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."
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.
In the commentary below, the operating results of the Company's oilseed processing business are included in continuing operations.
Revenues for the three months ended March 31, 2012 and 2011 were as follows (in thousands):
Three Months Ended
Animal Health and Nutrition
All other products
Collaborative and license
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.
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.
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.
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.
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.