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Operator
Good day, and welcome to the ImmuCell Corporation Reports its fourth quarter fiscal year 2019 financial results conference call.
(Operator Instructions)
Please note, this event is being recorded.
I would now like to turn the conference call over to Mr. Joe Diaz of Lytham Partners.
Mr. Diaz, the floor is yours, sir.
Joe Diaz - Managing Partner
Thank you, Mike, and good morning, and welcome.
My name is Joe Diaz 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 year ended December 31, 2019.
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 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 the safe harbor statement in the company's press release that was issued last evening as well as in the company's periodic filings with the Securities and Exchange Commission, which can be obtained from the SEC or by visiting the Investors 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 will open the call for your questions.
Michael?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
Okay.
Great.
Thank you all for taking the time to join today's call.
I do appreciate that.
I am not going to rehash a lot of the detail that you can pick up from the press release that we issued last night.
But I do want to use this time to highlight 4 important topics.
So first of all, let's review the sales growth.
We reported a 25% increase in total sales to $13.7 million during 2019 over 2018.
This is just continued great work by our sales team with a product that is delivering visible results to our customers every day.
You may recall that sales demand exceeded supply of Tri-Shield First Defense through the first half of 2019 because of difficulty producing enough of the complex rotavirus vaccine used in the manufacture of this product.
I would like to take this opportunity to publicly commend our manufacturing and our quality and our product development teams that worked together successfully to resolve this production lab challenge at the beginning of 2019.
As a result, during the second half of 2019, we were able to return to a mass market selling approach through distribution for Tri-Shield First Defense.
For that reason, I think it's also important to compare the sales results for the second half of 2019 to the second half of 2018.
Total product sales increased by $1.5 million or 30% to $6.6 million during the 6-month period ended December 31, 2019, versus the 6-month period ended 2031 -- December 31, 2018.
The second comment is that at this stage of the company's development, I believe its top line sales growth and positive cash flows are more important than our bottom line earnings or losses.
For this, I'll point to Page 4 of our press release.
I think it is important to look at the non-GAAP disclosures in the press release.
I think we should be aware of the amount of certain noncash expenses that are included in our net loss, like depreciation and amortization, stock-based compensation expense and income taxes.
Depreciation expense alone exceeded our loss before income taxes for the year ended December 31, 2019.
EBITDA, which is a non-GAAP financial measure, described in more detail on Page 4 of last night's press release, increased to approximately $1.4 million during the year ended December 31, 2019, from approximately just $88,000 during the year ended December 31, 2018.
Thirdly, I would like to talk just a bit about our marketing campaign beyond vaccination.
It is all about avoiding unnecessary vaccination, save the needles to the mother cows for critical disease vaccinations and instead, deliver First Defense to get the newborn calves off to a healthy start.
We believe dairy and beef producers are increasingly coming to understand our value proposition of less needles in cows and less antibiotics in calves.
There is a strong link between how we sell our product and the challenges we face in producing it.
We know better than most how variable a cow's response is to any vaccine.
We see this in every batch of First Defense that we produce.
The difference is that we adjust for this variability in antibody content as needed, so the newborn is given steady equal protection with each dose of First Defense.
It is the best way for a producer to know that every calf is equally protected.
Plus, an effectively treated calf does not require expensive antibiotic treatments.
To meet growing demand, construction of our expanded manufacturing facility to increase production capacity for the First Defense product line is well underway.
We expect to have substantially completed this work on schedule around the end of the upcoming second quarter, increasing our annual production capacity from approximately $18 million to approximately $27 million.
There will be an opportunity to tour this new space if you're able to make it to our annual meeting of stockholders on June 10 in Portland.
We will be posting some pictures of the construction progress on our website in the next week or so.
And lastly, with regards to Re-Tain, our manufacturing, quality and product development teams did an outstanding job recently, completing our response to an FDA inspection of our drug substance production facility.
This sets us up for the planned second phase submission of the manufacturing technical section to the FDA later this year.
This will include responses to queries from the initial first phase drug substance submission and detailed information about the manufacture of our drug product.
So I think we hit the 4 most important topics: sales growth, the impact of noncash expenses on our operating results, status of our production capacity expansion and the regulatory status of Re-Tain.
So in conclusion, I encourage you to review the press release we filed last night.
We expect to file our annual report on Form 10-K with all the details on or about March 27, 2020.
Also please take a look at the updated corporate presentation slide deck.
A February update will be posted later today.
I believe that provides a very good summary of our business strategy and objectives as well as our current financial results.
Also see the Investors section on our website, and click on Corporate Presentation for the -- to get access to that slide deck.
I hope you appreciate our streamlined approach to this call.
This saves 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.
I will be happy to take some questions.
Operator
(Operator Instructions) Our first question will come from [Bill Chapman], investor.
Unidentified Participant
When do you anticipate foreign sales to be initiated?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
I think the question really is when we expand them.
We do have some foreign sales today.
Of course, we're up into Canada, have been for a while.
We do get a little bit of product into Japan, South Korea, and some of these new territories we're working on currently should start to come online over the latter part of this year into 2020.
So it's a gradual expansion, territory by territory, trying to get the licensure and find the right in-country marketer.
The latter is not the issue, the issue is getting the in-country licensure.
Short answer, I think we're seeing progress towards the end of this year and more into 2020.
Unidentified Participant
Okay.
One last question.
With all that the company has going forward now, will you be enhancing your investor relations campaigns?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
That's a fair question.
And Joe Diaz is with me on the call from Lytham Partners.
We've been working together for 2 years.
I think right now, our strategy and our budget, time budget and money budget, it involves doing a complete job of these quarterlies, 4 times a year, the call, the filings with the SEC, the press release, any news in between and then getting out with Joe into his network of relevant investors around the country.
We make about 3 visits per quarter, 3, sometimes 4 days where he packs a day up with a full roster of different investors in different cities.
So that's the current plan.
It is back to the budget of time and money.
We are a small organization, the IR department pretty much consists of me at this point.
So yes, more of the same on that, and I don't see the rationale to hiring a full IR department, trying to make that a more -- a fuller effort.
I think I'll just keep working with Joe and get to the right people at the right time, it's 3 -- 3-ish times -- 3 to 4 days per quarter.
I hope that's a fair answer, [Bill].
Operator
(Operator Instructions) Next, we have Sam Rebotsky of SER Asset Management.
Sam Rebotsky;SER Asset Management;Portfolio Manager
So we've achieved almost $14 million sales, and we have the capacity of $18 million, and we expect by June to be up to $27 million.
Now how much of this extra $4 million will we get -- are we going at the rate where we utilize this extra $4 million in the first 4 months or for the year, what is the rate that we're working at to increase sales?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
Yes.
Well, I'm real comfortable, obviously, and clearly just did, speaking historically, I mean really fantastic growth, 25% for the year, 30% for that 6-month period, I highlighted kind of the last 6 of '19 versus last 6 of '18.
I'd love to see more of the same.
Sales team is doing all the right things.
The product is delivering the efficacy that is valued by the customer.
I just -- as an operator here, from an operating perspective, that $18 million is pushing every button, it's really maxing out every dose out of this facility.
So I'm not comfortable sitting at close to $14 million, knowing that full and pretty darn near 100% capacity, $18 million, is the way we're growing, I think this capacity expansion is coming on at the right time.
And the next few quarters will prove us right or wrong on that.
But yes, I don't want to wait until we're hitting $18 million to start this project, and I think it's about a year's worth of work between from design to certificate of occupancy.
So I'm glad, I'm not unhappy with the timing of the capacity, and I believe that's going to be ahead of the sales.
This is going to be a great improvement, not just to the capacity also to the quality.
We're just separating our processes, finished processes from raw incoming milk processing, the liquid processing space.
So a bunch of logistical, quality and then ultimately, capacity, dose production improvements.
And we're with a good crew of contractors.
It's a busy work site every day over there, just across the street from where I sit now.
Going well, as I said.
I think it will be online right around the end of the second quarter.
That's what we need.
I don't want to provide any color other than that.
Sam Rebotsky;SER Asset Management;Portfolio Manager
Okay.
And how many shifts are you working on and -- so you will be up to utilizing the full by the 6-month time frame and -- or the facility be up and running by the end of the second quarter?
And do -- now you have the capacity to sell more and more product overseas.
Is the overseas demand significantly greater than you're supplying?
Or what is that?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
Yes.
So to the shifting and then overseas, sort of a similar question to what [Bill] asked.
The shifting is -- I think formally, we're a single shift, but we -- to support that single shift, there's a lot of second shift work going on around it.
So full staff, it's a full regular day shift, but they're -- set up work that gets done on a weekend.
There's -- for instance, the freeze-drying process takes no -- does not sleep, the lyophilizer does not sleep, that runs overnight.
So most of our crew is on a single-day shift that is supported by both labor and machinery running overnight.
Then the international, I think we've timed this about right.
I'm glad we don't have a whole bunch of international demand and face the challenge of trying to supply that out of the current facility.
As those markets come on, we'll be in the new facility, we'll have the increased capacity, we'll be able to fill it, whenever that may be.
So I think it's exciting.
I think we need to be there, but there's so much opportunity as we're reporting in these current results, right here with the product line, right here in the U.S. and well, I'd say, North American market that I think this expansion is needed and justified just by anticipated North American growth alone.
Sam Rebotsky;SER Asset Management;Portfolio Manager
Okay.
Now with the coronavirus being in the news in that very first day where the stock traded almost 2.5 million shares.
As far as pigs, are we explored whether this corona -- whether the -- whether our product First Defense Tri-Shield is desirable use for pigs or possible?
And I know humans is far away with everybody else coming into it.
But talk about our product in coronavirus, what do you think opportunities might be?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
Yes.
I think our association with the world health emergency coming out of China was a bit misguided.
We got caught up in some cycles, some websites, and I'd say some manipulators that kind of associated -- hey, anything to do with coronavirus, let's buy all those stuff.
Let's be clear, we have an animal health application with coronavirus, that human coronavirus, call it, what it might be COVID-19, novel coronavirus, is a different subtype.
So we're not sure.
I don't think it's likely to have this cross-protection.
But we're in touch with the right people, like CDC, NIH, USDA.
Just in case, if we are tested, if our product is tested, and there is something positive there, we definitely would have a press release on that.
I don't think it's right to get the volume up, to get anticipation up.
Based on that, I don't see the scientific logic there, but we are going to stay very well connected, principally through the USDA.
If it does cross over and does become an -- this novel -- the COVID-19, if it becomes an animal health problem, say with cows, say with pigs, as you mentioned, we want to be there with our antibodies to see if we could help, see if there's a human and animal health benefit, not to mention a business benefit.
So we'll stay in touch with the right people, but I don't want to create expectations there.
I think it's a little off our track.
I just want to reflect and recognize the grief this caused and something I think numbers change every day, over 1,000 deaths, 70,000 infections, where is it going?
And what impact it's going to have on the economy overall, [we're] paying attention to it.
Operator
Next, we have Wally Wadman of Constitution Research.
Wallace Winfield Wadman - Chairman, Portfolio Manager, CIO, and Chief Compliance Officer
A couple of quick questions.
In the release, and I probably didn't do enough digging, but could you just give us some balance sheet highlights in terms of cash position and debt and then cap spending for the coming year?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
Yes.
So of course, a lot of that detail will come out in the K that we're working on presently.
But for cash, the balance sheet -- what's the right number.
So $8.8 million at the end of the year.
A good chunk of that is allocated to 2 CapEx projects.
So I don't want to leave the impression it's $8.8 million free and clear.
That will fund the completion of that First Defense expansion.
It will also fund the final step in Re-Tain being the -- bringing of the aseptic filling, the last phase of the drug product production in-house, away from a third-party manufacturer.
So that cash is solid.
Net working capital, $10.7 million; total assets, $38.7 million; equity, $29 million.
Wallace Winfield Wadman - Chairman, Portfolio Manager, CIO, and Chief Compliance Officer
And short-term borrowings, there were some in the September?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
Yes.
We're at $8.4 million.
Looking at -- just to make sure, when we say short-term, [on the 14 total]...
Wallace Winfield Wadman - Chairman, Portfolio Manager, CIO, and Chief Compliance Officer
(inaudible) [bank debt whatever it was, total debt], okay?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
$8.4 million.
So yes, 09/30 with 3 months of principal payment.
Wallace Winfield Wadman - Chairman, Portfolio Manager, CIO, and Chief Compliance Officer
Okay.
And then just to nail down the exact number for cap spending, if you have that for calendar 2020.
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
Yes.
So I know the total CapEx project of $7.5 million, but we did get started here in the fourth quarter.
So those 2 projects I mentioned, $7 million to $7.5 million.
Going to have -- as a number, going to have in great detail for the 10-K filing.
But we had a healthy but relatively small start on that spend here in the fourth quarter.
We really got started on both projects in December.
So most of that's going to flow through '20.
Let me get you the exact -- we have a very detailed CapEx chart.
Wallace Winfield Wadman - Chairman, Portfolio Manager, CIO, and Chief Compliance Officer
No.
That's fine.
I can wait for that, you've given [by market].
Yes.
And then stepping back on the industry with all the turmoil, the dairy industry mergers and bankruptcies, what impact is that having on the farming community in general?
And then the second gear of the question is, what are you seeing from the competitors?
Michael F. Brigham - President, CEO, Principal Financial Officer, Treasurer, Secretary & Director
Yes.
Okay.
So the industry, the bankruptcies get a lot of press and it should -- the significant moves in the industry.
But they're related to milk-processing companies, so -- like Dean Foods kind of they process the milk.
So what's happening is we're drinking less milk but we're eating more cheese.
So I think that as tragic as those bankruptcies are, it's our world.
It's a reality that people are drinking less milk and processors that are focused on just one thing, in fluid milk consumption, are going to have trouble.
But the cheese market and the other ways we consume dairy products is very strong.
I think the index I point to is the price of milk.
At the end of the day, it doesn't matter to also to our customer, how much, in which form the dairy product is consumed as long as it's consumed, and the demand is strong.
So a really good fourth quarter on that milk price getting up to $20.
We haven't seen this kind of milk price since 2014.
So to balance that optimism, great fourth quarter, I've seen some projections for 2020 with some of the economists are saying that milk price will stay strong, but the economic challenge that these producers and our customers went through from 2014 until 2019 were so severe.
It's going to take them a while to dig out.
So there's some optimism, but it's not -- it's still a very challenging industry.
So it kind of leads me to your second question.
It's great to be part of a growing market and sort of almost, I'll say, gravy sales.
Everybody is growing, but that's probably not the case for us.
But what we're seeing is we're able to grow even in a flat market, just by earning competitive share from competitors.
So that's your second question.
So what we're seeing with the competitors is, I'm biased.
I'm an insider, I consider this with the context of the source, but I do believe our technology is better.
When we go up against the competitive products, we can offer a value proposition that just makes a ton of sense.
We just have to sell that day after day after day against much bigger competitors.
But what we did notice and I think it's related, is that the Elanco products, the animal -- the former -- the spin-out from Eli Lilly -- the animal health spin-out from Eli Lilly, the Bovine Ecolizer, they've announced the distribution, they're not going to make any more of that.
So we still [stay in the] market.
They're still lining out whatever inventory they do have, but they have announced that they're not going to make more.
So that's a good opportunity for us, but it's not huge.
The real competition, the real big size competition for us is the Zoetis product, Calf-Guard.
Certainly, a volume leader, a huge volume product at a very low price.
And then this new territory, the new competitive territory of going into dam vaccines, a lot of opportunity there.
So I think that's where we're going, is that competitive market shares are flat, but with some promising upside market economics.
Operator
(Operator Instructions) Well, at this time there appears to be no further questions.
We'll go and conclude our question-and-answer session.
I will now turn the conference call back over to Mr. Joe Diaz for any closing remarks.
Sir?
Joe Diaz - Managing Partner
Thank you, Mike.
And again, thanks to all of you for taking the time to participate in today's call.
We look forward to talking with you again to review the results of the current first quarter of 2020 during the week of May 11.
So we thank you for your time, and have a great day.
Operator
And we thank you, sir, also for your time today and to the rest of the management team.
The conference call is now concluded.
At this time, you may disconnect your lines.
Thank you again, everyone, take care, and have a great day.