ImmuCell - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 marked continued operational recovery: revenue $6.45M (+18% YoY), gross margin 44% (vs 22% YoY), and net income $0.50M (vs loss of $1.53M YoY); sequentially softer vs Q1’s seasonal high and pipeline-rebuild tailwind.
• Management eliminated the order backlog by quarter-end and refilled distributor inventories, cautioning that the one-time pipeline replenishment may lead to softer sales in 2H 2025; focus shifts to winning back end customers and new business.
• Re-Tain entered Investigational Product use in 2H 2025–Q1 2026 (no revenue expected); full commercial launch awaits FDA approval, validated aseptic fill, and adequate cash; product development spend is being reduced and strategic options explored.
• Balance sheet improved: cash rose to ~$6.0M; debt was refinanced to reduce rates and eliminate a ~$2M 2026 balloon via a new 5-year note to 2030; working capital and equity increased.

What Went Well and What Went Wrong

What Went Well

• Eliminated backlog and refilled distribution, enabling a pivot back to growth selling: “We effectively eliminated the backlog of orders as of June 30, 2025…We have re-filled distributors with the inventory that they would like to hold”.
• Margin recovery: gross margin reached 44% in Q2 (vs 22% YoY), driving net income of ~$0.50M and Adjusted EBITDA of ~$1.36M.
• First Defense momentum and new format traction: initial sales of the spray-dried format in Q2; sales force “energized” now that supply is ample.

What Went Wrong

• Near-term revenue headwind: management warned that pipeline refill provided a temporary boost and sales may soften in 2H 2025.
• Re-Tain approval timing remains constrained by CMO FDA inspection observations; investigational use will not generate revenue, and existing Re-Tain inventory will be used (already expensed).
• Capacity expansion to ~$40M annual revenue remains on hold pending cash flow evaluation and demand visibility.

Transcript

Speaker 5

Good morning and welcome to ImmuCell Corporation Reports' second quarter ended June 30, 2025, unaudited financial results conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead.

Speaker 3

Thank you, and good morning to everyone. As the conference call operator indicated, my name is Joe Diaz. I'm with Lytham Partners. We're the investor relations consulting firm for ImmuCell Corporation. Thank you again for all of us for joining us today to discuss the unaudited financial results for the second quarter ended June 30, 2025. Listeners are reminded and cautioned 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 guaranteed or confirmed 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 better known as the safe harbor statement, provided with Form 10-Q and the 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, Friday, August 15, 2025. The company undertakes no obligation to update any information discussed on today's call. Please note that references to certain non-GAAP financial measures may be 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, for opening remarks. Michael.

Speaker 2

Great. Thank you, Joe, and good morning, everyone. I would like to make a few opening comments. We are in the midst of a very positive transition right now at ImmuCell. Our investment to increase production capacity for the First Defense product line to support $30 million or more in revenue per year is now complete. For sure, this took longer than we had planned as the process was plagued by certain contamination events and other challenges. That said, it is done, and we are in a good place going forward. With regard to our very long development timeline with Re-Tain, we are now initiating investigational product use studies to test market acceptance in the field over the second half of the year. While, of course, we would prefer commercial sales under an FDA approval, we'd like to say that we are going to get paid in data.

This data will inform our exploration of strategic options and the future plan for this product as we continue to anticipate the FDA approval. At this point, I'm going to turn this call over to Tim Fiori, our CFO, to review some second quarter financial highlights. I would like to offer a few comments from a strategic perspective, after which we will open the call for your questions. Tim?

Speaker 6

Thanks, Michael. Product sales during the second quarter of 2025 increased by 18%, or $972,000, over the second quarter of 2024. Product sales during the first half of 2025 increased by 14%, or $1.8 million, over the first half of 2024. Product sales during the trailing twelve-month period ended June 30, 2025 increased by 22%, or $5.1 million, over the trailing twelve-month period ended June 30, 2024. This period of increased production output allowed us to effectively eliminate our order backlog and rebuild inventory at distribution. During this period of short supplies, we were often shipping direct to critical customers to keep them in supply. Now we are back to only shipping through our normal distribution channels. Reselling the distribution pipeline after an extended backlog likely provided a temporary boost to sales.

Because this inventory rebuild is not expected to repeat, we may experience a softening in sales during the second half of 2025. We also realized some good gross margin improvement during the first half of 2025. Gross margin as a percentage of product sales increased to 44% during the second quarter of 2025 compared to just 22% during the second quarter of 2024. Gross margin increased to 43% during the first half of 2025 compared to just 28% during the first half of 2024. Gross margin increased to 37% during the trailing twelve-month period ended June 30, 2025 compared to just 26% during the trailing twelve-month period ended June 30, 2024. To remain successful, we must regain customers that we lost during our period of short product supply and increase market share while operating without significant contamination events or equipment breakdowns and also achieve strong production yields.

I'd like to talk for a moment about adjusted EBITDA because the impact of non-cash depreciation expense on our bottom line is significant. To be clear, adjusted EBITDA, as opposed to just EBITDA, includes an add-back of stock-based compensation expense, which is another non-cash expense that is included in net income as calculated in accordance with GAAP. We created an adjusted EBITDA of $1.4 million, $3.7 million, and $5.3 million during the three-month, six-month, and twelve-month periods ended June 30, 2025, respectively. These strong results compare very favorably to adjusted EBITDA of negative $619,000, negative $161,000, and negative $370,000 during the three-month, six-month, and twelve-month periods ended June 30, 2024, respectively. These strong results helped us increase working capital to $6 million as of June 30, 2025, from $3.8 million as of December 31, 2024.

On a final note, you may have seen our press release Tuesday night about the refinancing of a portion of our bank debt. We were able to reduce our interest rate and avoid large balloon payments that were due during the third quarter of 2026 with a new five-year note payable through the third quarter of 2030. With that, I'll turn the call back to Michael. Michael?

Speaker 2

Great. Thanks, Tim. We are very focused on the commercial opportunity that we have with First Defense. We are pleased to see a fraction of the new product formats of First Defense that we have introduced to the point where the First Defense product line now should be seen as a suite of related products with expanded uses and appeal. Our financial recovery and improvement shows up on the favorable adjusted EBITDA results that Tim just touched on. Eliminating the order backlog has been a critical business objective for some time now. Our focus remains on both recovering from the disruption caused by the prolonged supply shortage and capturing increased market share with the goal of building a long-term growth track. With regards to Re-Tain, we expect producers to become excited about identifying and treating cows at the subclinical stage with Re-Tain, thereby creating a substantial animal welfare benefit.

That is because animals infected with subclinical mastitis often go untreated and progress to the clinical disease state. Once cows are that sick, they require antibiotic treatment and may die or be culled from the herd. The success of this product will depend largely on our ability to implement treatment protocols in a way that the nice when we deliver to treated cows does not interfere with starter cultures that are used in some milk processing methods to make, for example, cheese and yogurt. One of our challenges is to find optimal treatment and milk processing practices to avoid such issues. The following comment is a very important issue to me.

We hope that milk processors will engage in this evaluation with us in order to help the dairy industry improve the health of certain sick cows that often go untreated, while at the same time improving the quantity and quality of milk that is produced and also reducing abortion rates. We believe that treating subclinically infected cows could enhance best practices in the industry. It is common practice for cows to be treated with traditional antibiotics that are also used in the prevention of certain diseases in humans, which is a growing public health concern in our society and an active issue with the FDA, largely because of the growing evidence that this overuse of traditional antibiotics contributes to antibiotic resistance and the rise of superbugs or pathogens that are resistant to these antibiotics.

Our bacteriocin is an alternative to these traditional antibiotics that are used in human medicine because our active ingredient, nisin, is not used in human healthcare. Re-Tain would not contribute to this significant public health concern and could help the industry address an important sustainability objective, that being the overuse of antibiotics that are medically important to human healthcare, while at the same time improving the quantity and quality of milk produced by treated cows. While sustainability objectives call for reducing the use of antibiotics in food-producing animals, no new FDA-approved drug to treat mastitis has been developed in years. In the big picture, we are introducing an entirely new class of antimicrobial as an animal drug, a bacteriocin that does not promote resistance against antibiotic use in human medicine, making it more closely responsible.

The industry could keep treating this very significant disease with traditional antibiotics, but it takes innovation to bring a bacteriocin like nisin to market. We believe our product fits very well with where the industry is going to be in the coming years. While being mindful and prudent of how much cash to be invested in inventory that would have a short expiry date if the market launch were delayed, we did build inventory during 2022 and 2023 to support potential initial sales of Re-Tain. Over the second half of 2025, we plan to use this inventory on hand that now has a relatively short shelf life in investigational product use studies, collecting market feedback about product performance in the field in collaboration with Michigan State University. We do not anticipate the investigational product use to generate sales or gross margin.

Although the FDA granted a zero milk discharge period for Re-Tain in 2018, we decided to introduce a short discharge period in these studies out of an abundance of caution. This is because nisin levels, while considered safe for adult human consumption, can impact certain milk processing applications. Even if we conclude that a milk discharge period is required by milk processors at launch, we expect it to be significantly shorter than those associated with traditional antibiotics currently on the market. Further, discarded milk is often fed to calves, and we believe that this discarded milk would be much healthier for calves than antibiotic-laden discard milk. It is our objective to complete the investigational product study and data analysis during the first quarter of 2026. At the same time, we are reducing product development expenses and exploring potential strategic options for our novel technology.

Our go-to-market strategy for Re-Tain has evolved in response to FDA approval delays and cash constraints. A full commercial launch will not proceed until three key conditions are met: one, FDA approvals obtained; two, a validated aseptic fill solution is in place; and three, adequate cash is available to produce commercial inventory. In the meantime, we are focused on three key projects, that being one, conducting the in-field investigational product use trial, which could provide valuable insights into how producers perceive the product benefits and integrate the product into their herd health protocols; two, evaluating strategic options that could offset some cash requirements and enable a mass market launch of Re-Tain; and three, investigating alternative uses for the Re-Tain manufacturing plant and equipment. This disciplined approach is intended to protect shareholder value, ensure regulatory compliance, and support a successful market entry.

Lastly, I encourage you to review 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. An August update was just posted to our website last night. See the investors' section of our website and click on corporate presentations or contact us for a copy. With that, we would be happy to take your questions. Let's have Nick open up the lines, please.

Speaker 0

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Once again, if you'd like to ask a question, please press star, then one. Your first question today will come from Andrew Rehm with Odinson Partners. Please go ahead.

Speaker 4

Morning, gentlemen. I guess my first question is, you noted that, second half, sales down, as you kind of work through the backlog. Can you say what organic growth, if we exclude the benefit of backlog sales in the first half, was?

Speaker 6

Hi, this is Tim. I don't think we specifically mentioned a number. I would mention that the backlog at the end of March, at March 31, 2025, was $4 million, and we have worked through that backlog during the second quarter, with some of the orders being canceled, most of them being filled. I think that's part of the reason we can grow. I don't know, Michael.

Speaker 2

Yeah, no, I think you're right, Tim. I mean, we really stay focused on GAAP. They all got our door. Our sales team has discussions with distribution and, you know, obviously tries to keep them full, but we don't have reporting requirements there or reporting results there. It's, yeah, I think we stick with GAAP out our door, but we're in enough conversations to raise it as a caution. It's essentially a one-timer, and I think that answer is going to play out over Q3 and Q4. I do think the long-term plan is solid, but we got to get through this bubble.

Speaker 4

All right. Can you guys give an update on kind of Re-Tain? I think in your 10-Q from the first quarter, you had mentioned you had a facility inspection and were kind of, I think you got a 483. I think you've responded to that, but has there been any additional back and forth with the FDA relating to that, or can you speculate on the delay in potential approval?

Speaker 2

No, it's a good question, Andrew. Just for clarity, there's sort of two sides to this. There's the ImmuCell side where we make the drug substance. We have passed inspection. We do not have a 483. We've been in that good condition for quite some time now. The challenge, the frustrating challenge, is that we do use a CMO for aseptically filling our drug substance into the tubes, and that CMO has to resolve a 483 inspection observations. I wish as much, and probably more than you, that I could put a timeline on that. It's extremely frustrating. It's been going on for over a year now. I do know with confidence they're working hard on it, but I don't know the timing on either end.

Their success or the FDA's agreement to their success, it's an open inspection that they are motivated to resolve, not just for Re-Tain, but for other products in their suite. It is the final hurdle for FDA approval, and we're eager to get it resolved, but it is almost exclusively totally out of our control, and the FDA and the CMO are working on it.

Speaker 4

Okay, that's helpful. You guys had also mentioned you got some inventory, which it sounds like is coming up close to expiring, so you're going to use that as part of your investigational. Can you just comment on how much inventory will be expiring in that, let's say, the second half of the year that would be part of that investigational use?

Speaker 2

Not in like numbers of tubes and certainly not in dollar value because it will not generate sales, as I mentioned. The answer is all of it. This is product that was produced in anticipation of the commercial launch. It will all be used for investigational. It will not generate revenue. I think, as I mentioned, coming back to commercial launch will require new production, and we have not put the cash to that at this point because we think it's better to get the approval, complete the investigational, and then see what our strategic options are. That will really have, yeah, Tim, comment on the P&L impact.

Speaker 6

That inventory for Re-Tain has already been expensed, so there is no impact on the future.

Speaker 2

Good point. Right.

Speaker 4

Okay. Can you just maybe provide some examples of the types? Like when you mentioned, you've mentioned a few different times here, including in the press release, pursuing some strategic options. What might be some of the different forms that that could reasonably take?

Speaker 2

Yeah, I think the number one priority would be we are a relatively small company with a relatively small sales team, and that team is very, very focused on First Defense. Bringing in a larger marketing group that could, we hope, look at our investigational study data and get excited and then help us with that loss financially and, you know, in the barn. Introducing a very different, a very novel, very new way to treat a disease-stage subclinical mastitis that's not treated today. We were looking for financial support and marketing support to take this to the next step. You know, we like to think that we would be a manufacturer, but that's those negotiations are really open and really flexible as to what form that takes.

Conceptually, it would be financial support and introducing a novel product at, to commercial launch, requires a lot of time in the barn, a lot of time with producers. I caught some combination that brings us that commercial launch with less financial exposure based on good data that we hope to get from this study during the second half of 2025.

Speaker 4

Would a distributor not necessarily be a good partner just because they might have a distribution channel, but they would lack kind of the experience or knowledge around the manufacturing side or even maybe the willingness to put up capital?

Speaker 2

I think you've almost answered your own question, and I would agree with your answer. Distribution products are essential. They're key. They do a great job for us. Our sales team is leveraged by them. It's largely, obviously, right now getting First Defense to market. As far as selling and changing practice and educating the industry and working with milk processors and lending financial support, the phone line's open, but I don't think that's likely. I think it's going to come more from a strategic and a distributor.

Speaker 4

Andrew, I think that's maybe my last question. I think you also have mentioned before thinking capacity from 30 to 40. Does the timing of that, what is that kind of dependent on?

Speaker 6

Yeah. We're continuing to evaluate the timing of that. There's no change in what we've announced in the past, which is essentially that project is on hold. There's some disclosure in the Q about the relative cost of moving from supporting $30 million in revenue to $40 million plus approximately, but no news on the timing, I think.

Speaker 2

I think it's a very important decision for our management and for our board, and timing is essential. We're just going to watch this over the second half of the year to make sure the cash flows are right. We're very happy to be over 30, and we're very optimistic that we will need to be over 40 and not too far out. A careful evaluation and under consideration. Timing is everything. Cash flow is everything.

Speaker 4

Okay. Maybe last question. On First Defense, it sounds like the sales team maybe has had some distraction, but now or more recently have greater focus. Can you comment on how you think that will help that product line, First Defense?

Speaker 2

Yeah, I'm guessing. If there was a distraction to our sales team, that would be, I think you might be referencing, how does the sales team sell product when it's on short supply? They've been very distracted dealing with a lot of very irritated distributors and customers that couldn't get the product they need. They did the best they could to manage that short supply, but that is distracting from new business, new territories, new customers, out of essential needs of we didn't, we couldn't, it would only make our backlog bigger if we brought in new business. Spoke a great clip here right around June 30, going into the third quarter, where now they are confident that we have adequate, very sufficient inventory. Go get the customers that we may have lost during short supply. Go get the new business wherever they can find it: dairy, beef, new territories.

They're back to what they like doing, which is selling.

Speaker 4

Is some of that too part of, I may be using the wrong word, but kind of rebuilding your reputation in the marketplace? I assume some of that, it's not necessarily starting on June 30th, your ability to unwind the backlog. I would hope that kind of helps in that process. Maybe you talk about some of the challenges, you know.

Speaker 2

Yeah. I mean, I would be very fair to say, very open to say our reputation was tarnished when we didn't deliver what the market wanted. They got frustrated with us. It was, you know, and then efficacy rules. They want this product because it works better than others. Yes, they were frustrated. That's what the sales team was distracted on, deal with that frustration. You know, with the expansions, capacity expansion complete, that phase, that era is over, and we just build back what's, you know, we were unreliable in supply in the past, but we are ready to ship every day going forward. Come back to us. Because efficacy rules, and that's how we'll get them back, the product performance.

Speaker 4

All right. I appreciate your time. It sounds like you're kind of in some ways, at least for First Defense specifically, a little bit of blue sky, which is kind of a nice environment for you guys to be in. Looking forward to watching you guys and the team kind of execute. I appreciate it. Thanks, boss. Great quarter.

Speaker 2

Thank you, Andrew. Very, very fair comment that's felt by each employee at ImmuCell for sure.

Speaker 0

Your next question today will come from George Melas-Kyriazi with MKH Management Company. Please go ahead.

Speaker 1

Thanks, Julie. Hi, Michael. Hi, Tim.

Speaker 4

Hey, good morning, George.

Speaker 6

George, good morning.

Speaker 1

You mentioned that investors play a great sell-off service. Can you talk a little bit about that, and maybe if you already have some sales there, and how do you sort of see the market opportunity?

Speaker 6

Yeah, just on sales, we're not specifically breaking it out. We definitely did have our first sales in Q2, and you know, we're going to continue to be on the market. I think we'll start breaking that out in the disclosure in Q3. We'll provide a little bit more detail as it becomes hopefully more material over time.

Speaker 2

Yeah, I just am, yeah, I think the numbers are early, yeah, but the feeling and the momentum is certain. I know Bobbi Jo and the sales team are really excited about it. It's a new niche. It's customers. It's large ranches with calf feeds as opposed to, you know, the traditional, you know, the dairy milking operation. Yeah, it's so far so good. I'll stand with Tim's comment and I think third quarter is the right time to start. We've always recently given that tri-field product line breakout, and I think it's appropriate to see where we get to in the third quarter and start tri-field, spray dried, and other. Just to give it a better, but an exciting start. You know, it's quite a build-up. A great job by the production team and by the sales team to get this new format out there. That's how we go.

Same technology, different formats, different packages, different markets, different customers.

Speaker 1

That sounds really good. It would be great if you could, I appreciate that you will break it out. That will, I think, sort of engage the conversation. Regarding your daily customers, are you talking primarily about sort of second-tier distributors that were somewhat neglected? Are you talking about end customers or are you talking sort of about both?

Speaker 2

It is a little bit of both, and mostly it's end customers. Distribution will move whatever they have available, and some got more than others. The same balancing act or rebound act is important. It's the end customers that just had to switch to a different product. They had to try something else to take care of their calf. Those are the ones that got to get back, and they can call their distributor, and the answer will be, they'll ship tomorrow.

Speaker 1

Okay. Is your sales force really energized right now that they can actually really sell as opposed to sort of take phone calls from customers that they couldn't, you know, deliver on?

Speaker 2

Energized, how do I say that more strongly? I mean, it's a new world, George. I mean, it was really hard for them. It was really hard for everyone. This is what they do for a living. This is what turns them on. They are fired up. It's a great—I'm sorry that they had to go through what they went through on short supply, and I'm excited for what they're going to deliver with tubes in the cooler.

Speaker 1

Okay, great. A couple more questions. I looked at the closing production inventory, and it's relatively flat. It came down a little. It seems after two very strong quarters of production, I was really surprised that it didn't come down. You still have a very strong inflow of collateral, of milk from the cows. How do you see that over the next 6 or 12 months?

Speaker 6

Yeah, just on inventory in general, you're right. We do have a strong network of farms that can provide collateral to us, and we're going to evaluate inventory over time as we see sales come in during the second half and manage that appropriately.

Speaker 2

I think, you know, just preventing a return to backlog is probably the number one priority. Cash management is essential and, you know, obviously super important. This inventory, this frozen collateral does have a long shelf life. It's a little bit of a security blanket, and the rebound plan would be to build, work it down, and spray dry is part of that strategy. It's pretty high right now. As back to Andrew Rehm's question on when do you go from 30 to 40, those are the things we're managing. Whatever steps we take are influenced by cash and by no return to backlog.

Speaker 1

Okay. Let me progress on those terms this quarter because net debt is down significantly, backlog is gone, and you have some finished with inventory. It seems like you're in good shape there.

Speaker 2

Sorry, George, I missed it. You said backlog was down. We agree. Some of the other piece we missed. What else?

Speaker 1

Yeah, like that, like that meaningfully. You made progress both on the cash position and on being able to serve customers.

Speaker 2

Yeah, George, we're definitely in agreement with you. Backlog down, that was key. Did you say debt was down? I missed that.

Speaker 1

Yeah, the net debt was down significantly with you.

Speaker 6

Yeah. We were able to refinance a couple of our loans, and as part of that, we eliminated a balloon payment right around $2 million. The debt in total is around the same amount, but we did eliminate a balloon payment in 2026.

Speaker 2

Right. Taking a $26 million balloon and spreading it over five years, like Tim said, total is still, it was a kind of a loss on the total, same total.

Speaker 1

Right. On the beef segment, that's my last question. It's very seasonal, and it's primarily December and January. What history, how big historically has that segment been for ImmuCell? What are you trying to do to build that side of the business?

Speaker 2

Yeah. It's hard because, again, we sell to distribution, and we don't know where they ship to. We don't get that kind of data, but we know just by historical seasonality and we know the way the beef guys do their calving early in the year. We know that that spike is largely due to beef, but also, you know, there can be seasonal challenges on scours, and maybe some people do treat more in a stressful cold winter. Beef is important and beef is difficult. Like we can do big dairies and, you know, one sales call can address 1,000, 10,000 calves. Beef is much more spread out, much more smaller. A lot of that work is done by marketing and just, you know, in the right pockets. The sales reps in the beef area do the on-site, on-farm, on-range visit.

What's new in that area to address beef is probably the biggest new thing is what Bobbi Jo Brockmann at the VTA Sales has done with the marketing campaign so we can reach a lot of people without a lot of truck rides.

Speaker 1

Okay, great. Thanks very much.

Speaker 2

Thanks, George. Appreciate it.

Speaker 0

Once again, if you have a question, please press star and then one. Please stand by as we pull for questions. Seeing no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Joe Diaz for any closing remarks.

Speaker 4

Thanks to all of you for participating on today's call. We'll look forward to talking with you again to review the results for the quarter ending September 30, 2025, sometime during the week of November 10. Thank you and have a great day.

Speaker 5

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