Verenium Corporation (VRNM)

Q1 2010 Earnings Call Transcript

May 10, 2010 5:00 pm ET

Executives

Kelly Lindenboom – VP, Corporate Communications

Carlos Riva – President & CEO

Jamie Levine – EVP and CFO

Analysts

Sarah Martin – Lazard Capital Markets

Pamela Bassett – Cantor Fitzgerald

Amanda Sigouin – Jefferies

Paul Resnik – Olympia Capital Markets

Presentation

Operator

Welcome to Verenium's first quarter 2010 financial results conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being taped at the company's request.

At this time, I would like to introduce your host for today's call, Kelly Lindenboom. Please go ahead.

Kelly Lindenboom

Thank you for joining Verenium's first quarter 2010 conference call. I'm Kelly Lindenboom, Vice President, Corporate Communications. With me today are Carlos Riva, Verenium’s President and CEO; and Jamie Levine, our Chief Financial Officer.

The agenda for today's call is as follows

First, Carlos will review business highlights and the accomplishments in the first quarter, then Jamie will summarize our financial results for the first quarter of 2010 and provide an update on select corporate activities and then we wish to open the call up for your questions.

Before we begin, I would like to advise you that this discussion will include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. These statements involve a high degree of risk and uncertainty and relates to matters such as our strategy, future operating plans, markets for our products, partnering, collaboration activities, public policy, financing activities, technical and business outlook.

Such statements are only predictions, and actual events or results may differ materially from these projected in such forward-looking statements. Factors that could cause or contribute to differences include, but are not limited to, risks related to our IP partners, competitors; and, regulatory and market forces. Certain of these factors and others are more fully described in our filings with the SEC, including, but not limited to our report on Form 10-Q for the quarter-ended March 31st, 2010.

I will now turn the call over to Carlos.

Carlos Riva

Thanks, Kelly. Good afternoon, everyone, and thank you for joining us on today's call. The first quarter has proven to be another productive quarter. And overall, we’ve had a strong start to the year in both our Biofuels and Specialty Enzymes business units.

Let me begin by discussing some of the more recent highlights from our Biofuels business. As we announced on April 1 st, we extended our Galaxy joint development agreement with our partner, BP, rather than allowing the agreement to expire or continue to further extend on a month-to-month basis, we and BP collectively decided to extend the original terms of the agreement for an additional four months or until July 31 st 2010.

During this period, or until another agreement is negotiated, BP and Verenium continue with ongoing joint development work to accelerate the development and commercialization of our cellulosic ethanol process.

As part of this agreement, Verenium will continue to receive $2.5 million per month from BP to co-fund activities at our San Diego Research Labs at our demonstration scale facility.

In addition, we entered into a related agreement with BP to which BP will provide a loan to Galaxy Biofuels, the special purpose entity that are jointly owned by Verenium and BP for the cost of certain activities to be agreed upon and conducted by Verenium at our demonstration plant.

Lastly, on the Biofuels front, we continue to make significant progress with the optimization process at the demonstration plant in Jennings. As previously mentioned, we’ve been running various campaigns to systematically evaluate the different stages of our process.

I’m happy to report that we’ve been continually increasing our mechanical operability and reliability of the plan, which is a direct result of the learning and know-how came through this important phase.

In addition, we’ve been able to run the process in an iterative manner between our pilot scale facility in San Diego and our demo facility in Jennings under varied condition to gain better understanding and insight into the optimal operating conditions.

Importantly, as we’ve continued to see advances to our process technology we’ve also seen key improvements in enzyme production and effectiveness, which are critical components and areas of continued research.

I now like to comment on our Specialty Enzyme business and recap its accomplishments since the beginning of the year. I’m happy to report that total product revenues for the first quarter of 2010 were up nearly 10% on a year-over-year basis and we continue to see signs of recovery within our core target enzyme markets which have been hampered by last year’s global economic recession.

Jamie will go into more financial detail in a moment, but let me touch on the highlights since the beginning of the year.

First, we together with our partner Danisco saw softening in the phytase animal feed market in the first half of 2009 due to the recessionary decline in consumer consumption. However, since late 2009, sales have increased as demand for poultry has begun to recover with improving economic conditions. Second, we also saw an increase in sales of our Fuelzyme and Veretase alpha amylases on a sequential basis as the corn ethanol industry rebound.

Next Purifine enzyme sales also increased in the first quarter and continue to gain strong traction with our customers in various stages of implementation. As we announced in early March, Molinos, the operator of the world's largest soybean processing plant located in Argentina, successfully completed a startup of the commercial-scale oil degumming process using Purifine. We expect that with the interest generated from Molinos’s use of Purifine, we will continue to see demand for this enzyme ramp up through 2010.

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