Verenium Corporation (VRNM)
Q4 2011 Earnings Call
March 5, 2012 8:30 am ET
James Levine – President, Chief Executive Officer
Jeffrey Black – Senior Vice President, Chief Financial Officer
Janet Roemer – Chief Operating Officer
Kelly Lindenboom – Vice President, Corporate Communications
Previous Statements by VRNM
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Good day ladies and gentlemen and welcome to the Verenium Corporation Fourth Quarter 2011 Earnings call. At this time, all participants are in a listen-only mode. If anyone should require assistance on the call, please press star then zero on your touchtone telephone. As a reminder, today’s call is being recorded.
I would now like to turn the conference over to your host, Kelly Lindenboom. Ma’am, you may begin.
Thank you for joining Verenium’s Fourth Quarter and Year-End 2011 conference call this morning. I’m Kelly Lindenboom. With me today are Jamie Levine, our President and CEO, Janet Roemer, our Chief Operating Officer; and Jeff Black, our Chief Financial Officer. The agenda for today’s call is as follows: first, Jamie will discuss today’s announcement, including our current financing strategy as well as the potential sale of the Company, and then give an update on progress made during 2011. Jeff with then review our financial results for the full-year 2011 and provide 2012 guidance, and Janet will then discuss commercial operations, including Q4 and full-year 2011 product performance.
Given the nature of the items we disclosed this morning and the status of ongoing discussions, we will not be taking questions on today’s call.
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 and M&A activities, technical and business outlook, and our 5.5% notes. The Company’s actual results may differ materially from those projected in such forward-looking statements. Factors that could cause or contribute to 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 31, 2011. These forward-looking statements speak only as of the date hereof.
I will now turn the call over to Jamie.
Thanks Kelly, and good morning everyone. Thank you for joining us. 2011 was an important and productive year for Verenium as we continued to build and maximize our product portfolio, which addresses the large and growing industrial enzymes market. I’d like to start today by discussing the news related to our financing strategy we announced in this morning’s press releases and SEC filings.
This morning, we launched a tender offer for our outstanding convertible notes pursuant to the provisions allowing holders to put their notes to the Company on April 2. In anticipation of this event, over the past month we have been exploring a number of options to address the Company’s funding requirements. We are currently working on two primary strategies: a potential financing to raise capital, and the potential sale of the Company. With regard to a financing, we have continued to advance discussions regarding the issuance of new equity or equity-linked securities. Regarding the potential sale, we are actively evaluating proposals we have received to acquire 100% of the stock of the Company. We remain committed to developing the most favorable outcome for all of our stakeholders. Given these conversations are ongoing, we are unable to provide additional details at this time but look forward to providing continued updates as appropriate.
I’d now like to turn to some of the progress made by the business in 2011. I’ll start with our financial performance for the year in relation to the 2011 guidance we previously announced. Jeff will go into greater detail in the financial section of this call, but to summarize, in 2011 we increased total revenue to just over $61 million, slightly higher than our revenue guidance range. We grew product gross margin to $21.5 million, within our guidance range. We increased R&D spend to $11 million, within our target range. We significantly decreased our SG&A spend to approximately $19 million, coming in below our guidance range, and we spent a total of $6.5 million in capital expenditures, within our target range, primarily for the build-out of our new facility in San Diego. I’m pleased with our financial performance in 2011, including our ability to meet our financial guidance and grow the business, especially given the current state of the economy and it’s effects on the industries we serve.
Now, I’ll walk through some of our recent accomplishments. In an effort to further grow and diversify our product revenue, we recently expanded our product portfolio to offer two enzyme products to the oilfield services industry. These products include Pyrolase cellulase for hydraulic fracturing of oil and gas wells, and VEREFLOW Alpha-Amylase for filter cake removal, a critical step when drilling a well. Together, we estimate that the addressable market for these enzyme products is approximately $270 million. Like our Purifine PLC product for oilseed processing, the oilfield services industry has not widely employed enzymes in their processes; however, we see great potential in this industry because enzymes can help to replace currently used expensive and often toxic chemicals. Enzymes have a number of benefits, including the fact that they are safer for both the user and the environment, are less harmful to operating equipment, and can improve operating efficiency.