Verenium Corporation (VRNM)

Q2 2010 Earnings Call Transcript

August 9, 2010 5:00 pm ET

Executives

Kelly Lindenboom – VP, Corporate Communications

Carlos Riva – President & CEO

Janet Roemer – President & COO of Enzymes Business

Jamie Levine – EVP & CFO

Analysts

Laurence Alexander – Jefferies

Pamela Bassett – Cantor Fitzgerald

Paul Resnik – Olympia Capital Markets

David Kaye [ph] – Tenor Capital [ph]

Pete Finolie [ph] – River Ridge [ph]

Presentation

Operator

Thank you for holding. Welcome to Verenium's second 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, Ms. Kelly Lindenboom. Ma’am, you may begin.

Kelly Lindenboom

Thank you for joining Verenium's second quarter 2010 conference call. I'm Kelly Lindenboom, Vice President of Corporate Communications and with me today are Carlos Riva, our Chief Executive Officer; Janet Roemer, our Chief Operating Office; and Jamie Levine, our Chief Financial Officer.

The agenda for today's call is as follows

First, Carlos will review business highlights, then Janet will review key accomplishments in the Enzyme business in the second quarter of 2010, Jamie will then summarize our financial results for the second quarter of 2010 and provide financial guidance for the remainder of 2010 and we will then 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 relate to matters such as our pending transaction with BP, our strategy, future operating plans, markets for our products, partnering and collaboration activities, public policy and financing activities, technical and business outlooks.

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 ability to satisfy all closing conditions in our pending transaction with BP, IP partners, competitors; and, regulatory and market forces. Certain of these factors and others are more fully described in our filings with the SEC, but not limited to our report on Form 10-Q for the quarter-ended March 31st, 2010.

These forward-looking statement speak only to the date hereof and the Company expressly disclaims any intent or obligation to update these forward-looking statements.

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. Today I am pleased to report that the second quarter was a very productive one for the company. It was an especially productive quarter for our Enzyme business. Product revenues increased significantly on both year-on-year and quarter-on-quarter basis. We believe this is a clear signal that the full impact of the recession in our target enzyme markets is behind us and that our newer products will continue to gain traction in the market as they become a larger proportion of the mix of total product revenue.

During the past quarter, we were also able to decrease our operating expenses. In addition, in April, we received a further $4.9 million award from the Department of Energy to fund activities at our demonstration plant in Jennings, thus further enhancing our cash position.

Critical importance, we recently announced an agreement for the sale of our cellulosic biofuels business to BP for $98.3 million. To recap the terms of this transaction, upon closing, BP will acquire Verenium’s facilities in Jennings, Louisiana, including our pilot plant and demonstration facility together with our R&D facilities in San Diego, our cellulosic biofuels technology and related IP as well as our holdings in the joint ventures we currently have with BP. In addition, BP will employ select scientists and personnel needed to continue the cellulosic biofuels development program.

In return, Verenium will receive a $98.3 million payment from BP. An additional $10.7 million currently in restricted cash will be released to Verenium upon BP’s assumption of the lease for our San Diego facility. After the close of the transaction, Verenium will retain our core commercial enzyme business, which will include approximately 80 of our 270 current Verenium employees who we believe make up the right team to support our business plan moving forward.

Select key hires have been identified to round out the team and we anticipate recruiting for those roles through 2011. We will also retain the supporting technology required to further develop our business, including enzymes for lignocellulosic biofuels as well as the potential to access certain biofuels applications developed by BP using the technology acquired from Verenium. And lastly, we will retain the option to remain in our San Diego facility over the next 24 months while we transition to new fit-for-purpose facility.

We believe firmly that the sale of capital intensive cellulosic biofuels business is the best path forward for Verenium and its stakeholders. This transaction provides us the financial flexibility to focus on what we do best, delivering high performance industrial enzymes to lucrative and growing markets.

In addition, Verenium will retain ownership of or royalty-free access to all the intellectual property we currently use in our commercial enzyme business. Finally, we may retain the option to license cellulosic technology now being developed by BP that the company may utilize in the future for its own advanced biofuels program.

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