ImmuCell Corporation (ICCC), a company specializing in animal health, has reported its unaudited financial results for the fourth quarter and the full year ended December 31, 2023.
Despite facing production setbacks due to contamination events that led to increased costs and a 6% year-over-year decline in sales, the company has shown a 30% sales increase in the fourth quarter compared to the same period in 2022.
The company's EBITDA fell by $2.9 million in 2023 but saw an improvement of $657,000 in the fourth quarter. ImmuCell has taken measures to mitigate financial strain by freezing certain capital expenditures and securing a $1 million line of credit extension until September 2025.
The company is addressing a communication issue with the FDA regarding the submission of the CMC Technical Section for their product Re-Tain, which may delay FDA review until May 2024. Despite these setbacks, ImmuCell remains confident in its future, planning to file its full annual report on Form 10-K by the end of March and is optimistic about its cash position and upcoming product launches.
Key Takeaways
- Sales decreased by 6% year-over-year but increased by 30% in Q4 compared to Q4 2022.
- EBITDA dropped by $2.9 million in 2023, with a Q4 improvement of $657,000.
- ImmuCell has frozen certain capital expenditures and secured a $1 million line of credit until September 2025.
- A delay in FDA approval for Re-Tain could push the response date to May 2024.
- The company plans a controlled launch of its product following FDA approval, targeting July to September.
- ImmuCell's financial results for the first quarter of 2024 will be released on April 8, 2024.
Company Outlook
- ImmuCell anticipates filing its full annual report on Form 10-K by the end of March.
- The company is optimistic about initiating a controlled product launch in the third quarter of 2024.
Bearish Highlights
- The company experienced a 6% decrease in year-over-year sales due to production challenges.
- EBITDA suffered a $2.9 million decrease over the year 2023.
- FDA approval for Re-Tain might be delayed, affecting the product's launch timeline.
Bullish Highlights
- Sales in the fourth quarter of 2023 increased by 30% compared to the same quarter in the previous year.
- ImmuCell has improved its processes and controls following the contamination events.
- The company has enough cash to begin sales and marketing efforts for new products.
- First Defense cash flows are supporting the business, and production output in 2024 is expected to differ from 2023.
Misses
- The company's communication issue with the FDA may lead to a delayed response for Re-Tain's review.
- There have been historical losses in the Mastitis segment, although these are reducing.
Q&A Highlights
- The company is working through a thin cash balance but is managing through prudent spending and a line of credit.
- Losses in the retail segment are expected to be lower than in previous years.
- The positive momentum from the fourth quarter of 2023 is intended to continue into the first quarter of 2024.
ImmuCell is navigating a period of recovery and transition, with strategic financial management and product development at the forefront of its efforts. The company's resilience in the face of production and regulatory hurdles signals a cautious yet forward-looking approach as it prepares for the upcoming quarters. With the first quarter results anticipated on April 8, 2024, stakeholders and industry watchers are poised to see how ImmuCell's strategies will unfold in the near term.
InvestingPro Insights
ImmuCell Corporation's (ICCC) latest financial results highlight both the challenges and opportunities the company is facing. As we delve into the metrics provided by InvestingPro, a clearer picture of ImmuCell's current financial health emerges. With a market capitalization of $40.92 million, the company's size is a critical factor for potential investors to consider.
One of the InvestingPro Tips points out that ImmuCell is not profitable over the last twelve months, which aligns with the reported decline in EBITDA and the 6% year-over-year sales decrease mentioned in the article. The negative P/E ratio of -7.05 further underscores this lack of profitability, indicating that investors are currently valuing the company's earnings negatively.
However, there's a silver lining as another InvestingPro Tip highlights a strong return over the last three months, with a 17.86% price total return. This suggests a potential turnaround or investor optimism about the company's future prospects, possibly due to the 30% sales increase in the fourth quarter of 2023.
Investors should note that ImmuCell does not pay a dividend, which could influence their investment strategy depending on whether they are seeking income-generating investments.
For those interested in a deeper analysis, there are additional InvestingPro Tips available, which could provide further insights into ImmuCell's financial position and future outlook. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for access to these valuable tips.
Full transcript - ImmuCell Corp (ICCC) Q4 2023:
Operator: Good morning and welcome to the ImmuCell Corporation reports Fourth Quarter and Year Ended December 31, 2023 Unaudited Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Joe Diaz with Lytham Partners. Please go ahead, sir.
Joe Diaz: Thank you, Chris. Good morning and welcome to all. As Chris indicated, my name is Joe Diaz. I am with Lytham Partners. We are the Investor Relations consulting firm for ImmuCell. I thank all of you for joining us today to discuss the unaudited financial results for the quarter and the year ended December 31, 2023. 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, which include any statement that refers to 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 in this press release 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, Wednesday, February 28, 2024. The company undertakes no obligation to update any information discussed on today’s call. Please note that references to certain non-GAAP financial measures maybe 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 ImmuCell Corporation. After which, we will open the call for your questions. Michael?
Michael Brigham: Thanks, Joe and good morning everyone. Let me open by stating the hard truth straight up. 2023 was an extremely difficult year for us. The contamination events that plagued our production process were harsh and expensive. Growth is challenging and we are growing. Good news is that we believe we have moved into 2024 in a much improved state. The investigation into and the remediation of these contamination events taught us a lot. It is relatively simple to run our – to run at lower production rates for the 30 years between 1991, the original USDA approval date of First Defense and 2021. The contamination events we suffered during 2022 and 2023 were largely the result of our processing more milk than ever before in order to meet increasing customer demand. As we enter 2024, we believe that we have much improved processes and controls in place from the farms through liquid processing. I’d like to speak about two financial disclosures that I think help them demonstrate this critical turning point of our business. First, with sales – excuse me, while sales were down 6% year-over-year, they were up 30% during the fourth quarter of 2023 compared to the fourth quarter of 2022. This improvement is largely the result of increased production output. The production level we reached during the final 2 months of the year would annualize to about $26.8 million in sales value, which equates to an average quarterly production of about $6.7 million. Our objective is to meet or exceed this level going forward. Second, EBITDA, earnings before interest, taxes, depreciation and amortization, decreased by $2.9 million during 2023 compared to 2022. But EBITDA during the fourth quarter of 2023 improved by $657,000 in comparison to the fourth quarter of 2022. That’s a big picture. With regards to the other financial results, last night’s press release reports no change to our product sales results that were first reported on January 8. The press release also provides a full unaudited P&L results and some unaudited summary balance sheet data. I will now take our time on this call to review all those numbers in detail, but I would like to discuss a high level overview. When we compare the year ended December 31, ‘23 to the prior year, the $3.3 million increase in our net loss was largely caused by the $3.8 million decrease in gross margin. The lower gross margin in 2023 was largely the result of contamination scrap and a lot of fixed costs being spread over lower total sales as we slowed down production output to remediate the production problems. As a result of all of this, cash is tight. In response, we have frozen certain capital expenditure investments for the time being and we recently secured an extension of our $1 million line of credit until September of 2025. We have been driven by data as we resolve this temporary production problem. All production batches are and always have been routinely tested by our quality control team at the beginning, middle and end of the production process to ensure that no added specification product ever gets to market. Improvements made throughout the production process are allowing us to come back into full production. We believe that the operational improvements implemented will help us run more effectively at a higher output level going forward. We have worked incredibly hard to address these challenges. To be successful, we must avoid future significant contamination events and equipment breakdowns and operate with good production yields. Based on our responses and progress, I am optimistic about what we can do in the coming quarters. Despite this significant diversion of our resources, we made our third submission of the CMC Technical Section for Re-Tain to the FDA in August. This type of submission is typically subject to a 6-month review by the FDA. However, the FDA notified us in late October that they had refused to review our August submission because of a misunderstanding about where and by whom we intend to have our drug product aseptically formulated and filled. Our understanding is that the FDA believes that our plan was to bring those services in-house, which we might do down the road post approval rather than to continue to have these services provided by our contract manufacturer, which is what we are doing currently. In response to this notification from the FDA, we’re forced to refile our submission in November. We are in communication with the FDA to resolve this unfortunate communication. But if we fail to recompromise the expected response date for their review could be delayed until May 2024, which is 6 months from 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 the zero-milk discard and zero meat withhold claims. Lastly, I encourage you to review the press release that we filed last month. Also, please have a look at our corporate presentation slide deck. I believe it provides a very good summary of our business strategy and objectives as well as our current financial results, a February update was just posted to our website last night. See the Investors section on our website and click on Corporate Presentation or contact us for a copy. We plan to file our full annual report on Form 10-K for the year ended December 31, 2023 around the end of March. With that said, I’ll be happy to take your questions. Let’s have the operator open up the lines, please.
Operator: [Operator Instructions] Today’s first question comes from Frank Gasker, a Private Investor. Please go ahead, sir.
Frank Gasker: Hi, thanks for taking my question. The inspections are – all the inspection of facility is completed?
Michael Brigham: I would answer that, Frank. Good morning, Frank. It’s in process. I see no issue, but it is an ongoing process at both our site and our contract manufacturers. So we’re making progress and responding to their action. But it’s ongoing, so far so good.
Frank Gasker: How about the backlog? You made no comment. I know that’s a little iffy because of the circumstances.
Michael Brigham: Yes, it’s interesting. It’s still very large. So we’ve done two things that might have resulted in a decrease in backlog. We have increased sales, increased auction and sales out our door. And we also did have an increase in selling price, about 8% back in November. But however, relevant or not relevant, those two things are the facts. The backlog is pretty stable, pretty strong. So we focus on production. And you know what the backlog is, I guess, a good sign at this point. But certainly, the objective is that we got to clear it – we got to clip it. But it remains strong. It’s a good problem to have, but it’s a problem. We’re going to clear it. But great demand. It’s a very interesting to watch. I would have thought it might have been leveling down by now.
Frank Gasker: As far as your work in progress or process for your inventory, have you had anything in the fourth quarter that would affect future revenues or sales?
Michael Brigham: Frank, when you say anything, do you mean like any further contaminations?
Frank Gasker: Yes.
Michael Brigham: Yes, no. No, fourth quarter was really super strong. I mentioned in my comments no significant contaminations. I don’t think we’ll ever be in a state where we’ll never have a contamination, but that quarter worked. We were – we go back to September 2 for the last contamination event.
Frank Gasker: I guess what I’m asking is, like in the third quarter, you had issues that affected fourth quarter. Is there anything in the fourth quarter that’s going to affect the first...
Michael Brigham: No, no. That disclosure was current. That’s our most recent contamination challenge is September, but it does affect October shipments.
Frank Gasker: Okay. That sounds great. I guess the only issue that I have remaining would be the statement in regards to working with the FDA as to when is the start of the third submission. Is that known or not known at the present time?
Michael Brigham: It is – I mean I have to put my mind around they’re going to stick to their schedule. That doesn’t mean I think it’s fair, but their schedule is many, and we’re continuing to talk about how we could possibly advance that a little bit. But I guess I do know what 6 months from the resubmission is, resubmission in November and 6 months later in May. So that’s why we have to sort of say by the end of May. It’s tough. I think there should be some compromise. And I think it should be something in between. The original expectation was February. So, the range is February to May. But at this point, I have to just be realistic and say it’s out of my hands. They have the power, and it may not be until May.
Frank Gasker: And given that approval could be as late as May and then the two months prior, are we in a position to – as far as the cash, to begin that sales and marketing?
Michael Brigham: Oh, yes. I mean keep in mind those disclosures we made of what we call a controlled launch, and we are not going to be blitzing the market with a huge advertising and sales and marketing budget. It’s – but yes, no, and I don’t think your timeline is right and the cash is there for that. If CMC is complete by May, if you add 60 days to that for the – it’s called the administrative review, May goes to July. Then you have a month or two months for labeling and just organizing. So, it’s there, July, August, September, we actually initiated that controlled launch. But that is not a – that’s not a – we got cash burden on that, that scares me at all.
Frank Gasker: Okay. Great. Okay. Mike, thanks again for taking my questions. That’s all I have. Thank you.
Michael Brigham: Thanks Frank.
Operator: [Operator Instructions] And at this time, we are showing no further questioners in the queue, and this does conclude our question-and-answer session. I would now like to turn the conference back over to Joe Diaz for…
Michael Brigham: Hey, Chris, there is one. Maybe can we grab, Sean, I think he is...
Operator: Yes. Thank you so much sir. And the next question comes from Mr. Sean Kirkwood with SRK Capital. Please proceed.
Sean Kirkwood: Hi. Thanks. I could jump in a late and can you hear me, Mike?
Michael Brigham: Yes. Go ahead, Sean. Thanks.
Sean Kirkwood: So, I had a question about the cash. So, on the balance sheet today, there is roughly $1 million, it looks.
Michael Brigham: Correct.
Sean Kirkwood: And are you anticipating that the company has got any cash throughout the year, or is the first quarter going to start the cash flow?
Michael Brigham: Well, yes, that is the thin capitalization, that’s a thin cash balance. We can manage it. We are frugal. We know how to do it. I mentioned the CapEx freezes. I don’t like freezing CapEx. CapEx investments are important for the future, but we had to deal with the present. That line of credit news is important to me. That’s nice flexibility. I don’t want to lean on that, but I would like to have that back pocket safety. And yes, the main thing, the most important thing is to continue what we saw there towards the end of the fourth quarter into the first quarter. That First Defense cash flows this business and at these higher rates of output, production output, ‘24 looks a lot different than ‘23. So, we would expect those numbers to be released on April 8th. We were in the habit, at which I will continue, that top line only press release early after the end of the quarter. So, let me confirm my projections on April 8th.
Sean Kirkwood: Okay. Yes. I mean just from looking at it, it seems like the business should do well this quarter. Can you speak a little bit to the Mastitis segment, a bit about maybe the losses that – are they just to be buying kind of with historical losses this year in that segment?
Michael Brigham: So, you mean like the health economic loss impact to the dairy producer or…
Sean Kirkwood: So, within the retail segment of your business, I think historically, it’s been around $4 million a year of losses in that segment. Should we expect something around that number this year?
Michael Brigham: Okay. You are not talking about the market, you are talking about our…
Sean Kirkwood: Right. Correct.
Michael Brigham: That’s it. Yes – no, I specifically call out CapEx investment pauses or freezes, but we are also super careful on that retained spend. So, we do – I think you are picking up that was in Note 17 either way of that segment, and I will try to put our team on the spot here. But – I think it’s 17, if my memory is any good, but it’s the segment note. We wanted to be able to answer your question very specifically as we go through this launch to look at the First Defense business, the Re-Tain business and the other. So, I guess long-winded to say, yes, we are – the bulk of the production for this launch and for the bulk of the regulatory costs and investments related to Re-Tain are reducing as we complete that process. So, say, less than ‘23 as we go into ‘24 when we look at that product development expense line. And that’s just part of that cash management. You got to do it. You got to – that’s a stretch, but I am glad we are not in the middle of the heavy spend on the regulatory submission process. At the same time, we are looking at this $1 million in cash. The big spend is behind us.
Sean Kirkwood: Good. Well, it sounds good. It sounds like the year is very optimistic. So, thank you.
Michael Brigham: Thanks for checking, Sean. Good deal.
Sean Kirkwood: Thanks. Take care.
Operator: And this does now conclude our question-and-answer session. I would now like to turn the conference back over to Mr. Joe Diaz for any closing remarks.
Michael Brigham: Hi Chris, we may have lost Joe’s line there. But let me just jump in on his behalf. All we wanted to say at this point was that thank you for participating in today’s call and we look forward to talking with you again to review the results for the first quarter ended March 31, 2024, towards the end of the week of May 6, 2024.
Operator: And thank you. This now does conclude our conference. Thank you for attending today’s presentation and you may now disconnect.
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