Marrone Bio Innovations (MBII): 6 Consecutive Quarters of Growth Tell the Story

Edward Kim  |

We've been following a company in the agricultural biotechnology space that has fallen off the radar for most investors. We think it may be time to take another look at Marrone Bio Innovations (NASDAQ: MBII). The company now trades at about one-fifth of its 2013 IPO valuation, yet it appears to be better positioned now than it was then. Marrone Bio is the only pure play public biopesticide company, with six commercial products - all with large addressable markets.

The company raised $66 million at a post-IPO valuation of $228 million in 2013 and faced a rough first few years of life as a public company. The travails were punctuated by results that disappointed the market (amid a rough time for any company remotely associated with agriculture) and a revenue recognition scandal that led to restatement of financials in 2013 and the first half of 2014, an SEC fine and legal settlements. A former executive with the company was charged criminally by the US Attorney's Office in 2016 for executing the revenue inflation scheme and profiting from expense report abuse and falsely earned bonuses.

Dr. Pam Marrone, founder and CEO, was not complicit in the scheme and has led the company past the scandal to demonstrate growth across all aspects of the natural agricultural inputs business, which encompasses pesticides, biostimulants and fertilizer. Though the market has lost interest in the stock, we believe that investors may be ignoring a significantly undervalued opportunity with Marrone Bio. The company reported its sixth consecutive year-over-year quarterly growth yesterday, posting a record quarter for product shipments and gross margins. Marrone Bio has six products on the market now - any one of which might justify the current valuation by itself - with a deep pipeline of developing products.

Source: Marrone Bio Innovations Corporate Overview, April 2017

We listened to the company's earnings call yesterday, which was well scripted and professionally delivered by Dr. Marrone and CFO Jim Boyd. The Q&A featured four participants: Sameer Joshi, analyst with Rodman & Renshaw (unit of HC Wainwright); Tyler Etten, an associate working with analyst Brett Wong at Piper Jaffray (NYSE: PJC); Michael Brcic, who we believe is a financial advisor with National Securities which led a $9 million follow on offering in April 2017; and Robert Smith, who we believe is an individual investor operating under a dba called the Center for Performance Investing.

We took away the following key notes from the call:

  • As mentioned above, the company reported a record quarter for product shipments - its sixth consecutive quarter of year-over-year growth - and gross margins. The company has six commercial products, with three additional EPA-approved products.
  • Growth was delivered across all aspects of the business: existing products, new products, strategic partnerships, domestic and international sales.
  • The company is acutely aware of cash management and expense rates, reflecting a lean organizational structure and a targeted R&D approach. Further, it continues to seek additional strategic partnerships.
  • Growing international activity to complement domestic growth. Marrone Bio has trial and registration activity in the Philippines, Korea, Vietnam, China, central America and Africa.
  • Growing industry and customer recognition of brand, technology and intellectual property. As of year end 2016, the company has 34 issued US patents, 153 issued foreign patents and 162 pending foreign patent applications.
  • Emergence of cannabis as an important business segment. Dr. Marrone stated that "cannabis growing practices are intensely yield and quality focused as well as space constrained and therefore call for much heavier use of inputs relative to traditional agriculture." The company commissioned UC Davis (ranked #1 in the US and #2 globally for agriculture and forestry by QS World University Rankings) to assess the growth potential for cannabis inputs (pesticides, biostimulants and fertilizers). The market in just Colorado, Oregon and Washington is estimated to be $91 million currently. Including California, with the recent change in legislation, the study estimates the market will grow to $1.4 billion within the next five years. In less than one year, a customer in this space has grown from zero to become one of Marrone Bio's top five customers. We note that there was no mention of the agricultural input market for cannabis in the earnings press release, perhaps on the guidance of a cautious attorney. This high growth market is nothing that the company should be hiding and saving only for conference call listeners.

In perfect hindsight, a case can be made that Marrone Bio shouldn't have gone public when it did, subjecting itself to market variance and scrutiny perhaps earlier than it needed to, and of course the revenue recognition scandal took its toll. The past isn't to be ignored, but neither should it hamper an investment thesis going forward. We like what we've seen from the company over the past year, Dr. Marrone has demonstrated an ability to grow the business while managing expenses and we think that the current valuation excessively discounts the existing product offerings and development pipeline.

To listen to a replay of the earnings conference call, investors should dial toll-free 1-844-512-2921 or 412-317-6671 (international) and enter passcode 3138201. This telephone replay will be available through May 18, 2017, and the webcast will also be available for replay at

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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
MBII Marrone Bio Innovations Inc. 1.42 0.01 0.71 45,999 Trade
PJC Piper Jaffray Companies 76.14 -0.48 -0.63 74,514 Trade



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