Q1 2021 ImmuCell Corp Earnings Call
Good morning, everyone and welcome to the and Michelle Corporation reports first quarter of fiscal year 2021 financial results conference call.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask questions.
I'll ask a question you May press Star and then one to withdraw your question you May press Star and two.
Please also note today's event is being recorded.
At this time I'd like to turn the conference call over to Joe Diaz with Lytham partners. Sir. Please go ahead.
Thank you Jamie good morning, and welcome to all.
Sam you indicated my name is Joe Diaz.
I'm with Lytham partners.
For any investor relations for consulting firm for Michelle.
Again, we thank all of you for joining us to discuss unaudited financial results for the first quarter of 2021 I'd like to preface. This discussion today with a caution regarding forward looking statements listeners are reminded that statements made by management and of course of this call include forward looking statements.
Subject to risks and uncertainties that could cause actual results to differ materially from those discussed today.
Additional information regarding these risks and uncertainties is available under the cautionary note regarding forward looking statements that are non interest safe Harbor statement provided in last Night's press release, and the company's quarterly report on form 10-Q.
With that said, let me turn the call over to Michael Brigham President and CEO of any shelf Corporation after which we will open the call for your questions Michael.
Great. Thanks, Joe I appreciate the opportunity to provide some updates on what is going on and then Michele the press release and the quarterly report on form 10-Q that we disclosed last night covered the key financial highlights and all the details.
And as you May know on April 7th we issued a press release covering our preliminary topline sales results. We have been making these optional announcements to give investors a very timely look and what I view as the most critical measure of our operations and financial performance that being product sales early in the reporting period.
Again and product sales were down 16% compared to the first quarter of 2020.
I should note that sales during the first quarter of 2020 benefited from some ending inventory going into the quarter on hand as of December 31 2019.
Well, we produce product at about a 100% of our current production capacity during the first quarter of 2021, it was not enough and strong demand created a backlog worth approximately $3 $1 million as of March 31, 2021 which was increased from about 1.8 million.
And as of December 31, 2020.
Our investment to increase our annual production capacity from approximately $16 5 million to $23 million is on track to be complete by the end of June.
With that we do expect to make up for the first quarter drop in sales and report sales growth for the full year 2021 over 2020.
Our sales team has been working very diligently to manage the product shortfall with customers I can now see the light at the end of this 18 month tunnel to where we can start selling with inventory on the shelf sometime during the third quarter.
The drop in gross margin to 39% of sales during the first quarter 'twenty one.
It is also related to this capacity expansion.
To demonstrate how well review some informal pro forma financials with you.
And we've been able to reduce cost by $287000. During the first quarter. Our gross margin percentage would have been 46% instead of the 39% we reported.
We have identified cost aggregating and at least that amount and I would consider upfront startup or onetime cost. These are costs that we had to incur to benefit from the future capacity expansion, but they were not necessary to meet the first quarter production output.
And in addition to the top line sales results the production capacity expansion and the gross margin results just discussed I would like to touch on three more topics. One the use of proceeds from april's equity raise to our cash flows and three the road to regulatory approval of reaching.
First as you May know, we raised $4.250 million and new equity at $8, 25% $8.25 per share last month.
That was a straight common stock deal and the warrants no converts very low issuance cost. This funding together with some other available cash allows us to aggressively take on for new important growth investments.
Aggregating about $5 $4 million.
We are investing.
Yeah.
To scale up and upgrade our vaccine production capacity.
Expand and improve our classroom collection capabilities and logistics for.
Further increase our annual production capacity for first defense from the new level of $23 million to about $30 million.
And for build inventory levels as we come out of backlog and prepare for peak selling season during the first quarter of 2020 two.
Full details about these investments and and other capital expenditure projects that we're working on and can be found in our quarterly report and the MD&A section under liquidity and capital resources around pages 25 to 26 I appreciate the confidence that these new investors have demonstrated and our business and I.
We're putting this money to very productive use to grow our business for the benefit of all stockholders.
So secondly, our cash flows.
Driven primarily by large product development expenses to bring retained market. We continue to reported net loss. However, I think we should focus on our cash flow is more than our GAAP net loss at this stage and our development.
Page four of last Night's press release provides a look at the impact of certain non cash expenses on our financial results.
You can see that we.
We continue to report positive EBITDA, which I believe is the most relevant.
To tracking our Bottomline performance at this stage.
But the most important measure is the statement of cash flows on page four of our quarterly report.
Third and lastly.
The roads and regulatory approval of reaching.
It has been a long and then it hasn't been an expensive road, but we are nearing completion of the work required to achieve FDA approval. This novel Subclinical mastitis treatment for lactating dairy cows without a milk discard or meat withhold.
During the first quarter, we submitted the last of five technical sections required for FDA approval. This kind of submission is subject to a six month review by the F. T E that puts us at a huge for us on the road during the third quarter of this year. If the FDA has questions for us we could be required to respond through another submission.
Which would be subject to an additional six month review, we do not anticipate and additional submission would be would be required after that there.
Therefore, we are making plans for a mass market launch during the second quarter of 2022, while also being prepared to flex two and initial limited launch plan and.
Around the end of this year and the events that approval comes through and response to our first submission.
Retained puts the second horse and the race for us as we strive to keep growing our total product sales.
So in conclusion I encourage you to review the press release and the quarterly report.
And on form 10-Q that we filed last night also please have a look at our corporate presentation slide deck and May update was just posted to the website or to our website last night.
And I believe it provides a very good summary of our business strategy and objectives as well as our current financial results.
And you would see the investors section on our website and click on corporate presentation.
With that said I will be happy to take your questions, let's have the operator open up the lines. Thanks, Jamie.
Ladies and gentlemen, we will be and the question and answer session to ask a question you May Press Star and then one using a touchtone telephone if you are using a speaker phone. We do ask you. Please pick up your handset before pressing the keys to ensure the best sound quality.
To withdraw your question you May press Star and.
Once again that is star and then one to ask a question and we'll pause.
Momentarily to assemble the roster.
And ladies and gentlemen, once again that is star and then one to ask a question.
Our first question today comes from Sam Robotically from SCR asset management. Please go ahead with your question.
Good morning, Michael.
Tell me how many employees do you have now and.
And how many do you expect to have one.
And in June and what we.
There are real and that.
Right Yeah. So the Q disclose is right around 50 for you know Ftes and we've got about six part times. So 50 50 354 currently.
That's gonna go right up to 60.
And on above up to around 70, and when we're fully loaded and and and launching retained into next year.
So you know as I see it.
I see 50 for going to 60 quick and 70 over the next year.
Okay.
And then as far as.
For the.
The June 30 day, where are comfortable with that date and being.
And being ready to start and manufacturing or.
What do we need to do.
Well, we're at the end of the process. So we're getting more and more comfortable as each objective is achieved and completed.
But it's not done until the USDA approves it.
So the final part of this and I think I kind of refer to that and the gross margin discussion and there are some of these costs already incurred so and then a new building over at 175 or we do our finished packaging.
And formulation and and filling a product that's already up and running and.
And it's a question of just finishing up the work here at 56 evergreen.
And that is installing tanks strength tanks are ordered.
And as tanks are fabricated tanks are being installed.
And I feel pretty good about that timeline. So beautiful space you know all the all the facility renovations are done.
Just poured the floor epoxy coating on the floor. This week and just as it's gorgeous space and it's it's.
So its plumbing and U S D E and I feel good about June 30.
Okay, and now as far as the retain.
Uh huh.
We have submitted that to the FDA.
And have we gotten any.
Any indication and how the FDA is operating.
Uh huh.
COVID-19 and.
And is it six months or or what is the time frame.
Yeah. The timeframe, you know pre COVID-19 and as far as we know in COVID-19 is six months. So we've seen no indications that would be that would be changed. So we do still expect <unk> to go to three Q on that critical submission that six months review.
For the F D. A just in the last few days did publish.
Some information on remote inspections. So that's obviously irrelevant to US you know where we are.
Thing and inspection of our facility and it and it look.
Looks like that may be remote and debt.
It's I've got a whole zoom and set up and that's what they've told the industry to be prepared for it so.
And with zoom and ready.
Right and and and with the backlog.
Hopefully went and how do we look at reducing the backlog.
You know its June 30th you'll hopefully had everything up and running when do we.
Is the backlog continue to increase and and why do we do relative to reducing it.
Yeah, well right at three point and one is a huge number so the backlog goes up and down we do see orders being canceled from time to time. Some distributors just don't want open pose on their books for for an extended period other place more.
Borders looking to get in the queue. So what we're doing here and the second quarter is taken advantage of that.
You know as much capacity as we can push and the second quarter.
You know and advance of the full completion of the project and.
And then going into third quarter, just run straight out well this run until we catch it and.
That's our goal somewhere there and the third quarter.
Get back to the point, where sales is on the.
You know on the road, knowing that inventories available to ship when appeal is placed.
Kept get this get this backlog stress out and behind all of us.
Well that sounds very good.
Good luck, Michael Hey, Thanks, and I appreciate it good to hear from you.
Okay.
Once again, if you would like to ask a question. Please press star and then one to withdraw your question you May press Star and two.
Yeah.
Okay.
The.
You start filling up Michael I have a question about that.
Shelly.
And the capacity and the timing of it is coming online and and also.
Approval process.
The actual facility can you give us a little color on a couple of those things.
Yeah, So I mentioned to Sam, but I do feel really good about June 30, you know everything is everything is falling in place we really have as long as this 18 month project has been since we started the beginning of 2020.
It has stayed to our our timeline and to our dollar budget.
Yeah the second.
Duplication of our cheese line in other words, increasing.
Our our liquids processing, 100% is really the last step here and those tanks are going in as we speak and then that that too so.
Somewhere there's a little flex here, but we think it's a two or three week process, we're really tight with the USDA. They know what's coming but we have to allow about two or three weeks for them to do their review and just make sure everything checks. So so on the first defense side, just idea and I feel good. It's it's right in front of US here and then retain again.
That is the you know I think it's a 21.
The objective to complete the regulatory you know and 22 is when we launch and it's just a question of what happens here with this for submission if they if they like it and don't have questions.
No.
We move onto the administrative review, which is the end of the process labeling and all of that freedom.
Freedom of information labeling and all of that and if they have questions at least we'll know what they want to see we answer them and submit for that's the one that adds another six months. So I mean, both of these objectives, which are so critical for our business are right in front of us get out of backlog and and get approval and then launch retain.
The next the next 12 months are gonna be a I think very exciting.
Yeah.
Alright, Thank you Mike.
And our next question comes from Jennifer Taylor from Mac funds. Please go ahead with your question.
Hi, Hi, good morning.
And it looks like and sounds like you're making very good progress and.
Bear with me I'm not completely current on and sort of what the last characterization has been in terms of.
Funding going out sort of over the next year or two I would imagine the recent funding, which was sort of viewed as a bridge to get you true what is hopefully a near term ft and approval, but could you and just a couple of words characterized publicly what you've said.
And how far this funding would get you and what you would look to do strategically longer term yeah. Thanks, Jennifer very very fair.
I would also first I guess refer you to the Q, where I really answered that question and then and a lot of detail because it's an important question and I.
I wanted to get that answer out there exactly where we're spending that money. So.
Project by project for $5 4 million really exciting investments. So so so the the first defense capacity was already budgeted and and sort of cash funded what's new is advancing the pre marketing launch expenses for for retail and <unk>.
First defense to get the higher level.
So these are these this new money. It just allows us to be a little more aggressive move a little quicker and next level first defense and then yeah.
Completing and prime for prelaunch.
Prelaunch marketing on retain.
I don't know does that help does that a full answer Jennifer you know what.
And I forgive me not having read the Q yet.
I was wondering with that raise you know whether or not.
And this would extend here I mean, I realize you've got and you know you need to build inventory and driving the top line and it I.
And just didn't know if you had characterized whether or not.
And sort of EBITDA.
EBITDA positive.
If you would need to raise additional capital free up more and get them all.
Launch.
Yeah, no I mean that.
That's a that's a lot of a lot of detail and a filing that just got out last night I Didnt mean to assume you'd read and I. Just it was probably too much detail for me to talk on this call. So it's there for a backup right is there for it and support when and when you get when you get a rainy day or are you getting some near the middle of the night, but yeah I think they I know you've really understand.
Your question well.
What we're what we're looking at is I mean.
The next big thing, we would need to do the next big use of capital for them yourself.
That would be related to retain post approval. So retain launches with a 10 million capacity I'd love to be and the situation, where we could look out and see a $10 million is not going to be enough and that's a net that that's that's that's sort of a new era and a new challenge and it's out in front of us So we.
Do I think to be specific we do not need more capital to bring our capacity on first defense to $30 million and we do not need more capital to both launch and.
Now to initiate sales of routine.
Perfect perfect that's great. Thank you.
Great.
Once again, if you would like to ask a question. Please press star and one.
Our next question is a follow up from Sam robots can be from SCR asset management. Please go with your follow up.
Yes, Michael.
You answered my follow up and I guess the question really is did we need any more money. After this and evidently you did and good luck.
Yeah.
And so.
Right, Yeah, and this last raise was just.
So well supported by the person family and some other key investors and just you know.
If I can considered optional, but it did put together and it did allow us to launch some really important.
And growth investments, but but I separate that from.
From that debt that retain.
Production capacity and north of 10 million different different topics different times different needs.
Sounds good good Sam Thanks, Okay sure.
And ladies and gentlemen, with that we'll conclude today's question and answer session I'd like to turn the floor back over to Joe Diaz for any closing remarks.
Okay.
Hey, Joe are you on mute maybe.
No worries.
And I'm on mute okay.
God bless and keep rabbits.
This call and we look forward to dog and with you again to review the results for the second quarter for 'twenty, one and not on mute around the second week of August 2021, and have a great weekend.
Well. Thank you again have a great day.
Yeah.
Ladies and gentlemen, with that we'll conclude today's conference call with you. Thank you for attending today's presentation you may.
Now disconnect your lines.
Yeah.
Okay.