Verenium Reports Financial Results for the First Quarter Ended March 31, 2012 -- Company provides updated 2012 financial guidance --

SAN DIEGO, May 10, 2012 /PRNewswire/ -- Verenium Corporation (Nasdaq: VRNM), a leading industrial biotechnology company focused on the development and commercialization of high-performance enzymes, today reported operating highlights and financial results for the first quarter ended March 31, 2012.

"The first quarter was a turning point for Verenium.  Beyond the repayment of our outstanding debt, we also initiated discussions with a wide array of companies who recognize the value of our technology, and signed agreements with both Tate & Lyle and DSM that validate our unique capabilities," said James Levine, President and Chief Executive Officer at Verenium.  "We now have the flexibility to direct our full attention on growing the business with a focus on increasing sales from our current product portfolio, advancing the multiple products in our pipeline, and completing new partnerships to accelerate our entry into new end markets."

Company Highlights

Since the beginning of 2012, Verenium has made progress on both operational and financial fronts.  Recent accomplishments include:

  • Completed a strategic transaction with DSM Food Specialties, B.V., including the sale of the Company's oilseed processing business, for total consideration of $37 million;
  • Repurchased $34.9 million in convertible notes outstanding, retiring all of the Company's remaining debt on April 2, 2012;
  • Announced an agreement whereby Tate & Lyle Ingredients Americas LLC licensed a proprietary enzyme product for use in the development of novel food ingredients and received a milestone payment of $0.5 million;
  • Along with partner Novus International Inc., announced the selection of a next-generation phytase as the first candidate from its strategic collaboration to advance toward commercialization;
  • Submitted a more thermostable, next-generation version of its Pyrolase® cellulase product targeted at hydraulic fracturing for regulatory authorization; and
  • Ended the quarter with unrestricted cash, net of outstanding convertible notes and accrued interest, of $22.8 million and $5.7 million in restricted cash.

Financial Results

In the commentary below, the operating results of the Company's oilseed processing business are included in continuing operations.

Revenues

Revenues for the three months ended March 31, 2012 and 2011 were as follows (in thousands):


Three Months Ended 

March 31,


2012


2011

Revenues:




       Animal Health and Nutrition

$           7,416


$         8,075

       Grain Processing

3,585


3,894

       Oilseed Processing

579


983

       All other products

141


80

            Total product

11,721


13,032

Collaborative and license

5,508


364

Total revenues

$         17,229


$       13,396

Total revenues for the three months ended March 31, 2012 increased 29% to $17.2 million from $13.4 million for the same period in prior year.  Product revenues represented 68% of total revenue for the three months ended March 31, 2012 compared to 97% for the same period in prior year. Product revenues for the three months ended March 31, 2012 decreased 10% to $11.7 million from $13.0 million in the prior year, due to:

  • A decrease in contract manufacturing revenue in the animal health and nutrition product line under a short-term agreement that ended in 2011;
  • A decrease in grain processing revenue compared to 2011 due to high wheat prices in Europe which impacted the demand for the Company's Xylathin® xylanase enzyme; and
  • A decrease in oilseed processing revenues due primarily to lower volumes to one customer that suspended operations for plant modifications.

Product revenue from non-Phyzyme products as a percentage of total product revenue decreased to 37% for the three months ended March 31, 2012 compared to 43% in the prior year.

Total collaborative revenue for the three months ended March 31, 2012 increased to $5.5 million from $0.4 million for the same period in the prior year, primarily due to recognition of the $2.9 million license fee from Novus and $1.5 million in license fees associated with the DSM transaction.

Product Gross Profit and Gross Margin

Product gross profit for the three months ended March 31, 2012 decreased 11% to $4.4 million from $4.9 million for the same period in the prior year. Gross margin remained flat at 38% of product revenue for the three months ended March 31, 2012, compared to the same period in the prior year. 

Operating Expenses (excluding cost of product revenue and restructuring charges)

Excluding cost of product revenues and restructuring charges, total operating expenses for the three months ended March 31, 2012 increased to $9.1 million (including share-based compensation of $0.2 million) from $7.1 million (including share-based compensation of $0.2 million) for the same period in the prior year.  This increase is primarily due to reimbursement of $1.1 million legal fees during the first quarter of 2011 associated with the settlement of a noteholder lawsuit, which was recorded as an offset to operating expenses.  In addition, operating expenses were elevated during the first quarter of 2012 for transaction costs associated with various financing alternatives the Company was pursuing. Overall, ongoing general and administrative expenses have decreased over the prior year, while research and development costs have increased, reflecting continued investment in pipeline products. Approximately 64% of the Company's research and development costs for the first quarter of 2012 was spent on pipeline products as compared to 72% for the same period in the prior year.

Restructuring Charges

On March 31, 2011 the Company closed its office in Cambridge, Massachusetts, resulting in charges of $2.8 million, consisting of employee termination costs, facilities closure costs, and relocation costs for several employees who were relocated to San Diego.

Gain on Sale of Oilseed Processing Business

On March 23, 2012, the Company entered into an asset purchase agreement with DSM for the purchase of the Company's oilseed processing business and concurrently entered into a license agreement, a supply agreement and a transition service agreement with DSM.  The aggregate consideration received by the Company was $37 million.  The gain on sale was calculated as the difference between the allocated consideration amount for the oilseed processing business, in accordance with authoritative accounting guidance, of $34.3 million and the net carrying amount of the purchased assets and liabilities and transaction costs.

Income (Loss) from Operations

Income from operations for the three months ended March 31, 2012 was $32.3 million compared to loss from operations of $4.7 million for the same period in 2011, on a GAAP accounting basis.  Adjusted for the impact of restructuring expenses and the gain on sale of the oilseed business of $31.5 million, the Company's non-GAAP pro-forma income from operations was $0.8 million for the three months ended March 31, 2012, due in part to the license revenue recognized from Novus and DSM. This compares to a non-GAAP pro-forma loss from operations of $1.8 million for the same period in 2011.  The Company believes that excluding the impact of these items provides a more consistent measure of operating results.

Net Income from Continuing Operations

Net income from continuing operations for the three months ended March 31, 2012 was $30.1 million compared to $3.8 million for the same period in 2011, on a GAAP accounting basis. Adjusted for the impact of restructuring expenses, non-cash items related to the Company's convertible debt and gain on sale of oilseed processing business, the Company's non-GAAP pro-forma net loss from continuing operations for the three months ended March 31, 2012 was $0.2 million compared to $2.9 million for the same period in the prior year. The Company believes that excluding the impact of these items provides a more consistent measure of operating results. 

Balance Sheet

The Company ended the quarter with $58.6 million in cash and cash equivalents, $5.7 million in total restricted cash, and $34.9 million in debt at face value.

Convertible Debt

On April 2, 2012, the Company repurchased the remaining $34.9 million in principal amount of its outstanding 5.5% convertible notes.  To effect these repurchases, the Company paid a total of $35.8 million in cash to its noteholders, including accrued and unpaid interest.  The Company has no remaining debt.

Financial Guidance for 2012

Verenium also provided updated financial guidance for 2012, as follows:

  • Revenue: $58M- $62M
  • Product Gross Profit: $19M - $21M
  • Operating Loss: $(7)M - $(9)M (excluding gain on sale from DSM transaction)
  • Capital Expenditures: $8M - $9M

"The updated financial guidance for 2012 we are providing today reflects our focus on continued revenue generation from our existing commercial products, investment in new product development, and reducing our cost of manufacturing, while at the same time maintaining prudent controls over operating expenses," said Jeff Black, Chief Financial Officer at Verenium.

About Verenium

Verenium, an industrial biotechnology company, is a global leader in developing high-performance enzymes.  Verenium's tailored enzymes are environmentally friendly, making products and processes greener and more cost-effective for industries, including the global food and fuel markets.  Read more at www.verenium.com.

Forward-Looking Statements

Statements in this press release that are not strictly historical are "forward-looking" and involve a high degree of risk and uncertainty.  These include, but are not limited to, statements related to Verenium's technology, products and product candidates, lines of business, operations, capabilities, commercialization activities, corporate partnerships, target markets, future financial performance, and near-term and longer-term growth and prospects.  Such statements are only predictions, and actual events or results may differ materially from those projected in such forward-looking statements.  Factors that could cause or contribute to the differences include, but are not limited to, risks associated with Verenium's strategic focus, technologies, products and product candidates, dependence on patents and proprietary rights, protection and enforcement of its patents and proprietary rights, the commercial prospects of the industries in which Verenium operates and sells products, Verenium's dependence on manufacturing and/or license agreements, its ability to achieve milestones under existing and future collaboration agreements, the ability of Verenium and its partners to commercialize its technologies and products (including by obtaining any required regulatory approvals) using Verenium's technologies, the timing for launching any commercial products and projects, the ability of Verenium and its collaborators to market and sell any products that it or they commercialize, the development or availability of competitive products or technologies, the future ability of Verenium to enter into and/or maintain collaboration and joint venture agreements and licenses, and risks and other uncertainties more fully described in Verenium's filings with the Securities and Exchange Commission, including, but not limited to, Verenium's annual report on Form 10-K for the year ended December 31, 2011 and any updates contained in its subsequently filed quarterly reports on Form 10-Q.  These forward-looking statements speak only as of the date hereof, and Verenium expressly disclaims any intent or obligation to update these forward-looking statements.

Contacts:



Kelly Lindenboom                              

858-431-8580

kelly.lindenboom@verenium.com

Sarah Carmody

858-431-8581

sarah.carmody@verenium.com



Verenium Corporation

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)




Three Months Ended

March 31,


2012


2011

Revenues:




   Product

$     11,721


$    13,032

   Collaborative and license

5,508


364

Total revenue

17,229


13,396





Operating expenses:




   Cost of product revenue

7,315


8,084

Product gross profit

4,406


4,948

Product gross margin

38%


38%

   Research and development

3,161


2,632

   Selling, general and administrative

5,928


4,500

   Restructuring charges

7


2,838

Total operating expenses

16,411


18,054





Gain on sale of oilseed processing business

31,481


--





Income  (loss) from operations

32,299


(4,658)





Other income and expense:




  Interest and other expense, net

(1,009)


(1,061)

Gain on debt extinguishment upon repurchase of convertible notes

--


11,284

      Loss on net change in fair value of derivative assets and liabilities

(324)


(1,813)

Total other income (expense), net

(1,333)


8,410





Net income from continuing operations before income taxes.

30,966


3,752

Income tax provision

(829)


--

Net income from continuing operations

30,137


3,752

 Net Income (loss) from discontinued operations

(15)


61

Net income attributed to Verenium

$     30,122


$     3,813

Net income per share, basic:

Continuing operations

$         2.39


$       0.30

Discontinued operations

$            --


$            --

Attributed to Verenium Corporation

$        2.39


$       0.30

Net income per share, diluted:

Continuing operations

$         2.32


$       0.30

Discontinued operations

$             --


$            --

Attributed to Verenium Corporation

$         2.32


$       0.30





Shares used in computing net income  per share, basic

12,608


12,604

Shares used in computing net income  per share, diluted

13,192


12,604



Verenium Corporation

Condensed Consolidated Balance Sheet Data

(unaudited, in thousands)



March 31,


December 31,


2012


2011





Cash and cash equivalents

$          58,559


$            28,759

Restricted cash, short term

2,500


5,000

Accounts receivable, net

9,065


11,371

Inventories, net

6,946


6,323

Other current assets

3,101


2,396

Restricted cash, long term

3,200


3,200

Property and equipment, net

10,468


7,806

Other noncurrent assets

283


482





Total assets

$           94,122


$         65,337









Accounts payable and accrued expenses

$           15,359


$           15,062

Other short term liabilities

363


436

Deferred revenue, current

2,037


4,137

Convertible notes

34,851


34,851

Other long term liabilities

1,198


906

Stockholders' equity

40,314


9,945





Total liabilities and

    stockholders' equity

$          94,122


$         65,337






Verenium Corporation

Unaudited Supplemental and Non-GAAP Pro Forma Financial Information

(in thousands, except per share amounts)


The following unaudited supplemental and non-GAAP pro forma financial information is derived
from the Company's condensed consolidated financial statements for the three months ended
March 31, 2012 and 2011, as reported under GAAP. The Company believes that such
supplemental and non-GAAP financial information is helpful to understand the results of
operations of the business.


Non-GAAP Pro Forma Income (Loss) From Operations




Three Months Ended

March 31,


2012


2011





 Income (loss) from operations

$         32,299


$           (4,658)





Adjustments: 




Gain on sale of oilseed processing business

(31,481)


--

Restructuring charges

7


2,838

Non-GAAP pro forma income (loss) from operations

$          825


$            (1,820)



Non-GAAP Pro Forma Net Income (Loss) From Continuing Operations




Three Months Ended

March 31,


2012


2011





 Net income from continuing operations

$         30,137


$           3,752





Adjustments: 




Gain on sale of oilseed processing business

(31,481)


--

Restructuring charges

7


2,838

Income tax provision (attributed to sale of oilseed processing business)

829


--

Gain on debt extinguishment upon    repurchase of convertible notes

--


(11,284)

Loss on net change in fair value of derivative assets and liabilities

324


1,813

Non-GAAP pro forma net loss from continuing operations

$           (184)


$            (2,881)

Non-GAAP pro forma net loss from continuing operations per share, basic

$          (0.01)


$               (0.23)





SOURCE Verenium Corporation



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