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Verenium Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2013

August 7, 2013

SAN DIEGO, Aug. 7, 2013 /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 second quarter and six months ended June 30, 2013.

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Operating Highlights

Since the beginning of 2013, the Company has made important progress on both operational and financial fronts. Recent accomplishments include:

Animal Health and Nutrition

    --  Introduced next-generation phytase enzyme product, CIBENZA(®)
        PHYTAVERSE(TM), with partner Novus, International, Inc. (Novus).  Novus
        and Verenium expect to launch this product in certain geographic regions
        in 2013.
    --  Selected the first lead enzyme candidate for a suite of non-starch
        polysaccharide (NSP) enzymes, also with partner Novus.

Grain Processing

    --  Launched Deltazym(®) APS protease for use in corn ethanol operations to
        reduce cost and chemical usage.
    --  Continued to demonstrate the operational and economic advantages of
        Fuelzyme(®) alpha-amylase in several new field trials.

Oilfield Services

    --  Launched Pyrolase(®) HT, a next-generation cellulase enzyme for use in
        hydraulic fracturing.
    --  Reestablished commercial sales to a Pyrolase(® )cellulase customer in
        China.

Expansion Pipeline

    --  Entered into a short term, preliminary research collaboration with
        Colgate-Palmolive Company to research an innovative enzyme-based
        manufacturing process to potentially replace traditional chemical
        processes that are standard in the manufacturing of certain consumer
        products.

Financial Results

Revenues

Revenues for the periods ended June 30, 2013 and 2012 were as follows (in thousands):


                              Three Months Ended         Six Months Ended

                                   June 30,                  June 30,

                                   2013             2012          2013       2012
                                   ----             ----          ----       ----

    Revenues:

           Animal health and
            nutrition            $8,061           $9,256       $15,987    $16,672

           Grain processing       2,880            2,256         5,046      5,841

           Oilseed processing        --               --            --        579

           All other products        90              730           214        871
                                    ---              ---           ---        ---

          Total product          11,031           12,242        21,247     23,963

    Contract manufacturing        2,512            2,486         4,730      2,486

    Collaborative and
     license                      1,844              969         3,196      6,477
                                  -----              ---         -----      -----

    Total revenue               $15,387          $15,697       $29,173    $32,926

Total revenues for the six months ended June 30, 2013 decreased 11% to $29.2 million from $32.9 million in the prior year, due in large part to license revenue recorded in 2012 from DSM and Novus. Combined product and contract manufacturing revenue for the six months ended June 30, 2013 decreased 2% to $26.0 million from $26.4 million in the prior year.

Product revenue for the six months ended June 30, 2013 decreased 11% to $21.2 million from $24.0 million in the prior year, primarily attributed to a decline in Phyzyme(® )XP phytase manufacturing revenue due to an increase in manufacturing volumes by DuPont, the Company’s marketing and distribution partner for Phyzyme(®) XP phytase. Revenue associated with product manufactured at DuPont sites is recognized on a net basis equal to the royalty on operating profits received from DuPont, and excludes gross manufacturing revenue.

In addition, grain processing revenue declined during the first quarter of 2013 and was offset in part by an increase in grain processing revenue during the second quarter of 2013, indicative of improvements in corn ethanol market conditions and increased customer adoption of the Company’s Fuelzyme(® )alpha-amylase enzyme.

The Company also reported lower revenue from its grain processing and oilseed processing product lines as a result of the sale of its Veretase(® )alpha-amylase and Purifine(®) PLC enzymes to DSM in March 2012. In conjunction with the sale to DSM, the Company entered into a supply agreement to continue to produce and sell Purifine(®) PLC and Veretase(®) alpha-amylase products to DSM at lower sales prices than prior periods when sold directly to end customers. Revenue from the DSM supply agreement is reported as contract manufacturing revenue.

Gross Profit and Gross Margin

Product and contract manufacturing gross profit for the six months ended June 30, 2013 increased to $9.6 million from $9.2 million for the same period in 2012. Gross margin increased to 37% for the six months ended June 30, 2013, as compared to 35% for the same period in 2012, attributed primarily to improved manufacturing yields.

Operating Expenses

Excluding cost of product and contract manufacturing revenues, total operating expenses for the six months ended June 30, 2013 increased to $20.3 million from $17.2 in the prior year. This increase is primarily due to increased research and development costs reflecting continued investment in pipeline products, including the launch of two new products during the first half of 2013, and the expected launch of one more product by the end of the year.

Income (Loss) from Operations

Loss from operations for the six months ended June 30, 2013 was $7.5 million compared to income from operations of $29.7 million for the prior year, on a GAAP accounting basis, including the impact of the $31.3 million gain on sale of the oilseed processing business to DSM in 2012.

Adjusted EBITDA

As detailed in the attached financial tables, the operating results for the first half of the current and prior year were impacted by significant non-recurring and non-cash items. The Company believes that reporting Adjusted EBITDA on a non-GAAP basis, which excludes the impact of these items, provides a more consistent measure of operating results. It should not be considered, however, in isolation or as a substitute for, or superior to, the financial information presented in the Company’s consolidated financial statements. Further, the Adjusted EBITDA measure shown for the Company may not be comparable to similarly titled measures used by other companies.

The Company reported Adjusted EBITDA loss of $5.1 million for the six months ended June 30, 2013 compared to $0.5 million for the same period in 2012. The change in Adjusted EBITDA is primarily attributed to license revenue recorded in 2012 from DSM and Novus International, and increased research and development expenses.

Balance Sheet

The Company ended the quarter with $21.7 million in cash and cash equivalents and $2.5 million in total restricted cash.

“In 2013, we’ve gained substantial traction with prospective customers for our grain processing products and expanded our presence in our core markets with the introduction of three new products,” said James Levine, President & Chief Executive Officer at Verenium. “Looking forward we are excited to launch our new phytase enzyme product, CIBENZA(®) PHYTAVERSE(TM), with partner Novus later this year.”

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 (including, in each case, their value, potential for revenue growth and expected near-term and longer term revenue) and product pipeline (including the timing for commercial launch of any product candidates), 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 (including all financial guidance), 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, 2012 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

    Sr. 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                  Six Months Ended

                                                               June 30,                        June 30,

                                                                2013                     2012                2013     2012
                                                                ----                     ----                ----     ----

    Revenues:

       Product                                               $11,031                  $12,242             $21,247  $23,963

       Contract manufacturing                                  2,512                    2,486               4,730    2,486

       Collaborative and license                               1,844                      969               3,196    6,477
                                                               -----                      ---               -----    -----

    Total revenue                                             15,387                   15,697              29,173   32,926

    Operating expenses:

       Cost of product and contract
        manufacturing revenue                                  8,667                    9,921              16,371   17,236

    Product and contract manufacturing
     gross profit                                              4,876                    4,807               9,606    9,213

    Product and contract manufacturing
     gross margin                                                 36%                      33%                 37%      35%

       Research and development                                5,201                    3,833              10,279    6,994

       Selling, general and administrative                     5,288                    4,313              10,051   10,228

    Total operating expenses                                  19,156                   18,067              36,701   34,458

    Gain on sale of oilseed processing
     business                                                     --                       --                  --  (31,278)
                                                                 ---                      ---                 ---  -------

    Income (loss) from operations                             (3,769)                  (2,370)             (7,528)  29,746

    Other income and expense:

       Interest and other expense, net                        (1,410)                     (87)             (2,781)  (1,367)

          Gain (loss) on net change in fair
           value of derivative assets and
           liabilities                                           597                      139                (330)    (567)

    Total other income (expense), net                           (813)                      52              (3,111)  (1,934)

    Net income (loss) from continuing
     operations before income taxes                           (4,582)                  (2,318)            (10,639)  27,812

    Income tax benefit (provision)                                --                       76                  --     (738)
                                                                 ---                      ---                 ---     ----

    Net income (loss) from continuing
     operations                                               (4,582)                  (2,242)            (10,639)  27,074

     Net loss from discontinued
      operations                                                  --                      (11)                 --      (26)

    Net income (loss) attributed to
     Verenium                                                $(4,582)                 $(2,253)           $(10,639) $27,048
                                                             =======                  =======            ========  =======

    Net income (loss) per share, basic                        $(0.36)                  $(0.18)             $(0.83)   $2.14
                                                              ------                   ------              ------    -----

    Net income (loss) per share,
     diluted                                                  $(0.36)                  $(0.18)             $(0.83)   $2.11
                                                              ------                   ------              ------    -----

    Shares used in computing net income
     (loss) per share, basic                                  12,784                   12,618              12,784   12,614
                                                              ------                   ------              ------   ------

    Shares used in computing net income
     (loss) per share, diluted                                12,784                   12,618              12,784   13,073
                                                              ------                   ------              ------   ------

                                  Verenium Corporation

                       Condensed Consolidated Balance Sheet Data

                               (unaudited, in thousands)

                                 June 30,                          December 31,

                                                   2013                            2012

                               (unaudited)
                                ----------

    Cash
     and
     cash
     equivalents                                $21,737                         $34,875

     Restricted
     cash,
     short
     term                                         2,500                           2,500

     Accounts
     receivable,
     net                                         14,330                          10,577

     Inventories,
     net                                          5,252                           5,311

    Other
     current
     assets                                       1,999                           3,039

     Property
     and
     equipment,
     net                                         35,375                          36,798

    Other
     noncurrent
     assets                                         552                             676

    Total
     assets                                     $81,745                         $93,776
                                                =======                         =======

     Accounts
     payable
     and
     accrued
     expenses                                   $11,444                         $13,266

     Deferred
     revenue,
     current                                        616                           1,929

    Other
     current
     liabilities                                    319                             428

    Long
     term          of                                     at
     debt,         $25.0                                  December
     at            million                                31,
     carrying      at                                     2012)
     value,        June
     net of        30,
     current       2013
     portion       and
     (face         $25.2
     value                                       25,370                          24,861

    Long
     term
     lease
     financing
     obligation                                  22,846                          22,020

    Other
     long
     term
     liabilities                                    539                             619

     Stockholders'
     equity                                      20,611                          30,653
                                                 ------                          ------

    Total
     liabilities
     and
     stockholders'
     equity                                     $81,745                         $93,776
                                                =======                         =======

                                             Verenium Corporation

                           Unaudited Supplemental and Non-GAAP Financial Information

                                                (in thousands)

    The following Adjusted EBITDA figures represent supplemental and non-GAAP financial information, and is derived from the Company's
     condensed consolidated financial statements for the three and six months ended June 30, 2013 and 2012, 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. It
     should not be considered, however, in isolation or as a substitute for, or superior to, the financial information presented in the
     Company's consolidated financial statements. Further, the Adjusted EBITDA measure shown for the Company may not be comparable to similarly
     titled measures used by other companies.

                                                Three Months Ended            Six Months Ended

                                                    June 30,                    June 30,
                                                    --------                    --------

                                                    2013               2012                2013                2012
                                                    ----               ----                ----                ----

    Income (loss) from
     operations                                  $(3,769)           $(2,370)            $(7,528)            $29,746

    Adjustments:
    ------------

    Depreciation and
     amortization                                    930                366               1,867                 693

    Non-cash share-based
     compensation                                    301                201                 600                 442

    Gain on sale of oilseed
     processing business                              --                 --                  --             (31,278)

    Cash paid for rent on San
     Diego facility (1)                               --               (109)                 --                (109)
                                                     ---               ----                 ---                ----

    Adjusted EBITDA                              $(2,538)           $(1,912)            $(5,061)              $(506)
                                                 =======            =======             =======               =====

    ­(1)          The Company is the deemed owner
                          (for accounting purposes) of its
                          San Diego facility, and as such
                          carries an asset on its books
                          representing the total cost of the
                          buildings and improvements, with a
                          corresponding lease financing
                          obligation. The assets are
                          depreciated over the term of the
                          lease, and cash rental payments
                          are allocated primarily to
                          principal and interest payments on
                          the lease financing obligation.
                          The Company believes that
                          including cash rental payments as
                          part of Adjusted EBITDA provides a
                          more accurate representation of
                          operating cash burn.  For the
                          three and six months ended June
                          30, 2013, no cash rental payments
                          were made, pursuant to the terms
                          of the lease agreement.

SOURCE Verenium Corporation


Source: PR Newswire