Verenium Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2011

-- Company reports increased revenue from grain and oilseed processing enzymes; enters strategic partnership to progress animal health & nutrition pipeline products --

Aug 09, 2011, 16:05 ET from Verenium Corporation

SAN DIEGO, Aug. 9, 2011 /PRNewswire/ -- Verenium Corporation (Nasdaq: VRNM), a leading industrial biotechnology company focused on the development and commercialization of high-performance enzymes, today reported a summary of recent Company highlights and financial results for the second quarter and six months ended June 30, 2011.

"I am very pleased with the progress we've made in terms of product revenues and partnership negotiations in the first half of the year," said James E. Levine, President and Chief Executive Officer at Verenium. "In the second quarter we saw significant growth and diversification of product revenues through our Grain and Oilseed Processing products.  In addition, we entered into an important collaboration with Novus International Inc. to develop multiple products for the animal health and nutrition market, demonstrating the value of Verenium's product development capabilities in the large and growing global industrial enzymes market."

Company Highlights

Since the beginning of 2011, Verenium has made significant progress on both operational and financial fronts.  Recent accomplishments include:

Operational/Industry Performance:

Animal Health and Nutrition

  • Announced a strategic collaboration with Novus International Inc. to jointly develop and commercialize a suite of new animal health and nutrition enzyme products from Verenium's late-stage product pipeline.

Grain Processing

  • Grew 2011 year-to-date revenues from the Company's grain processing enzymes, including Fuelzyme® alpha-amylase, Deltazym® GA L-E5 glucoamylase, Veretase® alpha-amylase and Xylathin™ xylanase, by 35% over the same period in 2010; and
  • Grain processing has grown to represent 31% of 2011 year-to-date product revenues from 25% during the same period in 2010.

Oilseed Processing

  • Achieved a 100% increase in 2011 year-to-date revenue from Purifine® PLC over the same period in 2010 due to higher utilization at higher prices to our existing customers.

Corporate/Financial:

  • Increased total product revenue by 11% to $27.5 million for the first half of 2011, compared to $24.9 million for the same period in 2010;
  • Increased 2011 year-to-date product revenue from Grain and Oilseed Processing product lines as a percentage of product revenue to approximately 40% from approximately 30% in the same period in 2010 through increasing sales of Company's newer enzymes including Fuelzyme® alpha-amylase, Xylathin™ xylanase, Veretase® alpha-amylase, Deltazym® GA L-E5 glucoamylase and Purifine® PLC;
  • Signed a lease agreement for new office and laboratory space in the Torrey Pines area of San Diego, which is targeted to commence in 2012 following the completion of construction and tenant improvements;
  • Ended the quarter with unrestricted cash and cash equivalents totaling $44.6 million and convertible notes outstanding of $44.2 million; and
  • Subsequent to the end of the second quarter, repurchased $8.2 million in principal amount of outstanding convertible notes.

Financial Results

In the commentary below, the historical results of the Company's ligno-cellulosic biofuels business for current and prior periods have been reclassified into discontinued operations as a result of the sale of the ligno-cellulosic biofuels business on September 2, 2010 to BP Biofuels North America LLC.

Revenues

Revenues for the periods ended June 30, 2011 and 2010 were as follows (in thousands):

Three Months Ended 

June 30,

Six Months Ended 

June 30,

2011

2010

2011

2010

Revenues:

      Animal Health and Nutrition

$          8,035

$         8,887

$        16,110

$        16,841

      Grain Processing

4,535

3,152

8,429

6,239

      All other products

1,908

1,251

2,971

1,772

           Total product

14,478

13,290

27,510

24,852

Collaborative

656

390

1,020

1,052

Total revenues

$         15,134

$       13,680

$        28,530

$        25,904

Total revenues for the six months ended June 30, 2011 increased 10% to $28.5 million from $25.9 million for the same period in the prior year, with product revenues representing approximately 96% of total revenues in both periods. Product revenues for the six months ended June 30, 2011 increased 11% to $27.5 million from $24.9 million for the same period in the prior year, primarily due to an increase in revenues from grain processing enzymes, including Fuelzyme® alpha-amylase, Veretase® alpha-amylase, Deltazym® GA L-E5 glucoamylase and Xylathin™ xylanase. These products continued to gain traction in the grain ethanol markets and together with Purifine® PLC for soybean oil processing, achieved significant revenue growth over 2010.

Product Gross Profit and Gross Margin

Product gross profit for the six months ended June 30, 2011 increased 6% to $10.0 million from $9.5 million for the same period in prior year. Gross margin decreased to 36% of product revenue for the six months ended June 30, 2011, compared to 38% for the six months ended June 30, 2010.  Gross margin decreased primarily due to a decrease in the royalty paid as profit share from sales of Phyzyme phytase by our partner Danisco Animal Nutrition.

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

Excluding cost of product revenues and restructuring, total operating expenses related to continuing operations for the six months ended June 30, 2011 decreased to $14.1 million (including share-based compensation of $0.3 million) from $16.3 million (including share-based compensation of $0.6 million) for the same period in the prior year; this is  primarily due to reimbursement of legal fees of $1.1 million for expenses incurred during 2010 for defense of the Company's noteholder lawsuit which was settled on March 23, 2011, and to initiatives to decrease general and administrative expenses. As a partial offset, research and development costs for continued investment in pipeline products showed an increase.

Restructuring Expense

On March 31, 2011 the Company closed its office in Cambridge, Massachusetts, resulting in a charge of $2.9 million, consisting of employee termination costs, facilities closure costs, and employee relocation costs for several employees who were relocated to San Diego.

Operating Loss from Continuing Operations

Operating loss from continuing operations for the six months ended June 30, 2011 was $6.0 million compared to $5.7 million for the same period in 2010. This increase is primarily reflective of restructuring expenses of $2.9 million. Excluding the impact of restructuring, operating loss from continuing operations decreased $2.7 million, primarily due to the reimbursement of legal fees and further reductions in general and administrative expenses.

Net Income (loss) from Continuing Operations

Net income from continuing operations for the six months ended June 30, 2011 was $2.3 million compared to a net loss of $9.9 million for the same period in 2010, on a GAAP accounting basis. Adjusted for the impact of non-cash items related to the Company's convertible debt, the Company's non-GAAP pro-forma net loss from continuing operations for the six months ended June 30, 2011 was $7.7 million compared to $9.8 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 second quarter of 2011 with $44.6 million in cash and cash equivalents, $5.0 million in restricted cash, and $44.2 million in debt at face value. Subsequent to the end of the second quarter, on July 27, 2011, the Company repurchased $8.2 million in principal amount of its outstanding convertible notes in a privately negotiated transaction. To effect this repurchase, the Company paid a total of $7.7 million in cash to a noteholder to retire principal, plus $0.2 million of accrued interest as of the closing date, leaving the Company with approximately $36 million in face value of debt at that date.

"We are encouraged by the strong operational and financial performance achieved in the first half of the year," said Jeffrey Black, Senior Vice President and Chief Financial Officer.  "Our ability to increase product revenues and product gross profit, while at the same time lowering operating expenses and conserving cash, signifies that we are executing on our strategy to strengthen our balance sheet and position the Company for future growth."

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 lines of business, operations, capabilities, commercialization activities, corporate partnerships, target markets and future financial performance, results and objectives, all of which are prospective.  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, risks associated with Verenium's technologies, risks associated with Verenium's ability to obtain additional capital to support its planned operations and financial obligations, risks associated with Verenium's dependence on patents and proprietary rights, risks associated with Verenium's 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, and 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 and 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, 2010 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

Vice President, Corporate Communications

858-431-8580

kelly.lindenboom@verenium.com

Sarah Carmody

Manager, Corporate Communications

858-431-8581

sarah.carmody@verenium.com

Verenium Corporation

Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)

Three Months Ended

June 30,

Six Months Ended

June 30,

2011

2010

2011

2010

Revenues:

Product

$     14,478

$    13,290

$    27,510

$  24,852

Collaborative

656

390

1,020

1,052

Total revenue

15,134

13,680

28,530

25,904

Operating expenses:

Cost of product revenue

9,392

8,830

17,476

15,346

Product gross profit

5,086

4,460

10,034

9,506

Product gross margin

35%

34%

36%

38%

Research and development

2,288

1,249

4,920

2,676

Selling, general and administrative

4,666

6,495

9,166

13,582

Restructuring charges

82

--

2,920

--

Total operating expenses

16,428

16,574

34,482

31,604

Operating loss from continuing operations

(1,294)

(2,894)

(5,952)

(5,700)

Other income and expense:

Interest and other expense, net

(692)

(2,127)

(1,753)

(4,107)

Gain on debt extinguishment upon conversion of convertible notes

--

--

--

598

Gain on debt extinguishment upon repurchase of convertible notes

--

--

11,284

--

Gain (loss) on net change in fair value of derivative assets and liabilities

518

(786)

(1,295)

(718)

Total other income (expense), net

(174)

(2,913)

8,236

(4,227)

Income (loss) from continuing operations

(1,468)

(5,807)

2,284

(9,927)

Discontinued operations:

Income (loss) from discontinued operations

--

(6,353)

61

(21,729)

Less: Loss attributed to noncontrolling interests in

consolidated entities – discontinued operations

--

7,675

--

15,175

Net income (loss) attributed to Verenium

$     (1,468)

$   (4,485)

$      2,345

$   (16,481)

Basic and diluted net income (loss) per share:

Continuing operations

$       (0.12)

$     (0.47)

$        0.18

$       (0.82)

Discontinued operations

$              --

$     (0.52)

$            --

$       (1.79)

Net income (loss)

$       (0.12)

$     (0.37)

$        0.19

$       (1.35)

Shares used in computing basic and diluted net income (loss) per share

12,606

12,273

12,606

12,165

Verenium Corporation

Condensed Consolidated Balance Sheet Data

(unaudited, in thousands)

June 30,

December 31,

2011

2010

Cash and cash equivalents

$          44,620

$            87,929

Restricted cash, short term

5,000

--

Accounts receivable, net

9,447

6,708

Inventory, net

5,649

5,316

Other current assets  

2,508

2,694

Restricted cash, long term

--

5,000

Property and equipment, net  

3,645

3,134

Other noncurrent assets  

602

976

Total assets  

$           71,471

$         111,757

Current liabilities, excluding deferred revenue, restructuring and liabilities of discontinued operations

$           10,703

$           16,849

Deferred revenue, current  

3,499

894

Accrued restructuring, current

1,047

--

Convertible notes, at carrying value (face value of $44.2 million at June 30, 2011 and $74.7 million at December 31, 2010)

48,242

88,011

Other long term liabilities  

946

1,216

Liabilities of discontinued operations  

683

1,617

Stockholders' equity  

6,351

3,170

Total liabilities and

stockholders' equity  

$          71,471

$         111,757

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 and six months periods ended June 30, 2011 and 2010, 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 Net Loss From Continuing Operations

Three Months Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Income (loss) from continuing operations

$        (1,468)

$          (5,807)

$         2,284

$        (9,927)

Adjustments:  

Gain on debt extinguishment upon repurchase of convertible notes

--

--

(11,284)

--

Gain on debt extinguishment upon conversion of convertible notes

--

--

--

(598)

(Gain) loss on net change in fair value of derivative assets and liabilities

(518)

786

1,295

718

Non-GAAP pro forma net loss from continuing operations  

$        (1,986)

$          (5,021)

$        (7,705)

$        (9,807)

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

$          (0.16)

$            (0.41)

$          (0.61)

$          (0.81)

SOURCE Verenium Corporation



RELATED LINKS

http://www.verenium.com