ImmuCell Corporation Aktie

Good morning, and welcome to the ImmuCell Corporation conference call to discuss unaudited first quarter 2026 financial results. [Operator Instructions] Please note this event today is being recorded. I would now like to turn the conference call over to Joe Diaz of Lytham Partners. Please proceed.

Thank you, Chris. Good morning, and welcome. As the operator indicated, my name is Joe Diaz with Lytham Partners. We are the Investor Relations consulting firm for ImmuCell. I thank you for joining us today to discuss the unaudited earnings for the first quarter ended March 31, 2026. 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 the steps the company plans to take in the future.

These statements are not guarantees of performance 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 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, May 15, 2026. 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.

With that said, let me turn the call over to Oliver Te Boekhorst, President and CEO of ImmuCell Corporation, for opening remarks. Oliver?

Thanks, Joe, and good morning, everyone. It's my pleasure to welcome you to today's discussion of ImmuCell's results for the first quarter of 2026. Starting this quarter, our discussion of results will be accompanied by a few key slides that are part of our new investor presentation. You can find that on our investor page, immucell.com/investors. In 2025, the company made significant changes to better position itself for success, including a strategic focus on the calf scours market and investments in leadership and in manufacturing yield improvement.

In the first quarter of 2026, we are starting to see the results of this focus. We achieved our first ever $10 million revenue quarter, which is an exciting milestone for our commercial team and our manufacturing team. And we also achieved 45% gross margins after absorbing legacy Re-Tain related costs that shifted from product development to gross -- to cost of goods sold and reduced gross margins by approximately 2.4% during the quarter. We also grew net income 34% compared to the first quarter of 2025.

In previous calls, we explained the rationale behind our new strategy to focus on First Defense, our leading calf scours preventative product. Since 1991, ImmuCell has competed successfully in the large growing market for calf scours prevention with a highly differentiated product portfolio that we believe has considerable runway for further expansion domestically and internationally. As we will discuss later in the call, we believe we are gaining share in this market, competing against the world's largest animal health companies.

Historically, ImmuCell's challenges have centered less around market demand and more on manufacturing capacity and product availability. And for a company our size, it made a lot of sense to focus on our successful on-market product and solve those challenges, and we are well underway to do that. Our results in the first quarter give us confidence in this decision. I will review some of these drivers in more detail and share some of our market observations after Timothy Fiori, our Chief Financial Officer, completes a deeper review of the financials for the first quarter of 2026.

I now turn the call over to him. Tim?

Thank you, Oliver. I'll start with a short recap of product sales results, which are unchanged from our April 8 press release. All the numbers I'll speak to are approximate and rounded. Product sales for the first quarter of 2026 came in at $10.4 million, an increase of 28.4% compared to what had been a record-breaking first quarter of 2025. Domestic sales for the first quarter grew 35.7% compared to the first quarter of 2025 to $9.7 million, while international sales for the first quarter declined 30.2% to about $600,000 in the same period.

In terms of product specifics, we continue to be pleased with strong relative sales of Tri-Shield, our flagship product, which grew 38.5% in the first quarter of 2026 compared to the first quarter of 2025. We realized gross margin improvement in the first quarter compared to prior year. Gross margin as a percentage of product sales increased to 45% during the first quarter of 2026 compared to 41.6% during the first quarter of 2025. We achieved this improvement despite a headwind of 2.4% in the first quarter of 2026 coming from costs associated with former Re-Tain assets, which year-over-year have shifted the cost of goods sold from product development expense.

Year-over-year gross margin expansion in the first quarter of 2026 is coming from both price and manufacturing performance, partially offset by the aforementioned shift of former Re-Tain-related costs. Operating expenses increased to $2.7 million in the first quarter of 2026 compared to $2.2 million during the first quarter of 2025. This was driven by increases in G&A, mostly related to investments in leadership and higher sales expense related to expanded commercial activities resuming a more normal pace following the backorder management period in the first quarter of 2025. Operating expenses were partially offset by lower product development expenses due to the previously mentioned shift of former Re-Tain-related expenses to cost of goods sold.

Other expense decreased to $15,000 in the first quarter of 2026 compared to $330,000 of other income in the first quarter of 2025. This was driven by a nonrecurring insurance payment in the first quarter of 2025. To wrap up our income statement discussion, our net income was $1.9 million or $0.21 per share during the first quarter of 2026 compared to $1.4 million or $0.16 per share during the first quarter of 2025. As Oliver mentioned, this is a 34% increase in net income year-over-year. As usual, we provided EBITDA figures in yesterday's earnings release. We believe looking at EBITDA assists management and investors by looking at our performance across reporting periods on a consistent basis, excluding certain charges from our reported income before income taxes.

EBITDA improved to $2.6 million in the first quarter of 2026 from $2.3 million in the first quarter of 2025. To wrap up with financials, let me highlight a few key balance sheet items. Our balance sheet as of March 31, 2026, is in a strong position with improvements versus year-end 2025, driven by the robust performance in product sales that we discussed previously. We ended the first quarter of 2026 with $6.8 million of cash on hand and $8.7 million of inventory. Working capital increased from $13 million at the end of 2025 to $15 million at the end of the first quarter of 2026. We will continue to closely monitor and manage cash and our other assets as we balance long-term investment with near-term operational needs.

With that, I will turn the call back to Oliver. Oliver?

Thanks, Tim. Congratulations to the team for the excellent results in the first quarter of '26. As I mentioned in my initial remarks, ImmuCell made the decision to focus on our scours preventative products called First Defense in late 2025. In the first quarter of this year, we achieved a record $10 million product sales and Tri-Shield particularly has showed very strong growth. It is the most advanced protection against scours that we offer in the market.

Our focus on First Defense makes a lot of sense when you consider calf values have increased almost sevenfold in the past 3 years, and scours is a condition that affects up to 15% of pre-weaning calves and is the leading cause of death in these calves. We believe it causes up to $1 billion of economic burden in the U.S. due to treatment costs, performance losses and mortality. High and rapidly increasing calf values have driven an increased appetite to invest in premium prevention products and scours is top of mind for many producers due to prevalence, morbidity and mortality.

In 2025, we estimate U.S. farmers spent approximately $93 million on scours prevention products for about 14% year-over-year growth. In Q1 2026, we saw a slightly moderated 11% year-to-year growth for the overall scours biologics category, but ImmuCell's first defense accelerated and accounted for what we estimated was nearly 80% of total category dollar expansion in the quarter. This is based on revenues to end customers as reported by distribution partners and market research firms. We are excited to report that our share of U.S. category spend expanded from 29.1% to 35.2%, and our share of animals treated increased from 15% to 18.1% between 2021 and the first quarter of 2026.

We believe this performance is driven by an increase in sales activity that started last quarter and the market's increasing confidence in our product availability. Another driver is our premium pricing and positioning in the market. Premium pricing explains why our share of spend is higher than our share of animals treated. When I visited with our customers this quarter, they told me that First Defense products have several advantages that create a premium value proposition for them. Specifically, First Defense provides immediate protection for immune incompetent newborn calves against the 3 common pathogens that cause scours. And in addition, it also offers a lot of other bioactives that help calves stay healthy as a result of being derived from colostrum.

So our sales activities are now pivoting to winning new customers since about 55% of calves are still not getting any biological treatments at all. We believe the addressable market in the U.S. is more than $200 million. And internationally, the TAM is at least 5x as large. We will focus on these opportunities. As I discussed in previous calls, a key part of our strategy, given the tailwind from the macro environment and our excellent value proposition for customers is to ensure we have product available. This has been challenging for ImmuCell, and we are working hard every day to ensure we maximize yield and increase our output to keep up with demand.

We made decisions in late 2025 to address manufacturing capacity constraints. And as you can see, we had an excellent first quarter of 2026, reaching a record of more than 450,000 manufacturing units of output per month. And this compares to 380,000 manufacturing units per month we achieved in 2025, 344,000 in 2024 and 252,000 in 2023.

This expansion of output helped improve our gross margin in addition to the price realization that Tim mentioned. Yield improvement is challenging and comes from doing a lot of different things really well every single day. There's no magic bullet or a single big lever. The team got together and committed to ensuring availability. And then we improved our planning, which allowed for more preventative maintenance and balanced workflows. We reduced waste and scrap events, and we increased utilization by deploying some overtime and making incremental investments in various equipment to increase throughput. I can't thank the team enough for their efforts.

Just a note about manufacturing units, they do not match up with revenue because of the different and changing price points of our products and the different number of units used for different products in our portfolio. There's still a lot of work to do to stay ahead of demand for the remainder of 2026. We have to stay focused on managing and mitigating contamination risk. We have to keep providing great service to our colostrum supplying farms, and we have to manage yield improvement while we execute a major capacity expansion in our colostrum processing plant.

We are pleased to announce that we reached a $2 million settlement with a former contract manufacturer, and we plan to deploy this cash to expand capacity to meet long-term demand. We plan to use more advanced process flows, state-of-the-art drying equipment and assets previously purchased to manufacture Re-Tain, the subclinical mastitis product that we have been developing until we focused on First Defense in December 2025.

We are finalizing these expansion plans, and we'll communicate more information on future earnings calls. In previous calls, we discussed other investments we're making to align with our new growth strategy. We hired an international business development executive with decades of dairy industry experience, and he is helping us transition from a reactive approach to international opportunities to a planful strategic approach. We are using a rigorous process involving management and the Board to understand market opportunities and product requirements, go-to-market investments, regulatory activity and time lines and our capacity expansion time lines as well.

While we believe the international opportunity is significant, success will require disciplined market prioritization and time to prepare for and execute successfully. And our efforts are focused on building the right foundation for sustainable global expansion. In the meantime, we have expanded our sales territories in the U.S. by 3 instead of the previously announced 2 territories since we see so much momentum in the domestic market.

Finally, I will repeat what I've communicated on each call. Our top priority at ImmuCell is solid execution across the organization from sales to farm management to vaccine manufacturing and colostrum processing, including all the support functions that make future profitable growth possible. In the first quarter of the year, we announced changes to our corporate governance that supports this focus. We now have a smaller independent Board with 3 new board members who bring extensive animal health and functional expertise. I look forward to working with the new Board on executing our focused strategy to deliver the day while we secure the future.

With that said, we will be happy to take your questions. Let's have the operator open up the lines.

[Operator Instructions] And today's first question comes from Frank Gasca, a private investor.

Outstanding quarter. And congratulations to the team on that performance. Could you talk a little bit about your First Defense in bulk product and its seasonality, its target market, whether or not it competes with existing products.

Thank you for that question. Let me see if I can give you a little bit more detail. So our functional feed product is a non-USDA-approved product that uses a different manufacturing process that we use a different process to make it, but it essentially has our First Defense technology inside. It uses the same colostrum. And it reduces our cost to manufacture, and it's offered to the market at a lower price point. And it is particularly useful for those operations that don't want to feed each calf individually, but can add this to the water or colostrum or milk that they're providing to the calves as a group. And so it has a different dynamic in that regard. We launched it late last year, second half of last year, essentially the new formulations of this product. And so we're -- it's still in a product launch phase for us.

And the next question comes from George Melas with MKH Management.

Totally outstanding quarter. Congratulations to a fantastic start. I want to ask a few questions about production capacity. I think you said that there's no magic bullet to improving production and yield that there's so many different levers. Can you tell us a little bit more about what were some of the key improvement that led to the yield improvement. And also with your current capacity and your 4 freezers, what do you see is your maximum capacity at this point?

Thank you, George, for your question. There are some primary levers that we used in the last quarter, and there are some others that we are planning for that will hopefully yield more in the future. So the primary levers in the past 4 to 6 months have been improving our planning. So aligning our sales forecast with our production forecast on a very kind of SKU level and then planning our workflows so that it's balanced so that one part of the team isn't waiting for another part of the team.

And with this planning, we also added some overtime capacity to some critical steps in the manufacturing process. And if you do that in a planned way, it's actually manageable and it ties into back to the timing point that I made. We also reduced waste in our process. There are parts of our process where we're not using everything that we could. And so reusing and just focusing on that waste and reducing that increases output.

Finally, there were a couple of steps in the process were minor, I would say, investments in capital and a bigger tank, some extra membranes, I mean some things like that really helped increase the throughput of a particular step in the process that was either a bottleneck or about to become a bottleneck. And so those are the key things that we've done. There's other ways to further improve yields, and we're looking at them on a continuous basis. We have a program in place that we're all focused on to get to a higher yield. And we review that program more -- several times a week, actually, we're working on it. And so we don't know and have a specific number in mind of what is our maximum.

We're just improving yields kind of on a percentage basis, if you will, on a continuous basis. And at the same time, as I mentioned in my comments, it is time to think about a major capacity expansion. And so we're very fortunate that we have the payment from our contract manufacturer that we can deploy towards that. And we are in the midst of actively planning a capacity expansion for our plan.

Okay. Great. If I look at Slide #5, where you have basically the product mix over the last 3 years. Help us understand the trajectory of Tri-Shield, how it dipped during 2025 and has had a huge rebound. What drove that? Was that demand driven? I imagine you have some ability to influence demand, but it's a puzzling -- it seems to peak in the first quarter, but it's -- maybe help us understand that, if you can.

Yes, George, it's good to hear from you. This is Tim here. I think that the thing that's challenging about some of the trends in the past few years even is the back order dynamic. So it's really a lot of time dependent on what was available to sell to customers. And I think that creates some different dynamics that may not be intuitive. So that could be what you're seeing. I mean, overall, the trend is that more customers seem to be shifting to Tri-Shield. That seems to be really where we're growing. It's our flagship product, and that's the trend that we're focused on.

George, the only other thing that I would add to that is that Tri-Shield is a premium-priced product also compared to Dual-Force and our other products. And in the calving season that we just had, it's the least price-sensitive segment that had a lot of demand in the last quarter or 2. And so that helps explain some of the uptake on Tri-Shield as well.

[Operator Instructions] And the next question is a follow-up from Frank Gasca, a private investor.

Your increase in sales force again that you just mentioned. I'm curious as to what the main drivers of that is. And as far as regionality and the target market for those regions, could you get into that? Because it's my understanding that the market is divided into dairy and beef. Where is your growth headed? Where is your sales directed?

Thank you, Frank. We have expanded our sales team to essentially cover the entire country where there are calves, whether they're beef or dairy because both industries use our product. Although traditionally more focused on the dairy segment where we're seeing significant increases in the beef as well because beef calves are also increasing in value. And so with the increase in value of calf, investing in a preventative like First Defense makes a lot of sense for producers where they're going to get a really good return on investment.

So our goal is that we understand, and I understand this from my personal visits to customers, but the sales team sees this, of course, every day is that the more contact you have with customers to explain how our product works, the differences between our product and some of our competitors, which are vaccines and the differentiation that our product provides, it really helps close the deal, helps educate the customer, and they appreciate the time and investment in them. So our strategy around sales force expansion is that more customer contact equals more revenue. And we've been seeing that now for a couple of quarters.

And so we decided that it made sense to add a third territory, a territory in the west of the U.S. that had been, frankly, open for almost a year now. We decided to accelerate the hiring for that region. So I hope that gives you some color. We're really looking at in each region of the country, what are the number of calves that are out there, what percentage of them are getting any treatment at all. And what does the sales cycle look like? We have some experience in that because in some regions, if you can close a deal faster than in others. And so we're looking at kind of the fastest, highest return of our investment when we talk about adding commercial people to our team.

And at this time, this concludes our question-and-answer session. I would now like to turn the conference back over to Joe Diaz with Lytham Partners for any closing remarks.

Thank you, Chris, and I thank all of you for participating on today's call. We look forward to talking with you again to review the results for the quarter ended June 30, 2026, during the week of August 10, 2026. Thanks again, and have a great day.

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

Good morning, and welcome to the ImmuCell Corporation Conference Call to discuss Unaudited Fourth Quarter and Full Year 2025 Financial Results.

[Operator Instructions]

Please note, this event is being recorded.

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

Thank you, Bailey, and good morning to all. As the conference call operator indicated, my name is Joe Diaz with Lytham Partners. We are the Investor Relations consulting firm for ImmuCell. I thank all of you for joining us today to discuss the unaudited financial results for the fourth quarter and the year ended December 31, 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 the future events or expected future results or predictions about the steps the company plan to take in the future. These statements are not guarantees of performance 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 the safe harbor statement provided with 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, Thursday, March 5, 2026. 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.

With that said, let me turn the call over to Oliver Te Boekhorst, President and CEO of ImmuCell Corporation, for opening remarks. Oliver?

Thanks, Joe, and good morning, everyone. It's my pleasure to welcome you to today's discussion of ImmuCell's Full Year 2025 Results. 2025 was a very successful year for the company. In 2025, we hired a new management team. We increased manufacturing capacity to meet end customer demand and resolved a multiyear backorder situation. We pivoted to a strategy that is dedicated towards maximizing shareholder value from our highly successful First Defense franchise.

We achieved total product sales of $27.6 million, and we earned $1.6 million of net operating profit, which was an improvement of $3.3 million compared to 2024, largely driven by significantly expanded gross margins. In our previous calls, including our special investor call on January 9, 2026, to discuss our full year revenue and our shift in strategy to focus on First Defense, we explained some of the drivers of our revenue performance and the rationale for our new strategy. In summary, we compete in a large growing market with a highly differentiated product portfolio that has a lot of runway for further growth domestically and internationally. And so we decided to double down on this successful First Defense franchise.

Our results in 2025 give us confidence in this decision. I will review some of the drivers in more detail and share some of our market observations after Timothy Fiori, our Chief Financial Officer, completes a deeper review of the financials for the fourth quarter and full year 2025.

I now turn the call over to him. Tim?

Thank you, Oliver. I'll start with a short recap of product sales results, which are unchanged from our January conference call. All the numbers I'll speak to are approximate and rounded. Product sales for the fourth quarter of 2025 came in at $7.6 million, a decrease of 1.6% as compared to the fourth quarter of 2024. The Q4 decline was so modest is noteworthy. As you will recall, our very strong sales in the fourth quarter of 2024 benefited from increased demand and catching up from a prior backorder situation. We had earlier warned that quarter-to-quarter comparisons for the last half of 2025 would be affected by this catch-up factor. That same dynamic will continue to impact growth rates in the first half of 2026, but I want to be clear that this does not impact 2026 operationally, we're shipping orders every day.

Digging further into the details, domestic sales for Q4 grew 8.7% as compared to the fourth quarter of 2024 to $7 million, while international sales for Q4 declined a bit more than half to about $600,000 in the same period, mainly driven by order timing in Canada. It's important to note that international sales are only approximately 8% of total sales for Q4 2025. For the year as a whole, in 2025, we grew 4.3% as compared to 2024 to total product sales of $27.6 million.

Similar to the quarterly results, we saw growth in domestic sales and a decrease in international sales, again, influenced by order timing from our Canadian distributor. In terms of product mix, we're pleased to see continued shift towards Tri-Shield, reflecting new customer acquisition and migration from our lower-priced Dual-Force products by some customers seeking the broadest protection available. We realized gross margin improvement in 2025 as compared to prior year. Gross margin as a percentage of product sales increased to 38% during Q4 of 2025 compared to 37% during Q4 of 2024.

Notably, we achieved this improvement despite Q4 2025 gross margin being suppressed by noncash inventory write-downs. The full year results show the story more clearly. Gross margin increased to 41% during the full year 2025 compared to 30% during full year 2024. Gross margin improvement in 2025 was driven by increased manufacturing volumes and efficiencies as well as product price increases, partially offset by noncash inventory write-downs. As previously disclosed in our January conference call, we conducted a thorough review of fixed assets and inventories.

As part of that review, we took a noncash write-down across Q3 and Q4 of 2025 of approximately $650,000, mainly consisting of work-in-process colostrum inventory. This noncash write-down is approximately 5.9% of Q4 2025 revenue and approximately 2.4% of full year 2025 revenue. We will continue to carefully monitor assets, including inventory as part of a rigorous and disciplined capital allocation process. Operating expenses increased to $3 million during Q4 of 2025 compared to $2.2 million during Q4 of 2024. Operating expenses increased to $9.8 million during the full year 2025 compared to $9.6 million during full year 2024.

The increase in both period comparisons was primarily driven by increases in G&A, partially offset by reductions in product development expenses related to Re-Tain. Other expense increased to $2.8 million during Q4 of 2025 compared to $100,000 during Q4 of 2024. Other expense increased to $2.7 million during full year 2025 compared to $500,000 during full year 2024. The primary driver of both Q4 and full year 2025 increases came about as a result of our shift in strategy around Re-Tain.

In December, we announced a shift away from Re-Tain manufacturing to allow us to focus more on our highly successful First Defense product line. In December, we took a noncash write-down impairment charge of $2.7 million for certain Re-Tain-related property, plant and equipment. This is $200,000 or so less than I discussed in the January conference call, which is attributable to a slight increase in our estimation of future salvage value.

We continue to sharpen our overall assessment of the value of former Re-Tain assets that we plan to repurpose for use in First Defense manufacturing and our estimates of their net value are subject to change. We did have a onetime income from insurance proceeds of $427,000 in the first quarter of 2025, which provided a partial offset to the Re-Tain write-down in the full year view. I'll wrap up the income statement financials with some discussion of the improvements we've seen regarding 2025 net income and earnings per share as compared to prior year.

Net loss of $1 million during 2025 represents a $1.1 million year-over-year improvement compared to 2024, even considering the significant impact of the previously mentioned $2.7 million Re-Tain write-down. The year-over-year improvement was driven by higher sales and increased gross margins. Basic net loss per share during 2025 was approximately $0.12 per share in contrast to a net loss of $0.26 per share during the prior year.

Please note that we provided EBITDA figures in yesterday's earnings release. However, the EBITDA calculations do not adjust for the impact of write-downs for Re-Tain or inventory, which are obviously material to 2025 results. Lastly, operating income for 2025 was $1.6 million compared to an operating loss of $1.6 million in 2024, a year-over-year improvement of $3.3 million. To wrap up with financials, let me highlight a few key balance sheet items. We ended 2025 with $3.8 million of cash on hand. Working capital increased from $10.6 million at the end of 2024 to $13 million at the end of 2025, driven by higher finished goods inventory. As you may recall, we ended 2024 with near 0 finished goods. We will continue to closely monitor and manage cash and our other assets as we balance long-term investment with near-term operational needs.

With that, I'll turn the call back to Oliver for some closing remarks. Oliver?

Thanks, Tim. Congratulations to the team for the excellent financial results in 2025. It was a challenging year for sure with a lot of change, but ImmuCell navigated it well, and we are ready to make 2026 a success. As promised, I will take a little time to review our strategic focus and share some market observations with you. ImmuCell competes in a very attractive, large and growing market for calf health solutions with our First Defense range of products. Calf's health is a dynamic market that has seen rapid and dramatic increases in the value of cats driven by dairy beef cross breeding and a contraction in the U.S. calverd, which has tightened calf supply relative to market demand. First Defense is a best-in-class preventative for calf scours, which is a condition that affects 14% to 15% of pre-weaning calves.

That's approximately 5 million calves every year in the U.S. alone and is the leading cause of death in these pre-weaning calves. Scours represents up to $1 billion of economic burden in the U.S. due to treatment costs, performance losses and mortality. And U.S. farmers spend $90 million to $100 million per year on scours prevention products. Our customers, whether they are dairies raising their own calves, calf ranches that raise calfs for dairies or cow calf operations are all interested in preventing scours outbreaks and protecting these calves that are the highest risk animals on the farm.

Calves are born immune incompetent. And in the first few weeks of their lives, they are particularly vulnerable to bacteria and viruses. Our product line protects against 3 common pathogens that cause scours, namely Bovine Coronavirus, E. coli and Rotavirus. First defense products are colostrum-derived and the only USDA-approved solutions for scours that aren't a vaccine and delivers 3 to 6x as many neutralizing antibodies against these pathogens than our primary vaccine competitor does. And being colostrum-derived, we provide these calves a lot of other bioactives to help them stay healthy, too. It should not come as a surprise that we are priced at approximately 2.5x competitive alternatives.

These product characteristics have helped us win market share, increasing from 10% to 15% of treated calves in the U.S. in the past 8 years, and we capture approximately 29% of the spend in this growing category. Specifically in the U.S. in 2025, producers spent approximately $93 million on calves scours category. That's vaccines and our antibody products, which was 14% higher than in 2024. 10% came from the increase in the number of calves using scours preventatives and the rest from price and product mix. And yet, about 55% of calves are still not getting any treatment for scours at all. So when you do the math, the total addressable market in the U.S. is more than $200 million.

And internationally, the total addressable market is at least 5x as large. ImmuCell maintained approximately 15% share of treated animals in the U.S. in 2025, and we are pleased to report that we added more customers with new account volume more than offsetting normal account attrition in 2025 and that recurring customers increased their purchasing in 2025, driven by higher coverage rates and inventory normalization. We believe momentum accelerated in the fourth quarter. So we gained revenue share against the 3 largest animal health companies in the world during a time when we were supply constrained due to the manufacturing challenges.

Now that we're addressing manufacturing capacity, we have a lot of confidence in future growth. In late December, we announced our strategy to focus on First Defense and pause investment in a subclinical mastitis product that the company had pursued for some time to allow us to focus on the scours market opportunity I just described and critically important, also on improving our manufacturing capabilities and capacity.

To give you some background, we grew our manufacturing capacity from approximately 3 million units in 2023 when we were in a backorder situation to 4.1 million units in 2024 and 4.6 million units in 2025. This helps you understand the gross margin improvement that drove our bottom line results in 2025, although not all that margin improvement was driven by volume, a portion of that was efficiencies and product price increases also.

In the past 3 months, we have completed an exhaustive analysis of our processes led by outside experts and key leadership inside the company, and we have identified over a dozen opportunities to further increase our capacity to between 5 million and 6 million units per year. Units don't match up exactly with revenue because of the different and changing price points of the products in our portfolio, so we will no longer communicate our capacity in terms of revenue.

Having said that, we recently implemented medium- and long-term demand and supply planning, and the team is confident we can meet demand in 2026 and 2027 by implementing yield improvements, while we work on our next major capacity expansion. When we focused on First Defense at the end of December, this enabled us to really dive into these yield improvement opportunities, and we are also excited to repurpose assets previously deployed for our subclinical mastitis product to First Defense, and we are now devoting all our time and investments to expanding a successful existing product line.

Finally, we previously announced that we are increasing our sales capacity, and I'm pleased to announce that we hired a senior international market development leader, added a new sales manager in the U.S. and are actively recruiting for a third commercial position. We will make additional territory hires based on continuous assessments of calf population density, adoption of calf level scours prevention solutions and demonstrated price acceptance within each region.

In the meantime, I just returned from a very successful sales meeting last week, where we implemented a new standardized sales approach that will enable us to scale our commercial activities more efficiently. Our top priority at ImmuCell remains solid execution across the organization from sales to manufacturing and including all the support functions that make future profitable growth possible.

With that said, we'd be happy to take your questions. Let's have the operator open up the lines.

[Operator Instructions]

Bailey, if I might interject here while the queue builds up, let me begin with a couple of questions for management. Oliver, 2025 certainly was a transformational year for ImmuCell. Looking ahead into '26 and '27, what are the biggest challenges ahead that you see for the company to achieve your goals?

Thank you, Joe, for that question. I see 2 types of challenges that we're addressing as a company. The first one is a planned increase in yield and followed by an increase in capacity through more major investments. So as I discussed, we believe that with the opportunities we identified in the last 3 months, we can increase our volume to between 5 million and 6 million units. And this is without making any major investments. This is through improved floor planning, some maintenance, some small additions to existing equipment and a whole series of activities that are planned for the year that will get us there.

So capacity and making sure that we have the capacity to meet market demand is our first order of business. And at the same time, we are now stepping up our commercial activities. So whereas our commercial team has spent a lot of time in the past year to 2 years, managing allocations of products due to our back order situation, it is now proving to a proactive outreach to gain new customers. And so it's all about growth on the top line for the company. So those would be our 2 primary initiatives that we're focused on in the coming year.

Will you be expecting any additional Re-Tain write-downs in 2026?

Joe, I'll take that one. We don't anticipate any large write-downs for the assets formerly associated with Re-Tain. We're evaluating the best way to roll out this larger capacity expansion project, medium term, using the former Re-Tain plan and the majority of the former Re-Tain assets. We have booked a modest salvage value, a couple of hundred thousand dollars associated with the assets that have been written down. And there's always a chance that we'll reevaluate a specific piece of equipment over time. But currently, we're really not seeing anything like that.

As it relates to 2025 revenue, how much do you consider to be recurring? And is that something that will be the case in '26 and '27?

Thanks, Joe. I'll take that question. So the -- once customers are on our product, they see a fairly dramatic change or reduction in scours related to the antigens that our products protect against. And despite price increases and some supply constraints over the last few years, they've largely remained loyal to the company and to the product because of its impact on their operations.

So we aren't at this time would have calculate things like churn to give you an exact answer around recurring revenue due to all the things that happened in back order situation. For example, if a customer couldn't get our product from one distributor, they would sign and ask another distributor for the product and that impacts the way that we can calculate churn. So that's just an example.

So what I can say with my sales team's input, but also from my own personal visits to customers over the last 3, 4 months is a high degree of loyalty and a high degree of satisfaction with our products.

Fantastic. Well, with that said, I think this will conclude the Q&A session. I want to thank all of you for participating in today's call. We look forward to talking with you again to review the results for the quarter ended March 31, 2026, during the week of May 11, 2026. Thanks again, and have a great day.

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

Good morning, everyone, and welcome to the ImmuCell Corporation conference call to discuss strategic change in focus and unaudited 2025 sales results. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Joe Diaz with Lytham Partners. Please go ahead.

Thank you, Jamie. Good morning, and welcome. As our operator indicated, my name is Joe Diaz with Lytham Partners. We're the Investor Relations consulting firm for ImmuCell. I thank all of you for joining us today to discuss the change in ImmuCell's strategic focus and the unaudited sales results for the fourth quarter and full year December 31, 2025. Listeners are reminded and caution 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 guarantees of performance 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 the safe harbor statement provided with 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, January 9, 2026. The company undertakes no obligation to update any information discussed on today's call. Please note that references to certain non-GAAP financial measures will be made during today's call. With that said, let me turn the call over to Olivier te Boekhorst, President and CEO of ImmuCell Corporation for opening remarks. We will then have further remarks from Tim Fiori, pardon me, the CFO of ImmuCell, and then we will open the call for your remarks and questions. Oliver?

Thank you, Joe, and good morning, everyone. This continues to be an exciting time at ImmuCell. We shared in late December that we are shifting our strategy as a company to focus on First Defense. And consistent with prior practice, we have an earnings call to discuss our full year financial results, which will take place in late February, and we will not be commenting on earnings estimates today. However, the strategic shift is significant for our company, and we decided it would be helpful to review the implications of that decision and our fourth quarter and full year unaudited sales results in today's call.

So we're happy to report that we had a near record sales quarter, and this one was without tailwinds from catching up on back orders in the fourth quarter of 2025. Our Chief Financial Officer, Tim Fiori, will walk us through the numbers in more detail, but 8.7% growth in the U.S. and 41.3% growth of Tri-Shield in the fourth quarter of 2025 compared to the fourth quarter of 2024 are exciting achievements for the company.

We're also seeing substantial improvements to our manufacturing output and with more to come. And as recently announced, we are now in a position to repurpose manufacturing assets from Retain to support our long-term growth in First Defense after we decided to suspend investment in manufacturing Retain. Our decision to redouble our focus on First Defense and pause investment in Rain is based on 2 factors. The first is that we have very high confidence in future sales and profit growth potential in our First Defense business that we feel justifies investment and focused execution.

The second reason is the unfortunate stumbling block post when the United States Food and Drug Administration, the FDA, issued an incomplete letter for our Re-Tain new animal drug application. The practical implication of the FDA's decision is that we are still years away rather than just months away from achieving an FDA-compliant manufacturing solution needed to launch this product.

Continuing to invest in Rain would have required an increased commitment to fund expenses and capital investments to bring this new product to market, diverting resources that could instead be devoted to expanding an existing successful product franchise, namely First Defense. But let's talk about First Defense. Our First Defense products address the critical industry need for protecting cats. The newborn calf market has evolved rapidly over the past 5 years as calf values have increased significantly driven in part by widespread adoption of beef on dairy cross-breeding and the shortage of beef calf related to drought and the closing of the Mexican border, amongst other things. As a result, newborn calfs can be worth approximately $1,300 on day 1 of life compared to roughly $200 in 2003. Historically, dairies would derive 2%, 3% of their yearly income from selling the calfs they don't need. And now it's up to 20% to 25%.

And this macro trend has raised the economic stakes of early life calf health and survival. ImmuCell's first defense provides proven protection against neonatal scours, helping to safeguard these high-value cats. So we believe we have great runway in the market for scours protection, which we have estimated is approximately $900 million in total addressable market worldwide. So our strategy is to get out and meet more customers with strong medical, scientific and outcomes-based arguments for trying and using our products.

We also have opportunities for increasing our First Defense manufacturing output through operational improvements. In 2025, we increased output of our key bottleneck process, lyophilization by more than 15%, and we believe we can achieve a similar rate of increase in 2026 and to do so without using significant incremental capital. So more on that later. All these opportunities in our First Defense business require and in our judgment, deserve increased focus and execution. Now a second reason for our shift is the FDA's incomplete letter for retain. We have been developing this innovative treatment of subclinical mastitis in dairy cows for some time and thought we were close to obtaining final approval. ImmuCell passed FDA requirements for safety, efficacy in 4 of the 5 technical sections of our application, and we had expected that our contract manufacturer's completion of the fifth technical section would soon follow.

You will recall that we decided to employ this contract manufacturer for filling the active ingredient into syringes in order to limit our capital expenditure and to reduce our risk. And unfortunately, that is not how things worked out. We are not in a position to comment on details, but we understand that the reason the FDA declined to approve our application was because our contract manufacturer had still not satisfactorily addressed previously cited inspectional deficiencies.

So we received the incomplete letter on December 23 and shared this news with you the next business day. The incomplete letter from the FDA -- combined with our contract manufacturers refusal to extend their contract beyond March 2026, meant that we would have had to restart our manufacturing section and spend an unknown period of time, years to obtain approval, incurring significant expenses along the way. We decided this is not the highest value use of our company's resources. Instead, we will complete the investigational studies that are underway to document efficacy in the field and then prepare the best case we can for a potential future partner for Rain.

In the meantime, we will redeploy most of the manufacturing assets that were built for Retain toward expansion of First Defense capacity. First Defense also uses liquid processing equipment, for example, and we have determined that most of the retain equipment can be repurposed. At this point, I'm going to turn the call over to Tim Fiori, our Chief Financial Officer, for a deeper review of the financial implications of this decision and the quarter and full year sales highlights. Tim?

Thank you, Oliver. I'll start with product sales results and then discuss implications of the change in strategy as well as some other balance sheet adjustments. Product sales for the quarter came in at $7.6 million, a decrease of 1.6% as compared to the fourth quarter of 2024. We are pleased with the overall product sales number. As mentioned in the last earnings call, we did anticipate difficult year-over-year growth rate comparison as the fourth quarter of 2024 significantly benefited from orders related to the catch-up of a backorder situation. I'd like to note that the first half of 2025 also significantly benefited from orders related to catching up from the backorder situation.

Domestic sales for the most recent quarter grew 8.7% as compared to the fourth quarter of 2024 to $7 million. We experienced a decline in international markets, mainly driven by order timing in Canada, with Q4 declining 52.6% year-over-year. Shifting to full year 2025 results now. We grew 4.3% as compared to the full year 2024 to total product sales of $27.6 million. Similarly -- similar to the quarterly results, we saw full year-over-year growth in domestic sales and a decrease in international sales. The other notable trend within the First Defense suite of products is that we are seeing a shift towards Tri-Shield in both the quarter and full year, reflecting a migration from dual force products and the acquisition of new dairy and beef customers seeking protection for their calves. Now let's talk a little bit about some balance sheet-related items, starting with some items related to the shift in Rain strategy. As Oliver discussed, we're shifting our resource allocation away from Rain and to First Defense. As part of that decision, we did an initial evaluation of over $15 million in property, plant and equipment related to Re-Tain and concluded that the majority of it, including our building and most of the equipment would be useful for the liquids processing part of our First Defense manufacturing process.

There are, however, certain pieces of equipment such as the aseptic filling machinery, which will not be useful in the manufacture of First Defense. The immediate financial impact of that assessment is a noncash impairment write-down of some existing assets, which will impact Q4 of 2025, currently estimated at $2.9 million.

As we continue to evaluate the repurchasing of the building, it is clear that modifications to the building and additional capital will be necessary, and we are currently in the process of evaluating the company's needs and related costs. In addition to our evaluation of retain assets and the shift in strategy to maximize the return on our assets and future cash expenditure, we conducted a thorough review of other fixed assets and inventories as part of the year-end closing process. In management's evaluation of inventory in conjunction with the manufacturing team, we have decided it would be prudent to take an estimated write-down of approximately $600,000.

This write-down mainly concerns previously purchased colostrum that we deemed not suitable for our requirements and which we, therefore, intend to sell on the open market without further processing. We take the management of assets and inventory seriously, and we have implemented rigorous and disciplined capital allocation processes to drive the highest and best use of our resources. With that, I will turn the call back to Oliver for some closing remarks. Oliver?

Thanks, Tim. We are very focused on the commercial opportunity that we have with the First Defense solutions, including new products in the functional feed line that were launched in June. As recently announced, we are expanding our sales team by 50%, creating 2 new U.S. sales territories and adding an international business development executive to our team. We want to spend more time with more customers to drive growth. We see expanded runway for First Defense sales, and we are excited to execute our growth initiatives. We're also very focused on operational excellence to ensure the consistent supply of quality products.

Our decision to redeploy former retained manufacturing assets for First Defense liquids processing will help us achieve our long-term capacity expansion objectives and prevent liquids processing throughput from becoming a challenge for us. In the meantime, we are continuously driving optimization of our lyophilization activities, which are typically our bottleneck.

In 2025, as mentioned, we saw more than 15% year-over-year increase in lyophilization output, and we are implementing more ideas to maintain that rate of improvement during 2026. These 2 actions give us confidence that we'll be able to meet customer needs for First Defense. When we finalize our capacity expansion plans in the coming quarters, we will provide more details. Our top priority at ImmuCell will continue to be solid execution across the organization. And with that said, we would be happy to take your questions. Let's have the operator open up the lines.

[Operator Instructions] And our first question today comes from Frank Gasca.

Great quarter. It was anticipated from your previous quarter that sales were kind of ipi, I'll say, but you've managed to have a remarkable quarter. With that being said, I have to say briefly, I've been an investor in ImmuCell for more than 25 years. So I have a working knowledge of the historical performance and questions.

So I do have some questions in regards to your focus, some of which is not necessarily new, but certainly welcomed such as the shift to also looking at foreign sales. With that being said, I know that in the past, it was certainly brought up in question. And one of the aspects of it was that there's some regionality in the pathogens. So I guess my question then is, to what degree do you think this impacts foreign development? And secondly, what qualifications, what requirements are you looking for, for this new position in regards to exploring and hopefully increasing foreign sales?

Frank, thank you very much for your question and for your trust in ImmuCell as a long-term investor, we really appreciate the confidence. International sales are complicated. And what we need to do is we need to hire somebody who has experience launching products in international markets. because there are very significant differences in product requirements, but also go-to-market strategies that should be deployed when considering international sales.

Now as you know, we're already in Canada and some other markets, Korea, et cetera, with our products. But there are differences in specific pathogens that drive scours in different markets. But there's also a lot of similarities. For example, rotavirus is a problem essentially everywhere. So our pivot to focus or double our focus on First Defense includes hiring expertise to help us drive those sales. You can't get there without that expertise and experience. So we're in the negotiating currently with somebody who has that experience and who hopefully will join our team. I hope that answers your question.

It does. I have further questions, but I'm going to get back in the queue and give other opportunity, but I do have several other questions.

And our next question comes from David Champoux.

My question relates to the contract manufacturer for Retain. Has the contract manufacturer provided an explanation for its failure or unwillingness to comply with the FDA requirements that resulted in the complete letter?

Thank you, David, for your question. We are in the midst of completing our conversations with this contract manufacturer. So I'm going to decline to give you more details at this point. But obviously, we're promoting the best interest of our shareholders in those discussions, as you might imagine.

Okay. I don't know how far you...

I might just add one other thing that based on the letter that we received from the FDA, it is clear the incomplete that we receive for our application is solely due to the circumstances at the contract manufacturer.

Understood. Is it -- I mean you may not be comfortable commenting on this, but I'll ask the question anyway. Is it your view that the contract manufacturer has a contractual obligation to ImmuCell to maintain its facilities in compliance with the FDA requirements?

Yes, that is my view.

Okay. So I'm not sure what's going on between ImmuCell and the CM at this point. But I would assume that as part of protecting the interest of ImmuCell, one possibility is pursuing the CM for damages resulting from its protracted and continued failure to comply.

So David, unfortunately, we can't comment on that.

Okay. One last question. Given the impact with the FDA and the pause on retained activities, in your view, how realistic is it to expect that a licensee buyer or other strategic partner for retained can be secured on favorable terms to ImmuCell?

Well, there's a lot of different components to your question. We have a high degree of confidence in our product and in its capabilities. And in its usefulness to dairy farms everywhere who are trying to combat mastitis without using antibiotics. So our job now is to find the best go-to-market strategy and the best kind of shareholder value-maximizing way to do that. And our determination is that manufacturing retained in-house is not the appropriate use of resources or the highest return use of resources.

So after we have completed our investigational studies in 2026, we will have a good set of arguments to go out and seek partners to help us maximize the value of retain.

Our next question comes from Felix Hettinger.

And I think 50% was also already short quested by David, so I will keep it short. So retrain, okay, I think you're in a situation where you cannot give any light on potential strategic. So that's fine for me. So I will focus now on the current business when it comes to the refires and as well as the cash needs in the future. So I read your letter on the 23rd of December as well as the update from your quarter. So congratulations to that. I understood that you currently developed or designed 2 new territories.

I was not sure if this already included new hires of the territories. So my question is, number one, if not, what is your expectation time line to hire new people to be able to run fully focus on the current portfolio? And number two, I read something that there is also a cash need for the business. So I would like to know if there are any additional, let's say, increasing of shares planned in the future, dilution of shares, anything else or that can be funded from current operations?

Thank you, Felix, for your 2 questions. Let me address the first one and then turn it over to Tim for the second question that you asked. So the first question is related to sales team expansion. So what we have done is we've taken a look at the market share and number of animals still to be won over to our product for each of our territories and determined that there are 2 territories, new ones that we should create because there is so much potential still in those territories. And so it's a question of number of cows and market share of cows or calfs, we should say, that are already on our product. And so we will be hiring 2 new individuals to augment our current U.S. sales team, field sales team. And those hiring processes are underway. There's quite a lot of interest because of the strength of our brand and our product in the market.

So we're going through that hiring process now. We've also, as I mentioned in the answer to a previous question, determined that international requires a dedicated individual. So we are in negotiations with somebody for that now, but have had a lot of interest in that role in all 3 roles. And so hope to complete those hiring processes as quickly as we possibly can, certainly this quarter. So I think that answers your first question. And then I'm going to turn it over to Tim for your second question.

Yes. Thank you for your question. Yes, you're correct that we will require investment as the company grows to meet that need in manufacturing. One of the things that we've talked about in the past is the freeze dryer # 5. That is still something that's on the radar, and that's around $3 million worth of capital outlay that would be required. Additionally, as we mentioned in the press release, we are looking at the costs associated with repurposing the former Rain facility.

As far as how we would fund something like that, I really would decline to comment on that. There are multiple ways. Of course, you can fund things through operating cash flow, also loans and/or capital raises, and I wouldn't take anything off the table. It all depends on what the economics of those choices look at the time we want to pull the trigger on investments. But I appreciate the question.

Our next question comes from Jonathan Rothschild.

Congratulations for making some very tough decisions. But I had a question on Re-Tain regarding the FDA's view of the API or the material that ImmuCell makes itself. Is that something that is distinct from what you referred to as the manufacturer of someone who's just making an intermammary injector and also keeping it separate from their other products. So the reason I'm asking this is, what is the FDA view of the API itself? This would affect efficacy, safety, all the 4 or 5 other technical sections that were already approved.

And what will happen as a result of you answering this question could give shareholders hope that there is an ability to partner this product since you have already decided that you're not going to do it in-house and you were not capable of doing it on scale anyway based on the time line that was already in effect. So let me know, please, how you expect the API itself to be judged as a subsection of the CMC section.

Jonathan, thank you for your question. Let me try to explain it this way. There's 2 manufacturing process. There is the manufacturing of our active pharmaceutical ingredient, also called drug substance. And then we have the second part of the process, which is taking that active pharmaceutical ingredient and putting it in an injectable format, aseptic injectable format, and we've called that drug product in various disclosures in the past. So there's 2 separate processes. The first process, we have proprietary capabilities here at ImmuCell that we've built over time to be able to do that. And the second process is what we have outsourced to a contract manufacturer who had experience with this process, who had previous FDA approvals and who was a reputable contract manufacturer, well known in the industry. The FDA has given us ImmuCell approval for everything other than manufacturing.

And then within manufacturing for our processes, we have passed inspections by the FDA. So flags on green or lights on green on the parts that we do here at ImmuCell. It is only the part that was done by our contract manufacturer, which is now blocking the FDA from being able to give us an approval.

So we -- like I think I mentioned before, have high confidence in our product, believe that the best strategy is to, in fact, find a partner and that, that is a better use of our resources, our cash rather than investing in our own commercial team and maintaining manufacturing while waiting years for a new FDA approval process to be completed. So I have previously mentioned that I believe there is a good product here and that a partner should be able to be found, but that's something that we now have to go do. we've decided to do that once we have our investigational study results because that gives us really good ammunition or arguments, I should say, to -- for any potential partner.

Yes. A question on that second point that you mentioned. There is a second pivotal study in process. And do you have a estimated time line when those results may come out?

I spoke to the Chief Investigator on that study in late December. And one of the things about these studies to have really good arguments. You need to have really good thorough study designs. You have a large number of animals enrolled in the study. And so we essentially completed our enrollment in December and expect Michigan State University, with just the University that we're working with here and a key opinion leader in the field of mastitis to complete these studies in the first half of the year.

But we're not going to rush that because the quality of the study, the rigor of the study is going to drive our success in figuring out our partnering strategy.

[Operator Instructions] Our next question comes from Tom Fox.

I'm just looking for a little bit of clarity on this self-imposed milk discard period for retain. So I'm going to fire off a couple of questions here. You say you're doing this out of abundance of caution. What exactly does that mean? I'm also wondering, is this going to be like a permanent issue? And how much milk -- how much less milk will be dumped compared to what farmers have to dump with antibiotics.

Thank you for your question, Tom. So we've discussed in previous calls and disclosures that our product is so effective against bacteria. -- that it also has a small impact on the good bacteria that you need to make cheese. And so what that requires is that for those farmers who are producing raw milk for use in cheese manufacturing processes, they need to not -- they need to voluntarily withhold the supply of the milk of a cow treated with retain for a few days while that flushes out of the cow system so that there is no impact on cheese manufacturing processes. So our withdrawal period when we started this project was 0 days, which is a very clear argument to be made in the market.

And now it's a few days, but it's still less than half of the withdrawal period of the main competition. So there's an advantage, clear advantage of retain. It's, I think, 4 milkings is the number of withdrawals that we would recommend for our product. It's 10 for the market leader out there. So clear advantage, but not as clear as 0. And so that does mean that we would probably need to invest more in our commercial infrastructure to be successful with this product than we originally thought. I hope that answers your question. It's certainly a factor in deciding the best use of our cash going forward that we believe a commercial partner might be a really good idea for this product.

So you are open to the idea that this might not be a forever thing that you could get at the discard period down to 0 days. Is that what you're saying?

No. I just want to be very clear about that. The discard period for those farmers who are providing raw milk to both cheese as well as fluid milk processing plants, it will always be more than 0. The FDA doesn't -- won't impose a withdrawal period because this does not impact in any way human health, and that is what the FDA imposes withdrawal periods for to prevent antibiotics from getting into the human supply chain.

There is a withdrawal period that the FDA requires for antibiotics used for mastitis or any other reason. The FDA will not require a withdrawal period on our product because our product is not an antibiotic and poses no issue for human health. But in practice, if you are a farmer that is providing raw milk for cheese processing, you should not -- we're suggesting a voluntary withdrawal period of those milkings. In the United States, it's increasingly common for farmers to obviously to provide raw milk for both uses. There may be some countries where those are still separated those processes so that you can sell to some farmers without a withdrawal period. But those are all not kind of -- those are not the key points in our decision-making in our largest market right here, we recommend a 4-day milking withdrawal period for retain.

Our next question comes from George Melas from MKH Management.

It's a fairly simple question. Your sales exceeded your expectations. Can you help us understand I don't know if you've had time to really analyze them, but how do they expect -- how do they exceed your expectations? How do you explain that?

So George, I really appreciate your question. As we've discussed in, I think, the 2 last calls, it is complicated to make good estimates of future revenues when you're coming out of a backorder situation because there are orders that are coming in because folks are trying to get back to regular inventory levels. I mean, our distribution partners and our sub-distributors. And then there's orders that are coming in because we're winning new customers. There's orders that are coming in because we're regaining customers we may have lost.

So there's a lot of different drivers, which makes compares kind of complicated. But when we looked at our results at the end of the third quarter, we -- as good management practice, we make estimates as to what we can expect in the fourth quarter and then execute accordingly. And I have to say compliments to the commercial team here at ImmuCell for achieving a higher level of revenue than we had anticipated just looking at some run rate trends at the end of the third quarter.

So we were very pleased with these results. It will continue to be difficult to completely analyze the effects of former backorder situations on current revenues. So in the next quarter or 2 will still be complicated. But overall, we're very happy with the -- I think this is our third highest revenue quarter ever. And once again, we believe that there is very minimal impact of the former backorder situation left in our results.

Yes. I would just add that we do -- we have published the back order numbers in each 10-Q as we've gone through time. So those are available when you're analyzing revenue.

Our next question comes from Russell Tolander from Capital Alliance.

Yes, great quarter of sales. And I think by my expectation, must have improved or over the second half of the quarter since the previous call was really in the middle of the operating period. So I guess, just kind of building on the question that George just asked, was there momentum in the last months specifically? And is there any feel for that momentum kind of continuing here early in this quarter given that this is really the peak caving season in -- domestically. So I guess I'm just looking for a little more color on the cadence of revenue during the quarter, if you can comment on that?

We wouldn't be able to comment on that -- well, so in Q3, when we were talking, we certainly weren't anything in our commentary they are related to Q4 or trends in Q4. We really were just presenting Q3 results and not offering anything forward-looking on that. I don't think I really want to get into the commenting on sales trend within the quarter either just because we haven't analyzed that specifically. I wouldn't say there's anything that struck me.

We do have shipping dates. So the way that we ship required at the end of the very end of the quarter, we had a little bit less shipping just due to holidays, but that's the only real trend within the quarter that I think might have been relevant. I don't really think there's anything there to be honest, yes.

And our next question is a follow-up question from Frank Gasca.

Further the previous caller. Q1 -- actually Q4 and Q1 are historically your best quarters. Do you see any deviation from that trend that's been going on for ever?

I think we'll still continue to see some seasonality in the business, of course, as we move into new products and customer bases, such as beef, there might be changes over time. But currently, right now, we still would expect to see the same type of seasonality, I believe.

Okay. And in your statement in December, you referred, and I quote here, "improved set of claims" and this is in regard to retain, and I'm assuming that it's also related to the, yes, the study. Could you elaborate on that a little?

Thanks for your question, Frank. So it's usual when you apply for an FDA approval for a product that you start with a claim and you go through the process to get that claim approved.

And along the way, you do more studies to see if that claim can be expanded, approved, both for the ability to market it more effectively or to address just a bigger, bigger set of problems that, in this case, dairy farmers are finding in their cows. And so in collaboration with the FDA, we obtained their approval to do some investigational studies to look at an expanded or better set of claims.

And we put together a very rigorous study to validate some of our hypotheses about how our product could be best positioned in the market. And we're all very anxious now awaiting the results of these studies because testing the product in the field in an active dairy farm situation and really kind of testing the boundaries of its capabilities is what we're trying to do here. So we're looking forward to getting those results. And as I mentioned, that won't be for a little while because it needs to be pretty -- it needs to be really well done the study in order for us to have claims that we can back.

Presently by my understanding, the claim is in regards to preclinical mastitis. Are you -- I would just -- I imagine that an improved set would indicate use on a clinical aspect. Is that a part of? Or is it potentially further potential for maximizing retain?

Well, expansion of claims in any direction is -- would enhance the value of retaining. I don't believe in the past, we've disclosed much about the current claims. It's also competitively sensitive information, to be honest. There is a very, very strong competitor out there who is the market leader in this space. So we're going to wait for what comes out of these studies, and we will be communicating at that time what the next steps are, and I can't really comment in the meantime on any of the specifics, unfortunately.

Okay. I have one more. And this might be a little tough, I guess. In the shift and the increase the Tri-Shield, very encouraging and it's certainly significant. But in previous calls, there was some regard in the fact that one of the reasons of reduced margins was the fact that Tri-Shield requires additional processing. To what degree my question would be, are you addressing the margin reduction that occurred from this aspect?

Yes. I think what we've said in the past is that Tri-Shield has -- it has the 2 components, we call manufactured units in it. So the cost is higher, but of course, the price is also higher. I don't believe we've ever specifically stated anything about the products margin. And in this call, we're not planning on covering anything related to margin, perhaps it's something we can consider for either the quarterly earnings call or future calls.

I'll add one more thing just to address your question about the improving margin over time. I think that when we increase the capacity, like we've been talking about in this call, 15% increase in output, this year -- or in 2025 and then striving for similar results in 2026, that will certainly help margin over time. But it's not specific to Tri-Shield. This is general manufacturing improvements where we're looking at bottlenecks and reducing -- or addressing those bottlenecks over time, so.

And ladies and gentlemen, at this time, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Joe Diaz for closing remarks.

Thank you, Jamie. I would now like to turn the call back over to Olivier te Boekhorst for closing remarks. Oliver?

Thank you, Joe, and thank you, everyone, for your excellent questions. Before we leave, I want to thank my predecessor, Michael Brigham, for his 30 years of service to ImmuCell, including 25 years as CEO and for his support during my transition. He -- today is his last day, and he will be missed sorely by all of us here. So thank you, Michael, and congratulations on your well-deserved retirement.

Thanks very much, Oliver. I have enjoyed my time at myself very much. I have a lot of confidence in the future of First Defense, and I wish the team the very best.

Okay. Thank you, Oliver, and thank you, Michael. We want to thank everyone for participating on today's call. We look forward to talking with you again to review the results for the year ended December 31, 2025, on February 26, 2026. Thank you, and have a great day.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Good morning, and welcome to the ImmuCell Corporation Reports Third Quarter ended September 30, 2025, Unaudited Financial Results Conference Call. [Operator Instructions] Please 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, Rocco. Good morning, and welcome to everyone. As Rocco indicated, my name is Joe Diaz with Lytham Partners. We're the Investor Relations consulting firm for ImmuCell. I want to thank all of you for joining us today to discuss the unaudited financial results for the third quarter ended September 30, 2025.

Listeners are cautioned that statements made by management during the course of this call include forward-looking statements, which include any statements that refers to the future events or expected future results or predictions about steps the company plans to take in the future. These statements are not guarantees of performance 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 better known as the safe harbor statement provided with the 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, November 14, 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, Special Adviser to the CEO of ImmuCell Corporation for opening remarks.

Michael?

Thanks, Joe, and good morning, everyone. This is an exciting time at ImmuCell. Lots of good change going on. Our financial performance over the first 9 months of 2025 has greatly improved compared to prior year, a turnaround, which was made possible in part by increasing our production output while improving gross margins. We are now in a great position as a company with a stock distribution channel and an energized commercial team. Our CEO and CFO will be commenting on the financial results in greater detail in just a moment.

On another topic of change, we are amidst 2 very positive management transitions right now at ImmuCell. First, as most of you know by now, we added Timothy Fiori, our CFO, to the team back in April. Secondly, back in June, we announced the CEO succession plan. This effort was completed successfully effective November 1, 2025, with the hiring of Oliver Te Boekhorst as our new President and CEO. I'd like to welcome Oliver to the company. Oliver brings over 25 years of leadership and results-focused execution experience in animal health to ImmuCell. Before joining ImmuCell, he served as an operating partner of [ Arkemed ], a global health care investment firm, where he focused on Animal Health Investments and served as Chairman and Chief Executive Officer of a portfolio company.

Prior to that, Mr. Te Boekhorst was at [ IDEXX ] for 18 years, IDEXX is a main-based NASDAQ listed company of more than $4 billion in revenue, where all of our lead strategy and M&A activities from 2004 to 2008 and then served as a Corporate Officer, Senior Vice President and General Manager of several business units from 2008 to 2021, including their livestock and dairy antibiotic residue testing businesses. He has a track record of driving growth and operational excellence in the livestock industry. And as I step away in January after 36 years with ImmuCell, I am very confident that we are in good hands with Oliver and Tim.

At this point, I will turn the call over to Oliver for a few comments. Oliver.

Thanks, Michael. I am very excited to be here, and I want to thank you for your support during my onboarding. I appreciate the warm welcome and the investment from employees in my onboarding process over the last 2 weeks as I'm starting to learn the business. In conversations with the team, I've been asked why I joined ImmuCell. And one of the reasons for my excitement to join at this juncture is the importance of the work here. Fundamentally, ImmuCell keeps cats alive and healthy. We don't just make and sell doses of First Defense. We provide protection to [ new more ] animals that cannot protect themselves.

Farmers trust us. because our technology works and they count on us to help them do their jobs better. And I tell the team that starts with the care and the effort we all put in every day. It is impressive to see the passion, dedication and pride of our staff in Maine and in the field as we support the larger mission of reducing the use of antibiotics in the food supply chain and ensuring the availability of safe, healthy and affordable dairy and beef products. I look forward to the next weeks of my onboarding process as I plan to spend a good deal of time in the field, meeting customers, colostrum suppliers, distributor partners, key opinion leaders and the commercial team. I'm a customer-focused leader, and I intend to bring customer perspectives to everything we do at ImmuCell

ImmuCell is poised to do great things, and I'm very excited to be a part of that. The company aims to deliver a strong value proposition for farmers and our financial and operational performance so far in 2025 reflects that. Execution across our supply chain will be laser focused on quality and product availability. From vaccine production, colostrum sourcing, liquid processing, formulation, packaging and shipping our final products, our team is rebuilding confidence in the market and our ability to consistently meet customers' needs. I look forward to working, to regain customers, to capture shares and to expand the use of scours preventatives. It's an exciting time to be at ImmuCell as we explore new more market opportunities aggressively.

Now turning to our revenue for the quarter. We had an 8% decrease in total product sales during the third quarter of 2025 compared to the third quarter of the prior year. This is in line with previous comments we made about the effect of restocking our distribution channels earlier this year. I'm encouraged that domestic sales were up 2% during the third quarter compared to the third quarter of 2024, and domestic sales were up 9.5% during the third quarter compared to the second quarter of 2025. So we are seeing positive momentum in the U.S. market that represented about 86% of our sales during the trailing 12-month period ended in September 30, 2025.

International sales, largely to Canada were down during the third quarter of 2025 compared to the third quarter of 2024 due to timing of shipments and allocations of our short supply, while we're managing our order backlog. This did create the 8% decrease in total sales during the third quarter that I just mentioned, but I do not believe this represents significant deterioration of underlying customer demand. It is worth noting that international sales during the 9-month period ended September 30, 2025, were 15% higher than the same period of the prior year. Longer-term growth trends are also meaningful. When we compare our trailing 12-month sales ending September 30, 2025, to the same period ending September 30, 2022, that is the period before we ran into significant supply issues. The 3-year compound annual growth rate is 11%.

Okay. Turning to net income. We delivered net income of $1.8 million during the 9 months ended September 30, 2025, compared to a net loss of $2.7 million during the 9 months ended September 30, 2024, which is a $4.5 million swing in the right direction, driven by a significant improvement in gross margins that Tim will discuss in detail. We are focused on production capacity and quality, and one way to measure that is the approximate level of revenue we can now support. During the 9 months ended September 30, 2025, we demonstrated that we can produce at an annual rate that is very close to our capacity expansion goal of $30 million per year. Our priority now is on operational excellence and execution while we review our next capacity expansion opportunities.

At this point, I'm going to turn the call over to Timothy Fiori, our Chief Financial Officer, for a deeper review of the third quarter financial highlights. Tim was my finance leader at IDEXX for 15 years, and it is a pleasure to team up with him again here at ImmuCell. Tim?

Thanks, Oliver. I'm happy to be working with you again. To start, I'd like to focus on improvements we've seen regarding the year-to-date net income and earnings per share as compared to prior year. Net income during the 9-month period ended September 30, 2025, increased by $4.5 million over the net loss during the 9-month period ended September 30, 2024. This significant improvement was driven by higher sales with increased gross margins and a 7.4% or $543,000 reduction in operating expenses. Basic net income per share during the 9-month period ended September 30, 2025, was approximately $0.20 per share in contrast to a net loss of $0.34 per share during the same period of the prior year.

As Oliver mentioned in his comments, product sales during the third quarter of 2025 decreased by 8% or $505,000 compared to the third quarter of 2024. Product sales during the 9-month period ended September 30, 2025, increased by 7% or $1.3 million over the 9-month period ended September 30, 2024. Product sales during the trailing 12-month period ended September 30, 2025, increased by 16% or $3.9 million over the trailing 12-month period ended September 30, 2024.

During the first half of the year, we effectively eliminated our backlog of orders and rebuild inventory and distribution, refilling the distribution pipeline after an extended backlog provided a temporary boost to sales. Overall, I'm pleased that we are out of the prior order backlog situation. As we can see in the Q3 results, backlog dynamics have created difficult conditions for year-over-year sales comparisons. During the Q2 call, we anticipated that we may experience a softening in sales during the second half of 2025, and that has happened as predicted in Q3. We believe that difficult comparisons may persist due to the back book fulfillment in prior periods for the next [ 12 ] quarters.

We should lap this backlog dynamic in the second half of 2026, given that we effectively exited the backlog situation as of June 30, 2025. You can see prior year backlog information by quarter in our most recent 10-K and in the 10-Q that we just filed. We have realized gross margin improvements in 2025 as compared to the prior year. Gross margin as a percentage of product sales increased to 43% during the third quarter of 2025 compared to just 26% during the third quarter of 2024. Gross margin increased to 43% during the 9-month period ended September 30, 2025, compared to just 27% during the 9-month period ended September 30, 2024. Gross margin increased to 41% during the 12-month period ended September 30, 2025, compared to just 27% during the trailing 12-month period ended September 30, 2024.

Future success will require continued achievement of strong production yields, coupled with strong sales growth. We have several opportunities to drive growth from the existing products, including regaining customers that we may have lost during the short supply in years past. We also have several new product offerings in our functional feed product line. I'd like to talk for a moment about adjusted EBITDA because the impact of noncash depreciation expense on our bottom line is significant.

To be clear, adjusted EBITDA includes an add-back of stock-based compensation expense, which is another noncash expense that's included in net income as calculated in accordance with GAAP. We created adjusted EBITDA of $751,000, $4.4 million and $5.8 million during the 3 months, 9 months and trailing 12-month periods ended September 30, 2025, respectively. These strong results compare favorably to adjusted EBITDA of $196,000, $35,000 and negative $175,000 during the 3 months, 9 months and trailing 12-month periods ended September 30, 2024, respectively. These strong results helped us increase cash to $3.9 million as of September 30, 2025, from $3.8 million as of December 31, 2024, while investing about $2.7 million in inventory build as we approach peak selling season. We will continue to closely monitor and manage cash as we balance long-term investment with near-term operational needs.

With that, I will turn the call back to Oliver for some closing remarks. Oliver?

Thanks, Tim. We are very focused on the commercial opportunity that we have with the First Defense suite of solutions, including the new products within the functional feed line that were launched in June. There is tremendous runway for First Defense, and we are excited to come out of a supply-constrained environment to execute growth initiatives. The energy and the commercial team is palpable. We are also very focused on operational excellence to ensure consistent supply of quality product. The year-over-year improvement in adjusted EBITDA that Tim just touched on are the results of this focus with increased sales at better gross margin and lower operating expenses.

As we discussed before, we are awaiting FDA approval for our Re-Tain product, which addresses an important market need for effective treatment of subclinical mastitis. We believe that treating subclinically infected cows with Re-Tain could enhance best practices in the industry with an alternative to traditional antibiotics that are also used in human medicine. While we wait for FDA approval, we have started investigational product use studies to collect market feedback about product performance in the field in collaboration with Michigan State University. These studies are well underway, and the data we gather from this work will inform us of our best strategies for Re-Tain in 2026. This disciplined approach is intended to support a successful market entry.

Our top priority at ImmuCell will be on solid execution across the organization. And I'm very pleased that we can leverage the foundation that Michael and the team have rebuilt and that we can now set our sights on defining and executing our strategy for long-term growth.

With that said, we will be happy to take your questions. Let's have the operator open up the lines.

[Operator Instructions] And our first question today comes from Frank Gasca, private investor.

First of all, and I wanted to just thank Mike for service, for the years that you put in at ImmuCell and we go back quite a way. It's about 25 years. So I wish him well in his upcoming retirement as I am enjoying mine. As far as my questions, I'm going to take a somewhat more critical tone. I don't see the clean slate that you referred to. I see more [ remark ]. In regards to First Defense, -- what has changed? It went from an expansion of capacity. We even committed capital, and now we're uncommitted to that expansion. I think it's on the -- some of the causes of that. But what I'm looking for is what active and steps are you taking to increase that growth that was somewhat anticipated even years ago.

Thank you, Frank, for your question. And let me maybe just start with -- what we mentioned is we are now at a level of capacity that we set out for ourselves when we started the capacity expansion project a few years ago. And while we had a contamination event, we have now arrived at a place where we are actually in a better shape than we even were when we started that capacity expansion project because we have put all kinds of quality measures in place to ensure that we can manufacture at a predictable level. So that is an improvement in our capability.

What I'm very excited to report after my first few calls with the commercial team is that after years of managing short supply, they are now able to go win new customers, talk to customers about increasing the use of First Defense, if they're already using it. And this is a very different approach that the commercial team can now engage with, and they are very excited. I will be visiting the field next week with -- visiting with customers and hopefully, we'll be able to report back to you firsthand what that excitement at both the customer and the sales team level is. So we're very pleased to be where we are. There is more to do but it does look quite positive from where I'm sitting. Thank you for your question.

[Operator Instructions] Our next question comes from George Melas with MKH Management.

Thanks. First of all, so I want to reiterate what the previous caller said, Michael, thank you very much for your service and really appreciated working with you. And I just want to say thank you very much. Oliver, welcome to the team. It's very exciting to have you. My question is a bit about the inventory. The [ WIP ] continues to grow. I mean a lot of it is the frozen colustrum, which is, I think you reported $3.3 million. But the finished good inventory right now stands at $2 million which is the highest bid, I think, in probably 6, 7 or maybe ever, or at least from my model in at least 6 years. I'm trying to see and -- trying to see how you plan to balance sort of production with sort of cash generation or cash management.

Well, first, George, thank you very much for your welcome. I'm going to turn it over to Tim to address the inventory question.

George, great to talk with you. Yes, we definitely have seen inventory levels come up a lot. Of course, we started the year with really practically nothing. And now we have a more desirable level, frankly, of inventory. And especially as we approach the peak selling season that's coming up in the -- around the first quarter, I meet with the team weekly with sales and the production team personally. And we have a good communication between the 2, and we do a planning process to seek those desired inventory levels. So we're paying a lot of attention to that. And I think we're in much better shape now than in the past couple of years for sure.

On the colostrum side, we want to have a considerable amount of colostrum. And I think you're right that we need to carefully manage that and make sure that it doesn't become too much and that is also on that regular review list of things that we're very focused on. But it is our key ingredient. And you're totally right that when you look at [ WIP ], that colostrum is a large component of that.

And George, if I could just add, I've worked with Tim for 15 years as my finance leader at IDEXX, as I mentioned earlier in the call, where we managed about $300 million business together. And Tim brings a very disciplined, rigorous process-focused approach to both operational and financial execution. And so I'm very excited to see that in place here and to continue working with him and also to partner with Bobbi Brockmann, our Vice President of Sales and Marketing, who has a very similar approach to commercial execution. And I'm bringing this up because I think that's the way forward for ImmuCell to build on what Michael has built for us and now to really focus on disciplined day-to-day execution of our plans. Thank you for your question.

Okay. This is Joe Diaz again, your moderator. I did want to have one question asked before we close the call out. The margin improvement in Q3 was very good. What do you attribute that to?

Thanks, Joe. Yes, the largest drivers of gross margin as we see it are the improved manufacturing performance as the primary one, but also the price increase. If you look around Page 37 of the recent 10-Q, we talk about our composite price increase in 2025 of around 6%. So those are both definitely important factors in gross margin improvement. And just the volume of sales, so you end up with that scale, that's helping in manufacturing and with fixed cost spreading it out over a larger amount of volume is always a big part of that as well.

Okay. That concludes our Q&A session. I want to thank everyone for participating in today's call. We look forward to talking with you again to review the results of the year ending December 31, 2025, during the week of February 23, 2026. Have a great day. Thank you for being with us today.

Thank you. That concludes today's conference call. You may now disconnect your lines, and have a wonderful day.

Good morning, and welcome to ImmuCell Corporation Reports Second Quarter Ended June 30, 2025 Unaudited Financial Results Conference Call. [Operator Instructions] 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.

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. Thank you again for all those who are 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 guarantees of performance 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?

Great. Thank you, Joe, and good morning, everyone. So yes, 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 regards to our very long development time line 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.

So at this point, I'm going to turn the call over to Tim Fiori, our CFO, to review some second quarter financial highlights. Then I would like to offer a few comments from a strategic perspective. After which, we will open the call for your questions. So, Tim?

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 12-month period ended June 30, 2025, increased by 22% or $5.1 million over the trailing 12-month period ended June 30, 2024. This period of increased production output allowed us to effectively eliminate our backlog of orders and rebuild inventory and distribution.

During this period of short supply, we were often -- we often shipped direct to critical customers to keep them in supply. Now we are back to only shipping through our normal distribution channels. Refilling 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 '25 compared to just 28% during the first half of 2024. Gross margin increased to 37% during the trailing 12-month period ended June 30, 2025, compared to just 26% during the trailing 12-month period ended June 30, 2024. To remain successful, we must regain customers that we lost during our period of short product supply and increased 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 noncash depreciation expense on our bottom line is significant. To be clear, adjusted EBITA, as opposed to adjusted EBITDA, includes an add-back of stock-based compensation expense, which is another noncash 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 3-month, 6-month and 12-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 3-month, 6-month and 12-month periods ended June 30, 2024, respectively. These strong results helped us increase cash 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 5-year note payable through the third quarter of 2030.

With that, I will turn the call back to Michael. Michael?

Great. Thanks, Tim. So we are very focused on the commercial opportunity that we have with First Defense. We are pleased to see traction 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 Nisin 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 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 health care. 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 health care, while at the same time, improving the quantity and quality of milk produced by treated cows.

While substantially -- excuse me. 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 antibiotics use in human medicine, making it more socially 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.

So while being mindful and prudent of how much cash we invested in inventory that will have a short expiry date, if market launch were delayed, we did build inventory during '22 and '23 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 zero milk discard period for Re-Tain in 2018, we decided to introduce a short discard period in these studies out of an abundance of caution. This is because Nisin levels well considered safe for adult human consumption can impact certain milk processing applications.

Even if we conclude that a milk discard 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 has often fed the calves, and we believe that this discarded milk will 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 approval is 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 infield investigational product use trials which could provide valuable insights into how producers perceive the product's benefits and integrate the product into their herd health protocols; and two, evaluating strategic options that could offset some cash requirements and enable the 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.

So 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 Presentation 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.

[Operator Instructions] And your first question today will come from Andrew Rem with Odinson Partners.

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

This is Tim. No, I don't think we are going to specifically mention a number. I would mention that the backlog at the end of March was -- 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. And I think that's as far as we can go. I don't know, Michael, if you...

Yes. No, I think you're right, Tim. We really stayed focused on GAAP sales out our door. Our sales team has discussions with distribution and obviously tries to keep them full, but we don't have reporting requirements there or reporting results there. Yes, 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've got to get through this bubble.

All right. And then can you guys give an update on kind of Re-Tain? I think, in your 10-Q from the first quarter, I think you had mentioned you had had a facility inspection and were kind of -- I think you've 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?

No, it's a good question, Andrew. And just for clarity, there's sort of two sides to this. So 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 conditions for quite some time now. The challenge -- the frustrating challenge is that we do use a CMO for filling -- aseptically filling our drug substance into the tubes, and that CMO is under -- has to resolve F 483 inspection observations. And I wish as much and probably more than you that I could put a time line 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. And it is the final hurdle to FDA approval. And we're eager to get it resolved, but it is just almost totally out of our control, and the FDA and the CMO are working on it.

Okay. That's helpful. You guys had also mentioned you've got some inventory, which it sounds like it's 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?

Well, not in like numbers of tubes and certainly not in dollar value because it will not generate sales, as I mentioned. But the answer is all of it. This is product that was produced in anticipation of commercial launch. It will all be used for investigational. We will not generate revenue. And 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. And that will really have -- yes, Tim, comment on the P&L impact.

Yes. So that inventory for Re-Tain has already been expensed, so there is no P&L impact in the future.

Right.

Okay. And then can you just maybe provide maybe some examples of the type -- when you mentioned -- you mentioned a few different times, you're including in the press release, pursuing some strategic options. Like what might be some of the different forms that, that could reasonably take?

Yes. So I think the #1 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. So bringing in a larger marketing group that could -- we hope they would look at our investigational study data and get excited and then help us with that launch financially and in the barn, introducing a very different, a very novel, very new way to treat a disease state subclinical mastitis that's not treated today. So we would be looking for financial support and marketing support to take this to the next step.

And we like to think that we would be a manufacturer. But that -- those negotiations are really open and really flexible as to what form that takes, but conceptually, it would be financial support and introducing a novel product to commercial launch requires a lot of time in the barn and a lot of time with producers. And so 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.

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

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

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

Yes. So 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, that project is on hold. There's some disclosure in the Q about the relative cost of moving to -- from supporting $30 million in revenue to $40 million plus approximately. But no news on the timing, I think.

I think it's a very important decision for management and for our Board, and timing is essential, and we're just going to watch this over the second half of the year just to make sure the cash flows are right. So 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. So careful evaluation and under consideration, timing is everything, cash flow is everything.

Okay. Maybe last question on First Defense. It sounds like the sales team maybe have 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?

Yes. I'm guessing if there's 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. So they've been very distracted, dealing with a lot of very irritated distributors and customers that couldn't get the product they need. So 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 need. We didn't -- we couldn't -- it would only make our backlog bigger if we brought in new business.

So it's a great flip 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.

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

Yes. 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. And efficacy rules. They want this product because it works better than others. So yes, they were frustrated. That's what the sales team was distracted on, dealing with that frustration.

But with the expansion, capacity expansion complete, that phase, that era is over, and we just fill back with -- we were unreliable in supply in the past, but we are ready to ship every day going forward. So come back to us because efficacy rules, and that's how we're getting back the product performance.

Yes. All right. Well, I appreciate the time. It sounds like you've kind of been 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. So looking forward to watching you guys and the team kind of execute. So I appreciate it.

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

And your next question today will come from George Melas with MKH Management.

You mentioned that you're starting to get some traction for the new format for First Defense, and I think that's the spray-dried colostrum. Can you talk a little bit about that and maybe if you already had some sales there and how you sort of see the market opportunity?

Yes. Just on sales, we're not specifically breaking it out. We definitely did have our first sales in Q2, and we're going to continue to be on the market. And I think we'll start breaking that out in the disclosures in Q3. So we'll provide a little bit more detail as it becomes hopefully more material over time. And Michael?

Yes. Just -- yes, I think the numbers are early, but the feeling and the momentum is certain. I know Bobby and the sales team are really excited about -- it's a new niche. It's customers, it's large ranches of calf feed as opposed to the traditional -- the dairy milking operation. And yes, so far so good.

And 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-Shield product line breakout, and I think it's appropriate to see where we get to in the third quarter and start Tri-Shield, spray-dried and other. Just to give -- but an exciting start. It's quite a buildup, a great job by the production team and by the sales team to get this new format out there. And it's -- that's how we grow. Same technology in different formats, different packages, different markets, different customers.

That sounds really good. And it would be great if you could -- I appreciate that you will break it out. That will, I think, sort of enrich the conversation.

Regarding regaining customers, are you talking primarily about sort of second-tier distributors that were somewhat neglected? Or are you talking about end customers? Or are you talking sort of about both?

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

Okay. So 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 deliver on?

Energized? How do I see 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. And this is what they are just -- this is what they do for a living. This is what turns them on, and they are fired up. Yes, it's a great -- it's a -- 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.

Okay. Great. And then a couple of more questions. I looked at the frozen colostrum inventory, and it's relatively flat. It came down a little. So it seems after 2 very strong quarters of production, I was a little surprised that it didn't come down. So you still -- you have a very strong inflow of colostrum -- of milk on the cows. How do you see that over the next 6 or 12 months?

Yes. Just on the inventory, in general, you're right. We do have a strong network of farms that can provide colostrum 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.

And I think just preventing a return to backlog is probably the #1 priority. And so yes, cash management is essential and obviously super important. But this inventory, this frozen colostrum does have a long shelf life. So it's a little bit of a security blanket, and the rebound plan would be to build -- work it down, and spray-dried is part of that strategy. But yes, it's pretty high right now. And I -- back to Andrew'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.

Okay. Well, you made progress on those counts this quarter because net debt is down significantly and backlog is gone, then you have some finished good inventory. So it seems like you're in good shape there.

George, I missed it. You said backlog was down, we agree. The other piece, we missed. What else?

Your net debt went down meaningfully. So you made progress both on the cash position and on being able to serve customers.

Yes. And sorry, George. We're definitely agreeing with you, backlog down, that was key. Did you say debt was down? I missed that.

Yes. The net debt was down significantly as well.

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

Taking the '26 balloon and spreading it over 5 years. But like Tim said, total is still -- it was kind of a wash on the total. Same total.

And then on the beef segment, that's my last question. It's very seasonal. It is primarily December and January. What -- how big historically has that segment been for ImmuCell? And sort of what are you trying to do to build that side of the business?

Yes. 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, there can be seasonal challenges on scours and maybe some people do treat more in a stressful, cold winter.

But beef is important, and beef is difficult. Like, we can do big dairies in one sales call, can address 1,000, 10,000 calves. Beef is much more spread out, much more smaller. So a lot of that work is done by marketing and just in the right pockets with the sales reps in the beef area do the on-site, on-farm, on-ranch visit. But what's new on that area to address beef is probably the biggest new thing is what Bobby, the VP of Sales, has done with the marketing campaign so we can reach a lot of people without a lot of truck rides.

[Operator Instructions] 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.

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.

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

Good morning, and welcome to the ImmuCell Corporation Annual Shareholder Meeting. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Michael Brigham, Chief Executive Officer. Please go ahead.

Thank you, Christine. Good morning, everyone. Let's jump in and get started. I'm pleased to welcome you to the 2025 Annual Meeting of Stockholders of ImmuCell Corporation in the form of both a dial-in conference call and an audio webcast.

I am, as Christine said, Michael F. Brigham, President and CEO and a Director of the company. I would like now to take a role call and introduce you to the other directors and officers and employees of the company who are participating remotely in the call today. So in addition to myself, we have the following members of our Board of Directors with us today: Gloria J. Basse, Director.

Here.

And Bobbi Jo Brockmann, Vice President of Sales and Marketing and a Director.

Yes. Thank you.

And Bryan K. Gathagan, a Director.

Hello.

And Steven Rosgen, a Director.

Hello, everyone.

And David Tomsche, the Chair of our Board of Directors.

[indiscernible].

And Paul Wainman, Director.

Good morning, everyone.

Great. Thank you. Also present with us today are the following employees, Tim Fiori, our Chief Financial Officer.

Hello.

And Gustavo Scaffa, our Senior Director of Quality.

Good morning, everyone.

And Beth Toothaker, our Director of Finance and Administration and the voting inspector for today's meeting.

Good morning.

And John Zinckgraf, Director of Product Development.

Good morning.

And Betsy Williams, our Vice President of Manufacturing Operations.

Good morning.

So I'd like to take a moment to recognize Betsy. As previously disclosed, she will be retiring at the end of the month. Betsy led our Re-Tain product development initiatives since joining the company in 2016. This work included the construction of our 16,000 square foot Nisin drug substance production facility, which is in compliance with the FDA inspectional requirements. We are all frustrated to have not received the FDA approval of Re-Tain during Betsy's tenure at ImmuCell. But on the upside, she has been able to help us set up for investigational product use.

This initiative will allow us to collect data on product performance, on commercial dairies over the second half of 2025, but it will not generate sales revenue. At the same time, we will wait for our contract manufacturer for the aseptic filling of drug product to achieve inspectional compliance. Betsy also helped us manage the growth in First Defense production and sales, meeting our capacity goals during the fourth quarter of '24 and first quarter of '25.

I've learned a lot working with Betsy over the last 9 years. I and our Board of Directors would like to thank Betsy for her dedicated work and wish her well in her next chapter of her life with her husband, Peter and family. Thank you.

Also with us today is Nick Anania, associated with the business law group at the law firm of Verrill, the company's legal counsel.

Good morning.

And also with us today is Tracy Heideman, a partner with the accounting firm of Wipfli LLP, the company's independent registered public accounting firm.

Good morning, everyone.

Great. So I've asked some of the individuals who are just introduced to make various motions necessary to keep the formal part of the meeting moving. After the formal part of the meeting is over, I would like to make some comments about the current status of our business. After that, we will have time for a brief and informal discussion to address any business questions you may have.

Please note, it's very important that only participants using the dial-in conference call as opposed to the audio webcast will be able to ask questions. That phone number again is (844) 855-9502 for toll-free and (412) 317-5499 for international access.

I would now like to begin to conduct the formal business portion of today's meeting. I ask the voting inspector to help get us started. Beth?

As evidence that notice of this meeting was duly given, I have here an Affidavit of Equiniti Trust Company, the company's transfer agent, that notice of this meeting has been duly given and that a proxy statement has been furnished by the company on or around April 25, 2025, to every holder of common stock of record as of April 14, 2025.

There is also available for inspection a complete list of stockholders entitled to vote at this meeting. I will now report the number of shares held by persons attending this meeting in person or represented at this meeting by proxy. Out of a total of 8,994,425 shares outstanding and entitled to vote at this meeting, there are present at this meeting in person or by proxy, the holders of approximately 7,048,097 shares, which constitute more than 78% of the outstanding shares entitled to vote.

Thank you, Beth. On the basis of the figures just reported by the voting inspector, I declare the presence of a quorum at this meeting. As Secretary of the company, I will now present the meeting -- present to the meeting the minutes of the Annual Meeting of Stockholders held on June 13, 2024. I have a copy of those minutes with me. Unless there is an objection, I will now entertain a motion to waive the reading of the minutes.

I move that the reading of the minutes of the annual meeting of the stockholders held on June 13, 2024 be and is hereby waived.

I second the motion.

Thank you, Paul, and Beth. The proxy holder has voted in favor. Therefore, I declare the motion carried. So by now, all record and beneficial owners of ImmuCell common stock should have received copies of the company's proxy statement containing a description of those matters, which the stockholders were asked to consider and act upon for this meeting. We will now proceed to those matters. Beth?

We ask that any stockholder who wish to vote their shares in person rather than by proxy, contact the company in advance of this meeting to facilitate remote voting. I report that no stockholders contacted the company to vote in this manner.

Okay. Therefore, let's proceed right to the consideration of the items of business cited in the notice of meeting. .

The first item of business is the election of directors of the company to serve until the next Annual Meeting of Stockholders and until their successors are elected and qualified.

[Voting]

I nominate for election Gloria J. Bassi, Michael F. Brigham, Bobbi Jo Brockmann, Bryan K. Gathagan, Steven T. Rosgen, David S. Tomsche and Paul R. Wainman to act as directors of the company until the next Annual Meeting of Stockholders and until their successors are elected and qualified. .

I second the nominations.

Thank you, Paul and Beth. There being no other nominations under the company's advanced notice bylaw, I declare the nominations closed. I will wait a moment to see if there is any discussion of the nominations. [Operator Instructions].

Okay. Hearing none, I now declare the polls for election of directors are now closed. Asking voting inspector to report the results of the voting. Beth?

I report that each of the 7 persons nominated for the Office of Director have received a plurality of the votes cast at the meeting.

Okay. With that, I declare that Ms. Basse, Mr. Brigham, Ms. Brockmann, Mr. Gathagan, Mr. Rosgen, Dr. Tomsche and Mr. Wainman, our elected directors of the company.

The second order of business is to consider a nonbinding advisory resolution on the company's executive compensation program.

[Voting]

I move the adoption of the following resolution resolved, that the compensation paid to the named executive officers of the company as disclosed in the company's proxy statement pursuant to Item-402 of Regulation S-K, including the summary compensation table and outstanding equity awards table is hereby approved.

I second the motion.

Thank you, Paul, and Beth. Is there any discussion on this proposal by any stockholder present on the conference call. [Operator Instructions]. Hearing none, I declare that the polls on this proposal are now closed. I ask the voting inspector to report the results of the voting.

I report that of the shares present and entitled to vote on this matter, 3,006,841 shares voted for 50,712 shares voted against and 295,712 shares voted to abstain. The shares voted in favor of this nonbinding advisory resolution represent approximately 43% of the total shares represented at this meeting. Whether or not voted on this resolution, including so-called broker non-votes.

Okay. Beth. Thanks. With that, I declare that the nonbinding advisory vote on executive compensation has not been approved. .

The third item of business is to consider an act on is the proposal to approve an amendment to the company's 2017 stock option and incentive plan, increasing the number of shares of the company's common stock reserve for issuance under such plan by 250,000 shares, from 650,000 to 900,000 shares.

[Voting]

I move the adoption of the following resolution resolved that the company's 2017 stock option and incentive plan be amended to increase the number of shares of the company's common stock reserve for issuance under such plan from 650,000 shares to 900,000 shares.

I second the motion.

Thank you, Paul. And Beth. Is there any discussion on this proposal by any stockholder present on the conference call. [Operator Instructions]. Okay. Hearing none, I declare that the polls on this proposal are now closed. I ask the voting inspector to report the results of the voting.

I report that of the shares present and entitled to vote on this matter, 2,897,020 shares voted for, 446,180 shares voted against and 10,065 shares voted to abstain. The shares voted in favor of this resolution represent approximately 41% of the total shares represented at this meeting.

Okay. Thank you, Beth. With that, I declare that the amendment of the 2017 stock option and incentive plan has not been approved.

The fourth item of business is to consider and act on is the proposal to ratify the appointment by the Audit Committee of the Board of Directors of Wipfli LLP as independent registered public accounting firm for the company for the year ending December 31, 2025.

[Voting]

I move the adoption of the following resolution resolved that the appointment by the Audit Committee of the Board of Directors of Wipfli LLP as the independent registered public accounting firm for the company for the year ending December 31, 2025 be and hereby is ratified.

I second the motion.

Thank you, Beth and Paul. Is there any discussion on this proposal by any stockholder present on conference call. [Operator Instructions].

Okay. Hearing none, I declare that the polls on this proposal are now closed. I ask the voting inspector to report the results of the voting.

I report that of the shares present and entitled to vote on this matter, 6,761,178 shares voted for, 13,636 shares voted against and 273,283 shares voted to abstain. The shares voted in favor of this ratification represent approximately 96% of the shares represented at this meeting.

Okay. Great. Thank you, Beth. I declare that the proposal to ratify the appointment by the Audit Committee of the Board of Directors of Wipfli LLP as the independent registered public accounting firm for the company for the year ending December 31, 2025 has been approved. In the company's mailing of the proxy statement, stockholders also received a copy of the company's annual report on Form 10-K for the fiscal year ended December 31, 2024. The annual report contains the audited financial statements for that year through the SEC's EDGAR website and through the company's website. You all should have access to our quarterly report on Form 10-Q for the 3-month period ended March 31, 2025 that was filed on May 14, 2025.

I will be commenting on the current business of the company following the adjournment of the formal part of this meeting. There being no other business to properly come before this meeting, this completes the formal business of the meeting. A motion to adjourn would now be in order.

I move that the meeting be adjourned.

I second the motion.

Okay. Thank you again, Paul and Beth. The Annual Meeting of Stockholders is now adjourned. .

Next, I would like to make some comments about the current status of our business and then open the floor to an informal discussion and Q&A session. Please remember that you must dial in to the conference call line as opposed to the live audio webcast to ask a question. That number, again, is (844) 855-9502 for toll-free and (412) 317-5499 for international access.

Before proceeding, I would like to ask our attorney to provide you with a disclaimer regarding any forward-looking statements made at this meeting. Nick?

Thank you, Michael. During the course of this meeting, company representatives might make reference to future events or expected future results or predictions about steps the company plans to take in the future. It is important for you to understand that these so-called forward-looking statements are subject to significant risks and uncertainties and are based on current expectations and that the actual results or outcomes might differ materially from those projected or anticipated in the forward-looking statements.

The company's most recent annual report on Form 10-K and its most recent quarterly report on Form 10-Q, contain more detailed descriptions of risk factors that make the company's future performance uncertain as well as other cautionary statements that should be considered in connection with any such forward-looking statements. These will not be read aloud to you today, but please note that copies of the company's 10-K and 10-Q are available online or by request to the company, and the company encourages you to familiarize yourself with the types of risk factors that affect its business.

To summarize, to the extent that company representatives make statements here today about future events or developments or expectations such as future time lines or budgets or financial results or market conditions. Please recognize that there are many, many known and unknown factors that could keep these from happening in the way that those representatives might suggest or predict. The company undertakes no obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Okay. Thank you, Nick. In addition to our SEC filings, our updated June 2025 corporate presentation slide deck provides an overview of the company's business with a fair amount of detail. To view that, please go to our Investors tab of our website at www.immucell.com or call (207) 878-2770, extension 0, or send an e-mail to [email protected] for help, and Jen will be very happy to send the slide deck to you directly.

So recognizing the increase in demand for First Defense, that was largely driven by the wide market acceptance of our trivalent product format called Tri-Shield that was approved by the USDA at the end of 2017, we initiated a significant investment project with a goal of doubling production capacity from about $16.5 million per year to over $30 million per year.

This growth proved to be very difficult to manage at both the farm level and in the production plant. The project took longer to complete than planned. And along the way, we encountered significant production contamination events that plagued us from the latter part of 2022 through the beginning of 2024. The good news is that we have not encountered another contamination event since April of 2024. We believe that we have emerged from this very difficult period with a stronger production system from start to finish.

We think that the fourth quarter of 2024 and the first quarter of 2025 demonstrate the level of production output that ImmuCell can deliver with our increased production capacity now in place and running well.

Tim, would you please discuss some of the recent financial highlights.

I'd be happy to. Product sales during the first quarter of 2025 increased 11% or $810,000 over the first quarter of 2024 to $8.1 million. We have previously announced a goal to increase annual production capacity to support approximately $30 million in annual revenue. Our achievement of $15.8 million in sales during the 6-month period ended March 31, 2025 suggest that we are achieving that target. Product sales during the 12-month period ended March 31, 2025 increased by 28% or $6 million to $27.3 million compared to the 12-month period ended March 31, 2024.

We achieved 42% gross margin during the first quarter of 2025, which represents continued improvement over the 37% we achieved during the fourth quarter of 2024. The impact of noncash depreciation expenses on our bottom line is significant. Please refer to our May 14, 2025 press release for adjusted EBITDA results.

During 2023 and into 2024, cash flow and cash on hand was a challenge. I'm happy to report that we have seen improvement in our cash balance, which as of March 31, 2025 was $4.6 million.

With that, I'll hand it back to you, Michael, to share an update on our product development initiative, Re-Tain.

Okay. Great. With regard to Re-Tain, all of us certainly expected that we would have achieved FDA approval of Re-Tain by now. For about a year now, approval has been delayed due to a less than satisfactory inspection results at the facilities of our third-party contract manufacturer that handles the drug product manufacturing for us. But there is at least some very good news. The FDA is not objecting to our investigational product use of Re-Tain, thereby giving us an opportunity to get this novel product out to customers, at least on a limited basis.

This is not expected to generate sales revenue, but we will be able to collect useful data about the product's performance in the field. This data could be very helpful to us as we explore potential strategic options for the product. We remain hopeful and excited to have the opportunity to see if we can revolutionize the way that subclinical mastitis is treated in the dairy industry with an alternative to traditional antibiotics.

With that, let's now move to the Q&A session. Again, only participants using the dial-in conference call as opposed to the webcast will be able to ask questions. Again, that phone number is (844) 855-9502 for toll-free, (412) 317-5499 for international access. [Operator Instructions]. So let's pause just for a moment to allow Christine to assemble the roster.

Our first question comes from the line of [ Frank Gasgar ], a Private Investor.

Yes, Mike. As you mentioned, it's been a year since the issues arose with the contractor. Can you give shareholders some idea as to how complex is in regards to whether or not there is a solution?

So I believe there is a solution. I don't have the details that's confidential to our CMO as far as to define the complexity, but we know they are highly motivated to come into inspectional compliance because this noncompliance not only affects Re-Tain, but it does affect their own proprietary products. This is a very large professional company, and we are confident they're working diligently on this solution. And obviously, we're going to make announcement to you as soon as we learn ourselves of this next step.

So what -- during the interim period, what alternatives or possible scenarios do you see taking to either accelerate this? Or are you completely a bystander?

Well, I would point to our strategic options. I mean we can either work with Norbrook, another CMO, or perhaps a partner brings their own aseptic filling. I don't believe any of that is likely to happen before we have the data from the investigational product use. That's why we're pushing that forward so quickly and good data should create some good options. But that is...

Lastly, I think at one point, you had stated a time period in which the FDA was going to either review or visit or somehow evaluate the situation at that contractor. Is there any dates out there that's public in regards to reevaluation of the thing? And Is it my understanding that they have, in fact, failed again?

Right. There have been 2 inspections. There have been 2 submissions by the CMO and that's where we're at. The second submission in response to the second inspection has been submitted, and it's at the FDA's discretion. They could pass it remotely. They could fail it remotely. They could revisit on site. These -- we are with you waiting for that next step.

Thank you, Mike, for the clarification.

A little bit of clarification, Frank, but it's a good question. I wish I had a deeper answer, but thank you.

Understanding, it's only been 25 years, Mike. I've been with you all the way.

Yes. That's very fair, Frank. Thank you. Yes, let's get into the second half of '25 and see if we can have a better answer.

[Operator Instructions] Our next question comes from the line of [ Tom Fox ], a Private Investor.

Now turning profit and starting this test launch with Re-Tain really looks promising. My question is about Re-Tain. I'm looking at Page 26 on your corporate presentation. It looks like you guys are planning to sell this for about like 3 or 4x the competitor price. Is that because it's just more expensive to make? Or is it just that much more efficient of a problem solver? In general, what are the margins on Re-Tain going to look like?

Yes. Thanks, Frank (sic) [ Tom ]. I only have sort of a general answer to that because, obviously, we're not there. But definitely, it's a premium product, very expensive to make. And I always say you've got what you pay for. It's not a me-too antibiotic. It's not subject to milk discard. It really is revolutionary in that regard because you will be able to use this product and not discard the milk. So that opens up treatment to cows at the early stage of infection, the subclinical infection that are generally not treated today because people want to sell that milk and if they treat with the traditional antibiotics, they've got to discard it.

So expensive to make, you get what you pay for. The milk discard is a differentiating feature. And yes, as I mentioned, this 2025 is not going to see the top line or the bottom line. It is just investigational data gathering without sales. We've been pretty clear on our disclosures of what it takes to maintain that plant open and ready for inspection. So we've minimized those costs, but they're still running about $2 million on a cash basis, excluding noncash depreciation. So the real detailed answer to your question is exactly why we're looking at strategic options.

We think we can get the approval. We think we can get the initial data and a bigger company could help us do a wider launch, greater sales, greater production and all the objectives of sort of have always been -- our First Defense line is in the 40% range today. It's been as high as 50% in that zone is where we established that pricing on Slide 26 that you referred to.

We have no further questions at this time. Mr. Brigham, I'd like to turn the floor back over to you for further comments.

Okay. Great. And I see there are no more questions. So this concludes the informal portion of our meeting. Thank you all for attending this virtual meeting. I look forward to speaking with you or many of you again to review our second quarter financial results during the week of August 11, 2025. Be well and be safe, and have a great rest of the week.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.