simply put our sales team continues to the.
Disrupt the traditional scour vaccine market by replacing very old vaccine technology with our preformed antibodies.
The on the top line results that I just discussed and were previously just goes.
The three most important things that I want to talk to you about today are one the status of our investment to expand our production capacity to the road to regulatory approval of retain and three our cash flows.
First the status of our investment to expand our production capacity.
We had a backlog of orders worth about $1.8 million as of 12, 31 2020 compared to no backlog as of 12 31 2019, the strong indication of demand for our product. That's the good thing and confirms the need for expanded production capacity, because we needed to get every dose that our customers want.
Into their hands.
The lease hold improvements to our new formulation fill an assembly facility were completed during 2020. The final phase of this project, which involves the 100% increase on our liquid processing operations and the 50% increase in our freeze drying operation.
Is on budget and on schedule for completion during the second quarter of 2021.
This work is being carefully coordinated to minimize disruption to our ongoing operations and product supply before this expanded capacity comes online we do expect to incur a decrease in sales during the first quarter of 2021 and comparisons of the first quarter of 2020.
This has some of the sales for the first quarter of 2021 amounts to about 92% of.
Of the $4 1 million that we estimate to be our current production capacity per quarter.
We sold product equivalent to about 91% of this estimated quarterly capacity.
During the fourth quarter of 2020.
We are working to fulfill this backlog and returned to a growth mode. During the second half of 'twenty 'twenty. One provided the provided that we capture anticipated demand and end the year with available inventory on the shelf ready for peak season sales during the first quarter of 2022 provided that we effectively completed our production capacity.
For the expansion of investment.
Second.
The road to regulatory approval of retain product development expenses continued to be our largest operating expense line items, increasing by 18% to $4 4 million during 2020.
Including a one point of 5 million, including $1 5 million of noncash depreciation expense.
Let's talk about retaining debt.
It's been a long of an inexpensive road, but we are nearing completion of the work required to achieve FDA approval of this novel Subclinical mastitis treatment for of lactating dairy cows without of milk discard. We recently submitted the last of five significant technical sections required for FDA approval. This one is known as the <unk>.
On the street manufacturing and controls or CMC technical section.
This kind of submission is subject to a six month review by the F. D. A that puts us at a huge fork on the road during the third quarter of 2021, if the FDA has questions for us we could be required.
Wired to respond through another submission, which would be subject to an additional six month review, we do not anticipate that on an additional submission would be would be required after that.
Therefore, we are making plans for a mass market launch during the second quarter of 2022, while also being prepared to flex to an initial limited launch plan.
During the fourth quarter of 2021, if approved will come through in response to our first submission.
Thirdly on last our cash flows I think we should focus on our cash flows more than on our GAAP net loss at this stage in our development page five of last Night's press release provides the.
Look at the impact of noncash expenses on our financial results.
We reported increases in both EBITDA and what I describe as a measure of cash flows, which I believe is most relevant to tracking our performance well both are important metrics to consider and understanding of our cash flows. The most important measure is the statement of cash flow is that weird that will be included with our form 10-K filing around the end of March.
Subject to completion of our debt.
Audit, we do expect to see year over year increase in net cash provided by operating activities of approximately $1.1 million, which included the benefit from of 938000 in other income from the forgiveness of our Paycheck protection program loan from the federal government.
So in conclusion I encourage you to review the press release that we filed last night also please have a look at our corporate presentation slide deck of February update was just posted to.
To our website last night I believe it provides a very good summary of our business strategy and objectives as well as our current financial results see the investors section on our website and click on corporate presentation or just contact our office and we can send you out of copy with that said I will be happy to take your questions.
Let's have the operator open up the lines.
We will now begin the question answer session. So ask the question you May Press Star then one on your Touchtone phone curious thing of Speaker phone. Please pick up your handset before pressing the keys withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster again it is star.
Then one ask your question.
Yeah.
Yeah.
It looks like we have a question from Sam Lipovsky with sort of asset management.
Please go ahead.
Good morning, Michael.
Uh huh.
Now tell me you we were expecting to submit the <unk>.
Retain the information.
The December 31, so presumably we just should mitigate.
And.
Could you discuss the.
Why it took us so long to put all the pieces together.
Yeah, just simply Sam by the way good morning, just a very complex submission. So yes, the months ago I'm actually not sure exactly how many months, we made that projection for year end, we did not need it.
And I'm, okay with that to meet the you know previously disclosed deadline with less on our best effort.
The minimum of foolish price.
So we took the time, we needed to get it right and Oh, just understand is of very very complex submission involving.
Data and input from other parties it when it was together and when it was right. It was submitted and as I said.
The recently submitted so plus or minus weeks on something like that magnitude I think is it is a bit of a rounding error.
Sooner would have been premature.
So we have got all the data that we needed from non broke.
And presumably the.
We're more comfortable on the submission did the FDA respond in any way to our submission.
No. They won't do that we wouldn't expect them to do that no I'd say that it's the statutory review period.
While there could be some back and forth during those six months nothing.
Nothing nothing that you know, we we wouldn't we wouldn't expect there their response until.
At six months of review period is up.
Okay, and then as far as getting the facility.
Ready.
To manufacture when do we.
We expect the.
The next quarter that will be short on.
On.
Getting everything to the will.
We'll be about 90%.
Submitted.
The.
When do we expect the during the second quarter do we expect the catch up and so we're fully.
Hey will just submit.
The product.
Right. So it's pretty much an on off switch Sam you know that 90% 90, 192 different periods of different slightly different percentages, but over 90% of our current capacity because of what we do today and our current capacity is about $616 5 million per year.
As hard as we push that plant and as hard as we push our staff, we keep coming up to the similar number then when the new line comes on it's mostly about more freeze drying mostly about more liquid processing when that comes on line, we move from $16 5 million annual capacity to 23 million.
Annual capacity, so it's that 23 that we need to be at.
Because that gives us a little bit of head space over the $15. Three that was you know current sales for 2020.
So the 23 million do we know which quarter, we expect to have.
The next quarter to Q, yeah that come all of this work gets completed here are in <unk>.
Wondering if that's the transition from the backlog fill.
Will it get a feel of the ongoing demand and then start building some inventory.
So there we are not looking at this backlog as we look into the.
The second half of 'twenty, one and most importantly build for peak season sales first quarter of 2022.
Sounds good Michael.
Rather our struggle.
I guess with the Covid and everything else good luck to the.
In the cell team.
I appreciate that yeah.
Thank you.
Yes, thanks for the tracking so closely appreciate it sounds good.
Our next question will come from George Melas M.
K H management. Please go ahead.
Good morning, Michael.
Hey, George good morning.
It looks like orders in the quarter.
The way quite strong because I think you started the quarter with the backlog of just 100000.
And you ended with one eight so it looks like you had ordered in the quarter of.
I think more than five.
Is that correct and had bad debt compared with.
The prior years.
Yes, George I'm not following that math.
The backlog at the end of the year 12, 31, 2020 was $1.8 million.
That.
Compares to zero as of 12 31 2019.
So as we come in to the first quarter of 'twenty one.
No we had that $1.8 million of orders on.
On the on yet on net as we.
Continuing to work worked through that in the first quarter here, but the but maybe I didn't get the question does that answer makes sense.
So let me from talking about the issue for.
For my question make sense.
Seems like the orders in the fourth quarter.
You had the orders that you're fulfilling the force in the fourth quarter plus the orders of one eight that you would not able to cold flow. So it seems like the orders from the fourth quarter of weak once two of them.
Is that correct.
Oh for sure the fourth quarter of things just started to really roll I mean, the orders for that was.
There's a huge amount of demand in the fourth quarter debt.
Is it because we had we had a larger backlog we work that down to a lower level there at 930.
On September 32020, and it just it just built up strong and you've got plenty of related to the strength of the dairy industry. What do you attribute that to because it seems like what is sort of exploded in the quarter.
Alright, I series on yes, well, obviously a lot of factors the dairy industry has been very volatile through the COVID-19 pandemic, but towards the end of the air became very strong its suffered in the early part of the March April may with very low milk prices rebounded as has the whole foodservice system sort of <unk>.
<unk> from from schools and restaurants too.
2222, the more take out in any of the whole adjustment here was was the I've got a good chart on milk price I can share with you. It just was very very low their March April may and then rebounded to a very high price. So the industry ended strong Soc that times out to the strong fourth quarter. So that probably is related I liked the.
I think that the debt.
What's really going on is the sales team is just as I mentioned in my.
And my talk there just they are having great success with this new.
Effort to replace dam vaccines I mean, the addition of a rotavirus claim on top of the you called out on krona. It makes our product.
Attractive and we're having great great success of great. It's a great conversation to have on the bar on about Hey, you're immunizing your kind of why what if what if you left that how long it didn't stick a needle on or didn't subject yourself to this variable of vaccine responses that NFL do the work for you. We will give you preformed antibodies measured out in a dose.
And you can give it to that to that newborn calf. So I think it's a combination of great work by the sales team and the strong market that the sort of rebounded from the early.
Covid pandemic lows.
Okay. Okay, I think the provide some good explanation because I mean I think the.
The the order numbers.
The simple math.
The strong so I think thats called the really well for the expansion of capacity that you are.
That will come online very soon.
It's very very needed I think that's on a very very good investment interest.
Needed as soon as possible.
And just Michael the sales team right now.
People weighted.
How does that how is that.
Yeah were level, we had a couple of open positions during the year, but were level at nine so where we are full staff and that's the seven.
Seven regional marketing managers sales and marketing managers and the director of marketing and then Bobbi Jo Brockmann, the VP of sales.
Great. Okay. Thank you very much.
George Thank you.
Hi, Ken if you'd like to ask the question today. It is star then one.
Star then one.
The question.
Yes.
There being no further questions Oh, it looks like we have the question from Scott Costa.
But on Buster.
Please go ahead.
First of all congratulations great work, especially in the in terms of what's been going on over the last year.
It seems as though you've penetrated the market quite substantially.
And obviously no one has the crystal ball, but.
To what extent do you think that you have further penetration developable in the market.
Yeah. Thanks, Scott.
The part of my answer I'm going to refer you to our slide deck, because I think the the numbers in the details there I referred to growing market share as well as growing sales. The slides around 14, 15, 16 really define what I see is the market I sort of the hint.
There's some pie charts, there and we are showing this continual and consistent growth and market share and we define the market in two ways. One the direct competition of products that are given to the newborn calf.
And then this larger market that I just started to discuss there a little bit with the prior question of the including those damn vaccines those vaccines given to the mother cow, but yeah. So about 22 million on the on the calf level about 42, when you incur.
The the.
The the mother cow, so that's on our opportunity and that's our that's the market that we keep competing in and those those.
Those percentages, we have of a pie.
Pie chart. There just so our share is red getting up to 41% of that Oh, that's the cash.
Half level and up to 13% of that when you combine in the the the dam vaccine market. So you know that leaves 87 available right.
Great. Thank you and that would be more.
The world.
The country wide domestic market correct al you're absolutely right. Yeah. This is on the those numbers other than those charts are just U S. So we are up into Canada, and we're having some good good good sales results up there where in two of fuse kick.
The other territories in the small way.
In the longer term plan coming out of backlog and having this capacity in place would be the continue to grow in other international markets, but.
That really wouldn't help us right now in 2020 of that would've just added to our backlog no absolutely.
Good problem to have a nice problem to have is a good way to put it. Thank you Scott. Thank you so very much.
Great. Thanks.
Our next question will come from Louis Parks, the high ROE Capital Management. Please go ahead hi.
Michael Happy new year, and thanks for the update.
My question actually Piggy backs on on what you were just discussing I was going to ask you too.
And a little bit of bond the international sales strategy.
Yeah. So.
As I said north of where really North America right now, we do get into South Korea, we do get into Japan.
And we've started that advance work the regulatory work, we want to work with some in country experts that would help us through the regulatory you know the there's different systems in each territory much like of USDA plus or minus so it's it's a product that does require in country regulatory approval.
And then where you know we just talked about nine sales reps. The yet we're not going to have reps on these different territories. So we're going to rely on a partner that's going to be will be the manufacturer there'll be the distributor of they'll help us with the regulatory so that work is underway Bobby is sort of leading that charge by the way.
Did want of staggered as I just mentioned, we just didn't want to disappoint on new territory of new customers.
And just you know.
Increased this this this backlog burden so yeah. It's the regulatory work. It's the partner work and you know as we get into 'twenty, two and after I think the.
The there theres scours around the world and there's lots of new opportunities that will start to.
The dress.
Thank you.
Again, a few bites US question today. It is star then one star.
The Star then one SaaS for the question.
There being no further questions. This will conclude our question and answer session.
I would like to turn the conference back over to Joe Diaz for any closing remarks.
Hey, Grant we made of lost Joe there, but I I've got the script and I know he was just kind of.
Have a half of that.
Have us close so Joe is that you're coming back on.
I'm on.
Hi, I'm on again as I was going to say.
I would like to thank everybody for participating on the call today, and we're certainly looking forward to talking with everyone again true.
We reviewed the results of the current first quarter here of 2021, some time around the second week of May shall have a great week stay safe and well thanks to everyone and Michael Thanks to you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.