Q4 2021 ImmuCell Corp Earnings Call
Good morning, and welcome to and you sell Corporation's fourth quarter fiscal year 2021 financial results. My name is Tom from chorus call and I will be assisting your conference call. This morning to get things started let me ask Joe Diaz to open up the call.
Thank you, Tom and good morning to everyone and welcome.
Tom indicated my name is Joe Diaz with Lytham partners, we are the Investor relations consulting firm for himself.
Thank all of you for joining us today.
Discuss the unaudited financial results for the first for those killed me the fourth quarter and full year ended December 31 2021.
I'd like to process 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 that 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, but are not so safe Harbor statement provided with last nights release and with the company's periodic filings with the Securities and Exchange Commission.
With that said, let me turn the call over to Michael Brigham President and CEO of <unk> Corporation, after which we'll 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 at <unk>. So we have several top priority challenges to meet presently at the top of the list is increasing our product sales and expanding our production capacity to meet growing demand.
I would add obtaining the final regulatory approval of retained from the FDA to the top of the list of challenges right in front of us.
I'm excited to introduce our VP of manufacturing operations, and our VP of sales and marketing two key people who are being extremely effective in meeting these challenges for US later in this call.
And let you hear directly from them first ill do a quick run through the numbers. The press release that we disclosed last night summarizes the unaudited financial results.
Since you have that information I will not take your time here to review all of the line item detail, but I would like to review some of the highlights.
As you May know on January 5th we issued a press release covering our preliminary topline sales results.
We've 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 have been product sales.
Early in the reporting period I have no changes to that very strong previous disclosure again product sales were up 45% during the fourth quarter of 2021 and up 25% for the year ended December 31, 21 and.
In comparison to the respective periods of the prior year.
The gross margin as a percentage of sales improved to 47% during the fourth quarter of 2021 compared to 43% during the fourth quarter of 2020, our gross margin percentage was 45% during both of the full years ended December 31, 21 and 2020.
The higher level of sales and improved gross margin helped US report net income of $74000. During the fourth quarter of 2021 and helped us reduce our net loss.
To 78000 during the year ended December 31, 2021 from a net loss of just over $1 million. During the year ended December 31 2020.
Earnings before interest taxes, depreciation and amortization or EBITDA increased.
$2 7 million during the year ended December 31, 2021, compared to $1 9 million. During the year ended December 31, 2020. These non-GAAP financial measures should be considered in context with our statement of cash flows that is presented in accordance with GAAP.
By way of an update on the status of <unk> I am pleased to report that we made our second submission to the FDA to address the fda's previous comments inquiries on the chemistry manufacturing and controls or CMC technical section.
Which is required for approval of our new animal drug application or.
This complex submission has been very it has been a very significant effort by our regulatory manufacturing and quality teams in August we will find out at the FDA, either approves or E. R. S for further questions.
Our product development objective is to demonstrate that our peptide microbial nice in a completely a productive role in the treatment of subclinical mastitis in today's dairy industry and offer an effective alternative to traditional antibiotics.
Because labor requirements of all interim memory drugs on the market today require that must be discarded in MEP withheld during treatment and for a period of time thereafter. It is common practice in the dairy industry today not to treat treat sick cows that are still producing saleable milk.
<unk> 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 peptide antimicrobial and it is not used in human medicine. This is important because the overuse of traditional antibiotics is thought to create antibiotic resistance, which is an ongoing public health concern.
Outside of the development of retain probably the most exciting work going on in MSR right. Now is the growth in both of our production capacity and sales demand for the first defense product line.
I've asked our VP of manufacturing operations, Betsy Williams, and our VP of sales and marketing Bobbi Jo Brockmann to speak about this exciting work Betsy let's start with you. Please it was not too long ago that our previous production capacity of about $16 5 million per year was enough to meet demand. However, as of the end of every quarter since March 31 2020.
We have had a backlog of orders would you. Please speak to the capacity expansion initiatives. We've completed over the past few years that enabled us to increase our output to almost $23 million on an annualized basis during the fourth quarter of 2021, yes.
Starting with the first steps in our manufacturing process, we substantially expanded the number of program farms.
And the overall number of program Kao from which we collect colostrum this effectively doubled our capacity at this stage of manufacture.
Support this growth our image and B cell vaccine team ramped up their manufacturing equipment capacity to provide for that doubling of program Kal.
They also were successful in numerous process enhancements to maximize yield and I'm happy to say, we have a very healthy stock of colostrum now for continued growth initiatives.
Moving on to liquid processing. The next step in the process the N b cell processing.
Processing liquid processing capacity.
By installation of a second way concentrate or what we called Chi equipment train. The next step in the process is lie off the location or freeze drying I've done liquid <unk> powder, and we installed a third freeze dryer in 'twenty, 'twenty, one which effectively expanded.
Our capacity by 50%.
And going into 2022, we're planning installation of a fourth freeze dryer to double the total capacity of what was in place in early 2021.
You may be wondering where's all this new equipment fit into our main building and the answer is it doesn't if we actually expanded our facilities by leasing and renovating a building about a block away from our headquarters. This specially renovated building specific for our process is now where we convert a free.
Dry powder from building 56, two finished product that is first defense capsule and bullets product as well as dual force and Tri shield gel products.
We designed dedicate rens are suites for each of the product types and added new and redundant equipment for our continued growth.
The building actually has room to expand further for formulation and filling operation into the future.
Building renovations the dedicated footprint for finished goods production and the higher capacity equipment really provide for efficient streamlined product and process flows and good regulatory compliance. So on behalf of manufacturing we truly appreciate these investments in our facilities.
<unk> to meet the increased demand and also being well aligned with current good manufacturing practices.
That's great Betsy. Thank you it was really great to see both increasing production output and growing customer demand at this time.
Given what we're seeing in the way of increasing customer demand I know, we all think $23 million per year is not enough production output needs to be well ahead of sales and we need safety stock.
We need to fill the backlog and stay ahead of demand going forward would.
Would you please speak to the ongoing new initiatives that are underway to increase our annual production capacity to about $35 million per year by the end of 2022, Yes of course, the next phase of our expansion in 2022 include as I indicated before the installation of a fourth lyophilize or freeze dryer and built.
<unk> 56. This is really essential and will result in 33% increase in capacity. We will also be installing a high speed automated filler specific for gel product that has labeling capability and this will reduce our cycle time for gel filling operations and any.
Abel additional production capacity.
New equipment is expected to be operational by the end of 2022.
Okay. Thanks, Betsy. Thank you for sharing your thoughts on all of the critical work you manage related to first defense.
Also keeping all the retained regulatory work moving forward at the same time.
Of course, this investment of time and money will not be necessary. If we were not experiencing increasing demand from our customers for first defense Bobby could you speak to the work you and the sales team are doing to create and sustain all this demand for first defense.
Well, let me start by pointing out what I want everyone on the call dinner with RBS, we are not selling a me too product. Our <unk> product line is truly unique we're the only U S. D. A licensed products and the scour prevention space that utilize polyclonal antibodies.
You see this technology removes the producers reliant on variable vaccine responses to generate antibodies.
And instead protect every calf equally with a measured dose of immediate immunity with this we are not only protecting the individual cap, but we are reducing pathogen shedding and disease amplification across the whole captured we're not splitting hairs messaging advantage, we've got something truly different itself and that's a testament to the gut fortitude.
Our product development and manufacturing teams.
We have taken the road less traveled by Big pharma companies.
That means prospective customers need to know where on that road to quote one of our highest growth territory managers. Mr. Dale Mettler, if you cant see them, you're not going to tell them.
Yeah. I mean, you saw had this unique technology for several years, but we didnt start a more aggressive sales and marketing investment until 2010.
We're still very much the David amongst pharmaceutical Goliath, but.
But our commercial team has grown from one to eight territory managers, our marketing director of technical services veterinarian and me. So theres 11 about facing the market every day.
There are territories, we'd like to split for improved coverage, but starting in 2015. This team growth had accumulative math and we're seeing that translate into reaching more prospects.
Now that <unk> needs to move across the sales process sufficiently and result in reoccurring customary time, probably stating the obvious there.
But I'm proud to say that has happened we have more customers and those customers are buying our higher revenue products closing those sales. So it takes time and skills. Because we are three times the sticker price of our competition.
But our improved marketing message and at times non traditional tactics led by MS. Kathy Becker has created a ripple effect that earned us a seat at the table with traditional vaccines.
This advanced yet common sense marketing clothing sales quicker I believe that's because the customer finds our message about how verified antibodies are better than a variable vaccine response more credible if marketing has done their part to get in that customer's mind space ahead of the face to face sales call.
So we aim for each region to grow faster than the competition and as a team that's translated into consistent market share gains.
I'm happy to say marketing and sales are effectively pulling the rope in the same direction.
You know I also want to speak about our supply issues, so supply shortages typically kill sales momentum.
But the strategy, we've used to manage through our shortages.
It seems to be working in our favor for the last 26 months, we've carefully allocated product to what we refer to as our make or break us customers.
This requires coordination with distribution and careful inventory management throughout the entire chain, even at the farm level, our whole commercial team pivoted toward the service focus.
Earned us some goodwill which is paying back the positive conversations we're having on farm suggests that the strategy is working.
And I'll wrap by saying, we have a lot of market share yet to gain domestically and are developing some new international markets.
The first defense lines future appears bright despite the challenge we may have to overcome any fallout from the extended order backlog.
I'll also speak briefly on how our team is preparing the commercial strategy or retain.
Dr. Raphael would be as a valuable New addition to my group in that regard.
We know well how to sell first defense I mean, not sales and marketing recipe has been perfected over the years. We are currently learning what that sales recipe might look like for routine.
Approval, we will get the opportunity to put that recipe to the test. We then listen to the market and tweak the recipe simply put that's how our commercial team intends to develop a value proposition and sales approach for routine.
That is as solid as what we have for the first defense line.
Wow that was really helpful. Bobby Thank you for sharing your thoughts on all the critical work you manage for us so effectively.
In conclusion to this conference call I would encourage you to review the press release that we filed last night, we expect to file our audited annual report on Form 10-K at the end of March.
Also please have a look at the corporate presentation slide deck. Our February 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 I'd see the investors section of the website and click on corporate presentation with that said I'll be happy to take your questions lets have the <unk>.
Operator open up the lines.
Thank you.
We will now begin the question and answer session, if you'd like to join the question queue Press Star then one to join.
If you are using a speakerphone please pick up your handset before pressing the keys.
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We will pause momentarily to assemble our roster.
Again, we have no. One currently joined in the Q that is star one to join.
We have a question from George Melas with N KH management. Please go ahead.
Yes. Thanks for taking my question good morning, Michael and a real pleasure to two here.
But beyond the call. Thank you very much for your for your explanations.
On the last call I think the plan for capacity expansion for first defense was from 23 to 30 and now you guys are talking about 35 can you explain sort of what happened and.
Is there some additional investments or are there some process improvement that you think.
April you to get to 35.
Sure Yeah. Good morning, George Thanks for.
We're following late that in.
That's a really mentioned the track that's the more the better we are just trying to find all the efficiencies, we can but that Joe automation that Fitzgerald filling automation really is that last sort of incremental benefit that kind of pushes us a little higher than we first thought.
But so largely the plan is the same but the gel pillar does.
Give that extra bump that extra $5 million over previous plan, coupled with a full year of life for.
In fact, yeah those too.
<unk> or so incremental.
Talk about we always talk I take quarter quarterly numbers and annualize them, we talk about annual but of course.
Each new piece of equipment comes in in a particular quarter and we don't get the benefit for the full fiscal year, but yeah.
It's very much a similar plan.
Just getting it done getting it done with all possible efficiencies in this automation of gel will be will be will be a great help its really necessary at this level of production.
Okay that sounds great and then from a capex perspective, both for first defense and routine.
What what what what do you guys expect to get to.
235 to 35 million capacity Grippers defense.
Just to get retain started.
Initial capacity level.
Right so.
Aye.
Our September 30, Q disclosures on where a detailed out each project.
Letter Mail <unk>.
Budget for each status of each that's still well in place well online. So I'd refer back to that definitely we are going to update that with some current detailed numbers in the 10-K at the end of March but no new projects. So this is all the same projects same budgets.
And.
Similar answer for or retain the big money was spent on the development.
One project Betsy's, managing is that $4 million investment to bring the aseptic filling from a CMO or outside contractors in house, but again that was in the September 30th unexpected any big changes to the 12 31 disclosures. So so.
Steady steady as we go those those capex projects are funded.
<unk>.
Moving forward and no big changes.
Okay, Great and then maybe just a quick question for Bobby.
You've done an amazing job with your team.
But I imagine they quite stretched given that you cover a huge theory Tory with eight territory managers is the plan to increase your your stuff or.
We're not.
Yeah, we do have big territories are how we manage those territories I think.
Is it maybe a bit of a competitive advantage we use some good market share data so that focuses on.
High concentration areas, a competitor product instead of being on one like we have to get to every corner of the territory right. So that's kind of how we've managed through with that fewer salespeople. We certainly have areas like I kind of mentioned were.
Well, we want to split territories and get better coverage, but as of now that's kind of put on hold we need production to match demand before we make any of those investments.
The strategy is is in place and we're ready to activate it but we want to make sure we optimize install as much as we can with the team. We have now before we bring on added head count.
Okay, Georgia factory.
Bobby and I are on the same page with that I mean, more more hiring as possible, but we've done some hiring to get to where we want to be right now and further.
Further expansion of the staff is going to be in proportion.
Sales.
Cash flow in and funding it so.
Okay, and then Matt and then as you layer on routine.
Seems deals force that will retain.
Oh, Yeah for sure I mean, we are capable of selling more than one product.
As do a number of animal health sales routes don't follow a whole portfolio of multiple products now our team is a real serious right now about learning the mouse data space right because we.
I really well versed on the cap area.
And are getting up to speed on the mouse data side, but we certainly have the bandwidth to bubble.
Okay, great. Thank you very much.
Thanks, George I appreciate that.
We still have time for questions again, if you'd like to join the question queue Press Star then one we currently have no wind and.
Okay.
I've got a couple of questions that I think would be important for our listeners to hear about Bobby is as it relates to the dam vaccine program can you give us a bit of a recap how's it going.
Mentioned, some make us or break us.
Type customers, how does that fit into the dam vaccine program.
Yeah. So.
Have your Collins vaccinated ahead accounting there on a schedule right and so when we go in and we displace that technology for our first defense line, which is administered to the cap after birth those.
Those customers are counting on us to be there to protect that cap because they can't if we don't have that product available at the time that Caf is is meeting it they've missed their window to protect that cast with the dam vaccine.
So I mean, we really have to know your customer base and end.
Where the fit is for our product on those farms and then manage the supply to be able to funnel those tight supplies to those critical customers. So you don't leave them and alerts so so.
So that's that's the interaction of the supply shortage and how we can manage through that but those make or break us customers.
And then and then on the other side the opportunity side, you know pre cabin scour vaccines are incredibly traditional they've been around forever.
One of those things that I'd say customers just kind of maybe do without a lot of thought they just do it because they've always done it and so disrupting that.
Protocol and bringing in our technology to treat at the cap level has actually been pretty fun. Its a slow down because they are so traditional and grade.
But the advantages are pretty significant to the producer because now every calf is equally protected you're not dealing with that bear variable vaccine response.
And in fact, you're not investing that money on those pre Kevin scour vaccines.
For cabs that might not even be born because there's a certain percentage calves that are either imported or dead on arrival until you're out you're able to.
Focus your investment on those LIBOR and viable cab. So so the messaging works, though the impact of the producers there.
It's just a matter of.
Getting those traditional thought process has changed making sure people recognize the value of antibodies over over a variable vaccine response system.
Sure.
I think related to that it was the pricing you mentioned that you may be as high as three times the <unk>.
Any of the competitors, how do you sell against that though what is it that what is the argument that youre, making for the value proposition.
Where your prices somewhat higher than our competitors.
Yeah. So so.
So when you're selling a premium product not every prospect is a suitable customer great youre not going after the low cost guys are going after the guys, who really want to invest in their calf crop because they recognize.
But that newborn calf is the future of their herd right. So it's identifying the right prospect number one and then number two it it goes back to protecting every calf equally I think on farm what tends to happen is you might be going along fine and the.
The calf crop is looking good and then all of a sudden you have a massive scour outbreak and I mean that is stressful that's not only economically.
Negative for the farm, but it's incredibly stressful for the employees and employees keeping and maintaining good employees are really important you don't want them to have compassion fatigue, and so those messages really built into our value proposition because we keep that pathogen load at a lower level.
More consistent.
This other immunity for that calf crop and so you don't have those flare ups with scholar flare ups and and they're certainly not as severe as what you would have with the alternative products.
So I think that builds into our value proposition the opportunity to.
Again, not in best because you have to have that shot into the top of the pre Kevin scull of vaccines, you're given her that backs neat vaccine before you've got a life caf on the ground right.
There's a movement to do more beef crosses and so really fine tune the number of peppers that youre, raising or that you're keeping to replace the crop.
To come into the milking string and so as.
Producers.
Toward that more sophisticated more dialed in approach to their replacement Heifer program.
There is really an added value to using our product because those now now there's a subset of that market that are that calf crop that really has to be protected.
And and you're able to target that investment to that subset.
Thank you Bobby.
Okay.
You bet.
Yeah.
Hey, Tom I think I think we have.
Yes, yes, yes, we have a question over the phone from the top box, who is a private investor. Please go ahead.
Yeah. So my question is about the Fda's response to retain them.
Maybe you've submitted these batches are would you say that they come back with questions. I'm. Just wondering if you can elaborate on what these questions are thank you.
Yeah.
Yeah, it's a very interactive process very detailed questions, but it's aligning on how data is presented and what data is presented.
To keep to this schedule, which is eastern has been pretty quick I think its implied and it is true that there hasn't been significant questions requiring lots of time, new trials, New studies, we've been able to work with them to get their specific questions answered in a relatively a matter of months.
Two or three months six months 12 months or so so I guess in a general way Im saying no no no queries no revisiting of old technical sections, no new trials, but just clarification of data, which requires some lab work and then just aligning on how it is presented.
We also did meet with C. D M. The center for Veterinary Medicine, several times by virtually to make sure. We understood. What they were looking for and clarity and I think that was a good.
Path to making what I feel is a very quality submission.
It definitely increases our expectation are hopeful prospects for success, but when we always caution investors and our board and and.
And others that you just don't know they could they could raise a new question, we don't think that's likely but they could.
As well as we think we're aligned and they can say you know you really didn't answer a question. We have a further question. We're just not going to know until August , but we do know as Betsy said, we've put or we put our best effort forward.
Okay. So just so I have a clearer picture I mean, I guess I'm picturing right now maybe the FDA is questioning what's on the label and the way you're presenting the data on the label of the product am I correct in thinking that no no label is pretty well aligned I mean, there is there in that last 60 day period.
Say, we get to August .
And it is complete if it is complete there are 60 days admin review label will be tweaked and finalized, but we have really good alignment on the label. They haven't challenge any of those big kind of that would be a big one.
This potentially could require new studies, none of that so again label aligned.
And they provided minor changes to the label already so you like to like to anticipate that if you're in that level of detail that means we've already covered your big picture questions and they are resolved and no further and that's what we're going to find out in August with that is that hoping assumption is true.
Okay that answers my questions and congratulations on your continued discusses them yourself.
Hey, guys.
Appreciate it Tom Thank you.
I mean, you still have some time for questions. So again, if you'd like to join the queue Press Star then one.
Yeah.
Okay. It appears that we have no other questions in the queue I would like to thank all of you for participating in today's call. We look forward to talking with you again to review the results for the first quarter of <unk>.
<unk> thousand 22 during the second or third week of May I have a great week stay safe and be well. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Hey, guys.
Yes.
Thank you.
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Yeah.
Thanks.
Okay.
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