ImmuCell Corp (ICCC) 2018 Q4 法說會逐字稿

Good morning and welcome to the ImmuCell Corporation reports fourth quarter and full year 2018 financial results conference call.

(Operator Instructions).

Please note this event is being recorded.

I would now like to turn the conference over to Joe Diaz with Lytham Partners.

Please go ahead.

Thank you, Chad.

Good morning and welcome to the ImmuCell fourth quarter 2018 earnings conference call.

Thanks to all of you for joining us today.

As a reminder, today's call is being recorded.

My name is Joe Diaz with Lytham Partners.

We are the investor relations consulting firm for ImmuCell.

Please note that the unaudited summary press release that was filed with the Securities and Exchange Commission last night is available to you and that the full audited details of the company's 2018 financial results will be available toward the end of March when the company files its annual report on Form 10-K with the SEC.

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 that are subject to risks and uncertainties that could cause actual result to differ materially from those discussed today.

Additional information regarding these risks and uncertainties is available under the cautionary note regarding forward looking statements in the company's press release that was issued last night as well as in the company's periodic filings with the SEC which can be obtained from the SEC or by visiting the investor section of the company's website at immucell.com.

With that said, let me turn the call over to Michael Brigham, President and CEO of ImmuCell Corporation, after which we'll open the call for your questions.

Michael.

Great.

Thank you all for taking the time to join today's call.

I do appreciate that.

Let me start by saying happy Valentine's day to all.

Also, I have to apologize, I'm just coming out of quite a cold.

So forgive me for the scratchy voice here.

I'm going to go a bit off script today and just speak to you top of mind about a few things that I think are important to note about the press release, disclosures we made last night.

As Joe mentioned, a more complete and audited review of 2018 will be available when we file our annual report on Form 10-K towards the end of March.

So top line, we start with sales.

You can see sales are up 5%.

This is in a very difficult dairy economy; I mean we really do see and feel the pain of our customers.

So we are quite pleased to be up with the 5% increase.

And Tri-Shield is driving a lot of that increase and I will talk about that as my second topic.

The fourth quarter was off a bit.

I see Seeking Alpha picks that up as a title, as a headliner.

And if you dig into the numbers, we are talking about less than $200,000 flux there.

So it doesn't concern me a great bit.

I did put some detail into the Q -- into the press release as to why that happened and I'm comfortable with those reasons for that flux.

And the other point I want to make is when we back out from non-core animal health products and just look at our core animal health products, the sales were up about 8%.

So 5% and 8%, when you look at the numbers that way in this very difficult dairy economy, not horrible.

So let's go to Tri-Shield next.

Very exciting new product for us.

Challenging year for both our production team and our sales team.

Bottom line is we don't have enough inventory to meet demand.

That's a frustrating situation, but it's great to see this customer demand.

Sales team is working really hard to manage that, to allocating product directly to customers so that we don't get in a situation where customers are not able to get product that we promised to them and when we promise it, we meet their P.O. and deliver it.

But we simply are not producing as much as the market wants.

We are fixing that problem and I expect to see that come through our sales line in the second half of '19.

It has been a long technical fix to the vaccine production part of this product and then the production cycle is a long cycle, about 5 or 6 months.

So fixing that problem now really does not show impact in our sales line, at least significant impact to the second half of the year.

But as I said, the increases we are seeing in sales right now are largely being driven by Tri-Shield.

We see the boldest format of this product as maturing and now the source is significant growth going forward, but both of our gel formula formats, both the bivalent and the trivalent gel formats of this product are seeing growth and we are, again, seeing this customer demand exceeding supply because the customer is really receptive to our Beyond Vaccination story.

We position the product as an alternative to dam vaccines and people like this.

They like the opportunity to save the needle, not stick a needle in the cow and instead delivered measured antibodies directly to the newborn calf.

So moving on to the product development side.

The PD expense for 2018 is high.

We are largely invested in the Nisin product, the FDA product.

This is driving those high PD expenses.

We expect that to continue, but not at such a high rate in '19 as shown in '18.

We did previously project that we would have this first CMC submission into the FDA by the end of 2018; that obviously did not happen.

I should note the CMC referring to this as the manufacturing technical section for the Nisin product.

But we are pretty confident now where we sit.

We are just wrapping up the details and to get that in here in February yet.

And with that, we'll put out a press release and provide some detail confirming that has been filed and some detail on the status and project update.

So the most important thing I want to talk about is something that I can't really talk about in the 10-K or an SEC report.

I want to talk about some non-GAAP financial measures that we look out here internally.

And I emphasize non-GAAP.

So when we file an SEC report, that's all -- I'm former Ernst & Young guy, I know GAAP, I respect GAAP, but I also think management and perhaps you investors need to look at numbers from a slightly different angle and I can do that in this press release.

So that I'm referring to the chart on page 3 of the press release where we start off by looking at our net loss before taxes.

So I've backed out taxes because they are non-cash for at this point.

We are not paying cash taxes, so back out taxes, start with net loss before taxes and then look at depreciation and look at stock option compensation expense.

When we back out those, those 3 items and the amortization, we move from the red to the black and I guess that's really my point is that's not a GAAP measure.

But when we know, when we understand the amount of depreciation that we're putting through our books, which is a requirement at this point even though we are not seeing revenue out of the Nisin plant, we are not matching revenue with expenses in this case.

We are depreciating that plant before we have any revenue.

So I like to look at that and of course the statement of cash flows, a full GAAP statement, will be provided with the 10-K filing at the end of March.

But there is kind of a view where management looks at these numbers with a little -- when I look at the local newspaper here, putting their story out this morning, the headliner is this big $2.3 million loss, I get it.

I do spend a lot of time with the staff writer there.

If you take the time to read his story, you can see that he understands what I have been talking about as far as the impact of depreciation and other non-cash expenses.

But of course the headline is the big $2.3 million loss.

But again on a cash basis, it is not $2.3 million cash loss.

So thanks for taking a look at that angle.

Please, I encourage you to review that table and that's kind of my off the cuff kind of comments to implement those 4 points.

But those are just a few of the results that are important to me.

I choose not to write up a big script and read to you all some of these numbers and these fluxes by dollars and by percentages.

You can see all of those in the press release because I value the time we have here on this call and hope that you agree that this is a productive approach to the call.

It saves us more time for your questions, which are important to me.

So with that said, let's have the operator open up the lines for your questions.

(Operator Instructions).

The first question today will be from Sam Rebotsky with SER Asset Management.

Is the second half, you talk about having enough supply for the Tri-Shield, will you be able to significantly increase sales because as you're allocating right now?

How should we look at sales from this Tri-Shield going forward?

So projections are just that, projections.

They're going to be wrong.

I don't know if they're going to be high or low.

So I don't have a dollar figure to sort of throw out there publicly at this point, but I do expect significant sales in the second half and way above this 5% and 8% range.

And we'll report those as we go.

It it'll be staged so that you will see the fourth quarter being higher than the previous three quarters of 2018.

And we will be able to step through it as first quarter, second quarter '19, but really again the fixes that we're putting into the vaccine technology now are 6 months away from doses that we can give to the sales teams to move to market.

So the bigger impact is going to be Q3 and Q4.

Okay, that sounds good.

Now the First Defense, do we have the same problem or can we ship all the First Defense we want to?

Yes.

I mean, I refer to it as one First Defense product line and then we have the Dual-Force and the Tri-Shield.

I think you're referring to the Dual-Force bolus, the traditional product.

It's 27 years on the market now since first USDA approval.

So that we have plenty of the bolus, no backlog on the bolus.

We just do see those sales kind of being mature and not a source of great growth, but still a huge portion of our total sales.

So flat, but important and no problem with inventory there.

And we'll move forward into gel formats, just open up new customers to the product, perhaps to these customers that doesn't like the bolus delivery as much.

And also again this Beyond Vaccination concept, customers that are using a dam vaccine that maybe weren't willing to give that up for the bivalent coverage, but maybe more willing to give it up for the trivalent coverage of the Tri-Shield.

Okay.

And further on the submission of the Mast Out, we expect to submit it before the end of February, which is 14 days away.

So we're pretty certain on that submission today is that we've done all of the testing and we're ready to submit that?

I can commit to that, Sam.

I mean that I know the testing is done, it has been done for a while.

It's really the documentation and the formatting of the submission.

I put a lot of pressure on our team to put that in before this call because it would have been convenient for me.

And I found it more productive just to step back a little bit and make sure they just get it right and not make a rush submission at the last minute plus or minus a couple weeks, plus or minus a couple months.

At this point, isn't going to really be a big negative.

So, yes, at this point not by today, but very soon.

(Operator Instructions) It looks like we have a follow up from Mr. Rebotsky with SER Asset Management.

After you have everything together, Michael, do you think you want to start telling the new investors and potential investors the story and so that they can hear what ImmuCell is doing?

So when you say everything together, Sam, are you referring to just having the submission into the FDA?

Well, so presumably will you start telling your story to new investors prior to filing the 10-K in March or are you going wait for that or are you going to start going around once you submit to the FDA, go to more investor conferences and share what ImmuCell has been doing?

Yes.

Thanks.

I get it now.

So that schedule is something I talk to Joe Diaz about quite often.

He kind of leads that program, guides me through that program.

As I look at my schedule quite selfishly, I don't think we're going to be able to get out on the road until I get that 10-K filed.

There's just quite a lot of work involved with that and other matters that are going to kind of tie up a good deal this February-March time.

But then things settle down and then I think what our routine is, is to get out on the road with investors, likely investors that Lytham Partners introduces to us couple of times after each press release.

So long-winded answer, Sam, but I think what I'm trying to say is, couple of times per year after each earnings release, in this case just probably more likely to be after the 10-K filing.

Ladies and gentlemen, this concludes our question-and-answer session.

I would like to turn the conference back over to Joe Diaz for any closing remarks.

Okay.

Thank you all of you for participating in today's call.

We do look forward to talking with you again to review the results of the current first quarter of 2019 sometime around the middle of May or thereabouts.

Again, I remind you that the full audited 2018 financial details will be available towards the end of March with the filing of the Form 10-K.

With that, have a great finish to the week and we look forward to talking with you again soon.

Have a great day.

This conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.