Company outperforms 2012 revenue, gross profit and operating loss guidance
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 fourth quarter and year ended December 31, 2012.
Since the beginning of 2012, the Company has made important progress on both operational and financial fronts. Recent accomplishments include:
- Selected lead enzyme candidates for the development of a next-generation phytase enzyme and a suite of non-starch polysaccharide enzymes for animal health and nutrition with partner Novus International Inc.;
- Announced the commercial launch of Pyrolase® HT, a next-generation cellulase enzyme for use in hydraulic fracturing;
- Completed the start-up of the Company’s new bioprocess development pilot plant facility;
- Announced a $22.5 million, five-year secured financing with Athyrium Opportunities Fund providing the capital required to grow the business; and
- Ended the year with unrestricted cash of $34.9 million.
“2012 was a productive year for us as we continued to make progress operationally while at the same time creating a more solid financial structure from which to grow the business and create shareholder value,” said James Levine, President & Chief Executive Officer at Verenium. “I look forward to the many opportunities that lie ahead in 2013, including the growth of our existing commercial products, the execution of new product launches from our Product Pipeline, and the potential for new partnerships that will allow us to drive the long term growth and success of our business.”
Total revenues for the year ended December 31, 2012 decreased 7% to $57.2 million from $61.3 million in the prior year. Product and contract manufacturing revenues represented approximately 86% of total revenues for the year ended December 31, 2012 compared to 91% in the prior year.
Product revenue for the year ended December 31, 2012 decreased 23% to $43.4 million from $56.0 million in the prior year, primarily due to the following:
- A decrease in grain processing revenue compared to 2011 attributed to adverse business conditions in the corn ethanol industry, resulting in plant closures and reduced operating rates, increased competitive pressure, and delays or extensions of product trials which affected new customer adoption rates.
- The sale and license of the Company’s Purifine product for oilseed processing and Veretase product for grain processing to DSM in March of 2012, now reported as contract manufacturing revenue at lower selling prices; and
- A decrease in animal health and nutrition due to toll manufacturing revenue included in 2011.
Product and contract manufacturing revenue from non-Phyzyme® XP products as a percentage of total product and contract manufacturing revenues decreased to 37% for the year ended December 31, 2012 compared to 46% in the prior year. Contract manufacturing revenue increased as a result of the supply agreement entered into in conjunction with the DSM sale, under which the Company produces and sells Purifine and Veretase to DSM at lower sales prices than when the Company sold directly to end customers.
Total collaborative revenue for the year ended December 31, 2012 increased to $8.3 million from $5.3 million in the prior year, primarily due to recognition of license fee revenue from Novus International, Inc. and license fees associated with the DSM transaction. This increase was offset in part by a non-recurring license fee received in 2011 for a commercial enzyme candidate previously licensed to a third party.
Product and Contract Manufacturing Gross Profit and Gross Margin
Product and contract manufacturing gross profit for the year ended December 31, 2012 decreased 22% to $16.8 million from $21.5 million in the prior year. Gross margin decreased to 34% of total product and contract manufacturing revenue for the year ended December 31, 2012, compared to 38% for the year ended December 31, 2011. Gross margin decreased primarily due to a shift in sales mix from higher margin grain processing revenue to the Company’s lower margin supply agreement with DSM, implementation of upgrade projects at the Company’s manufacturing facility which resulted in idle capacity charges and incremental inventory reserves and write-offs associated with certain lots of inventory which did not meet defined product specifications.
Operating Expenses (excluding cost of product and contract manufacturing revenue and restructuring expense)
Excluding cost of product and contract manufacturing revenues and restructuring charges, total operating expenses related to continuing operations for the year ended December 31, 2012 increased to $34.6 million (including share-based compensation of $1.0 million) from $30 million (including share-based compensation of $0.8 million) in the prior year. For the year ended December 31, 2011, total operating expenses includes reimbursement of $1.1 million of 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. Excluding this reimbursement, total operating expenses increased $3.5 million primarily due to increased research and development costs reflecting continued investment in pipeline products, additional depreciation and facility related costs associated with the Company’s new headquarters beginning in June 2012 and transaction costs associated with various financing and strategic alternatives the Company was pursuing during the first quarter of 2012.
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 services agreement with DSM. The aggregate consideration received by the Company was $37 million. The $31.3 million gain on sale for the year ended December 31, 2012 was calculated as the difference between the allocated consideration amount for the oilseed processing business, and the net carrying amount of the purchased assets and liabilities, net of transaction-related costs.
Income (Loss) from Operations
Income from operations for the year ended December 31, 2012 was $21.7 million compared to loss from operations of $6.2 million for the prior year, on a GAAP accounting basis. Adjusted for the impact of restructuring expenses and the gain on sale to DSM of $31.3 million, the Company’s non-GAAP pro-forma loss from operations was $9.6 million for the year ended December 31, 2012 compared to $3.2 million for the prior year. The Company believes that excluding the impact of these items provides a more consistent measure of operating results.
Net Income (Loss) from Continuing Operations
Net income from continuing operations for the year ended December 31, 2012 was $18.3 million compared to $5.6 million for the prior year, on a GAAP accounting basis. Adjusted for the impact of restructuring expenses, non-cash items related to the change in fair value of derivative assets and liabilities and gain on the sale to DSM, the Company’s non-GAAP pro-forma net loss from continuing operations for the year ended December 31, 2012 increased to $12.2 million compared to $6.3 million for the prior year primarily due to a decrease in product and contract manufacturing gross profit and continued research and development investment in pipeline products. The Company believes that excluding the impact of these items provides a more consistent measure of operating results.
The Company ended the quarter with $34.9 million in cash and cash equivalents and $2.5 million in total restricted cash. On December 7, 2012 the Company entered into a $22.5 million secured debt financing with Athyrium Opportunities Fund (“Athyrium”). Net proceeds after estimated expenses were approximately $21.3 million. The debt bears interest at 11.5% per annum, with interest payments due quarterly over a five-year term and the principal balance due as a lump-sum payment at maturity in December 2017.
“We had a strong fourth quarter, and overall, we are pleased with our financial results for 2012,” said Jeff Black, Chief Financial Officer at Verenium. “Importantly, we secured the necessary financing that should enable us to execute on our business. At the same time, we prudently managed our operating burn during challenging market conditions.”
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.
Statements in this press release that are not strictly historical are “forward-looking” and involve a high degree of risk and uncertainty. These include, but are not limited to, statements related to Verenium’s technology, products and product candidates and product pipeline, lines of business, operations (including Verenium’s ability to successfully negotiate and enter into future collaborations and partnerships), capabilities, commercialization activities, customer adoption rates, industry conditions, future financial performance, and near-term and longer-term growth and prospects. Such statements are only predictions, and actual events or results may differ materially from those projected in such forward-looking statements. Factors that could cause or contribute to the differences include, but are not limited to, risks associated with Verenium’s strategic focus, technologies, products and product candidates and product pipeline (including Verenium’s ability to identify, develop and commercialize new products and product candidates, either independently or with collaborators or partners, and market demand for those products and product candidates), dependence on patents and proprietary rights, protection and enforcement of its patents and proprietary rights, the commercial prospects of the industries in which Verenium operates and sells products, Verenium’s dependence on manufacturing and/or license agreements, its ability to achieve milestones under existing and future collaboration agreements, the ability of Verenium and its partners to commercialize its technologies and products (including by obtaining any required regulatory approvals) using Verenium’s technologies, the timing for launching any commercial products and projects, the ability of Verenium and its collaborators to market and sell any products that it or they commercialize, the development or availability of competitive products or technologies, the future ability of Verenium to enter into and/or maintain collaboration and joint venture or partnership agreements and licenses on a timely basis or at all, and risks and other uncertainties more fully described in Verenium’s filings with the Securities and Exchange Commission, including, but not limited to, Verenium’s annual report on Form 10-K for the year ended December 31, 2011 and any updates contained in its subsequently filed quarterly reports on Form 10-Q . These forward-looking statements speak only as of the date hereof, and Verenium expressly disclaims any intent or obligation to update these forward-looking statements.
For more information on: Verenium