Verenium Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2009

Friday, Mar 12, 2010

 Verenium Corporation, a pioneer in the development of next-generation cellulosic ethanol and high-performance specialty enzymes, today reported financial results for the fourth quarter and year ended December 31, 2009.  The Company also provided a summary of recent highlights and accomplishments.

"I am pleased to report that although 2009 was a challenging year both from an economic and industry perspective, Verenium remained focused on its overall goals and continued to execute against key corporate initiatives," said Carlos A. Riva, President and Chief Executive Officer of Verenium. "Verenium made significant progress throughout 2009 creating a stronger business platform and better positioning it for future commercial success."

Company Highlights

In fiscal 2009, Verenium made significant progress in several important areas, including:

• Aggressively managing costs to decrease operating expenses and conserve capital;
• Establishing Vercipia Biofuels, a 50-50 joint venture with BP Biofuels North America, focused on developing one of the nation's first commercial-scale cellulosic ethanol facilities;
• Sponsoring, through Vercipia, the first cellulosic ethanol project to enter the project due diligence phase of the U.S. Department of Energy's (DOE) Loan Guarantee program;
• Significantly increasing sales of Fuelzyme®-LF and Veretase™ alpha-amylase, sequentially and year-over-year, as the corn ethanol industry recovered in late 2009;
• Gaining commercial traction with Purifine®, including a long-term contract with, Molinos Rio de la Plata, one of the world's largest soybean oil processors;
• Extending strategic partnerships with Bunge and Alfa Laval, further increasing the Company's global market presence; and
• Completing its research collaboration with Syngenta, gaining rights to several enzyme product candidates in late-stage development, and license fees and rights to future royalties for a commercial enzyme candidate licensed to a third party.
• "The growth we achieved in our product gross margin dollars in 2009 demonstrates the underlying strength of our enzyme business," said James E. Levine, Executive Vice President and Chief Financial Officer. "We look forward to further progress in 2010."

Financial Results

Total revenues for the fourth quarter and year ended December 31, 2009 were $16.6 million and $65.9 million, respectively, compared to $19.7 million and $69.7 million for the same periods in the prior year, with product revenues representing more than 60 percent of total revenues in all periods.

Product revenues for the fourth quarter and year ended December 31, 2009 were $11.9 million and $44.0 million, respectively, compared to $12.1 million and $49.1 million for same periods in the prior year, representing a 2 percent decrease for the fourth quarter and 10 percent decrease for the year ended December 31, 2009, primarily reflecting the impact of a shift in a portion of manufacturing volume of Phyzyme from the Company's toll manufacturing facility in Mexico City to Genencor's manufacturing facility. Pursuant to current accounting rules, for sales of Phyzyme manufactured by Genencor, an affiliate of Danisco, the Company recognizes revenue only for the amount of the royalty from Danisco, whereas for product supplied through the toll manufacturing facility in Mexico City, the Company recognizes revenue for the sale of the product to Danisco at cost, along with the royalty revenue.  The decrease in product revenue for the year ended December 31, 2009 also reflects the Company's discontinuation of its Bayovac-SRS and Quantum product lines during early 2008.  The decrease in these product revenues was offset in part by an increase in revenues from the Company's Fuelzyme, Veretase and Xylathin enzymes.

Product gross margin dollars increased in the fourth quarter and for the full year ended December 31, 2009, versus the same periods in the prior year, due primarily to an increase in Phyzyme royalties from Danisco, a shift in product mix to higher margin products and a reduction in inventory losses compared to 2008 related to contamination issues in the Phyzyme enzyme manufacturing process, which resulted in a lower product gross margin dollars in 2008.

Excluding cost of product revenues, total operating expenses decreased to $20.4 million and $102.3 million for the fourth quarter and year ended December 31, 2009 from $30.7 million and $214.4 million for the fourth quarter and year ended December 31, 2008.  The year-over-year decrease in total gross operating expenses (excluding cost of product revenues) relates primarily to the $106.1 million non-cash goodwill impairment charge recorded in September 2008.  Excluding the goodwill impairment charge, total operating expenses (excluding cost of product revenues) decreased $5.9 million for the year ended December 31, 2009 as compared to the same period in 2008, primarily due to aggressive expense management. Total operating expenses include gross expenses incurred to support ongoing development related to the Company's consolidated joint ventures with BP, Galaxy and Vercipia.  BP's share of the total operating expenses of the joint ventures was $8.8 million and $34.3 million for the fourth quarter and year ended December 31, 2009 and $7.5 million and $12.5 million for the fourth quarter and year ended December 31, 2008, and is included below operating expenses as "Loss attributed to non-controlling interest in consolidated entities" on the Company's Consolidated Income Statement.  On a non-GAAP basis, net of BP's share of expenses, pro forma net operating expenses decreased as compared to prior periods, reflecting the cost sharing and the Company's expense minimization efforts.

Interest expense related almost exclusively to the cash and non-cash interest expense from the Company's convertible debt instruments.  Of total net interest expense for the fourth quarter and year ended December 31, 2009, $0.5 million and $4.0 million, respectively, represents non-cash interest expense related to the Company's convertible notes, compared to $1.6 million and $5.4 million in non-cash interest for the same periods in 2008.

Net loss attributed to Verenium for the quarter and year ended December 31, 2009 was $3.0 million and $21.9 million, respectively, compared to $11.9 million and $176.5 million for the same periods in 2008. Adjusted for the non-cash impact of accounting related to the 8% and 9% convertible notes and non-cash goodwill impairment charge, the Company's non-GAAP pro-forma net loss for the quarter and year ended December 31, 2009 was $3.5 million and $40.1 million, as compared to $14.1 million and $70.1 million for the same periods in the prior year. The Company believes that excluding the non-cash impact of these items provides a more consistent measure of operating results.  

As of December 31, 2009, the Company had unrestricted cash and cash equivalents totaling approximately $32.1 million, of which $7.2 million was held by the Company's consolidated joint venture with BP, Vercipia, which is available solely for the operations of Vercipia.  

About Verenium

Verenium Corporation is a leader in the development and commercialization of cellulosic ethanol, an environmentally-friendly and renewable transportation fuel, as well as high-performance specialty enzymes for applications within the biofuels, industrial, and animal health markets. The Company possesses integrated, end-to-end capabilities and cutting-edge technology in pre-treatment, novel enzyme development, fermentation and project development for next-generation biofuels. Through Vercipia, a 50-50 joint venture with BP, the Company is moving rapidly to commercialize cellulosic technology for the production of ethanol from a wide array of non-food feedstocks, including dedicated energy crops, agricultural waste, and wood products. In addition to the vast potential for biofuels, a multitude of large-scale industrial opportunities exist for the Company for products derived from the production of low-cost, biomass-derived sugars.

Verenium's Specialty Enzyme business harnesses the power of enzymes to create a broad range of specialty products to meet high-value commercial needs. Verenium's world class R&D organization is renowned for its capabilities in the rapid screening, identification, and expression of enzymes-proteins that act as the catalysts of biochemical reactions. For more information on Verenium, visit http://www.verenium.com.

Source: PR Newswire