Good afternoon, everyone and welcome to the ImmuCell Corporation Reports Third Quarter Fiscal Year 2017 Financial Results Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time I would like to turn the conference call over to Mr. Joe Diaz with Lytham Partners. Sir, please go ahead.

Thank you, Jamie and thanks all of you for joining us today to review the unaudited financial results of ImmuCell Corporation for the third quarter of 2017 which ended on September 30, 2017. My name is Joe Diaz with Lytham Partners. We're the Investor Relations consulting firm for ImmuCell. With us on the call representing the company today are Michael Brigham, President and CEO; Bobbi Jo Brockmann, Vice President of Sales and Marketing; and Elizabeth L. Williams, Vice President of Manufacturing Operations. Before Michael gets started, let me say that statements made by management of ImmuCell during the course of this conference call that are not historical facts are considered to be forward-looking statements that are subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. Words such as believe, expect, anticipate, intend, estimate, will and other similar words or statements of expectation identify forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, those risks and uncertainties detailed from time to time in filings the company submits to the Securities and Exchange Commission. Investors are cautioned that forward-looking statements made during the course of this conference call are based on management's analysis as of today and actual results could differ materially from the statements made. The company undertakes no obligation to publicly release the results of any revision to these forward-looking statements. A more complete safe harbor statement was included in the press release and the Form 10-Q that were both filed by the company today. With that said, let me turn the call over to Michael Brigham, President and CEO of ImmuCell Corporation. After which, we will open up the call for your questions. Michael?

Thanks, Joe and I thank all of you on the line for taking the time to join us on today's call. The full details to our quarterly financial results are available in the press release that was filed earlier today and the Form 10-Q that will be filed very shortly. I'd like to focus my comments on the sales results and also touch on gross margin, product development expenses and net income. I've asked Bobbi Brockmann and Betsy Williams to join the call to speak about our new product launch and our Nisin production facility. So sales were just over 2 million in the quarter and just under 7.3 million for the nine months year-to-date. These sales levels are similar to sales recorded during the same period during 2016. I believe it is important to consider the impact of an order backlog and a discontinued product to better understand our sales results. The prolonged period of order backlog which began in early 2015 and extended through the middle of 2016, disrupted our normal shipping patterns. The order backlog was reduced to 365,000 as of June 30, 2016, which backlog was subsequently cleared during the third quarter of last year. Since then, we've sufficient inventory to ship in accordance to the demand of our distributors. Secondly, during the first quarter of 2017, we discontinued the manufacture and sales of topical wipes product line. Sales during the first nine months of 2017 included just $97,000 of this product line, compared to 271,000 during the first nine months of 2016. Excluding the shipments of orders that were in backlog as of December 31, 2015 and sales of the discontinued product, our sales during the first nine months of 2017 would have increased 8%, in comparison to the same period during 2016. So it…

Thank you, Mike.

So with that I'd like to now ask Bobbi to speak about our new product and the beyond vaccination marketing strategy.

Thanks, Mike and I go with congratulations as well. So this additional USDA claim on our label means we are the only calf-level product that can protect against three note common scour also known as diarrhea pathogens for new born calf. We are the only one. Over the years, we've been shipping away at the market share of our largest calf level competitor that being Calf-Guard. Calf-Guard is the volume leader in this calf level category and until now Calf-Guard was the only product that had a rotavirus claim. They have this along with coronavirus claim. But now with our first contractual product, we have all three, E. coli, corona and rotavirus. So we should displace the Calf-Guard at a more rapid rate. The broad set of claims also opens the door for us to compete in a larger products category, this being the dam-level scours preventative market. This category comprised of vaccines given to the calf for no other reasons but to protect the calf from scours. These vaccines are designed to increase the antibody concentration in colostrums for these scour pathogens. Then through that consumption of colostrums, the calf receives immunity. Until now these vaccines have been the most often used tool in the tool box, that's why this dam-level category is the largest. But with Tri-Shield, we're doing what the producer is trying to accomplish with the commercial vaccines which is, increase the specific antibody concentrations, but we're removing all variant OD. So unlike traditional Dam-level scour vaccines, we can ensure as the calf receives a guaranteed level of protected antibodies. Our product is also already due to administer than dam-level vaccines, this enables producers to avoid the tricky timing required for vaccine efficacy and the associated risk of adverse reaction to those vaccines. Also, when using a dam-level vaccine, a producer needs to spend that money, before they know if they know if they have a live born valuable calf. Tri-Shield is given at birth, so the investment is much more targeted. We are certainly taking on some big competitors in a product category they focus a lot of time in this dam-level scour preventative market. We know we are poking the bear. This is truly a David and Goliath story, but you just read all the reasons why Tri-Shield is better than traditional dam-level scour vaccines. So our beyond vaccination message, service has a really solid platform and so far it's been quite well received. So those are the points that I thought you all might be interested in. At this stage I'll turn it back over to Michael.

It's great. Thanks Bobbi. This is really exciting and our sales team has been anticipating this product launch with great excitement. So let me come back for the financial results just a bit. Gross margin was lower than usual during the third quarter of 2017. We experienced in the biological yield during the quarter, so we understand and we're already seeing improved yields during the fourth quarter of 2017. Product development expenses were higher during both the third quarter of 2017 and during the first nine months of the year in comparison to the period during 2016. The increase in these controlled low expenses was necessary to advance the development of our two new products. So largely as a result of the increases in cost of goods sold and product development expenses, we reported a loss during the third quarter of 2017, which reduced our net incomes just over breakeven for the first nine months of the year. As many of you know, we initiated construction of our $21 million pharmaceutical facility to produce Nisin during the third quarter of 2016. As of September 30, 2017, we had invested approximately $14.6 million in this project, leaving approximately 6.2 million to go to finances. We had approximately 2.3 million in cash on hand as of September 30, 2017 and have access to up to 4.2 million in available bank debt. Our ground breaking product innovation is unlike all other antibody treatments in the market today. Our goal is to revolutionize the way mastitis is treated by making the treatment of subclinical infections economically feasible by not requiring a milk discard or a meat withhold during or for a period of time after treatment. No other product on the market can offer this value proposition. Nisin, the active ingredient, is a bacteriocin that is not used in human medicine and would not contribute to the growing concern that widespread use of antibiotics encourages growth of antibiotic resistant bacteria or superbugs. So with that background, I would now ask Betsy to speak about the current status of the project and the ribbon-cutting ceremony we held just last week.

Thank you, Michael. Yeah, the certificate of occupancy was issued on October 30, 2017 by the City of Portland. This really is almost precisely 13 months after ground breaking in late 2016, late September 2016 and certainly represents an outstanding job by our construction company, Consigli and our design firm Stantec, along with all of their sub-contractors. So to recognize this key milestone as Michael indicated, we did host a ribbon-cutting ceremony at the new facility on November 8. This included officials from the Portland City Council as well as the Economic Development Council, the State Agricultural Commissioner, some key vendors for us as well as many employees from Consigli, some local companies and a number of our employees here on site. So the certificate of occupancy really is a key milestone. It enables us as ImmuCell collogues to start to occupy the facility and initiate progress the equipment qualification work, which is necessary before we make the first full scale drug substance batches in the first quarter of 2018. Now, these drug substance initial batches drive the subsequent regulatory filing timings. In other words, the Phase I drug substance filing is targeted for mid 2018, followed by Phase II, which would be responses to any queries from the drug substance section, plus drug product dossier would comprise Phase II. Phase II is planned for filing in early 2019, since you'll see these are very key milestones in the regulatory filing. All of this is assume six months for each phase filing, followed by a 60 day administrative review. All of this is a represented timeline which could be to potential approval by the end of 2019 and then subsequent market launch. So we're well on our way, chipping away at the key milestones to get to approval and very, very proud of the team here that executed on that.

Thanks, Betsy. This is really a great progress on a huge project. So with that said, let's have the operator open up the lines for your question.

Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator Instructions] And our first question today comes from John Lipman from Craig Hallum. Please go ahead with your question.

Hey, good afternoon. Thanks for doing the call today, Michael and team, congrats on the quarter. Quick question for you, if you could just talk about Mast Out for a second, the filing schedule that you have in the couple of different phases, could you talk about - what is the work in these dossiers that you're putting together and more specifically, the data that the product works, that the Nisin works, could you talk about the clinical trials that you've already completed. Are there new clinical trials that you're going to do in treating calfs for mastitis or that's all done already?

Yeah, great question John. Thanks. I'm going to turn part of that over to Betsy as far as the specifics on the submission, which is called the chemistry manufacturing and controls technical section. So really it's all about manufacturing. That's explain what goes into those submissions because what's behind us - there are total of five technical sections, three of them are complete. In other words, the FDA has issued a technical section complete letter on environmental impact, on target animal safety and perhaps most importantly a fact of this. So that's where all the animal studies were conducted and those technical sections are complete. There is a fourth one called human food safety, the important piece of that technical section was the granting of what we call the zero milk discard, if liaison is safe to consume. The FDA has agreed that it can have a label claim zero milk discard, we did not want to go forward with investments like this without knowing we had efficacy in the animal on a competitive product label and a differentiating competitive advantage being zero milk discard. That technical section is not yet quite complete. We expect it will be complete in the second quarter of next year. There's a last step there, it's a laboratory method technology transfer from our labs, the FDAs labs, so that's underway. It's inside of the critical path timeline which again I will turn to Betsy for little detail on the CMC technical section.

Yes, the drug substance section that will represent a lot of the detail about our process here in Portland from an overview of the process, the critical the quality aspects of the process are in process controls or finished goods specification. A lot of that are manufacturing facility, equipment, rim classifications, level of clean room status etcetera. And the section also includes analytical procedures that are used for end process and finished good testing. That will be the essence of the drug section filing. It's a very detailed package and that section could culminate in a FDA inspection of our facility here in Portland. That's typically done and they will not see facility up until that point. So that's phase 1 in anticipated to be submitted in mid of 2018. The second phase involves responses to any queries that FDA surfaces as a result of the filing so gives us a chance to respond, provide additional controlled data etcetera, we don't anticipate any additional batches per say, but it will also include the drug product sterility assurance processes and description and controls and testing etcetera, so it's by phase II we will have a very comprehensive including drug substance plus drug products. And that we anticipate to be filed in early first quarter of 2019. And again that drug product facility in Norbrook would be subject to an inspection if FDA deem that appropriate. They are currently FDA approved for a similar dosage form.

So, John these reviews are subject to a statutory review time of six months so the time that leaves out more or less like this. We finish all works of installing qualified equipment we make these batches around the middle of '18. We make that first submission and we sit for six months. That's - and could be longer than we shorter and we are pretty sure it's going to take two submissions, so it will a few months in between the first and second to respond to the question like that in detail. Then you have another submission. It's another six months and as she mentioned that last sixty days we had all that up, things go well, if we stick to that time line brought to the end of 2019 for a product license.

Great, and just one other question. Congrats, I saw that you got USDA approval for Tri-Shield. Could you talk to us about your marketing plan for Tri-Shield and when you are done telling us about the marketing plans for the Tri-Shield, if you wouldn't mind is there any marketing plan or changes you will need to make your sales force for Mast Out as well. And then I'll stop and I'll get back in queue. Thanks.

All right, thanks John. Yeah, so the marketing plans to date has been hold back the sales team, because this sales team is very real, but they have no product to sell. We can super dose so we got a license from the USA but with this license we roll out to launch with that I will turnover to Bobbi, just to explain little bit more about what's beyond vaccination, what she is doing with the sales team to launch now that we have the approval to ship and sell.

Yeah, so it's one thing that actually ship product and our goal was to make sure that as said as we had approval, our market was ready to place orders. And so we have since then in the last couple of months working with distribution to get the product entered into their system, convince them to take the products into their system. Number one then get a setup in their system and there is a number of our distributors that have worked with us to the extent where they were actually booking pre-orders. So, obviously we can ship products so they could ship product, but they were taking orders and so there's end users credit cards for example wouldn't be charged until we ship the product and so I feel like the distribution chain is very well prepared. We have - so we are ready to go there and then I discussed the beyond vaccination message a little bit. That is really the platform entering this products, because it allows us to go after our primary calf level competition but will also open that bigger pie right that dam-level vaccine market, because we have three claims so we can better compete with those game level products that also have those rates. But we are doing it on a platform where a whole lot of good reasons why people should challenge the conventional way, the traditional way which at the game level caller vaccines and so we are breaking tradition. And going after that, that market as well so it is the bit of a paradigm shift not as much of a paradigm shift as the mastitis product will be, but it's good launch pad to get us even deeper relationships with largest dairies, so that we are ready for when the mastitis product is available.

Thank you, very much.

And thanks Bobbi and John just to touch on the next level I think you referred to at the end. So, the more success of this launches and the more we grow sales and more we can afford, more sales reps and as our team is challenged with large territories. So, each time we're able to break a territory down. We can be more and more effective in that territory. So, we would expect some incremental growth in the sales team as we go over the next couple of years. And at the end of the day David is not going to become Goliath overnight. We are certainly competing against the big guys that are always going to have more reps and we do in every zip code and every county, but working too long ago that we had one or two sales people covering all country and we have had this incremental growth up to six regional reps of sales and marketing employee and then Bobbi run in the show. So, incremental growth has we compete for and get ready for a launch of a bigger our products representing two years out.

Thanks a lot. Thanks for your time. Good luck on the coming quarters.

Thanks John.

[Operator Instructions] our next question comes from Sam Rebotsky from SER Asset Management. Please go ahead with your question.

Yes, good afternoon and congratulations on this wonderful achievement, Mike and everyone in the team.

Thanks Sam. Feel some exciting week or so round here.

That's good. Now, the First Defense and the Tri-shield are they - do you sell both products going forward or the Tri-Shields have the First Defense product in it?

Yeah, so we are not going to take anything away from our customer. So, if our customer is happy with products that they are using today, we are going to keep that available. So, that means we will have a bivalent product in a capsule, we have a bivalent product available in the gel tube, if they do want to step up and subscribe to the beyond vaccination program that will be the trivalent product in the gel tube only because that many antibodies just one up there inside of a capsule.

Okay. So, that's a combination of both products or does the - the former need to have both products? I don't know this

No, only the single dose.

Single dose.

All of them - so the producer would decide, do I want a single dose in a capsule, do I want a single dose bivalent in a gel tube. Do I want a single dose trivalent in a gel tube.

Okay, that sounds good. Now I assume since you have advance orders or we - distributors had the advanced orders, is there a total dollar amount that you could sort of - do you have inventory or you not allowed to produce the inventory into the USDA gave you u approval and how long would you be able to produce an inventory to ship now?

So, we are going to just build inventory according to sales. So, we took a risk and built some for launch that will ship in the coming days. Final packaging and what not take place in its ship and then we are just going to have to do - we are going to be monitoring sales and allocating our production process between the bivalent line and the trivalent line. So really we will launch right away in the coming days and we just have to see the results. We know we're going to see some drop in bivalent sales as the customer converts we may see some first times on a trivalent customer because we are ready for all formats and respond to customer demand.

And now that you have the Tri-Shield do you think will be able to get overseas shipments in the countries that you won't able to sell the first defense, previously is there more of - have you got any advance signs of that?

Actually not really Sam, I mean it will be helpful for sure rotavirus is an important pathogen in those territories but the barrier is not having rotavirus, the barriers is the regulatory approval. So, we will continue whether it's a bivalent or trivalent having to get that regulatory import or exporter across, but there will be more interest and certainly have in that relative with something that was missing from some international customer demand.

Okay, I had previously spoke to you about the size of the global market for Nisin and this publication statistics MRC had a number even though it's not the purified Nisin that you are going to make. They had indicated that the size of the market is $420.8 million in 2016 and $618.6 they are projecting for 2023 and their point is that meet the rising consumer need across many nations and applications of meat protects it from being contaminated. And maybe at some point in time this size of the market when you finally get approval for the Mast Out, somehow there will be a way to get more Mast Out because the size of the Nisin market is pretty large.

Yes Sam Nisin, I am not familiar with that source, I would like to catch to then and have our team to take a look at it, but I am going to take a guess here I mean what I know is it's not an animal house drug application of Nisin. I think what they must be referring to is the other huge market which is food preservation. So, it's the same Nisin not aware of it being used as a meat preservative more as a sort of processed dairy food preservation agent, so a very different same Nisin, but a very different level of purity. So, that food preservation would never get approved, their foods, that food grade Nisin used for food preservation will never get approved for what we are trying to do all this work and all this money is being spent to make a high pharmaceutical grade purity. So, similar and instructing but I don't know enough about to comment at this point now.

I will fax this to you or get this to you.

Yeah, curious, I am curious to look at in. It's good, it's good news to - we have - I think we are opening a new market, but it's good to know that is that market is large as you suggest on these other applications and doesn't surprise me. Nisin is very broad spectrum very effective, very active and has a heck of lot of sales in a much lower price point application as if we are talking about that.

Good luck.

Thanks Sam.

[Operator Instructions] Our next question comes from Tony Pollock from Aegis Capital. Please go ahead with your question.

Good afternoon.

Hi, Tony thanks.

Could you give us an idea on the pricing on the Tri-Shield versus the existing First Defense product.

So, it is going to be more expensive to buy, it will more expensive to make because this essentially two doses in one. We will continue to have the same productions stream for E-coli and corona and then we had a whole new productions stream for rotavirus to combine a three-in-one in one tube, but Bobii wants to jump in on the distributor pricing. Bobbi Brockmann

Yeah, no problem. Well, how about I can put it in the perspective on retail pricing might be more real. So, our producer is going to pay $2 more, 2 to $2.50 more for the Tri-Shield product than for the current product if they were to get our current in the gel tube. The gel tube format as Mike had indicated is more expensive to produce versus the capsule, but we just can't set the needed of rotavirus antibody into that capsule so the new product going forward will only be available in a gel tube. So that added packaging allowing the added value of the rotavirus creams will be about 2, 2.50 depending on the region more per calf. Now comparatively speaking our competition, some of them are dead cheap and some of them are slightly higher than that. So, I think when we compare the value for the price, we are actually priced pretty well at that 99 retail.

And could you give us an idea of the market size in terms of - is there a product out there that takes care of this problem, the rotavirus or is that just used when necessary I mean is it I don't understand the market there.

I think we can put it in on, it kind of speaks to Bobbi, what we are excited about is the damn level market, we see the cash level market as about $17 million a year and then as Bobbi mentioned the damn level is bigger. It's about twice that so there are going to be people that will stick with their vaccine and never move over. It does give us a bigger target, something like about double of the cash level market.

All right and just any statistics on how much you are saving in the industry because they went - they went fully from $17 million market to a $34 million market.

Will, Bobbi in the team and she may want to comment on this too, but it is almost a case package, they are going out with distributors and leveraging that distributor beating with big producers and running that on a rely and on a form-by-form basis where you can show them here is your totally loaded cost of vaccine with all associated cost and here is the total cost of ours. And we are not going to win every calculation, but there is plenty of opportunity where we can sell that positive of ROI versus the direct delivery to the viable camp versus vaccine to all the cows. Get that close Bobbi.

Yeah, to spot on actually there are so many factor and that it is a case-by-case scenario and we do just dispense the true cost of a dam-level scour program and that takes into account first on first papers on the firm, how many deliver that on arrival cows, the firm and the response rates, since they think they are getting from a damn level vaccine which industry with a positive 80% response rate and then with present and of course that's different if they are using semen. So there is a lot of factors, that calculation though has been very positive because that really shuts some light on what the true occurred to live on valued animal is on this firm I mean different farms and it put some sense in pretty positive light when you are comparing clinically.

And can you operate at if you got orders for double your sales, could that be accomplished by the way or within a few months in other word as the product really took off.

All right, the big investment we made to double capacity was completed early '16. I would - don't expect it to flow it overnight. However, we got the capacity available for just about double what we didn't say will be watching these sales reports over a week by week over the next few months just to see what to be put in our projections, production schedule projections for 2018.

Okay, could you address why the cost of goods sold went up r so much this quarter versus last year?

Yeah, frustrating for sure, kind of hit we weren't expecting, but really, largely due to biological yields we - it since we are seeing as Bobbi goes out and sells the beyond vaccination program, one of the things she was talking about is the response to vaccines is variable. That's a good sales pitch, that's not such a good production pitch, but it's true on both ends, so do we see biological yields go up and down. We saw quite a bit down here in the third quarter as you've seen. As I did mention, I think we've been able to understand it and fix it and we look at the fourth quarter and the early batches are already coming to the right place, so I don't see there's a long extended problem, but it definitely hit the third quarter. It kind of doubles down on a quarter in which we had planned not so much production because we were good with inventory and we took people and allocated that labor over to the Nisin project. So when you're a little late on output or throughput and you get a yield on the same quarter, we had I guess the good news is that - that is bad as it's ever been at 47% than we see it texted in the - going into the fourth quarter here.

Thanks a lot.

Thanks, Tony.

And ladies and gentlemen that will conclude today's question-and-answer session. At this time I would like to turn the conference call back over to Joe Diaz for any closing remarks.

Thank you, Jamie and again I like to thank all of you for participating on today's call. We will look forward to talking with you again at the conclusion of the current quarter. And hope you have a great day and a great week ahead of you. Thank you.

Ladies and gentlemen that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.