Verenium Corporation (VRNM)

Q1 2012 Earnings Call

May 10, 2012 5:00 p.m. ET


James Levine – President, Chief Executive Officer

Jeffrey Black – Senior Vice President, Chief Financial Officer

Janet Roemer – Chief Operating Officer


Laurence Alexander - Jefferies & Co.



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Good day ladies and gentlemen, and welcome to Verenium Corporation’s first quarter 2012 earnings conference call. [Operator instructions.] I would now like to hand the conference over to Mr. Jeff Black, chief financial officer. Sir, you may begin.

Jeffrey Black

Thank you, and good afternoon. Thank you for joining Verenium’s first quarter 2012 conference call. I’m Jeff Black, chief financial officer, and with me today are Jamie Levine, our CEO, and Janet Roemer, our chief operating officer.

The agenda for today’s call is as follows. First, Jamie will provide an outlook on the business moving forward in light of the transaction we recently announced with DSM. Janet will then discuss commercial operations, including Q1 performance, and I will then review our financial results for the first quarter of 2012 and provide updated 2012 financial guidance.

Before we begin, I would like to advise you that this discussion will include certain statements that are not historical facts and are forward-looking statements that involve a high degree of risk and uncertainty. These statements relate to matters such as our strategy, future operating plans, markets for our products, partnering, collaboration activities, public policy, financing, M&A activities, technical, and business outlooks.

The company’s actual results may differ materially from those projected in such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in our filings with the SEC, including, but not limited to, our report on Form 10-K for the year ended December 31st, 2011, and in our subsequently filed quarterly reports on form 10-Q. These forward-looking statements speak only as of the date hereof.

And I will now turn the call over to Jamie.

James Levine

Thanks Jeff. And good afternoon everyone, and thanks for joining us. I’d like to start with a few comments regarding the recent transaction with DSM. As you know, in March we announced that DSM has acquired certain commercial and pipeline products for a total consideration of $37 million. And I’d like to add two observations to the comments that we made at the time of the announcement.

First, you’ve heard us talk in the past about how our technology can create the highest-performing enzymes. Our sale of Purifine shows a global player like DSM clearly agreed with the substance of our claim. However, for our current portfolio, the same performance advantage is also true. Fuelzyme, our high-performance product for corn bioethanol, has a fundamentally different mode of action compared to competitors’ enzymes, and Janet will describe how this has allowed us to grow our sales of Fuelzyme in a very challenging period for corn bioethanol.

The second observation I’d make about the DSM deal is that a number of global companies we’ve met with in the past several weeks have emphasized that they’ve had a longstanding interest in accessing Verenium’s technology, but also a concern about the impact of the convertible notes on our financial health. With the debt now behind us, we’re finding that opportunities for partnering have expanded.

I’ll now turn to the meat of my comments regarding our sources of growth in light of the changes from the DSM transaction. Fundamentally, our future success relies on execution and not new technology development. It therefore follows that there’s a lot of transparency into our growth going forward. Today, we sell eight products under three product lines, and simply put, our growth is coming from these eight products and our product pipeline.

We anticipate providing more detail at our capital markets day this summer, but given the focus over the last few weeks from investors on our current growth profile, I’d like to be clear about our pipeline as it stands today. In our animal health and nutrition product line, we are developing four enzymes together with Novus. Given that Verenium developed two of the four high-performing Phytase enzymes serving this large market today, we have a strong view of what’s required to succeed in animal feed, and we believe our offering will be highly attractive to this market.

In our grain processing product line, our recent partnership with Tate & Lyle represents a new source of near term growth, and we believe we can add substantially to our grain processing pipeline through additional partnering discussions currently underway.

Finally, we come to oil field services. As of today, several large and mid-sized oil field services companies are testing our Pyrolase product used for breaking guar in the hydrolic fracturing process. The feedback indicates Pyrolase can cost-effectively address an area not well-served by the current breakers on the market. Namely, wells that are too hot for standard breakers, typically over 140 degrees Fahrenheit. The growth of this product is a critical area of focus for the company and we look forward to updating our progress in the future.

For the oil field services pipeline, we are announcing today that in the first quarter we submitted for regulatory authorization a more thermostable version of our Pyrolase product, which will expand the potential portion of the fracturing market our products can serve. We expect that process will allow us to bring this new product to market in 2013, if not sooner, because the regulatory process for this product is shorter than we usually describe. We are already allowing potential customers to test this product candidate in their labs, and they are seeing strong performance at very high temperatures.

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