Marrone Bio Innovations, Inc. (MBII) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Marrone Bio Innovations second-quarter 2013 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time.

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to hand the conference over to Mr. David Niederman, Investor Relations for Marrone Bio Innovations. Sir, you may begin.

Good afternoon, and thank you for joining us on today's conference call to discuss Marrone Bio Innovations' fiscal second-quarter 2013 results. This call is also being broadcast live over the web and can be assessed in the Investor Relations section of Marrone Bio Innovations' website at investors.marronebioinnovations.com. With me on today's call are Pam Marrone, Marrone Bio Innovations' Chief Executive Officer; Don Glidewell, Chief Financial Officer; and Hector Absi, Senior Vice President, Commercial Operations.

After the market closed today, Marrone Bio Innovations issued a press release announcing the results for its fiscal second quarter ended June 30, 2013. If you would like a copy of the release, you can access it online at the Company's website, or you can call The Blueshirt Group at 415-217-7722, and we will fax or email you a copy.

Before beginning, I would like to remind you that this conference call may contain statements regarding management's expectations, hopes, beliefs, intentions or strategies regarding the future, as well as projections, forecasts, or other characterizations of future events or circumstances. Such statements are based on management's current expectations and beliefs concerning future developments and their potential affects on the Company. There can be no assurance that future developments affecting the Company will be those that management has anticipated. Such statements involve a number of risks and uncertainties, some of which are beyond management's control, or other assumptions that may cause actual results or performance to be materially differ from those expressed or implied by these statements.

Important factors that could cause differences are contained in the reports filed by the Company with the Securities and Exchange Commission, including the Form S-1/A that the Company filed on August 1, 2013, and our earnings release posted on the Company's website. Should one or more of these risks or uncertainties materialize, or should any of management's assumptions prove incorrect, actual results may vary in material respects from those discussed today. Any guidance that management may offer in this conference call represents a point-in-time estimate. The Company expressly disclaims any obligation to revise or update any guidance or other forward-looking statements to reflect events or circumstances that may arise after the date of this call.

Now, I would like to introduce Pam Marrone, Chief Executive Officer of Marrone Bio Innovations. Pam?

Thank you, David, and thanks to everyone participating on first earnings call as a public company. Going public was a significant milestone for Marrone Bio Innovations. We view this as an important step on our journey as we continue to execute our vision of transforming pest management and the way we feed the world. I want to take a moment to thank all of our stakeholders, including our customers, partners, and most importantly, our employees, who helped make this possible. We had a very strong second quarter, with total revenues of $4.5 million, representing growth of almost 200% compared to the second quarter of 2012. As a further indication of our growth, our revenues for the first half of 2013 came close to exceeding last year's total revenue. This growth underscores that we are at inflection point with respect to the adoption of our products and technology by our customers and distribution partners.

Before I discuss our recent progress in more detail, I want to take a few minutes to provide a brief background on our Company mission and strategy for those who may be new to our story. The current global population is over seven billion and expected to grow to nine billion by 2050. Feeding this growing population will be a significant challenge. We are seeing the beginnings of these challenges today, as farmers attempt to address multiple concerns, including increasing pest resistance to current pesticides, the need to increase yield on a finite acreage, and also the need to reduce impact on vulnerable and vital components of the ecosystem, including bees. Marrone Bio Innovations is poised to capitalize upon these challenges and help feed the world of today and tomorrow. We are a pioneer in creating safe and effective biologically based pest management and plant health solutions and currently serve the agriculture, water treatment, and turf and ornamental markets. Our products help our customers treat a wide variety of pest issues, from plant diseases and insects, to weeds and invasive mollusks, and do so with confidence in the safety of our products, both to workers and the environment.

We have already made good progress. In addition to our 3 product lines that we are selling today, we have an additional product approved by the EPA, 2 more products pending approval at the EPA, and more than 25 product candidates. Further, over the past few months, we have received US patents on two separate herbicidal active ingredients, and also received EPA approval to allow Grandevo to be sprayed when bees are actively flying and at bloom time.

This commercial and regulatory success, as well as our broad pipeline, is the result of many years of work by our experienced scientists and management team. Our team is one of our strongest competitive advantages. It has enabled us to build what we believe is the broadest stream and biggest pipeline in the industry. We recently bolstered our team with the addition of Dr. Alison Stewart in April. Dr. Stewart joined MBI to serve as our Chief Science Officer and is an acclaimed researcher and global authority on microorganisms than enhance plant health. While working at Lincoln University as Director of the Bio-Protection Centre in New Zealand, she was responsible for discovering several microorganisms that were successfully commercialized to benefit farmers. We also recently hired Dr. Yuko Soneoka, as Chief Patent Counsel, to move the management of our ever-increasing IP portfolio in house. Dr. Soneoka was Senior Corporate Counsel and Director of Intellectual Property for Genomic Health, and before that, worked in several law firms as patent counsel. She has a PhD in Biochemistry from the University of Oxford and a JD from Georgetown University.

This is a good point to review what biopesticides are. They are naturally occurring organisms; microbes, such as bacteria or fungi; or biochemicals, which are nature-identical compounds, like pheromones or plant extracts, with a non-toxic mode of action that are used to control unwanted pests, plant diseases, insects, and weeds. Biopesticides can be used alone or in combination with traditional chemical pesticides. Biopesticides have been safely used for over 60 years, and because of their safety and biodegradability, they are regulated less stringently than chemical pesticides. Due to a reduced regulatory cycle, and our screening and development processes, we have brought our current products to market in three to four years and for $3 million to $6 million. This compares to conventional chemical pesticides, which can take 10 or more years and $250 million to develop.

This phase of new product introduction is driven not just by our internal capabilities, but also by market demand. Biopesticides are growing at nearly three times the pace of chemical pesticides. This rapid adoption is the result of several advantages that biopesticides hold over chemicals. First is performance. When our products are used in conjunction with traditional solutions, we typically see better results and higher crop yields than when chemicals are used on a standalone basis. Second, government and regulatory bodies are continuing to restrict, and sometimes ban, chemical pesticides, and we expect this trend to continue. Third is safety, both for farm workers and the environment. Using our products, the farmer can spray in the morning, and then deploy a crew in the afternoon to prune or harvest. And, the harvested food can be shipped immediately. Due to reentry restrictions and residue limitations, you cannot do these if treating with traditional chemical pesticides.

Additionally, our technologies address markets beyond agriculture, which should further support our growth. For example, our Zequanox product is a breakthrough solution for the very serious problem of zebra and quagga mussels that invade freshwater environments and occlude the vital pipes of industrial and power plant facilities. We are making headway and moving this product into commercial use into power facilities and further demonstrating performance in lakes. Our Grandevo PTO insecticide and Regalia PTO fungicide have been successfully selling into the turf and ornamental market. Both Grandevo and our Venerate product candidates have been shown to kill flies and mosquitoes. Both are in development with Scotts for the consumer lawn and garden market. Our goal is to penetrate all of the applications and markets to which our products can be applied.

We have been able to leverage existing products into new segments, and we will also seek to use new products to drive our growth. Our pipeline of new products continues to progress, and our target is to launch one to two each year. We have recently received positive field trial data for four of our pipeline products. The first is MBI-601, which is a microorganism that is applied to soil as a biofumigant to control plant diseases and nematodes. Our field trial on strawberries showed that MBI-601 increased marketable yield the same as the chemical standard, Pic-Clor, which is a toxic chemical with many use restrictions.

The second is MBI-110, which is a biofungicide that we discovered from our internal screening process. MBI-110 showed excellent control of downy mildew on grapes in a field trial in New York. The control was the same as the best chemical pesticide. This disease is difficult to control with chemicals and there are few effective biological alternatives.

In a third field trial, MBI-302 and two other candidates showed effective control of soybean cyst nematodes when applied to seeds. Finally, in a fourth field trial in New York, our product candidate, Venerate, controlled plum curculio as well as the chemical standard. This insect is very difficult to control, as there are only a few available chemical options, and currently, no biologically based methods. These are just some of the exciting results from our pipeline, and you will hear more about these and our other pipeline products in the future.

We address substantial growing market segments, and when you combine the crop protection, water treatment, and the industrial and consumer markets, we believe our total addressable market is nearly $120 billion. To best target these opportunities, we have partnered with the best-in-class distributors on both a product and regional basis. Here in the US, we are working with well-known companies, such as Crop Production Services and Wilbur-Ellis. In Europe, we have signed an exclusive agreement with Syngenta for Regalia biofungicide in specialty crops. FMC is distributing Regalia in Latin America, and ScottsMiracle-Gro will market our products to consumer markets globally. We have signed exclusive agreements with these three companies to help promote our technologies in international markets, and they have paid multi-million-dollar milestone payments for this exclusivity. Over the next several years, we anticipate increasing revenue contributions from regions outside the US. We are taking a very strategic approach as we create distribution agreements that will cover our current and future product portfolio across the globe.

In reviewing our accomplishments so far this year, we are very proud of what we have achieved. As I mentioned, we took Regalia PTO and Grandevo PTO into the turf and ornamental market. We launched Regalia Rx into row crops and made an initial batch of Regalia at our plant in Michigan. Finally, we expanded Grandevo sales in the fruits, nuts, and vegetables. With three product lines selling commercially and two additional products pending EPA approval, in just seven years, we have made tremendous progress and are just getting started. We remain on track to launch one to two new products per year through 2017 and also to ramp our international presence.

Before I turn the call over to our CFO, Don Glidewell, to discuss our financial results and operational progress, I want to take a moment to thank all of our employees, partners, and customers, whose combined efforts and support have been integral to our success to date. We are grateful to everyone who has helped us reach this point in our development and look for to continuing the journey with you all. Now, Don will provide an update of our financials. Don?

Thanks, Pam. We had strong performance in the second quarter, with total revenues of $4.5 million, compared to $1.5 million in the same period last year, and compared to $2.7 million for the first quarter of this year. For the first six months of 2013, total revenues of $7.2 million equates to a 106% increase, compared to $3.5 million in revenues for the same period in 2012. Our second-quarter gross margin of 24.5% compares to 55% for the same period in 2012 and compares to 34% in the first quarter of this year. On a year-to-date basis, gross profit margin of 28% compares to 56% for the same period in 2012.

We introduce our products to the market comparatively early to gain valuable customer feedback. This strategy, at times, may result in lower gross margins on newly introduced products. This is the case with Grandevo margins this year. We anticipate some variability in our gross margins due to new product introductions, but this variability will diminish as new product revenues represent a smaller percentage of our total revenue, over time. We expect the comparatively lower margin of Grandevo to continue until our production from our in-house facility enters the market. As the Marrone Michigan Manufacturing facility, which we refer to as M3, comes online and we shift more of our production to M3, we anticipate we will see gross margin improvements as a result of in-house production, in addition to the other levers for margin improvement, such as yield increases, potency improvements, and increased scale.

Turning to our operating expenses, R&D expenses of $3.9 million increased $1.5 million from the second quarter of 2012 and slightly more than $650,000 from the first quarter of 2013. This reflects investments in headcount, field trial expenses, toxicology and regulatory fees to support our ongoing product development. Our SG&A expense of $3.1 million increased $941,000 from the second quarter of 2012 and $260,000 from the first quarter of 2013, as our sales and corporate teams are being built out to support our anticipated sales growth and our requirements as a public company. Additionally, accounting, legal, and valuation consulting fees associated with our convertible debt issuances during the second quarter impacted our results, but are not expected to continue. As a separate note, stock-based compensation was approximately $339,000 for the quarter.

Net interest expense was $2.3 million for Q2, compared to $600,000 in the comparable quarter last year. Although we do not provide formal guidance, we anticipate lower interest expense moving forward, and we will provide more insight on this matter in our discussions of our post-IPO debt level. Net loss attributable to common stockholders of $3 million declined from $3.9 million in the second quarter of 2012 and a loss of $10.7 million in the first quarter of 2013. Please note, these loss amounts, both the Q2 and comparative quarters, include non-cash interest expense, changes in fair market value, and deemed dividends all associated with financial instruments that were converted or otherwise changed at the IPO.

Before I turn to the balance sheet, I would like to provide an update on our facilities, including our headquarters here in Davis, and also M3. In July of last year, we acquired Bangor -- a plant in Bangor, Michigan, and retrofitting of the plant is currently underway. Owning our own production facility allows us much greater control over our intellectual property in the production process. I am pleased to report we produced Regalia at M3 this quarter, and we will be shifting more of our Regalia production to M3 as the plant nears completion. Once on line, we believe the plant should provide substantial positive impact to the gross margin of our fermentation products. We expect to be producing Grandevo at M3 by the end of the year. Substantial progress has been made on the retrofitting to date. Progress includes completion of the 6,600-square-foot building that houses the fermentation processes as well as the fabrication and site delivery of three 20-cubic-meter fermenter tanks and associated seed tanks.

Regarding our Davis location, we announced earlier this week we signed a lease for a larger facility that will accommodate our anticipated growth. We expect to move our operations there by mid-2014. Total lease expense for the new facility is comparable to our existing lease expense, despite being larger and better suited for our needs. The lease rate includes all material tenant improvements, and therefore, we are not anticipating substantial capital expenditures for this relocation.

Turning to the balance sheet, cash as of June 30, 2013 was $4.2 million. Since we did not close our IPO until August 7, our cash balance as of Q2 does not reflect our IPO proceeds. While we are not providing guidance regarding our cash balances, recall that our net proceeds raised during the offering were approximately $56 million, which is net of underwriter fees and all other IPO-related expenses. Our inventory grew approximately $1.5 million to nearly $7 million in the second quarter, reflecting our anticipated growth. On the liabilities side, we held approximately $48 million in convertible debt that converted at the IPO and will not be on our balance sheet post IPO. We anticipate approximately $12.5 million in debt will remain on the balance sheet at the rate of 12%, interest only. Finally, we spent approximately $900,000 on equipment purchases in the second quarter for both our Davis and Michigan operations.

Now, I will turn to our financial outlook for the remainder of the year. We anticipate that our revenues for the full year 2013 will double those of 2012, in keeping with the trend for the first six months of the year. Several factors should drive this anticipated growth, including continued sales of our new product, Grandevo; increased expansion into row crops; further market segmentation by expanding the platform into professional turf and ornamental; and continued international expansion.

Just a quick bookkeeping note, share count, following the closing of our IPO, was 19.1 million shares, and we will be using this in our calculation of weighted average share count. With that, we would be happy to take your questions.

(Operator Instructions)

Laurence Alexander, Jefferies.

Could you give a little bit color on the field trial data you've received? And also, are you receiving -- or do you expect to receive any field trial data on your existing products that would [make] the selling proposition into next year easier or addressable to more markets?

I will address that first. I can give you some more color on these field trials, and Hector can talk about the field trials pending in row crops on Regalia that speaks to revenue. Which one you'd like to take first, Laurence -- which one would you like to take first?

Whichever you like.

110 is a new species or new strain of bacteria we discovered, and it was tested at Cornell University on chardonnay downy mildew and the chemical standard comparison -- we actually compared it to Regalia alone, as well as the chemicals -- best-standard programs with chemicals. Regalia was quite good compared to the untreated control, but was not as good as MBI-110, which is why we discovered 110 to fill in the hole -- a market need there. The chemical standards were Zampro and [Filguard] and Revus Top and Induce, and we were not statistically different from those chemical standards in this trial.

On soybean cyst nematode, it was done by Auburn University, and we tested MBI-302, a new species of flavobacterium which we discovered, as a seed treatment. We tested it, also, in furrow, and it worked both ways -- the seed treatment and in furrow. We saw a plant health effect, so not just killing of the nematodes. It was not statistically different from the chemical standard, in this case, Avicta.

On MBI-601, biofumigant is a fungus that produces gasses -- volatile gasses as it's growing, and we licensed this from Gary Strobel, a professor emeritus from Montana State University, and we're developing it. It was a trial in California by Pacific Agricultural Research, and we -- it was not statistically different at the higher rate, which was 1,000 pounds per acre, compared -- of just the crude material, it's not a final form -- none of these, by the way, is a final formulation at all. These are all technical-grade material, so you would expect that when they are formulated, they would be even better. The standard was Pic-Clor 60 EC at 25 gallons per acre. All gave significant marketable yield way above the untreated control, and we were not statistically different from Pic-Clor.

Venerate is our product we're going to be launching later this year, and controls of plum curculio, not statistically different than the chemical standard, [Imadant].

Laurence, this is Hector. All the data presented here by Pam puts us on path to be able to deliver our expectations into the future. Regarding the Midwest, harvest data is still coming in. We will have further guidance, and at least, results on that in future calls. However, I can tell you, based on recent visits with growers in Iowa, the perception, in terms of what they have seen in the field, in terms of plant vigor, growth, color, and all those other quality traits, leads us to believe that we will have a very successful season by the time harvest comes around.

Specifically, on Zequanox, can you give any color on how the negotiation pipeline looks? So, number of active negotiations versus trials?

Yes. At this point, we are in the application season, as you know. We are conducting several applications as we noted during the road show, Ontario Power being one of them. We will be providing results associated with those applications on future earnings calls. Our season has shifted over from prospecting and selling to applications and demonstrations. Again, I will signal that given the results -- the preliminary results we're seeing and the amount of activity we're seeing at the customer level, we are on track to deliver objectives.

I might mention that the trial in the open water trials have also looked positive, and we'll be reporting on the full results in the next quarter as well.

Thank you. I will hop back in queue.

Philip Shen, Roth Capital.

I want to wish you congratulations, again, on the IPO.

Thank you.

I would like to start off with Regalia. I know you just shared some results from some -- on some other field trials. Can you give us an update on the potential timing of the commercial launch of Regalia for, perhaps, corn and soybeans?

We launched corn and soybeans this season, in 2013, in a small test market in Iowa. We consider that our first initial launch, and we will continue to expand the penetration of that technology into the upcoming season.

Okay, great. In terms of your Regalia distribution agreement with Syngenta in EMEA, I believe it's only for specialty crops. What is your plan to address row crops in EMEA?

We are currently entertaining several conversations with partners. We are currently entertaining a lot of conversations as far as memorandums of understanding that we expect to be reporting on future calls. However, at this point, we are satisfied with the level of activity and the progress we have made in those areas. And, they will be consistent in allowing us to continue to grow the international market, which as you know, is a very important aspect of our future row business.

Right, okay. Then, on to Grandevo, have you made any headway on securing international distribution partners for Grandevo? Perhaps you can give us an update, and also, some timing on this situation as well?

Yes, absolutely. Again, the communication I just had previously, indicating that we are in conversation with several partners, includes both Regalia and Grandevo. We have made a significant amount of progress in putting together demonstrations in different world areas. That has attracted a lot of key partners, both at the distribution level and at the manufacturing level, to come and have conversations with us about helping us grow our markets in those specific geographies. I will say that you should expect some communication regarding progress in that area for Grandevo in upcoming calls.

Fantastic. That's helpful. One last one, and I will jump back in queue, and this might be geared more towards Don. As we think about gross margins for Q3 and Q4, how should we be thinking about them, given the recent performance, and what you expect ahead?

Sure. There's a number of things that yield the ultimate blended margin. All of those things, unfortunately or fortunately, are things that we try not to provide guidance on. But, I think it's important to couch it this way -- one is that Regalia has a higher margin, Grandevo has a lower margin, which is improving given the levers that are in play, such as contract manufacturing gains, shorter fermentation times, and so forth. So, we are seeing a positive trend in the margins of Grandevo. Historically, fourth quarter is -- and the second half of the year is more of a fungicide market, in general. So, you would expect the mix -- the product mix that affects that ratio to be higher in the second half for fungicides as one component.

On the other hand, Grandevo is really new in the market and gaining momentum, so it is really hard to guide on that exact product mix. And, of course, that product mix affects the margin. I think those are the pieces to triangulate. The other point I might make is that third quarter, historically, has been, revenue wise, one of the lower quarters of our fiscal year, so that could help you have the levers to model that, I think.

Great, thanks, Don. Pam and Hector, thank you as well. Congrats, again.

Thank you.

Brett Wong, Piper Jaffray.

I wanted to see if you could talk about some customer satisfaction or customer opinions on the products used for the row crops? You talked about Regalia already. Can you talk about perception of how that is working?

Absolutely. Again, recent conversations with growers in the Iowa area, climbing up on silos, looking across fields of treated versus untreated situations, pulling up plants, a certain number plants on the treated side versus the untreated side, clearly show that there has been a very significant response due to the treatment of our products. Again, we have to wait until yield to be able to translate, and ultimately, make a final decision or demonstrate, obviously, the performance of our technologies. The early indications, given what we are seeing, is showing very good response from our technologies, and in turn, very satisfied customers. Again, this would be all in the Midwest, and this information is as early as within the last couple weeks. We will not be expecting full harvest data until sometime towards the end of October, into November, at the earliest. We will be reporting on those results coming up in, probably, the next quarterly call.

Okay. Great. Thanks for that color, Hector. Can you talk to your expectations for [orders] from the channel over the next six months?

We won't really provide that level of granularity, here, on this call. I can tell you that we are seeing a very consistent growth pattern across all of our trade partners, today. We have a high level of satisfaction with those partners. We expect to continue to do business with them. And, we will continue to provide guidance, annual guidance, in terms of where we will end up, perhaps in our business, in future calls.

Okay. Can you speak more on the pending EPA product approvals? When should we expect to see the next new registration to be submitted?

We have committed to launching a targeted launch of one to two products every year. And as you know, Opportune and Venerate are on the docket for this year. We expect those both to do a targeted launch this year, which would mean that Venerate would be approved before the end of the year, and we expect that. Opportune is already approved.

Right, so then what is the other product that is in there now?

Yes, okay. The other ones that are awaiting approval are MBI-011, and that is a herbicide. That was submitted more recently, so we would not look to see that out the door for probably another year, at least.

Okay, great. Thanks. I will hop back in line.

(Operator Instructions)

Paul Massoud, Stifel Nicolaus.

I just have a couple -- I think, first off, Don, I appreciate some of the commentary you had on seasonality, but I was just curious, as you start to see a ramp up in demand for products like Grandevo and Zequanox, do you think that seasonality starts to go away in terms of revenues? Or, will third quarter continue to be a fairly weak quarter relative to the others?

No, I think that's an excellent question. Our business strategy has been to try to mitigate the volatility quarter to quarter. The way that we do that is by offering fungicides and insecticides, also international expansion, Southern Hemisphere has, virtually, opposite seasons. So, over time, we expect that our -- there will be a smoothing of the quarter-to-quarter revenue as a result of international expansion and product-line expansion.

Okay. As far as Zequanox goes, correct me if I'm wrong, but you have one main customer, there, in Ontario. Have we seen sales from Zequanox this year? Or, is that something that's going to show up in the second half of the year? And, if it is a second-half-of-the-year event, is it -- do you anticipate seeing an impact revenues of one quarter, or will it be broken up over the year? How should we expect Zequanox's revenues, given the lumpy -- the small client base, now, to show up, going forward?

Let me break up your questions into different pieces. The first question, regarding sales for this season, yes, there have been sales for Zequanox in 2013. It has just not been one customer. We have a handful of customers that have purchased material from us, which applications are ongoing this fall. We will not be providing the granularity at the product level, except to provide, obviously, revenue guidance on an annual basis.

The good news, however, is that given the applications we have had this season, given the early results of some of those applications, and the pipeline of product or customers that we have in the queue today, we feel confident that we are on track to deliver objectives into the future.

Thanks for clearing that up, Hector. Right now, the Zequanox is only being used in pipe, is that right? And, you are conducting tests on open water applications?

Yes, commercially, we applying commercially in pipe.

Yes.

We have had some limited transactions on open water, but we are -- those are primarily going to be demonstrations that we are conducting in open water this season --

The reason is because the EPA registration, the label for open water is actually pending, and we expect that approval next year. So, we won't be able to get sales until that is approved, so that's why we're doing demos.

Okay. We should assume that open water usage will be done within the US before internationally, is that right?

That's right.

Okay. And then, maybe one last question -- you've talked a little bit about future growth into corn, soybeans -- is wheat -- are there applications for wheat that you are seeing with your products now? Or, is that something that could potentially be another area where you will grow into?

Yes. When we categorize the term, row crops, we consider corn, soybeans, wheat, and rice among the primary crops -- and canola, as we venture into Canada. In relation to your specific question on wheat, yes, we have done -- we have collected data in that crop as well. And the results, again, have been very consistent with the results that we have been seeing in the Midwest in corn and soybeans. We will be in a position to be able to provide more color, perhaps, on some of that data in upcoming calls.

Same for rice.

All right, thanks a lot.

Laurence Alexander, Jefferies.

Just a couple of things -- you alluded to a few items that would be largely not recurring in the back half. Can you quantify those?

I'm sorry, I did not hear the question. Could you repeat that, Laurence?

Sure. You alluded to a few items related, for example, on the interest expense line that would not be recurring in the back half. Could you quantify what those were?

Sure. They actually are fairly well spelled out in the 10-Q and in the earnings tables. The things were deemed dividends, the -- again, some of these are depending on which quarter you're looking at, but -- I'm sorry?

We can circle back, also, on them, that's fine --

Yes --

Second question is on -- I appreciate you don't want to give too much granularity on the Regalia and Grandevo volumes, but can you discuss how they're doing versus your [plan]? Are they both roughly in line, is one doing significantly better -- Can you give a sense? And also, given the seasonality, can you discuss to what degree volumes might have shifted from Q2 to Q3, if at all?

Yes. Most of the information we shared during the road show, Laurence, is still consistent. Grandevo, today, is outperforming our expectations that we originally cast in our financials. We showed those graphs in the road show. We have been able -- we feel very comfortable that is not necessarily a quarterly shift, but instead, good natural growth that has happened in terms of higher demand. And, Regalia is currently performing as expected based on our forecast. So, we are on track to double the business from last year and deliver the objectives for the season.

And lastly, on the shift of Regalia to M3, will it be a fairly smooth shift, or will it be choppy? Should we expect to see in one quarter or two quarters a significant step up, or should be volume shifting over, over time --?

I think it will be volume shifting over time, but I want to make sure that we're clear that Regalia is not a fermentation product. The expectation of production there is more about -- we're paying about 2% of the product cost to have it done outside, so we may save 1.5 points. The desire to move it over there is really for scheduling and IP control -- small impact on margin. And, it will be a smooth transition over the remainder of this year and next.

Fair enough. Thank you.

Paul Massoud, Stifel.

I just had a couple of questions. I think I missed it, but you had mentioned share count and expected share count, going forward, right at the end of your prepared comments, is that right?

Yes, correct. The share count, as of the IPO, was 19.1 million shares. And then, of course, we will report using a weighted average, so that 19.1 million will be the weight that is there, post-IPO.

Okay. And then, going back to some of the commentary you said -- you gave on research and development, it looked like the number, I guess, was little bit bigger than, at least, what I was expecting. Should we assume a higher run rate, or were there some items associated with hiring that may not necessarily show up in future quarters?

I don't think the hiring was an issue. I would guide towards looking at the year-to-date average. There's some lumpiness, timing, depending on when we, say execute on a submission to the EPA, just preceding that there will be the payment of a lot of toxicology studies. The timing on field trials, we typically pay those when we start the trial and finish the trial. So, there gets to be some timing issues in there. I think the guidance is really to look at the year-to-date trend, plus don't forget to include the stock-based compensation. A lot of our salaries are related to R&D headcount, so a big chunk of that $341,000 in stock-based compensation does get into the R&D grouping as well.

Got you. The cost associated with Opportune and Venerate are tied in that number -- in the first-half number, is that right?

Yes, sure, there certainly are some. There's -- in Opportune, certainly, with we are producing some material. There clearly are costs associated in this quarter for moving those products, and others in the pipeline, forward.

Got you. And then, we will get MBI-601, 110 and 302 in the second-half numbers -- field trials associated with that -- is that right?

Yes -- field trial -- as Don said, field trials are booked 50% when you start the trial, and then 50% when you finish the trial, so you will be seeing the remaining in the second half. Plus, we have several other pipeline products that are in field trials, as well as additional trials in new market segments on Regalia and Grandevo, so field trials will always be a significant line item in our budget.

That's all I had. Thank you.

I am showing no further questions at this time. I would like to hand the conference back over for any closing remarks.

Thank you, all, for joining us on today's call. We look forward to speaking with you again next quarter and updating you on our progress. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.