ImmuCell Q3 2023 Earnings Call Transcript

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November 14, 2023

Key Takeaways

  • The company reported a swing to negative EBITDA of $4.6 million for the nine months ended September 30, 2023, compared to positive EBITDA of $1.3 million a year earlier, driven by a $4 million drop in gross margin.
  • To address cash shortfalls, ImmuCell took on additional bank debt in July, cut discretionary spending, and froze planned capital expenditures.
  • After resolving contamination issues and repairing freeze dryer #2, production has ramped steadily to 89% of the quarterly target, hitting a $5.3 million sales value in Q3 2023.
  • The FDA refused to review the August CMC submission for RETAIN due to a misunderstanding about manufacturing plans, leading to a November resubmission and potential review delay to May 2024.
  • Management remains optimistic about scaling production and introducing its novel antibiotic alternative for subclinical mastitis with zero milk discard and zero meat withhold claims.
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Earnings Conference Call
ImmuCell Q3 2023
00:00 / 00:00

There are 3 speakers on the call.

Operator

Good day, everyone, and welcome to the ImmuCell Corporation's Third Quarter 2023 Financial Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. And now, I would like to turn the conference over to Joe Diaz.

Operator

Please go ahead.

Speaker 1

Thank you, Marlise. Good morning and welcome to everyone. As Marlise indicated, my name is Joe Diaz. I'm with Welcome partners. We are the Investor Relations consulting firm for ImmuCell.

Speaker 1

I thank all of you for joining us today to discuss the unaudited Financial results for the quarter ended September 30, 2023. I'd like to preface today's discussion 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, which include any statement that refers to the future events or expected future results or predictions about 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 the Safe Harbor statement Provided on the quarterly report on Form 10 Q 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, Tuesday, November 14, 2023.

Speaker 1

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 Immicell Corporation, after which we will open the call for your questions. Michael?

Speaker 2

Okay. Thanks, Joe, and good morning, everyone. First, with regards to the financial results, last night's press release reports No change to our product sales results that were first reported on October 5. The press release also provides We also filed our Form 10 Q for the quarter ended September 30, 2020 3 last night. I won't take our time here to review those financial results in great detail.

Speaker 2

Last night's press release also includes our non GAAP earnings before income taxes, depreciation and amortization or EBITDA. Please see Page 5 of the press release. You can see a significant swing of negative $3,600,000 from positive EBITDA of $1,300,000 during the 9 months ended September 30, 2022 to negative EBITDA of $2,300,000 during the 9 months ended $26,000 during the 9 months ended September 30, 'twenty two to $4,600,000 during the 9 months ended September 30, 23. The increase in the net loss was in turn largely caused by the $4,000,000 Decrease in gross margin earned from $6,700,000 during the 9 months ended September 30, 'twenty two to $2,600,000 during the 9 months ended September 30, 23. In response to this loss in cash, we took on more bank debt in July and have cut some discretionary spending and frozen several planned capital expenditure projects for the time being.

Speaker 2

All this is unfortunate, but necessary. We are focused intensely on working our way out of this tight situation by increasing production and sales. To be successful, we must avoid future significant So what is going on here? Let me try to speak to that. I'd like to point you to a disclosure being on Page 29 of our quarterly report or Page 31 of the agrized version that's filed with the SEC under the heading Production Capacity Increase, Production Contamination and Related Events, in which we review some of the significant challenges we have faced Over the last 12 months, that contributed to our current financial results.

Speaker 2

So after much work and some Significant delays by the end of 2022, we had completed all the facility improvements and the new equipment installations, including freeze dryer number 4 that are necessary to increase our estimated full production capacity to approximately $30,000,000 per year. Just as we began to operate at this higher level of capacity at the beginning of 2023, we were forced to slow down production to remediate a event related to our incoming raw material. At the very same time, freeze dryer number 2 stopped operating, requiring a 6 month repair, Denning us back to 3 operating freeze dryers. As of early July 23, we were back to operating for freeze dryers and we now believe these contamination events are largely, but not fully behind us. Finished goods produced increased steadily from approximately $3,300,000 to $4,000,000 and further to $5,300,000 during the first, second and third quarters of 2023, respectively.

Speaker 2

Our goal is to produce product with an estimated sales value of approximately $6,000,000 per quarter, which would annualize to about 80% of our estimated full production capacity of approximately 30,000,000 Our 3rd quarter production was approximately 89% of our quarterly objective. We have been driven by data as We resolved this temporary production problem. All production batches are routinely tested by our quality control team at the beginning, middle and end of the production process. Improvements throughout the production process from the depth of the contamination problem in January are allowing us to come back into full production. We believe that the operational improvements we have implemented will help us run more effectively at higher output level going forward.

Speaker 2

Despite this significant diversion of our resources, we made our 3rd submission of the CMC technical section for RETAIN to the FDA in August. This type of submission is subject to a 6 month review by the FDA. As disclosed on Page 35 of our quarterly report or Page 37 of the Edgar Rice version is filed with the SEC. The FDA notified us in late October That they have refused to review our August submission because of a misunderstanding about where and by whom we intend to have our drug product formulated and filled. The FDA thought our plan was to bring those services in house, which we might do down the road post approval rather than to continue with our contract manufacturer, which is still our current plan.

Speaker 2

In response to this notification from the FDA, we refiled our submission in November. We are on communication with the FDA To resolve this unfortunate miscommunication, but if we fail to reach agreement, the expected response date from their review could be delayed past February 2024, which is 6 months from the August submission date to as late as May 2024, which is 6 months The November resubmission date. Regardless, 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 with 0 milk discard and 0 meat withhold claims. As I said, The last 12 months have been very challenging for us for sure. We have worked incredibly hard to address these challenges and move forward.

Speaker 2

Based on our responses and progress, I'm optimistic about what we can do in the coming quarters. Lastly, I encourage you to review the press release and the quarterly Please also have a look at our corporate presentation slide deck. I believe it provides a very good summary of our business strategy and our objectives, as well as our current financial results. A November update was just posted to our website last night. You could see the Investors section Questions, let's have Marlise open up the lines.

Operator

Thank you very much. And we'll begin the question and answer Since no questions are posed At this moment, I will then turn the conference back over to Joe Diaz for some closing remarks. Go ahead, Joe.

Speaker 1

Okay. Thank you, Marlise, and thanks all of you for participating in today's call. We look forward to talking with you again To review the results for the full year ended on December 31, 2023, sometime around late February 2020

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