Verenium Reports Financial Results For The Third Quarter And Nine Months Ended September 30, 2012

Verenium Reports Financial Results For The Third Quarter And Nine Months Ended
                              September 30, 2012

-- Company strengthens balance sheet and updates 2012 financial guidance --

PR Newswire

SAN DIEGO, Nov. 8, 2012

SAN DIEGO, Nov. 8, 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 third quarter and nine months ended
September 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120924/MM79973LOGO)

"During the third quarter we made some important steps forward with our
manufacturing investment program; however, the downtime experienced in
manufacturing due to these upgrades combined with the continued unfavorable
market conditions in corn ethanol, made this a challenging quarter
financially," said James Levine, President & Chief Executive Officer at
Verenium. "Despite the impact on our margins this period, we remain confident
that the enhancements we are making now in our manufacturing platform, as well
as our high-performance product portfolio, our current Product Pipeline and
our strategy for diversifying our revenue through products for new end
markets, will support our growth in the future."

Company Highlights

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

  oImplemented manufacturing improvements that resulted in greater Fuelzyme^®
    alpha-amylase yields and reduced manufacturing costs;
  oPresented a co-authored scientific paper reporting on our findings from
    research conducted with the Company's next-generation Pyrolase^® HT
    cellulase product for breaking cross-linked fracturing fluids under
    extreme downhole conditions in hydraulic fracturing;
  oEnded the third quarter with unrestricted cash of $13.9 million and $4.1
    million in restricted cash.

Financial Results
In the commentary below, the operating results of the Company's oilseed
processing business, sold to DSM in March 2012, for prior periods are included
in continuing operations.

Revenues
Revenues for the periods ended September 30, 2012 and 2011 were as follows (in
thousands):

                                   ThreeMonthsEnded   NineMonthsEnded

                                   September30,         September30,
                                   2012       2011       2012       2011
Revenues:
 Animal health and nutrition $  5,849  $  8,624  $ 22,521  $ 24,734
 Grain processing            2,054      3,942      7,895      12,371
 Oilseed processing          --         1,929      579        4,541
 All other products          101        247        972        606
Total product                      8,004      14,742     31,967     42,252
Contract manufacturing (1)         1,561      --         4,047      --
Collaborative and license          697        3,674      7,174      4,694
Total revenue                      $ 10,262  $ 18,416  $ 43,188  $ 46,946

(1) Revenue from the DSM supply agreement is reported as contract
manufacturing, revenue for Purifine and Veretase prior to the DSM transaction
are reflected in oilseed processing and grain processing revenue,
respectively.

Total revenues for the nine months ended September 30, 2012 decreased 8% to
$43.2 million from $46.9 million for the same period in the prior year.
Product and contract manufacturing revenues represented approximately 83% of
total revenues for the nine months ended September 30, 2012 compared to 90%
for the same period in the prior year.

Product revenue for the nine months ended September 30, 2012 decreased 24% to
$32.0 million from $42.3 million for the same period in the prior year,
primarily due to the following:

  oA decrease in grain processing revenue compared to 2011 attributed to
    adverse business conditions in the corn ethanol industry, which has
    resulted in delays or extensions of product trials which has consequently
    affected new customer adoption rates and increased competitive pressure;
  oThe sale and license of the Company's Purifine and Veretase products to
    DSM in March of 2012; and
  oA decrease in animal health and nutrition due to toll manufacturing
    revenue included in 2011, and lower production volumes of Phyzyme^® XP
    phytase in the three months ended September 30, 2012 due to a shift in
    manufacturing to the Company's partner, Genencor, a division of DuPont,
    Inc. While this shift in production has little or no impact on the gross
    margin in absolute dollars recognized for every sale of Phyzyme^® XP, it
    does have a negative impact on the gross product revenue recognized for
    Phyzyme^® XP.

Product and contract manufacturing revenue from non-Phyzyme^® XP products as a
percentage of total product and contract manufacturing revenues decreased to
37% for the nine months ended September 30, 2012 compared to 50% for the same
period in the prior year. Contract manufacturing revenue increased as a
result of the supply agreement entered into in conjunction with the DSM sale,
under which the Company produces and sells Purifine and Veretase to DSM at
lower sales prices than when the Company sold directly to end customers.

Total collaborative revenue for the nine months ended September 30, 2012
increased to $7.2 million from $4.7 million for the same period in the prior
year, primarily due to recognition of the $2.9 million license fee revenue
from Novus International, Inc., and $1.5 million in license fees associated
with the DSM transaction. The Company also generated $0.5 million in revenue
from a one-time up-front payment associated with the development of a
commercial product under an agreement with Tate & Lyle.

Product and Contract Manufacturing Gross Profit and Gross Margin
Product and contract manufacturing gross profit for the nine months ended
September 30, 2012 decreased 25% to $12.1 million from $16.1 million for the
same period in the prior year. Gross margin decreased to 33% of total product
and contract manufacturing revenue for the nine months ended September 30,
2012, compared to 38% for the nine months ended September 30, 2011. Gross
margin decreased primarily due to a shift in sales mix from higher margin
grain processing revenue to the Company's lower margin supply agreement with
DSM and idle capacity due to previously planned upgrades at the Company's
manufacturing facility.

Operating Expenses (excluding cost of product and contract manufacturing
revenue and restructuring expense)
Excluding cost of product and contract manufacturing revenues and
restructuring charges, total operating expenses related to continuing
operations for the nine months ended September 30, 2012 increased to $26.2
million (including share-based compensation of $0.7 million) from $21.7
million (including share-based compensation of $1.1 million) for the same
period in the prior year. This increase is primarily due to reimbursement of
$1.1 million of 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, after the effect of the prior
year legal fee reimbursement, ongoing general and administrative expenses have
remained flat over the prior year, while research and development costs have
increased, reflecting continued investment in pipeline products.

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 services agreement with DSM. The aggregate consideration received
by the Company was $37million. The gain on sale for the nine months ended
September 30, 2012 was calculated as the difference between the allocated
consideration amount for the oilseed processing business, in accordance with
authoritative accounting guidance, of $31.3 million and the net carrying
amount of the purchased assets and liabilities and transaction costs.

Income (Loss) from Operations
Income from operations for the nine months ended September 30, 2012 was $24.3
million compared to loss from operations of $3.9 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 $31.3 million, the
Company's non-GAAP pro-forma loss from operations was $7.0 million for the
nine months ended September 30, 2012 compared to $0.9 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 (Loss) from Continuing Operations
Net income from continuing operations for the nine months ended September 30,
2012 was $22.4 million compared to $8.1 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
its oilseed processing business, the Company's non-GAAP pro-forma net loss
from continuing operations for the nine months ended September 30, 2012
increased to $8.1 million compared to $3.3 million for the same period in the
prior year primarily due to decrease in product and contract manufacturing
gross profit. 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 $13.9 million in cash and cash equivalents
and $4.1 million in total restricted cash. On October 5, 2012, the Company
entered into a $10 million revolving credit facility with a maturity date of
October 5, 2014. This credit facility will allow the Company to borrow up to
$8.4 million against certain eligible foreign and domestic receivables and
will cover an existing $1.6 million letter of credit commitment to the
Company's landlord. The credit facility also immediately frees up $1.6
million in restricted cash which had previously secured the letter of credit.
Advances under the credit facility bear interest at a daily adjusting LIBOR
plus a margin of 4.75%. To date, the Company has not borrowed against this
facility.

Financial Guidance for 2012

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

  oRevenue: $53M- $55M
  oProduct Gross Profit: $14M - $16M
  oOperating Loss: $(11)M - $(13)M (excluding gain on sale from DSM
    transaction)
  oCapital Expenditures: $8M - $9M

"The revised financial guidance for 2012 we are providing today reflects the
continued challenges faced by the corn ethanol industry," said Jeff Black,
Chief Financial Officer at Verenium. "Despite the decrease to our 2012
guidance we continue to execute against our financial goals in terms of
decreased cash burn and operating expenses. Importantly, the credit facility
we put in place with Comerica and the equipment financing we drew down during
the third quarter were two important steps in addressing our capital needs."

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 and product pipeline, lines of business,
operations (including Verenium's ability to successfully negotiate and enter
into future collaborations and partnerships), capabilities, commercialization
activities, customer adoption rates, industry conditions, 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 and product pipeline (including Verenium's ability to
identify, develop and commercialize new products and product candidates,
either independently or with collaborators or partners, and market demand for
those 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 or partnership agreements and licenses on a timely basis or at
all, 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:

Sarah Carmody
Manager, Corporate Communications
858-431-8581
sarah.carmody@verenium.com







Verenium Corporation
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
                                    Three Months Ended    Nine Months Ended

                                    September 30,         September 30,
                                    2012        2011      2012        2011
Revenues:
 Product                          $ 8,004    $ 14,742  $ 31,967    $ 42,252
 Contract manufacturing           1,561       --        4,047       --
 Collaborative and license        697         3,674     7,174       4,694
Total revenue                       10,262      18,416    43,188      46,946
Operating expenses:
 Cost of product and contract     6,726       8,698     23,962      26,174
manufacturing revenue
Product and contract manufacturing  2,839       6,044     12,052      16,078
gross profit
Product and contract manufacturing  30%         41%       33%         38%
gross margin
 Research and development         4,045       2,673     11,086      7,593
 Selling, general and             4,783       4,940     15,139      14,106
administrative
 Restructuring charges            11          20        27          2,940
Total operating expenses            15,565      16,331    50,214      50,813
Gain on sale of oilseed processing  --          --        31,278      --
business
Income (loss) from operations       (5,303)     2,085     24,252      (3,867)
Other income and expense:
 Interest and other expense, net  (78)        (618)     (1,130)     (2,371)
Gain on debt extinguishment upon    --          4,065     --          15,349
repurchase of convertible notes
 Gain (loss) on net change in
fair value of derivative assets and --          290       (92)        (1,005)
liabilities
Total other income (expense), net   (78)        3,737     (1,222)     11,973
Net income (loss) from continuing   (5,381)     5,822     23,030      8,106
operations before income taxes
Income tax benefit (provision)      147         --        (595)       --
Net income (loss) from continuing   (5,234)     5,822     22,435      8,106
operations
Net Income (loss) from             (23)        (24)      (49)        37
discontinued operations
Net income (loss) attributed to     $ (5,257)   $ 5,798  $ 22,386    $ 8,143
Verenium
Net income (loss) per share, basic:
                                    $  (0.41)  $  0.46  $   1.77  $  0.64
Continuing operations
Discontinued operations             $ --       $ --     $ --       $ --
Attributed to Verenium Corporation  $  (0.41)  $  0.46  $   1.77  $  0.65
Net income (loss) per share,
diluted:                            $  (0.41)  $  0.46  $   1.75  $  0.64

Continuing operations
Discontinued operations             $ --       $ --     $ --       $ --
Attributed to Verenium Corporation  $  (0.41)  $  0.46  $   1.74  $ 0.65
Shares used in computing net income 12,765      12,607    12,664      12,607
(loss) per share, basic
Shares used in computing net income 12,765      12,607    13,124      12,607
(loss) per share, diluted

Verenium Corporation
Condensed Consolidated Balance Sheet Data
(in thousands)
                                       September 30,       December 31,
                                       2012                2011

                                       (unaudited)         
Cash and cash equivalents              $     13,938   $      28,759
Restricted cash, short term            2,500               5,000
Accounts receivable, net               7,250               11,371
Inventories, net                       5,017               6,323
Other current assets                  2,700               2,396
Restricted cash, long term             1,600               3,200
Property and equipment, net           14,346              7,806
Other noncurrent assets               653                 482
Total assets                          $      48,004  $      65,337
Accounts payable and accrued expenses  $      8,880   $      15,062
Other short term liabilities           402                 436
Deferred revenue, current             1,806               4,137
Convertible notes                      --                  34,851
Long term debt, net of current portion 2,705               --
Other long term liabilities           653                 906
Stockholders' equity                  33,558              9,945
Total liabilities and
                                       $     48,004   $      65,337
 stockholders' equity





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 nine months ended September 30, 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              Nine Months Ended

                       September 30,                   September 30,
                       2012              2011          2012         2011
Income (loss) from    $ (5,303)        $  2,085     $ 24,252     $ (3,867)
operations
Adjustments:
Gain on sale of
oilseed processing     --                --            (31,278)     --
business
Restructuring charges  11                20            27           2,940
Non-GAAP pro forma
income (loss) from     $ (5,292)        $  2,105     $ (6,999)    $  (927)
operations

Non-GAAP Pro Forma Net Income (Loss) From Continuing Operations
                                  Three Months Ended     Nine Months Ended

                                  September 30,          September 30,
                                  2012        2011       2012        2011
Net income (loss) from           $ (5,234)  $  5,822  $ 22,435   $ 8,106
continuing operations
Adjustments:
Gain on sale of oilseed           --          --         (31,278)    --
processing business.
Restructuring charges             11          20         27          2,940
Income tax (benefit) provision
(attributed to sale of oilseed    (147)       --         595         --
processing business)
Gain on debt extinguishment
upon repurchase of convertible --          (4,065)    --          (15,349)
notes
(Gain) loss on net change in fair
value of derivative assets and    --          (290)      92          1,005
liabilities
Non-GAAP pro forma net income
(loss) from continuing            $ (5,370)  $  1,487  $ (8,129)  $ (3,298)
operations
Non-GAAP pro forma net income
(loss) from continuing operations $  (0.42)  $  0.12  $  (0.64)  $ (0.26)
per share, basic



SOURCE Verenium Corporation

Website: http://www.verenium.com
 
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