Good morning. This is Andrea from Chorus Call. I will be assisting with your conference call this morning. To get things started, let me ask Joe Diaz to open up the call.

Thank you, Andrea. Good morning, and welcome to everyone on the call this morning. 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 first quarter ended March 31, 2022. 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 provided with last night's press release and with our Form 10-Q for the quarter ended March 31, 2022, and with the company's other periodic filings with the SEC. 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.

Great. Thanks, Joe, and good morning, everyone. We have some great stuff to talk about today, so let's get started. The press release that we issued last night summarizes the unaudited financial results. Since that information is available to you, I will not take your time here to review all the line item details, but I would like to discuss some of the highlights. Our efforts to scale up our production capacity to capture the acceleration in demand for first events is paying off. Sales are up considerably and we are making big strides in reducing the amount of the order backlog. As you may know, on April 11, we issued a press release covering our preliminary top line sales results. We have been making these optional announcements to give investors a very timely look at product sales, which I believe is the most critical measure of our operations and financial performance early in the reporting period. I have no changes to that very strong previous disclosure. Again, product sales were up 46% during the first quarter of 2022 and up 45% for the 12 month period ended March 31, 2022, in comparison to the respective periods of the prior year. That is a $6.6 million increase in sales during the 12 month period ended March 31, 2022, compared to the prior 12 month period ended March 31, 2021. So we are beginning to capture the benefits of our strategic decisions to invest more in sales and marketing expenses and to expand our product line. This sales growth is happening as we continue to manage a backlog of orders. Prior to our introduction of the newest extension of the First Defense product line in late 2017, namely First Defense Tri-Shield, annual production capacity of about $16.5 million was adequate to cover sales promptly without an order backlog. However, our world changed with the introduction of Tri-Shield. We have been investing millions of dollars in capital expenditures to increase our production capacity. This kind of significant investment in real estate, manpower, and equipment does take time despite all the urgency and energy our team puts into it. The objective of the first phase of our production capacity expansion, which was initiated during 2019, was to increase our annual production capacity from $16.5 million to $23 million. We have achieved that goal with annualized production output being just about $22.9 million during the fourth quarter of 2021 and about $23.8 million during the first quarter of 2022. Given our sales of approximately $21.1 million during the 12 months ended March 31, 2022, with an order backlog outstanding as of March 31st, I feel confident that we made the right decision during the second quarter of 2021 to initiate an additional capital investment to further increase our annual production capacity to about $35 million by the end of this year. That work continues as planned. The gross margin as a percentage of sales improved to 52% during the first quarter of 2022 compared to 39% during the first quarter of 2021. Our gross margin percentage was 49.5% during the six month period ended March 31, 2022, and 48% during the 12 month period ended March 31, 2022. The higher level of sales and improved gross margin helped us report net income of $736,000 during the first quarter of 2022, in contrast to a net loss of $441,000 during the first quarter of 2021. Earnings before interest, taxes, depreciation, and amortization or EBITDA increased to $1,434,000 during the first quarter of 2022 compared to $258,000 during the first quarter of 2021. These non-GAAP measures should be considered in the context with our statement of cash flows that is presented in accordance with GAAP. In addition to increasing First Defense production capacity, our other company changing goals are to achieve FDA approval of Re-Tain. We are anticipating a response from the FDA during the third quarter of 2022 to our second submission of the last of five technical sections, significant technical sections pertaining to Re-Tain. This one specifically is called the Chemistry, Manufacturing, and Controls technical section. This would complete our new animal drug application. This response from the FDA will determine whether we will be able to commence market launch early in the fourth quarter of 2022. At the same time, we are responding to observations from a recent preapproval inspection by the FDA. So our product development objective with Re-Tain is to demonstrate that our polypeptide antimicrobial Nisin 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 labor requirements of all intramammary drugs on the market today require the milk to be discarded and the meat to be withheld during treatment for a period of time thereafter, it is common practice in the dairy industry to not treat sick animals 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 or the meat withhold penalties. In addition to improved animal welfare, Re-Tain enhances food safety and sustainability by utilizing Nisin 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. So that brings us to a conclusion with regard to First Defense and Re-Tain. At this point, I would like to look back at the beginnings of these product initiatives. To do that, I'm very excited to introduce Dr. Joseph H. Crabb to you. Joe is our former Chief Scientific Officer and VP of Product Development. He is now serving in a consultancy role to ImmuCell. So thanks for joining, Joe. I guess just two questions for you. First Defense was first approved by the USDA back in 1991. Take us back to that time, please. How did you come up with the idea of purifying antibodies from milk to make a scours prevention product for newborn calves?

Okay. Thanks a lot, Michael and Joe and everyone, I appreciate the opportunity to have a little discussion. Well, I wasn't the first one to come up with the idea, but I did ultimately develop the product First Defense. I mean it starts with the differences between ruminants and primates, believe it or not. Human infants get almost all of their immunity in their first days of life through the placenta of their mom; the IgG transfers across the placenta to the baby. In ruminants, the infant calf receives all of its maternal antibody not from the placenta but from mother's milk or colostrum. So it's always been known to be a very good practice in the dairy industry to feed your calves one gallon of high purity, high-quality colostrum, which contains a lot of antibodies for that developing calf. And there was a lot of literature in the 1980s regarding using bovine colostrum to treat or prevent gastrointestinal illnesses. In the '70s, work by Norden, MeVis, and others primarily at the University of Nebraska identified several different types of viruses that cause gastrointestinal problems in calves. And Norden established the value of using vaccines for calves. In other words, vaccinate the mom so she can provide specific immunity to the developing calf. Right around that time in the late '80s, I came on board because I had a vaccine and an antibody purification background. We were working with Mead Johnson, an infant formula company, researching the addition of bovine anti-rotavirus antibodies into specific formulas for human infants. And while that work never went forward too far, we retained the animal health rights to the technology, and we began working on First Defense. Our reasoning here was that if we could make a convenient dosage form of these antibodies that are strong against the gastrointestinal pathogens, we might have a good product to easily prevent this illness in calves. So we focused on developing subunit or otherwise novel vaccines, and we also focused on antibody purification technology so that we could boost the antibody levels in colostrum to the point where we could offer an efficacious protective dose against multiple pathogens in a single orally delivered capsule. Also, we found that freeze drying, which is our main method of drying these purified antibodies, turned out to be the most gentle way to preserve the antibodies. And so that was basically the beginning of the First Defense franchise.

Wow, Joe, really interesting. I learn something new every time you speak. That's great history. Thanks for reviewing that. Let me switch over to Re-Tain. So as we know, Re-Tain has a much longer development path with the FDA than what we did experience with the USDA for First Defense. Take us back to the 2000s; what was it about Nisin that interested you? And how did you come up with the purification technology to make a pharmaceutical drug preparation of Nisin at commercial scale?

Sure. Thanks a lot. Well, then so to transition here, after several years of working on human applications of these bovine antibodies at ImmuCell, such as travelers' diarrhea, clostridium difficile, and cryptosporidium, and a lot of that was funded through SBIR grants from the NIH. In the late '90s, we made the strategic decision to focus on only animal health applications, to be successful with animal health products. Mastitis was our obvious market because it's the largest animal health market. It's responsible for approximately $2 billion worth of losses in the US every year. I became interested in bacteria as potential mastitis treatments. Looking at some of the literature and through the work of Phil Sears, who at the time was in Cornell and later MSU, and some of the pioneering work of a company called Applied Microbiology, who became AMBI and then ultimately became N21. After discussions with AMBI, we were able to secure the animal health rights to their Nisin technology. We started off by purchasing their product already on the market, it was a Nisin-based pre-milking teat wipe called Wipe Out. Our reasoning here was that we could establish proof of concept of Nisin being useful against mastitis pathogens by having some experience with this teat wipe, and we also gained experience in manufacturing Nisin. Well, ultimately, Wipe Out was a good product, it never really could compete on a cost basis with the iodine and chlorhexidine based products that were already on the market. But we were able to leverage the Nisin technology and develop Re-Tain. And in doing so, we developed a novel purification method that ended up with pharmaceutical grade Nisin, i.e., 95% pure Nisin. And since Nisin was used for many years in the food industry as a food preservative, a much cruder form of Nisin, we felt that we would have a clearer path through the FDA to develop this product for mastitis applications as an intramammary because of its long use and history as a safe product in food. That ended up not being totally true. We ended up going down pretty much the standard drug pathway for Re-Tain. But thankfully, we were able to secure the zero milk discard, which is a critical difference between Re-Tain and the other intramammaries, which are primarily based on antibiotics. So hopefully, in the coming months, we're going to meet the goal and be able to launch the product. Is there anything else I can add to that, Michael?

Well, I'm just so glad to join the call. You've captured 30 years or so in a few minutes, and I've traveled that road with you and boy, it was really good to hear a concise summary like that. I hope that was of interest and benefit to our investors. So thanks for sharing that, Joe. I really do appreciate it. So let's watch the clock here a little bit and conclude this conference call, at least our presentation portion. I encourage you to review the press release and the quarterly report on Form 10-Q that we filed last night. Also, please have a look at our corporate presentation slide deck, and the May update was 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 just see the Investors section of our website and click on the corporate presentation. So with that said, I will be happy to take your questions. Let's have the operator open up the lines. Thank you, Andrea.

Our first question will come from John Lipman, a Private Investor.

A couple of questions for you, Michael. Just reading through your 10-K the other day, a very big investment has gone into this great story Joe laid out for us with Nisin and how you've come here. The company has projected potentially, if approved, $1 million in sales for 2023 of Re-Tain and maybe potentially another $1 million on top of that for 2024. It seems like that might be a very small amount of sales for a company that spent a lot of money and a lot of time getting to this kind of blockbuster product. Could you talk to us about where you derive those potential revenues and what the real revenue opportunity is here for Re-Tain?

We refer to this launch strategy as a controlled launch. There are two approaches we could take. One option is to distribute the product like we do with First Defense, by delivering it to warehouses and allowing representatives to distribute it to farms. However, this approach carries significant risks with a new product like Re-Tain. Instead, we've chosen a controlled launch strategy, which may not produce an immediate spike in revenue within the first 18 months, but prioritizes delivering excellent customer experiences to the initial customers. This way, we can ensure the product is administered and dosed correctly, reaching the right cows while carefully managing industry risks associated with things like hot milk tanks or faulty cheese tanks, ensuring Nisin is used appropriately. While this approach requires some patience, we have built production capacity of 10 million. Attempting to pursue mass market distribution too soon would be too risky. Our sales team is preparing well, as evidenced by the recent additions of Dr. [Indiscernible] and Dr. [Wüstenberg]. They will assist Bobby, Kathy, and the team in managing this controlled launch, focusing on the long-term advantages of the product rather than a faster, larger launch in the initial year. Although it's a trade-off, I believe the long-term benefits are worthwhile, and we must ensure this product is launched and utilized correctly for optimal benefits over years two, three, and four. I look forward to the day when we realize that the current production capacity is insufficient and needs to be expanded, and we can pursue that path together. Did that clarify things for you, John?

It seems like a controlled launch aimed at ensuring customers fully understand the product before introducing it to the market. Regarding the strong profitability in the business, as development costs for Re-Tain decrease and assuming it launches successfully, could you discuss how you plan to scale up staff to support Re-Tain while managing sales? Additionally, what are your expectations for scaling up the First Defense franchise, considering its potential to reach over $30 million in sales? Will you need to invest significantly in capital expenditures or expand your workforce to support this growth, or are you confident that the current staff and infrastructure can handle the anticipated increase in sales?

Yes, John, that’s a great follow-up because it really helps make more sense of this controlled launch strategy. First, we’re so fortunate to have First Defense; the growth we're seeing there helps create some of that patience we need to do this control launch with Re-Tain. So yes, staffing is increasing. The CapEx is really well defined. I don’t see any surprises. We know what we need to do to complete this growth on First Defense, and that’s laid out in the Q by specific project and then disclosing the cost of those projects versus available cash. We’ve got headroom for the first time in ImmuCell's history, which is unique in my experience with ImmuCell, we’re always scrambling with not enough cash. So First Defense, I feel like that's well defined in the Q. And then on Re-Tain, the staffing will increase, but it's not like huge. So what we're seeing as a staff today of about 67, just under 70 people. I can see very quickly going into '23, we'll be up to 80. But it’s not a huge explosion in staffing. And again, the CapEx is budgeted and known, and the cash is available to fund it. So I would say modest on personnel but we definitely need some new people, and CapEx is in good shape.

Michael, could you just address one last thing? I appreciate the answers to the questions. Can you talk to us about Re-Tain? Specifically, do we need to educate the farmers and people in the dairy industry who will be using Re-Tain on how to apply the product, or are they already aware of how to use it?

It's a standard intramammary infusion. So it's two liquids that are infused through the teat opening just like the other mastitis treatments on the market today. So as far as application, the customer will need no training and nothing new. This is what they do with the current intramammary tubes on the market today.

And then my last one, and it's probably in the K, but I must not have picked it up. Could you just talk to us about First Defense has been fantastic. The growth has been just stellar. Could you talk to us about the barriers to entry, the patents, the IP here? It seems like you've got a special sauce here that's generating a lot of cash. I assume it would attract attention from others?

Well, that’s a great question, having given Joe the opportunity to discuss the history. So a lot of that technology is very old. So none of it is patented. So we rely exclusively on the intellectual property around the manufacturing process, as Joe described, from the proprietary vaccines we use in the production process to what we do and what we're expanding here in Portland as far as the purification, and Joe even mentioned some of the technology around the freeze drying; just the particulars of how you purify those antibodies to get them down to a small, say, 4 to 5 gram deliverable dose. It's tricky. It's a lot of management. At the farm level, our farm team is unique in what they can do to manage the vaccine program, the hyperimmunization vaccine program, and the collection and the ship back to Maine, and then the process here, which is what we're essentially doubling or more. So it's process know-how and there's not a blockbuster kind of patent that you might see in a typical pharma drug, but we're not a typical pharma company.

And our next question will come from Joe Diaz from Lytham Partners.

Leveraging off of the previous questioner with regard to First Defense and your increasing production capacity. What's your plan going forward here in the next couple of years, and are you confident that, that market will continue to grow, and growing capacity makes sense?

Well, certainly, it’s hard to predict the future of the market and future sales. I’m more focused on capacity. I’m very confident there. The sales team will support me 100% or more and that none of us can live further under this backlog condition that’s really difficult on the team. It’s really difficult on our customer. So the CapEx that I referred to, sort of the two phases of expansion that I referred to going from $16.5 million to $23 to $35, all that is in place. We need to just finish off some of this equipment installation, validation, and put it in USDA approved operation. That gets us there by — everything is in place. I mentioned just it continues as planned to get to that $35 million here by the end of the year, so no more big hurdles like new real estate. It’s more finished what we started and it’s online. And yes, that’s just critical as we go through the second half of this year to transition from a company that asks its sales team to allocate scarce product to more productively asking the sales team to go find new customers and retain current and recover those we may have lost during the period of short supply.

Michael, both you and Dr. Crabb mentioned that Nisin is a polypeptide antimicrobial that it's not an antibiotic. Could you give us a little bit of background on the difference between the two?

Yes, that’s a big word for me. I’m glad Joe is on the call; I’m going to ask Joe to speak to that, please, Joe.

I’ll try to do somewhat simplified. Nisin is a polypeptide. A polypeptide is native amino acids like a protein. A protein is a polypeptide too, but most proteins are very large. Nisin happens to be a relatively small polypeptide of 34 amino acids. The traditional antibiotics like the beta-lactams are very small molecules that are much, much smaller than Nisin and then they tend not to break down in the environment. So one of the attributes of Nisin is that because it's kind of like a protein, it does its work against mastitis. But then in the milk, it will eventually break down. So it's not a problem. That's one issue. The other issue is the use of Nisin does not cause the development of antimicrobial resistance, because it's a completely different class of molecules than the traditional antimicrobials. The third aspect of Nisin, which is interesting is that your beta-lactams like penicillin work, their mechanism of action is to stop the growth of a bacterium by interfering with the biosynthesis of the cell wall. But Nisin's interestingly different because Nisin, being a polypeptide and modified in a certain way, doesn't stop the growth of a bacteria; it actually pokes a hole in the bacterium and kills it directly. So while Nisin can kill growing cells or resting cells, traditional antibiotics can only kill growing cells. So there's a couple of differences between Nisin and traditional antibiotics.

Thanks, Joe. I always appreciate the way you take some pretty complex science and make it common speak.

One other question as it relates to Nisin. You mentioned that it's naturally occurring in the environment; it's used as a food preservative. Is the Nisin that will be used in Re-Tain any different?

The only difference is it's purified to pharmaceutical level of purity. So for example, Nisin and other bacteriocins are produced by normal bacteria in the environment. They're produced as a mechanism of having sort of bacterial competition. They produce bacteriocins to establish their niche. So yes, they're produced in the environment but they also degrade in the environment. So yes, Nisin is naturally produced by a bacteria like many of the beta-lactams are naturally produced by a fungus. So our Nisin is the same Nisin that's produced by a certain type of bacteria, but we take the purification up to a pharmaceutical level, which is something that's not seen. So if you look at, for example, the food grade Nisin preparations that you can buy to preserve things like dairy foods, those preparations are actually 2.5% pure Nisin. The rest is milk solids. Our Nisin is essentially 95% pure pharmaceutical grade.

So Joe, what you’re saying is that there’s no way the FDA would approve this intramammary infusion at that 2.5 level. We had to get to that 95 to be considered for approval by the FDA?

Yes. I mean, it’s generally considered you need a pharmaceutical to be over 90% pure. But the other interesting aspect is that if you infuse the crude preparation of Nisin into the other, you would have a massive inflammatory response because of all the other impurities. So part of the drug approval process is doing a target animal safety study where you look at infusing the product on the effect of – on the animal. Does the outer swell, does it get red, does it get hot, have you caused mastitis? All of those things can be caused by the impurity. So it's incumbent on us to have a very high purity product for this.

Thank you. Let's conclude here. I believe I will hand it over to Joe. It seems we have no further questions, Joe.

There are no other questioners in the queue. So that being the case, let's go ahead and wrap up today. We appreciate everybody taking time to go over this quarter's results. We'll look forward to talking with you again after the next quarter. We expect that it will be sometime in early August. So have a great weekend. Stay safe and we'll talk to you again. Have a great day.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.