ImmuCell Corporation

Good morning, and welcome to Emucel 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. As Tom indicated, my name is Joe Diaz with Letham Partners. We're the investor relations consulting firm for Emucel. 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 safe harbor statement, provided with last night's release and with the company's periodic filing with the Securities and Exchange Commission. With that said, let me turn the call over to Michael Brigham, President and CEO of Emucel Corporation, after which we'll 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 Emucel. 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 demands. I would add obtaining the final regulatory approval of retain from the FDA to the top of 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 at meeting these challenges for us later in this call. I'll let you hear directly from them. First, I will 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 January 5th, we issued a press release covering our preliminary top line sales results. We've been 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 end of December 31, 2021, compared to $1.9 million during the year end of 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 Retain, I'm pleased to report that we made our second submission to the FDA to address the FDA's previous comments and queries 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 teams, In August, we will find out if the FDA either approves our NADA or asks for further questions. Our product development objective is to demonstrate that our peptide antimicrobial, 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 labor requirements of all intramemory 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. Retain 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, Retain 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 Retain, probably the most exciting work going on at Emuso right now is the growth in both of our production capacity and sales demand for the first defense product line. I have asked our VP of Manufacturing Operations, Betsy Williams, and our VP of Sales and Marketing, Bobby Joe Brockman, to speak about this 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 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.