Q3 2021 ImmuCell Corp Earnings Call

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Good morning. This is Betsy from chorus call I will be assisting with your conference call. This morning.

Good thing started let me ask Joe Diaz to open up the call.

Thank you Betsy and good morning, and welcome to everyone.

Is that she indicated my name is Joe Diaz I'm with Lytham partners, we are the Investor relations consulting firm for them yourself.

I. Thank all of you for joining us today to discuss the unaudited financial results for the third quarter of 2021.

I would like to preface this discussion today with a 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 to differ materially from those discussed today.

Additional information regarding these risks and uncertainties is available under the cautionary note regarding forward looking statements or better known as the Safe Harbor statement provided with last Night's press release and the company's quarterly report on Form 10-Q.

That let me turn the call over to Michael Brigham President and CEO of <unk> Corporation, after which we will open the call for your questions Michael.

Thanks, Joe and good morning, everyone I appreciate the opportunity to provide some updates on what is going on and then Michele.

The press release and the quarterly the quarterly report on Form 10-Q that we disclosed last night cover all the financial details.

Since you have that information I will not take your time here to review all the line item detail, but I would like to review some highlights and after I make a few strategic comments.

About where I see our business today.

First defense continues to generate strong cash flow.

We're grateful for the interest that our customers have in protecting their newborn calves using our antibody technology rather than scours vaccines. The first defense product line is the only veterinary biologic with our breath of claims that can remove the unpredictability associated with scours protection that results from it.

Variable vaccine response this benefit is being realized in the field and we aim to continue our market share gain with more great work by our production and sales teams.

Earnings before interest taxes, depreciation and amortization increased to 852000 during the three months period ended September 32021.

Compared to 354000 during the third quarter of 2020 EBITDA increased to just under 2 million. During the nine months period ended September 32021, compared to approximately $1 million.

During the nine months period ended September 32020.

These non-GAAP financial measures.

Of our cash flow should be considered in context with our statement of cash flows I just presented in the financial statements included in our quarterly report.

We are completing our most recent investment in first defense production capacity, which will increase our annual production capacity from about $16 5 million to approximately $23 million. The production required to achieve our third quarter sales of first defense when annualized is the equivalent of about 21.

Million of production per year. This is a testament to our production team's ability to maximize throughput during the expansion process.

We are not resting at 23 million, we have initiated an additional investment to further increase this annual capacity.

230 million or more by the third quarter of next year.

At the same time, we are investing a significant amount of the cash generated by first events into completing the marketer marketing and regulatory work required to being retained to market.

We aim to demonstrate that our bacteria sin nisin a can play a productive role in the treatment of subclinical mastitis in today's dairy industry because label requirements of all interim memory drugs on the market today require that milk be discarded and let me be withheld during treatment and for a period of time thereafter, it is common practice.

The dairy industry today to not treat sick cows that are still producing saleable milk retain provides an animal welfare benefit by removing this economic disincentive to treating subclinical, mastitis, and allowing sick cows to be treated without the milk discard and meat withhold penalties.

In addition to improved animal welfare retain enhances food safety and sustainability by utilizing a bacteria that is not used in human medicine. The overuse of traditional antibiotics is thought to create antibiotic resistance, which is an ongoing public health concern.

So we are on track to make our second submission to the FDA before year end.

The fifth and final significant technical sections required for approval of our new animal drug application. The next fork in the road come six months after submission and the FDA, either approves or N. A G E. R. S. Further questions requiring another submission.

As you May know on October six we issued a press release covering our preliminary topline sales results. We have been making these optional announcements to give investors a very time, they look at what I view as the most critical measure of our operations and financial performance that being product sales early in the reporting period.

I have no changes to that very strong previous disclosure again product sales were up 38% during the third quarter of 'twenty, one and up 19% for the first nine months of the year in comparison to the respective periods of the prior year.

The gross margin as a percentage of sales improved to 47% during the third quarter of 2021 compared to 46% during the third quarter 2020.

We started the year with our first quarter sales drop of 16%, which reduced our gross margin to 39% for the three months period ended March 31, 'twenty 'twenty. One we have recovered from this first quarter sales dropped.

And are on track to report positive sales growth for the full year 2021 over 'twenty 'twenty as projected and our gross margin percentage of sales improved to 44% during the nine months period ended September 32021.

This higher level of sales and improved gross margin helped US report net income of 148000 during the third quarter of 2021 in contrast to a net loss of 323000 during the third quarter of 2020 and helped us reduce our net loss 252000 during the nine months period ended September 30 2020.

One in comparison to a net loss of $1 2 million during the nine month period September 32020.

Of the $10 5 million of cash we had on hand as of September 30, we expect to use about 4.45 millions to complete certain capital expenditure projects. This would leave us with about $6 million of cash available for general working capital purposes, including anticipated.

Inventory builds for both first defense and retain full details about the capital expenditure investments that we are working on can be found in our quarterly report in the MD&A section under liquidity and capital resources.

So in conclusion I encourage you to review the press release and our quarterly report on Form 10-Q that we filed last night also please have a look at our corporate presentation slide deck and November update was just posted 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. So 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.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

But anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Yeah.

As a reminder, if you have a question. Please press star then one to be joined into the question queue.

On the first question comes from Scott Bilodeau with wallet partners. Please go ahead.

Oh, Thanks for taking my question.

Just wondering as you bring on the new capacity for first defense is.

Last time, you had a little dip any issues with as you bring that capacity on I think you mentioned by Q3 of next year or into Q3 Youll have.

Up to $30 million of capacity, maybe you know kind of the staging of that will that scale up or alright, maybe give us a little a little sense of that.

Sure Scott Thanks.

Not sure about the which dip or a dip that you might be referring to but let me see if this answers your question so pre expansion.

We were running a capacity of about $16 5 million. So this first investment was to get it up to 23 I look at right now basically everything we make we're shipping so basically sales kind of reflects production. So when I annualize the third quarter were at 20.

'twenty one so you know you can see us stepping right in the middle of the path from 16.5 to 23, we're at 20 I think in the fourth quarter, we'll finish that.

The last pieces of this project or are being plugged in so that gets us to 23, what we did on the on the for that next level that you referred to was when we started that investment really as part of the first phase we made the space for the equipment at that time. So that construction work is done, but we didn't buy the.

Equipment, yet because we wanted to see the first phase equipment work and actually make sure we were confident with it so oh something like a month to six weeks ago, maybe it's almost two months now we did order that piece of equipment and it is a long lead and it's a complex piece of equipment is a big installation and that's the one.

One that will be in place third quarter of next year. So the orders placed the fabrication started third quarter, that's what gets us up to that $30 million level does that answer the question Scott Yeah, Yes. It does great. Thanks, Okay, and I know have you pretty much worked through backlog at this point and you know how.

Hum.

Our customers still ordering in advance or maybe give us a little view of that would be great. Yeah. That's a really good question.

You know I want to see the backlog go away, but there's two ways. It goes away one as demand goes away and we're not seeing we're not seeing that at all so I'm guessing this backlog turning a little bit into the good news, it's not I don't mean that truly is not good news I've got customer wants product he wants to pay for it I want to close that sale, but it is better than the <unk>.

Alternative so the backlog is persisting, but its interest it's persisting with this increase in sales. So we're chasing both they were chasing a write up the ladder and you know we will catch it but as long as the sales are increasing.

See the backlog is a little bit of a good sign but something nonetheless, we've we've got it we got it Phil.

Yep Yep and that ladder, we talked about 16 520 23 to 30, you know, we're gonna, where we're gonna catch it in that light and in that step up.

Yes, great.

I think that's a that's all I had I mean, you'll retain kind of is what it is I guess you submit and then its a six months before you really get the result, anything youre doing for pre marketing in advance of that or what what you need to do or how are you situated at this point yeah.

Yeah. So that is something that we're our director of sales and marketing Bobbi Brockmann is getting more and more active in you know split things you split your time between first defense initiatives and retain one of the positive things. We've done lately has hired a veterinarian Raphael dicty onto our staff he's.

Very involved with the the that retain launch so yeah as we'd hope that.

You know approaches say, we submit here yet in the fourth quarter. So you know six months later, we get through this response if its positive that's that's what the team is working on right now so yeah. We're we're starting that work working with.

Some you know very very well.

It varied.

Influential veterinarians very well experienced veterinarians some other consultants and some large dairy producers and.

Yeah, you start you start to see the end of this 20 year development and start to anticipate a commercial sales right.

Great.

Hey, Michael Thanks, I appreciate it good quarter, Thanks, Scott well done thanks.

As a reminder, if you have a question. Please press star then one to be joined into the queue.

Star then one to be joined into the queue.

This concludes our question and answer session I would like to turn the conference back over to Joe Diaz for any closing remarks.

Thank you Betsy and thanks to all of you for participating in today's call and we look forward to talking with you again to review the results of the full year ending December 31, 2021 sometime around the end of March have a great week stay safe and well.

Yeah.

Yeah.

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