Yield10 Bioscience Inc (YTEN) 2006 Q3 法說會逐字稿

Please stand by we are about to begin. We do thank you for standing by. And welcome to the Metabolix Incorporated Third Quarter Earnings Conference Call. [OPERATOR INSTRUCTIONS] And at this time, I'd like to turn the conference over to Kathleen Heaney of Integrated Corporate Relations. Please go ahead.

Thank you and good afternoon, everyone. By now you should have had or received the Metabolix third quarter 2006 earning press release. If you do not have a copy, one may be found on the website at www.metabolix.com in the Investor Relations section. Making presentations during the call today will be Jim Barber, President and Chief Executive Officer of Metabolix and Tom Auchincloss, Chief Financial Officer. Also standing by for questions is Oliver Peoples, Metabolix's Co-founder and Chief Scientific Officer.

Before we begin our formal remarks today, I need to remind everyone that part of our discussion today may include forward looking statements. These statements are not guarantees of future performance and, therefore, undue reliance should not be put upon them. The company undertakes no obligation to update any forward looking statements in order to reflect events or circumstances that may arise after the date of this conference call. We refer all of you to the recent SEC filings for a more detailed discussion of the risks that could impact the future operating results and financial condition. With that I'd like to turn the call over to Jim Barber, President and CEO of Metabolix. Jim.

Thank you Kathleen. I'd like to welcome all of you to the first earnings conference call for Metabolix. After my introduction of the company, Tom Auchincloss, our CFO, will revue our financial results and discuss the commercial details of our alliance with ADM, as well as some important upcoming developments. But before we begin our formal remarks, I'd like to review our status as a public company. And I'm also delighted to highlight the press release that we sent out this afternoon, along with our earnings release announcing that permits for our natural plastic facility with ADM were received November 30th and construction has commenced.

Now as most of you know, on November 10th Metabolix become a public company, when our stock began trading on the NASDAQ under the symbol MBLX. We issued 7.8 million shares, including the greenshoe, at an offering price of $14. Proceeds from the IPO totaled $99.5 million, and an additional $7.5 million of stock was sold to Archer Daniels Midland in a private placement concurrent with the public offering. So in total we raised approximately $107 million. We'll use these funds to purchase equipment, to expand pilot manufacturing and for commercialization of our natural plastic products, as well as further research and development in our switchgrass biorefinery program. We are extremely pleased with the success of the offering and excited about the future of the company. As the offering substantially enhances our ability to further develop and commercialize our proprietary patent products.

As this is our first conference call, I think it appropriate to review the Metabolix story, as many of you might not be very familiar with our company. So Metabolix is a brand new breed of biotech company. We founded the company in 1992 to develop and produce biodegradable natural plastic from renewable resources such as corn sugar, which is abundant here in the US. We are innovation driven using bioscience to provide sustainable, clean solutions to our needs for plastics, fuels and chemicals.

Dr. Ollie Peoples, our co-founder and Chief Scientific Officer, was instrumental in getting the company to where it is today. At MIT, Dr. Peoples pioneered the then-new field of metabolic pathway engineering and did the path breaking work that has enabled the biological production of natural plastic. He's the inventor and holder of over 90 patents and patent applications worldwide.

Now back to the company. Today we are producing three commercial quantities of natural plastic jointly with Archer Daniels Midland, the $36 billion agricultural processor, at a pilot plant having a capacity of about eight tons per month. As part of our strategic alliance with ADM, we're building a 110 million pound per year, commercial manufacturing facility to produce natural plastic. And we anticipate commercial production to start up in 2008.

Natural plastic is the cleanest, greenest, best performing product available and we've made tremendous progress, in a short period of time, toward their full commercialization. And we're very [inaudible - background noise] to be recognized for these achievements. And last year we received the President's Green Chemistry Award for this development.

To give you an idea about our potential marketplace, let me quickly review the current market for plastics. Today, the global plastics market is about 350 billion pounds per year, and each year another 15 billion pounds of new demand is created, virtually all made from petroleum. In fact nearly 10% of the oil consumed in the US is used in the production of plastics. As we all know, oil is a disappearing resource, we're importing more and more from unfriendly places, and the cost of finding oil is rising.

In addition, petroleum-based plastics are causing major environmental problems, both at the front end , there is significant emitters of greenhouse gases in their manufacture, and at the back end, they last virtually forever and are creating growing solid waste and environmental challenges. Our natural plastic can reduce these problems. It's made from renewable resources, not from petroleum. And significantly reduces greenhouse gas emissions. And since natural plastic is totally biodegradable, it can reduce environmental issues associated with solid waste and the persistence of plastics in the environment, even in wetlands and oceans.

So what are our products and how are they made? We start with corn sugar because here in the US, it's the most economic feed stock but we could just as well use cane sugar or palm oil or cellulose based sugars as they become available. The key to our process is the sophisticated biotechnology we have engineered into our production microbes that transform the corn sugar into natural plastic. And after their use, natural plastic returns harmlessly back to nature, closing the carbon cycle and reducing greenhouse gases.

In sum, we have developed a broad family of natural plastic products that is based on renewable resources and is totally biodegradable and is attracting interest from a verse range of industries. Natural plastic can be used in a wide range of products, from hot cups and lids, to gift cards to plastic bags, and can be molded thermoformed and processed into film using standard plastics processing equipment. In fact, we have over 30 perspective customers, retailers, brand owners, converters evaluating natural plastic in over 50 different applications in segments such as single-use disposables, packaging, consumer products, electronics and agriculture and erosion control. And construction products, automotive and home and office furnishings companies have expressed interest in natural plastic, although we are not focused on these segments at this time.

To commercialize natural plastic, we entered into an alliance and joint venture agreement with ADM. This alliance combines world's best technology with a powerful, integrated, low cost global manufacturer. ADM is the largest industrial fermenter in the world and one of the largest agriculture processors. Our relationship with ADM has been excellent. As I mentioned earlier, ADM is an investor in Metabolix, and concurrently with our IPO, purchased $7.5 millions of our stock in a private placement.

Tom will provide the financial specifics of this alliance. But briefly, we formed a 50/50 joint venture with ADM where they provide most of the capital required for commercialization and we retain 50% of the opportunity after ADM recovers its capital investment. We developed not only the biotechnology and genome engineering for making natural plastic, but also the entire manufacturing technology and process.

ADM is building the world's first natural plastic plant at its facility in Clinton, Iowa right in the heart of corn country. And we're delighted to report that the Iowa Department of Natural Resources issued permits on November 30 and that construction of the plant has commenced and we expect to be up and running in 2008. The Clinton site is home to a worldscale corn wet mill and sweetness plant, and the natural plastic plant has been designed with expansion in mind so that we can expand with this market.

Now onto the technology. When you think of biotechnology, you tend to think of the biopharmaceutical industry, where a single gene is used to produce single therapeutic protein which eventually may become a multibillion dollar drug. Our technology is more complicated because it involves many genes, taking genes from a variety of sources in nature assembling them into a new operating system that codes for the biological pathways that create natural plastic and then directly incorporating this operating system containing multiple genes into the chromosome of the living organism, whether microbe or plant. This turns the organism into a biofactory that produces natural plastic. And most importantly, these engineered organisms produce natural plastic with unprecedented efficiency. Our overall focus is to continue to drive innovation, to expand the range of products we can make and to continue to reduce cost and improve efficiency.

Now this core competency, this core science base of Metabolix can be used to do other things besides making natural plastic and microbes. For the past five years, we have employed our capabilities in genome engineering to develop switchgrass that will produce natural plastic right within the leaves and stems. Many of you probably hadn't heard of switchgrass up until the President's State of the Union address back in February. But since then, switchgrass has been in front page news in many magazines and newspapers. The reason is that switchgrass is a very attractive biomass biofuel crop for the US with enormous volume potential.

We began investing in switchgrass five years ago because it has the fundamental properties and agronomics that make it a very interesting platform for renewable fuels, chemicals and materials. We've developed the capability to genetically engineer switchgrass. And natural plastic is now being produced directly inside switchgrass plants, growing today in our greenhouse here in Cambridge, Massachusetts.

The basic concept is to grow these plants at a very large scale, harvest them and take them to a biorefinery where they would be processed to extract the natural plastic. The plant residue would then be used for generating heat and power or converted into biofuels by other technologies. This has enormous potential for the Midwest and the US overall. And this same approach can be taken in other plants more suitable for regions outside of North America as well.

The key point here is that by co-producing natural plastic, you can increase the value of the biomass that's harvested, making the entire economic proposition for biomass energy and fuels more attractive. So this is a fairly broad-based opportunity for Metabolix. Our core competencies will drive innovation, and create opportunities outside the ADM alliance based on a strong, broad and deep intellectual property portfolio. Hopefully, I've conveyed to you my excitement and given you a look at the future opportunities for Metabolix. And I'd like now to introduce Tom Auchincloss, CFO of Metabolix. Tom.

Thank you, Jim. And thank you all for joining us today. As Jim mentioned, we became a public company on November 10th. As this occurred in the fourth quarter, our financial results for the third quarter, the period we are discussing on this call, do not reflect this. In particular, our balance sheet is quite a bit stronger today than it was on September 30th. And at November 30th, the balance of our cash and marketable securities stood at approximately $122 million.

Now as most of you can appreciate, since our founding, we have been primarily involved in research and development activities, and to date have not had any significant sales of natural plastic. Our financial results basically reflect this R&D focus, as well as, more recently, the initiation of pilot manufacturing, sales and marketing activities and so forth, to set the stage for the commercialization of our natural plastic products. As an R&D company, the key part of our financial strategy has been to offset a significant portion of our expenditures through collaborative partnering arrangements and government grants.

We've been fairly successful in this regard, and as a result, our net cash used for operating activities for the nine months ended September 30, 2006 was only $2.7 million. And this was almost $600,000 less than the comparable figure for last year, even though the activity level and expense base for the company has roughly doubled in that time frame. In fact, for the most recent quarter, we were cash flow positive. At present we are receiving significant levels of support from our partner ADM, as well as the US government. And I will provide more detail on our financial arrangement with ADM later in these remarks.

Now on a GAAP basis, our reported net loss for the three and nine months ended September 30th was $4.2 million and $8.6 million, respectively. This is considerably greater than our reported net cash flow for operating activities, which was a positive $200,000 for the quarter and a negative $2.7 million for the nine month period. The primary reason for the difference is that, under GAAP, all of the payments we received from ADM are recorded as deferred revenue, and therefore, do not appear on our income statement. For the quarter and the nine month period, these payments totaled $3.3 million, respectively -- excuse me, $3.3 million and $6.4 million respectively.

The deferral of recognizing payments from ADM will continue until commercial sales from our manufacturing facility commence, which we expect in 2008. And from that point forward, the deferred revenue will start being recognized. Another reason for the difference between net loss and net cash flow for our operating activities is the recognition of stock compensation expense. For the most recent quarter and the nine month period, this non cash expense totaled $400,000 and $1.2 million, respectively.

So while we essentially broke even on a cash flow basis this quarter, we are continuing to grow. And efforts are now underway to expand our pilot production of natural plastic and to expand our sales and marketing infrastructure. We also plan to increase our research and development, to improve our production microbes, as well as to advance our switchgrass program. Finally, we are putting in place the administrative infrastructure that we need to meet our growing needs. As a result, we expect that our cash flow used for operating activities will increase in the coming quarter and for next year.

So now let me review some details of our third quarter 2006 financial results as well as the terms of our alliance with ADM. Our GAAP revenue for the third quarter was $400,000 and for the nine months ended September 30, 2006, was $4.2 million. As I mentioned earlier, the payments we receive from our collaborate partners were recorded as deferred revenue. In the quarter and the nine month period, payments from partners totaled $3.3 million and $6.4 million respectively.

On the expense side, total operating expenses in the third quarter were $4.9 million, almost double the comparable period for the third quarter of 2005. The increase in operating expenses was due to both an increase in research and development as well as general and administrative activities. As I mentioned in the beginning of my remarks, Metabolix has largely been a research and development company and our R&D expenses reflect increases in the most recent fiscal periods due to pilot production of natural plastic as well as product development activities and additions to our R&D staffing. Our G&A expenses were also up in the third quarter and year to date.

To set the stage for commercialization of natural plastic, we have added sales and marketing, as well as administrative staff. In addition, we recognized an increase in stock compensation expenses. So now I'd like to review our alliance with ADM. Our alliance with ADM is essentially a 50/50 joint venture with provisions to address the fact that ADM is putting up the bulk of the capital for our first plant. The alliance unfolds in a series of stages, the first of which is already complete. Last year ADM ran our technology in their commercial scale equipment and validated our low cost manufacturing economics.

During that time, they paid us $5 million in up front fees and milestones, $2 million of which were tied to hitting very specific performance benchmarks in their commercial scales fermentation reactors. We are now in the second stage of the alliance, whereby ADM is constructing the plant, funding the cost of that construction and providing ongoing support to Metabolix of $6.3 million per year. These payments will help partially fund our continued R&D as well as the expansion of our sales and marketing activities.

The third stage of our alliance starts when commercial sales begin. And at that point Metabolix will collect a royalty on each pound of material sold as well as receive reimbursements for all of our expenses associated with the business. Now since ADM is putting up such a disproportionate share of the up front capital requirements, there will be a preferential distribution of profits from the joint venture to them until the company's respective capital investments are re-balanced. Once that occurs, this will be a 50/50 joint venture in every respect going forward.

Now, in terms of what the business looks like, the Clinton facility is designed with a rated capacity of 110 million pounds. This represents a very small share of the global polymer market. And at that level, we can focus our initial efforts on the highest value customer applications. So our sales force is in the field today marketing to customers at target prices of $2 a pound and higher. Now the Clinton facility is being designed and built with infrastructure to handle significant expansion. And consequently we believe we will be able to accommodate a fair amount of growth beyond this initial 110 million pounds at this site.

For competitive reasons, we're not disclosing our anticipated manufacturing costs. But we believe we have an efficient manufacturing process and that our cash production costs can be in the same neighborhood as those that are incurred for making common petrochemical polymers today. So between our premium pricing and our low cost manufacturing, we believe that the natural plastic business can attractive margins that will provide us with a rapid payback of capital as well as a good return on investment over the long run.

Now we look forward to reporting on a number of events in the coming quarters. First and foremost will be progress on our customer pipeline. Today, we have 30 customer prospects working on 50 different applications. And by this time next year, it is our goal to double that. This will set the stage, we believe, for not only selling out the Clinton plant but also creating demand for future expansions. Efforts are also under way to expand our pilot manufacturing operation by the first quarter of next year. And so we look forward to reporting on expanded production in the coming quarters.

We are also developing relationships with a number of key customers and believe that these can lead to important co-branding arraignments and other commitments next year, which we could report on. We will also be launching our brand early next year and we plan to be very public about it. And now that ADM has started construction of the plant, we expect to provide periodic construction updates. We will also report on certain technical advancements including new patents we receive. And if we are fortunate enough to close any additional government grants or corporate collaborations, we'll announce those. So those are the potential milestones that we're looking forward to in the coming year, and with that we would be happy to open this up to any questions that you might have. Operator, please open the lines to questions.

Very good. [OPERATOR INSTRUCTIONS] Our first question will come from Eric Larson with Piper Jaffray.

Yes, good morning Jim and Tom -- or good afternoon, Jim and Tom.

Hello

Hello Eric.

A couple quick questions -- by the way, congratulations on the successful offering. It worked out really well, it looks like. Can you give us a quick update on your 30-ton pilot plant? Are you still, sort of, online to get that online by Q1 of next year?

Yes. As you know, we're in the process of expanding our approximately eight tons a month pilot facility to about 30 tons a month. And that's on schedule for completion during the first quarter of next year.

Okay. And then Tom, in the quarter, the ADM payments, did you have two quarterly payments lumped into Q3? I think you did -- just from a timing perspective.

Yes, that's correct. We get -- the quarterly payments are $1.575 million per quarter. And in July 2006, given the various timing things that occurred, we actually received two payments in that quarter.

Okay, good.

Going forward it will be the $1.575.

Okay, good. That will obviously help the cash flow of the quarter, as well. And then Jim, I know this is a difficult subject and it's really hard to give too much information, but can you give us a little more flavor; which -- what might have happened in the most recent quarter in terms of maybe additional customers that have come on to talk to you? Not necessarily the names, but can you give a little more flavor as to the sort of the customer marketing sales process and how it's progressing?

Sure, I'll do that as well as I can, Eric. As through the earlier part of the year, we spent considerable energy in bringing onboard our sales and marketing team. And in the spring we brought on board a -- Bob Findlen, our Vice President of Sales and Marketing, in August, Brian Igoe, our Vice President and Chief Brand Officer, and a number of market development people. And so, over these past months, they've all been getting their feet on the ground. We've had a considerable backlog of leads that they've been getting out into the field and beginning to talk to. And so we've just been progressing along the lines that we outlined earlier and with particular focus on the consumer disposables packaging segments in particular.

Okay. And then just one other final question and I'll turn it over because I'm sure there's a lot of other questions out there. Looking forward into your potential incremental government potential support programs, et cetera, new projects you might be working on and how those might come in, do you expect any significant programs that could come in over the next six to nine months?

Eric, this is Tom. We have a couple of plans to make a few proposals into the government in the coming year. So if they come through, we will have additional grant revenue to -- or grant programs to report on. At this time, though, we cannot gauge how successful those efforts will be.

Okay, good. I'll follow up offline with a few other questions, but I'll turn it over. Thanks guys.

Thank you.

Thanks, Eric.

Our next question is then from Mark Manley with Ardour Capital.

Hi, I'm kind of new to your story; so I just wanted to talk a little bit about the technology and the business process. First question is about how much corn do you need or in terms of bushels per pound of product yield? Just trying to get an idea of what you would use in 110 million --

[inaudible - cross talk] say exactly, but we do give the general guidance that we're producing on the order of 10 pounds of natural plastic per bushel of corn or better.

Okay. And can you give me a sense of roughly what percent of your costs corn might represent?

No, we have not disclosed exactly what our feed stock costs are. However, based on current corn prices, we believe that the cost of making our material could be in the same range as the cost of making common petrochemical polymers today. And just for reference, common petrochemical polymers today cost under $1 a pound to make, as low as $0.50 a pound in some cases. We have, when we were out on the road, we did, we received a number of questions about what the sensitivity of our manufacturing costs would be to the price of corn. And the -- what we indicated is that an increase in the price of corn of, say, $1 per bushel could add on the order of $0.10 a pound to our manufacturing costs.

Okay.

Mr. Manley, any additional questions at this time?

Yes. You mentioned also that you could possibly use, what was it, palm oil, did you say? Other sugars of course, but was palm oil one of the feed stocks that --?

Yes, we did mention palm oil as one example of vegetable oils.

So what you can, you don't actually have to use a starch or sugar, it can also be a oil seed that-?

Yes, that's actually correct. We can use vegetable oils just as readily as we can use starch or sugars.

I see. And does the, when you got the plastics out of the plant, I mean, does that reduce the yield of, let's say, since it was corn, in the case of corn oil or starches or are the yields of those sort of co-products kept the same?

Yes, when you get the plastics out of the production plant, the one that's going to be built in Clinton, it's actually being produced from the sugar stream which comes out of the stock processing at the wet mill at Clinton. So it does not impact the corn oil or any of the other corn products just gluten meal, but does in fact, the flow of starch, utilization of starch.

And do you need a wet milling process to extract the plastics or can dry milling?

Dry milling is not applicable for this technology at this point in time.

Okay. So all expansion plans would be around a wet milling?

Wet milling or vegetable oil extraction facilities.

Okay.

Mark, just to clarify on one point there. The extraction that goes on in the wet mill is of the starch and -- which is converted into then a corn sugar stream, which serves as the feed stock to the fermenter. So the plastic is not actually extracted in the mill -- in the corn wet mill.

Right, okay. It's within the starch stream. And then you extract that later on, is that --?

The starch is converted using our microbial production systems into the natural plastic --

Oh, okay.

-- and then that is then isolated later on.

Okay. One more dumb question, sorry about that. But is the -- do you need to modify the plan, genome or plant seed, to-so that you can extract the -- or process the starch? Or is it really any old corn starch sugar can be converted into your plastics?

Yes. Maybe I'll start and then Ollie can pick up. What we have for our production system is an engineered microbe, a bacteria to which we feed the starch stream, and the bacteria converts it into the natural plastic. It is a separate platform that's still in research that involves the production of plastics directly inside a plant host.

I see. And that was-right, okay. That's what you are doing with switchgrass?

Yes. So our relationship with ADM is essentially using a fermentation process to convert the sugar stream from their corn wet mill into the natural plastics.

Our next question is from Laurence Alexander with Jeffries.

Good afternoon.

Hi Laurence, how are you?

Very good.

Good to see you Laurence.

I just have, I guess, a couple of questions to follow on that thread. First is ADM have a claim on your fermentation technology for any feed stock, or just fermentation of the corn sugar stream? In other words, can if ADM wanted to switch to a different feed stock, could they do so?

They have the license covers the production of natural plastics by fermentation.

Perfect. And Ollie can you give us some update on how you're thinking about from reducing the cost to me either through process optimization or optimizing the effect of the microbes that are used for the fermentation? I mean, what could we be looking at over the next 12 to 18 months if all the stars align and things go well?

Yes. So basically we are - we continued - have continued over the years to improve the basic organism for production of these materials. We continue to drive that forward. We've not disclosed our costs of any of this to anyone. So I'm not entirely sure what I'll be disclosing to you in terms of that. But I do -- would like to point out we do continue to make process on that. There is additional upside in that for cost savings, we'll continue to drive that as we go forward. We're basically meeting our planned goals at this stage of technology.

Okay. And on a brand management or a marketing standpoint, can you give us any flavor for the initial price points that customers appear to be comfortable with, I mean, admittedly it's at a very early stage?

Sure, Laurence. We're out -- our sales and marketing team are out talking with customers in the range of $2 per pound and up. There seems to be very good traction at that level in select segments where there is appreciable brand benefit to the brand owners associated with providing their products with natural plastic.

And I guess lastly, are you seeing any interest from other companies -- I mean, chemical companies or otherwise in licensing your technology for applications to other chemical streams that you are not focusing on at this point?

We certainly have the attentions of a variety of companies around these types of uses. We had spoken in our public offering presentation around opportunities for producing established chemical intermediates from technology around this platform. And there's been considerable interest in that.

Okay, thank you.

[OPERATOR INSTRUCTIONS] We'll next go to Paul Knight with Tom Weisel Partners.

Paul Knight, Tom Weisel Partners: Jim?

Hello Paul.

How are you?

Very well, thank you.

Could you go over where you are with the build up of the sales force? Are you -- and the next question is regarding production, are you able to deliver enough trial quantities in '07? How does this part of the business roll out as you see it?

Sure. So today we have a sales marketing team of first off Bob Findlen, Vice President of Sales/Marketing, then three market and business development folks based here in the US -- two in the Cambridge area, one in California and then one based in Europe. We're spending quite a bit of time now getting our thinking together as to how to approach the European market. And so stay tuned in the early half of next year for some steps in that direction.

In respect to being able to provide material in 2007, as we've mentioned, we have a current capacity of around eight tons a month in our pilot unit which will be expanding in the first quarter into the 25 to 30 tons per month range. And so certainly there will be a scarcity to this material and that actually is probably working beneficially in that our customer prospects are understanding that even this first commercial plant of 110 million pounds will be relatively a small start. And so that is helping to, I think, secure their attention here. But I think in terms of doing the job of qualifying product with customer prospects along a timeline that works with the 2008 plant start up, we'll be in a good position.

What's your feedback - what feedback do you get right now, Jim, regarding is it decision going to be made on the environmental attractiveness, meaning biodegradable nature or how much does pricing come into play?

Of course, at some level, pricing always comes into play, so we don't have unlimited flexibility there, I'm sure. But basically what we are finding is that around two propositions, one in, say, the agriculture and erosion control markets, where natural plastics can be used in the outdoors and then will simply go away after their job is done, and alleviate the need of sending crews back out into fields to collect these various things. And then secondly, and more importantly, and more broadly, the proposition with brand owners providing to the consumer for very, very little incremental cost at the consumer level, products that they use whether that might be the cup and lid of your coffee cup or gift cards or any variety of things, plastic bags where the brand owner gets a very substantial brand benefit from providing their product in this clean and green plastic material. And with -- just a few percent up charge in that segment can actually expand their margin at this same time. And this is providing a very potent offering.

Thanks, Jim.

[OPERATOR INSTRUCTIONS] Return to Mark Manley with Ardour Capital.

Hi. Just wondering if there was any kind of indication where R&D spending was going to be over the next few quarters.

At this time, we have not issued formal guidance on our future financial outlook, including what our expenditures for R&D will be in future quarters.

Do you expect to do that anytime in the next few quarters or -- ?

We're evaluating how to handle guidance presently. And so I don't have a specific answer for you on that. That said, we are comfortable stating that our R&D budget will be going up as we expand pilot production from our expanded pilot facility in the first quarter of next year as well as given the increase personnel we have, not only in microbial and plant research but also product development and fermentation.

Okay, great. What are your current staff levels? Can you disclose that?

We have total people in the company of 55.

Got it. Great. That's it. Thanks very much.

Yes.

And with that there are no further questions. I'd like to turn the conference back to Jim Barber for any additional or closing comments.

Alright, well, thank you. Before I conclude this call, I'd like to leave you with the four key factors that I believe have us very well positioned for the future. First, Metabolix is now commercializing a broad family of natural plastics, useful in a wide arrange of applications that are totally biodegradable, reduce greenhouse emissions and made from renewable resources like corn sugar. Second, we are commercializing this first product platform in an alliance -- a very attractive alliance with ADM, where they are providing most of the capital required for commercialization. And we retain 50% of the opportunity downstream. Third, our breakthrough technology is strongly patented protected and we have the robust pipeline of further opportunities building on it. And fourth and finally, we have a very dedicated, very strong management team in place today making this happen. So we thank you for joining us today on our first conference call and we look forward to speaking with you again at the end of the next quarter. Thank you.