Joe Diaz - Lytham Partners, IR Michael Brigham - President and CEO.

Sam Rabotski - SER Asset Management Brian McCauley - Moloney Securities Larry Brookes - Moloney Securities Tony Pollock - Aegis Steven Farber - Far Ventures.

Good afternoon. And welcome to the ImmuCell Corporation Fourth Quarter and Fiscal 2014 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, this event is being recorded.

I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead..

Thank you, Laura. And thank all of you for joining us today to review the financial results of ImmuCell for the full year and for the fourth quarter fiscal year 2014, which ended on December 31, 2014. As the conference call operator indicated, my name is Joe Diaz. I am with Lytham Partners. We are the Investor Relations consulting firm for ImmuCell.

With us on the call representing the company today is Michael Brigham, President and Chief Executive Officer. At the conclusion of today's prepared remarks, we will open the call for question-and-answer session.

If anyone participating on today's call does not have a full text copy of the release, you can retrieve it from the company's website at immucell.com. Before we begin with prepared remarks, we submit for the record the following statement.

Statements made by the management of ImmuCell during the course of this conference call that are not historical facts are considered to be forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements.

The words believe, expect, anticipate, estimate, will and other similar statements of expectation identify forward-looking statements.

Such statements involve risks and uncertainties, including but not limited to those risks and uncertainties relating to difficulties or delays in development, testing, regulatory approval, production and marketing of ImmuCell’s products, competition within its anticipated product markets, the uncertainties associated with product development, pharmaceutical grade, Nisin manufacturing, the company’s potential reliant upon third parties for financial support, products and services, changes in laws and regulations, decision-making by regulatory authorities, currency fluctuations and other risks detailed from time-to-time in the filings ImmuCell Corporation makes with the Securities and Exchange Commission.

Including its quarterly reports on Form 10-Q, its annual report on Form 10-K and its current reports on Form 8-K.

Investors are cautioned that forward-looking statements made during the course of this conference call are based on management's current expectations -- involve risks and uncertainties that could cause actual results to differ materially from the statements made.

More complete Safe Harbor statement was included in the February 4th press release announcing this conference call and also with today’s financial results press release. The company disclaims any obligation to update forward-looking statements.

With that, let me turn the call over to Michael Brigham, President and Chief Executive Officer of ImmuCell Corporation.

Michael?.

Thank you, Joe, and thank you to all of you participating on today's call. All of us at ImmuCell greatly appreciate your time and interest. As you saw in today’s press release the fourth quarter of 2014 was very strong capping off of very productive year in 2014.

Sales in the fourth quarter increased 41% to $2.2 million and increased 26% for the full year to $7.6 million. That puts us at 10 consecutive quarters of positive sales growth and 16 out of last 17 quarters in comparison to the same quarters of the prior years. Our lead product First Defense comprises over 90% of our total sales.

Regarding First Defense, calf scours take the heavy total in terms of economic harm to the farm. We estimate that annual scours related costs are approximately $328 million to the dairy industry and approximately $412 million to the beef industry. So these are large market opportunities with great potential going forward.

Our Director of Sales and Marketing, Bobbi Jo Brockmann and her team continue to do a great job in driving First Defense sales and further penetrating the dairy and beef calf markets.

The recent expansion of our sales team is paying dividends as we now have regional sales and marketing managers in each of the significant dairy producing markets in the U.S., which include California, Texas, Idaho, Wisconsin and the Eastern U.S.

Driven by improved efficiencies and increase production volume, gross margin during the fourth quarter 2014 was 61%, compared to 39% during the fourth quarter of 2013. The fourth quarter of 2013 result was unusually low, gross margin for the full year 2014 was 59%, compared to 51% in full year 2013.

While we are pleased with the 2014 results, this is not something that I expect to be repeated on the consistent basis. Our realistic expectation going forward is gross margin can consistently be maintained above 50% on an annual basis.

Net income for the fourth quarter was $131,000 or $0.04 per diluted share, compared to net loss of $151,000 or $0.05 per share in the fourth quarter of 2013. For the full year 2014, the company reported a net loss of $167,000 or $0.06 per share, compared to net income of $117,000 or $0.04 per diluted share in the full year 2013.

The financial results during 2014 include approximately $973,000 in product development expenses related to the building out of the necessary manufacturing infrastructure to complete the FDA Chemistry, Manufacturing and Controls Technical Section known as the CMC, as the company progress towards an asset approval -- towards approval of our Mast Out product.

So in that regard, sales of Mast Out are subject to approval of our new animal drug application know as a NADA by the FDA. The FDA’s phase review process of NADA allows us to break down the regulatory development process into five technical sections as we go.

We have three technical section complete letters in hand for environmental impact, target animal safety and effectiveness. Our remaining efforts are now focused on completing the Human Food Safety and the manufacturing technical section. The big investments required for NADA approval are behind us. The large clinical trials expenses are complete.

The large investment in our manufacturing facility was completed at the beginning of our third quarter. With these large expenses behind us, we returned to profitability in the third quarter of 2014 and continue that profitability into the fourth quarter as we have projected. Market conditions are still very positive.

The annual average milk prices and milk-to-feed ratio for 2014 were very strong, despite a drop at the end of the year and the price for bull calves remains near an all-time high. The fundamentals of our business are very strong. We continue to be in good position to grow our business in the coming years.

All-in-all, we are pleased with the continued momentum and the consistent sales growth of our First Defense product line and the continued progress we're making in our Mast Out, FDA approval process. We anticipate being able to begin commercialization of Mast Out around the end of 2016.

Our sales team continues to do a great job of penetrating the market for First Defense and setting the stage for the Mast Out product rollout if FDA approval is achieved.

The financial underpinnings of the company remained strong, with cash and cash equivalents of approximately $3.8 million after funding a $2.2 million investment in product development expenses during 2014. We have only $896,000 in bank debt and we continue to fund our operations from internally generated cash flow.

We continue to execute on the two core components of our business strategy, expanding the market penetration of First Defense, our best-in-class treatment for calf scours and advancing the development of Mast Out, our novel treatment for subclinical mastitis and lactating dairy cows without a milk discard requirement.

We are making measurable progress on our strategic goals and look forward to 2015 and beyond with great enthusiasm.

With that, let’s open the call for your questions? Laura?.

Thank you. [Operator Instructions] Our first question will come from Sam Rabotski of SER Asset Management..

Yeah. Good afternoon, Michael..

Hello, Sam..

This was a wonderful quarter. It's unbelievable the -- I guess the additional sales help that you acquired, contributed to this substantial improvement in sales.

And can we look forward to -- I mean, we don't expect to have the same kind of profit margins but we expect to improve the sales significantly going forward for the First Defense?.

Good question, Sam. So my caution there was I do think the fourth quarter is unusually high as I mentioned around 61%. I think we can keep that over 50%. I want to bring that expectation down to a reasonable level and that's a good healthy margin for us. As to growing sales that’s our expectation into the foreseeable future.

I mean it's a good market and two-fifths of our regional sales managers were only working with us for half of 2014. So we stand to benefit from their efforts for the full year going into 2015. So, we keep pushing ahead and look for similar results..

Well, that's good. The interview that you had just recently was a very-very positive and talking about a 60 million to 75 million U.S. market for the Mast Out.

Is it possible that the worldwide market could be as much as $400 million?.

I’m not at all familiar with that number, Sam. I think what I’d caution is the 60 million that writer referenced was what we have referenced for the clinical market. So, we have a pretty good feel for how many, what the market is for the sale of -- traditionally antibiotics to treat clinical mastitis.

And we’ve used that as a benchmark or an indicator of the potential magnitude of a subclinical markets for our product where that subclinical claim. So that’s an important clarification that $60 million at least for us in our disclosures is referring to clinical mastitis.

Now outside of the U.S., this objective for ImmuCell to get FDA approval, that’s our goal. We would need assistance from some kind of a partner, an outside source with foreign regulatory expertise. I would caution one of the big markets being Europe, our current expectation is Mast Out.

A product like Mast Out will not get a zero milk discard in Europe. It will be subject to milk discard just like traditional antibiotics. So that market is not quite as attractive to us, although a shorter discard is better than longer discard. But outside of Europe, those markets where we think a zero discard could be relevant.

And we would pursue those with some order collaboration with someone who has got that foreign regulatory expertise..

Thank you, Michael. I’ll give somebody else a chance to ask some other question and I'll come back with some follow-ups..

Okay. Thanks Sam..

[Operator Instructions] Next we have a question from Brian McCauley of Moloney Securities..

Hi Mike. Good quarter..

Hey, thanks Brian. I appreciate that..

Hope you’re doing okay in the snow out there..

Yeah, we’re doing a little digging..

How many doses can you produce of the First Defense in the current facility? And is that -- I know the sales are going up but what do you look for going forward on that?.

Yeah, you might have noticed in that press release if you had a chance to look at it. We did comment on the needs to grow production -- grow production capacity. So we’re doing that. When you see, we talked about the 40% and similar kind of growth over the last six months. So it doesn’t take very long at that rate to double sales.

So we’re investing pretty aggressively in production capacity to get in track -- to get in line with sales growth. So the first investment is complete. I mentioned that. You can see pictures of that. If you're curious on our website that’s 7100 square feet facility investment is now usable and that’s going to help us immediately on growing capacity.

And we’re going to need to keep investing with sales growing like this..

Okay. Great. Thanks Mike..

And then the next question is from Larry Brookes of Moloney Securities..

Yeah. Hi. Couple of things, you indicated of course your gross margin was up this quarter. Why -- I guess, maybe I missed it.

Why was the quarter so good and why do you feel you can’t maintain that higher margin?.

Well, it was a pretty unusual quarter to ship that much product over a lot of fixed cost. So when we look on an annual basis, I think we’re going to find that to be a little -- very favorable but a little hard to repeat.

There was that kind of growth in one quarter when our equipment, our facility in the short term over the last three months of the year. Our labor was potentially a fixed cost, so all the stars are lined up pretty good there. And over time I think that’s too high of a bar to set us a standard..

When you trace back from historically your sales, this doesn’t seem to be your highest quarter.

So it appears that I guess, the improvement stales, the group that you hired has helped out or what’s your comment there?.

I think the sales team is doing really an awesome job. So no doubt, they get a lot of credit for this. It helps to be more frequent, more present with distribution with customers in a good market environment and then our real strong milk price, our real strong milk to feed, our real strong value for the bulk assets, a very new economic benefit there.

The bulk have been in worth as much as it is today. That helps our sales team succeed but to make it very interesting point, Larry because the first quarter traditionally is our best quarter and we just succeeded the first. The fourth quarter of ‘14 was higher than our first quarter of ‘14.

Our last quarter is never bad quarter but the first is always the best. So it does give us some excitement about -- if we can keep that trend going through the strong quarter. The first quarter has always been the strongest. Scours are more prevalent in winter. The beef producers are caving more seasonally at that time.

So it’s a nice fourth quarter to roll right into our peak season on..

Is this the best quarter result the company has seen?.

You’re talking topline because it’s certainly not on the bottomline but on sales….

Yes..

…on the -- off the top of my head, I know for the fact it is for the last three years going back '12, '13, '14..

And then -- okay, good. In reference to the facility, so everything is pretty much already for, if you do get approval.

In other words, you have the machinery in place, whatever you need to produce the new product, is that correct, or what else are you missing here?.

Right. That’s correct. But just to be clear there has really been two different facility investments. So there you are talking about the Mast Out investment. So that’s the facility and isolate clean room that we are going to produce Nisin at small scale to get regulatory, to get FDA approval of Mast Out.

I think the prior question was asking more about First Defense. So the second investment has been the facility addition and that’s production space for First Defense. So yes and yes, that addition has just recently been completed and that Mast Out facility was completed in the third quarter of '14.

So we’ve been using that facility to optimize and validate and get ready for that CMC submission..

So part of the facility is just kind of just waiting for the new product to come out?.

It was a necessary part to the regulatory submission. You’ve got to show the FDA that you know how to make the product, repeatable, good consistent quality and equivalent to the material use in your clinical trial. So that’s the purpose of the Nisin investment, the investment in the Nisin plant..

I see.

And you still hope that you will get these two acceptances, CMC stuff going six months intervals it sounds like?.

Yeah, I think what is the we are looking to make the first submission in third quarter and the FDA is by statute got six months to review that and they will use all everyday of the six months. So we are anticipating two submissions. So the first one we want to get in the third quarter. They will review it.

I would be happy to have them come back and surprise us with the first time complete. But it’s not likely, it’s not common, CMC is almost always a two submissions. So six months each..

I see.

So I guess what I am getting as in the first submission, could that go beyond six months?.

No, the good news and the bad news is its six months, it won’t be shorter, it won’t be longer..

Okay..

Once we make a submission, they get back to us at about 178 days..

I see. Okay. And then I guess the last thing, I think we just touched on this the last conference call, but I am just not sure.

Once everything is completed, once you have the CMC stuff going, once you can start producing product, what type of dollars are you looking at on a -- let’s say a three months, six months basis for your sales? It sounds like it’s just going to be a very limited dollar amount..

Right. It is -- it is insignificant. It really is test marketing and this is just not a commercial plan. This investment was made for a regulatory purpose to get the license, get the approval. This is not the commercial scale plant..

I see. Okay. Good..

And that gets back to that comment I made about the $973,000 this investment, because it’s not a commercial investment, it’s not a commercial scale plant, that’s the investment that was expensed and written off during the first half of 2014..

I see. Okay. Good. Well, thank you. And good luck..

Great. Appreciate it. Thanks..

And our next question comes from Tony Pollock of Aegis..

Good afternoon..

Hi, there, Tony..

So on the Mast out, I assume there was minimal capital expenditures to be expensed until you get approval.

Is that true?.

Right. Yeah, that we ran all -- almost all, I mean we’ve got ongoing labor to make the submissions and all that, personnel costs, but you asked about capital expenditures, now that’s all done, that plant is up and running. We are doing the optimization, the validation now and those expenses went through in the first half of 2014..

Assuming you get approval by the end of 2016, what would be the capital expenditures after that for Mast sales of Mast Out?.

Right.

So full scale, when we were talking with big pharma and looking for that kind of a huge market launch with big pharma, the big full scale plan was $13 million, but what we’ve done, if that’s too much to do as of first at launch, we’ve got a sort of revised plan that can scale that back by several million, get us in the 9 -- get us under $10 million -- $8 million to $10 million for commercial scale, but maybe not year 5 and 10, but maybe year 1 to 5.

So it’s an investment that’s beyond our current ability to finance and it’s in the range of $8 million to $10 million..

Okay. Thank you..

Great. Thanks, Tony..

And next, we have a question from Steven Farber of Far Ventures..

Michael, can you give us any update on the rotavirus work and new indication for First Defense?.

Yeah. Good question, Steve. Thanks. So the trials being run on time. We expect it to complete enrollment around the end of the year and that we’ll achieve timely. So, we’re in that stage here where we don’t have a public disclosure on the results. But I can tell you when we do, we know positive or negative.

That will generate a press release as a material event and that's the next step there. So the enrollments been complete as planned, announcement up or down, when we have the data and then the further submission and regulatory work with the USDA gets us out to an expectation to launch that product, not in ‘15 but in ’16..

Okay. Thank you..

And the next question will come from [Ted Siemens of Retail] [ph]..

All right. Michael, congratulations on the quarter..

Thanks Ted..

I just wanted to ask looking at the press release from the third quarter and the CMC technical section was supposed to be submitted in the first quarter of this year. And it seems like the timelines being pushed back six months for Mast Out that was laid out and the third quarter press release.

Is there any reason for that or can you explain that?.

Three letters, FDA. We do try and put our best in current expectations. And rather than seeing them back and always coming under, we try and be realistic and I can remember making that disclosure. And at that time that was our best and current thinking.

Today is better and more current thinking is it’s going to take us a few more months to get this ready. The optimal submission ready to go and I’d rather make the right submission just a little bit later than a rush submission early.

And this is back-and-forth with the FDA and you get new questions and you get a little better answer every time you have around with the regulators and that's kind of the name of the game or something that's as big as new animal drug application..

Okay. Thank you. Appreciate the answer..

Thanks Ted..

And the next question is from [Frank Gasca] [ph]..

Good afternoon..

Hi, Frank. Thanks..

Most of my questions have been answered already. But I have one maybe, Nisin pharmaceutical-grade.

Do you know of any other manufacturers of the pharmaceutical grade and do you see any other markets where it could be sold?.

We don't know of others. Certainly not with our strain and we think we have a very valuable high producing proprietary strain. We see a lot of Nisin on the market but not pharmaceutical-grade. I mean, it starts out as a food preservative at a very, very crude preparation.

We’ve been selling a fairly cleaned up preparation of Nisin as a surface sanitizer but this pharmaceutical-grade for the FDA submission. We’re not aware of any others and other markets meaning outside of the U.S.

or….?.

I mean other uses of Nisin other than Mast Out..

Right. Well, I can tell you -- I think there are Nisin’s very broad-spectrum. It’s got a lot of interesting characteristics outside of mastitis and for us it’s the surface and the intramammary at this point. But I think there's other opportunities down the road.

But right now, the Wipe Out is our surface, is our skin sanitizer for the dairy cow cleaning the other. And we are selling also companion application. Very similar product just targeted towards the companion animal market. So for us at this point, surface and intramammary but I think there's potential for others down the road..

Keep up the good work. Thank you..

Thank you. Appreciate it..

And our next is a follow-up from Sam Rabotski of SER Asset Management..

Yes. Michael, there seem to been in the herd’s dairy two articles talking about somatic cell count and improvement of milk by getting the somatic cell count lower. What is the number that would by the Mast Out of the somatic cell count? And to the extent that we could give more of this and get it lower improve the milk that would seem to be good..

Right. So, I’m not positive I understood the question, Sam. But I can tell you this. The claim to treat subclinical mastitis is based on a care. It’s a bacteriological care. So it's not based on a number of somatic cell counts but you're right to know that the industry is moving towards cleaner milk and somatic cell counts are measured in thousands.

So, the U.S. industry used to be 750,000 limit for commercial milk. It's recently moved down to a 400,000 limit to comply with European standards. And clean farm operates at a 100,000 or under. So, Mast Out will have a claim for one thing and to be able to assist sort of off-label, if you will on two other things.

We have a claim for a treatment of subclinical mastitis in lactating cows, Part of what that will do is prevent clinical infections and also part of what that will do will be reduce somatic cell counts and that's part of the value prop on the product is what the producer gets is not just a subclinical cure but he gets more valuable milk.

And they are paid on a scale based on somatic cell counts measured quality of milk. The better your milk, the better you get a higher price. You get a premium..

That sounds wonderful. You are doing a good job. The whole ImmuCell team, keep up the good work..

Awesome. Thanks, Sam..

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Brigham for any closing remarks..

I think that was a very-very good discussion. I appreciate people being on the line and asking good questions. I hope we have answered them and just want to thank you all for your participation on today's call. And we’ll look forward to talking with you again at the conclusion of this first quarter 2015. Have a great day. Great week..

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