The spoils of success took a major toll on Portland, ME-based ImmuCell ($ICCC). One year ago, the company was drowning in orders for First Defense, a drug that protects calves from scours. As the backlog of orders grew, the company scrambled to build up its manufacturing facility. It has since spent $3.6 million to double its production capacity, but during the time when customers couldn’t get their hands on First Defense, some moved to other products. Others chose not to protect their cows against scours at all.
That was the explanation from ImmuCell on October 18, when the company announced preliminary third-quarter results that included a year-over-year sales drop of 20% to $1.97 million. The company also announced plans for a private placement of 659,880 shares of its stock at a price of $5.25 per share. That was a significant discount to its closing price of $7.78 per share.
Not surprisingly, investors were displeased. Shares of ImmuCell fell more than 15% in morning trading to $6.55.
Initially, sales of First Defense seemed poised to skyrocket when a competing product from Eli Lilly’s ($LLY) Elanco suffered a supply interruption that extended from late 2014 through the first half of last year. That product is back on the market, and some customers have gone back to it, according to ImmuCell. The competition will make the company’s marketing task even harder, and it doesn’t expect sales growth during the second half of this year, said CEO Michael Brigham in a press release about the preliminary third-quarter figures.
The private placement will bring in $3.5 million, which ImmuCell said will primarily be used to produce the active ingredient in Mast Out, a product the company is developing as an alternative to antibiotics for treating mastitis in dairy cows. The company broke ground on a new facility for producing that drug earlier this month. ImmuCell is budgeting $20 million for the construction of that facility, and it plans to supplement the new financing with funds from bank debt and cash flow from operations, Brigham said in a press release about the financing.
As food producers move away from antibiotics in response to tough new FDA rules meant to stem the rise of superbugs, ImmuCell should be poised to fill the need for new products to protect animals. But the company is at risk of falling into the red as it rushes to get First Defense back on line and Mast Out on the market. The company could report a loss of as much as $67,000 during the third quarter, according to the release announcing preliminary results. ImmuCell will release its full quarterly financials on November 10.