Good morning and welcome to ImmuCell 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 has indicated my name is Joe Diaz with Lytham Partner. We're the Investor Relations consulting firm for ImmuCell. We thank all of you for joining us today to discuss the unaudited financial results for the fourth quarter and full-year ended December 31, 2021. 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, better known as a set of safe harbor statement provided with last night's 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 ImmuCell Corporation, after which we will 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 ImmuCell. 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 Re-Tain from the FDA to 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. I'll let you hear directly from them. First, I'll 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 the line-item detail, but I would like to review some of the highlights. As you may know, on the 5th, we issued a press release covering our preliminary top line sales results. We were making these optional announcements to give investors a very timely look at what I view as the most critical measure of our operations and financial performance, that being 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, 2021, 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, 2021, and 2020. The higher level of sales and improved gross margin helped us report net income of $74,000 during the fourth quarter of 2021 and helped us reduce our net loss to $78,000 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 to $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 Re-Tain, I'm pleased to report that we made our second submission to the FDA to address the FDA's previous comments, and inquiries on the chemistry, manufacturing and controls, or CMC technical section, which is required for approval of our new animal drug application or NADA. This complex submission has been a very significant effort by our regulatory, manufacturing, and quality team. In August, we will find out if the FDA either approves our NADA or ask for further questions. Our product development objective is to demonstrate that our peptide and microbial niacin A can play a productive role in the treatment of subclinical mastitis in today's dairy industry and offer an effective alternative to traditional antibiotics. Because label requirements of all intramammary drugs on the market today require that milk be discarded and that meat be withheld during treatment and for a period of time thereafter, it is common practice in the dairy industry today not to treat sick cows that are still producing saleable milk. Re-Tain 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, Re-Tain enhances food safety and sustainability by utilizing a peptide antimicrobial that 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 Re-Tain, probably the most exciting work going on at ImmuCell 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 the 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 not 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 two years, that enabled us to increase our output to almost $23 million on an annualized basis during the fourth quarter of 2021?

Yes, happy to. Starting with the first steps in our manufacturing process, we substantially expanded the number of program farms and the overall number of program cows from which we collect colostrum. This effectively doubled our capacity at this stage of manufacture. To support this growth, our ImmuCell vaccine team ramped up their manufacturing equipment capacity to provide for that doubling of program cows. They also were successful in numerous process enhancements to maximize the 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 ImmuCell liquid processing capacity doubled with the installation of a second whey concentrate or what we call cheese equipment training. The next step in the process is lyophilization or freeze-drying of the liquid to powder. We installed a third freeze dryer in 2021, 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. So, you may be wondering, where does all this new equipment fit into our main building? And the answer is it doesn't. 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 the freeze-dried powder from Building 56 to finished product, that is, the First Defense capsule and bolus product, as well as dual force and Tri-shield gel products. We designed dedicated rooms or 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 operations into the future. The 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 to meet the increased demand and also being well-aligned with current good manufacturing practices.

That's great, Betsy. Thank you. It is 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 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 includes, as I indicated before, the installation of a fourth lyophilizer freeze dryer in Building 56. This is really essential and will result in a 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 enable additional production capacity. That new equipment is expected to be operational by the end of 2022.

Good. Thanks, Betsy. Thank you for sharing your thoughts on all the critical work you manage related to First Defense, while also keeping all the Re-Tain 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. Bobbi, 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 to know is obvious. We are not selling a Me-Too product. Our First Defense product line is truly unique. We are the only USDA licensed products in the scour prevention space that utilize polyclonal antibodies. You see, this technology removes the producer's reliance on variable vaccine responses to generate antibodies, and instead protects every calf equally with a measured dose of immediate immunity. With this, we are not only protecting the individual calf, but we're reducing pathogen shedding and disease amplification across the whole herd. We're not splitting hairs. Again, we have something truly different to sell. And that's a testament to the determination of our product development and manufacturing teams. We have taken the road less traveled by big pharma companies. That means prospective customers need to know we're on that road. To quote one of our highest growth territory managers, Mr. Dale Miller, if you can't see them, you're not going to sell them. ImmuCell had this unique technology for several years, but we didn't start a more aggressive sales and marketing investment until 2010. We're still very much the David amongst pharmaceutical Goliaths, but our commercial team has grown from one to eight territory managers, a marketing director, a technical service veterinarian, and me. So, there are 11 of us facing the market every day. Sure, there are territories we'd like to split for improved coverage, but starting in 2015, this team growth has been cumulative, and we're seeing that translate into reaching more prospects. Now that reach needs to move across the sales process efficiently and result in recurring customers. I'm 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, though, takes time and skill 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 have created a ripple effect that's earned us a seat at the table with traditional vaccines. This advanced yet common sense marketing closes 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 into that customer's mindset 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 translated into consistent market share gains. I'm happy to say marketing and sales are effectively pulling the rope in the same direction. I also want to speak about our supply issues, as supply shortages typically kill sales momentum. But the strategy we've used to manage through our shortages seems to be working in our favor. For the last 26 months, we've carefully allocated products to what we refer to as break-up 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 this service focus. This earned us some goodwill which is paying back. The positive conversations we're having on-farm suggest that the strategy is working. 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 line's future appears bright despite the challenges we may have to overcome any fallout from the extended order backlog. I will also speak briefly on how our team is preparing the commercial strategy for Re-Tain. Dr. Raffael Lichdi is a valuable new addition to my group in that regard. We know well how to sell First Defense. I mean, that sales and marketing recipe has been perfected over the years. We are currently learning what that sales recipe might look like for Re-Tain. Post-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 Re-Tain that is as solid as what we have for the First Defense line.

Well, that was really helpful, Bobbi. Thank you for sharing your thoughts on all the critical work you managed 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, a February update we 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, see the Investors section of the website and click on the corporate presentation. With that said, I'll be happy to take your questions. Let's have the operator open up the lines.

Thank you. We'll now begin the question-and-answer session. If you'd like to join the question queue, please press star one on your telephone keypad. Again, we have no one currently joined in the queue. We have a question from George Melas with MKH Management. Please go ahead.

Yes. Thanks for taking my question. Good morning, Michael, and a real pleasure to hear Betsy and Bobbi on the call. Thank you very much 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 what happened and is there some additional investments or are there some process improvements that you think enabled you to get to 35?

Sure. Yeah. Good morning, George. Thanks for following up on that and Betsy really mentioned the track that's more about the best. We're just trying to find all the efficiencies we can, but that gel automation, that high-speed gel filling automation really is that last incremental benefit, that pushes us a little higher than we first thought. But largely the plan is the same, but the gel filler does give that extra bump, that extra $5 million over the previous plan.

Coupled with the full year of lyophilization.

Exactly. These steps are so incremental. We always talk, I think, in terms of quarterly numbers and I annualize them. We talk about annual, but of course, this new piece of equipment comes in in a particular quarter and we don't get the benefit for the full fiscal year, but yes. It's very much a similar plan with just getting it done and getting it done with all possible efficiencies. And this automation of gel will be a great help. It's really necessary at this level of production.

Okay, that sounds great. And then from a capex perspective, both for First Defense and Re-Tain, what do you guys expect to get to $35 million capacity for First Defense? And just to get Re-Tain started at the initial capacity level?

In the September 30 disclosures, we outlined each project, detailing budgets and statuses from A to F. Everything remains on track, and I recommend reviewing that information. We will provide an update with more current figures in the 10-K at the end of March, but there are no new projects. The projects and budgets remain unchanged, including for Re-Tain. Most of the investment has already been made in development. One ongoing project, managed by Betsy, involves a $4 million investment to bring aseptic filling in-house from an outside contractor. This was mentioned in the September 30 disclosures, and I don’t anticipate significant changes in the 12-31 disclosures. Everything is proceeding steadily; those capex projects are funded and advancing without major adjustments.

Great. And then maybe just a quick question for Bobbi. You've done an amazing job with your team, but I imagine they're quite stretched given that you cover a huge territory with eight territory managers. Is the plan to increase your staff or not?

Yes, we do have big territories. How we manage those territories, I think, is maybe a bit of a competitive advantage. We use some good market share data, so that focuses on high concentration areas of competitor products instead of having to get to every corner of the territory. Right? That's kind of how we've managed through that. With fewer salespeople, we certainly have areas, like I mentioned, where we want to split territories and get better coverage. But as of now, that is put on hold. We need production to match demand before we make any of those investments. So, the strategy 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 headcount.

George, can I agree? Bobbi and I are on the same page with that. More hiring is possible, but we've done some hiring to get to where we want to be right now, and further expansion of the staff is going to be in proportion to sales, cash flow, and funding added.

Okay. And then as you lay on Re-Tain, the CMBS deals force that will sell repaying?

Yeah, for sure. We are capable of selling more than one product, as do a number of animal health sales representatives still sell a whole portfolio of multiple products. Now, our team is really focused right now on learning the mastitis space, right? Because we are really getting up to speed on the mastitis data side. But we certainly have the bandwidth to sell both.

Thank you very much.

Thanks, George. Appreciate that.

We still have time for questions. Again, if you'd like to join the question queue, please press star one on your telephone keypad. We currently have no one in.

Okay. I've got a couple of questions that I think would be important for our listeners to hear about. Bobbi, as it relates to the VAM vaccine program, can you give us a bit of a recap? How's it going? You mentioned some make or break customers. How does that fit into the VAMS vaccine program?

To have your cows vaccinated ahead of calving, they're on a schedule already, and so when we go in and we displace that technology for our First Defense line, which is administered to the calf after birth, those customers are counting on us to be there to protect that calf because if we don't have that product available at the time that calf needs it, they've missed their window to protect that calf with the dam vaccine. We really have to know your customer base and where the fit is for our product on those farms, and then manage the supply to be able to funnel those type supplies to those critical customers that you don't leave them in a lurch. So that's the interaction of the supply shortage and how we've managed through that with those make-or-break customers. And then on the other side, the opportunity side, pre-calving scours vaccines are incredibly traditional; they've been around forever. One of those things that I'd say customers just 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 calf level has actually been pretty fun. It's a slow go because they are so traditional, but the advantages are pretty significant to the producer because now every calf is equally protected; you're not dealing with that variable vaccine response, and in fact, you're not investing that money on those pre-calving scour vaccines for calves that might not even be born because there are certain percentages of calves that are either aborted or dead on arrival. So, you're able to focus your investment on those live-born viable calves. So the messaging works, the impact on the producer is there, it's just a matter of getting those traditional thought processes changed, making sure people recognize the value of antibodies over a variable vaccine response.

I think regarding the price you mentioned, which might be up to three times higher than competitors, how do you market that? What is the argument you present for the value proposition given your prices are somewhat higher than those of competitors?

When selling a premium product, not all prospects are the right fit. We're not targeting low-cost buyers; instead, we want those who are willing to invest in their calf crop, understanding that a newborn calf is essential for the future of their herd. First, it’s about identifying the right prospects. Second, it involves ensuring that every calf is adequately protected. On the farm, everything might seem fine until a severe scour outbreak occurs, which can be very stressful and economically damaging. It not only impacts the farm's finances but also leads to significant stress for employees. Retaining good employees is crucial; we want to avoid compassion fatigue among them. This is where our value proposition comes in, as we maintain a lower pathogen load, providing a more consistent immunity for the calf crop and reducing the severity of scour outbreaks compared to alternative products. This enhances our value proposition. Additionally, there's a way to avoid investing in pre-calving scours vaccines for cows, especially as producers increasingly focus on raising the right number of heifers to replace their herds. As they move toward a more refined approach to their replacement heifer program, the value of our product becomes even more apparent, as it allows for targeted investment in specific market segments that need robust protection.

Thank you, Bobbi.

You bet.

Tom, I think we have a

Yes. We have a question over the phone from Tom Fox, who is a private investor. Please go ahead.

Yes. So my question is about the FDA's response to Re-Tain. Or you made these, you've submitted these batches, and you say that they come back with questions. I'm just wondering if you can elaborate on what these questions are. Thank you.

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 on each turn has been pretty quick. I think it's implied and it is true that there haven'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 matter of months, not 2 or 3 months, not 6 or 12 months. I guess in a general way I'm saying no queries, no revisiting of old technical sections, no new trials, which is clarification of data which requires some lab work and then just aligning on how it's presented.

We also did meet with CVM, the center for veterinary medicine, several times 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.

Definitely increases our expectation or hopeful prospects for success. But we always caution investors and our board and others that you just don't know. They could raise a new question. We don't think that's likely, but they could as well as we think we are aligned; they can say, you really didn't answer our question. We have a further question. We’re just not going to know until August, but we do know is that we put our best effort.

Just so I have a clear picture, 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.

The label is well aligned. In the last 60 days, as we approach August, if everything is complete, there will be a 60-day administrative review. The labels will be adjusted and finalized, but we have a strong agreement on the label. They haven't contested any of the major details, which is significant. It could potentially require new studies, but that hasn’t been the case. Once again, the label is aligned.

And they provided minor changes to the label already.

You like to anticipate that if you're in that level of detail, that means you'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 hoping assumption.

Okay. That answers my questions, and congratulations on your continued success at ImmuCell.

Hey, that's appreciated, Tom. Thank you.

We still have some time for questions. So again, if you'd like to join the queue, please press star one on your telephone keypad.

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 2022, during the second or third week of May. Have a great week, stay safe and be well. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.