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VRNM > SEC Filings for VRNM > Form 10-Q on 9-Aug-2013All Recent SEC Filings

Show all filings for VERENIUM CORP



Quarterly Report


Except for the historical information contained herein, the following discussion, as well as the other sections of this report, contain forward-looking statements that involve risks and uncertainties. These statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement.

Forward-looking statements applicable to our business generally include statements related to:

our estimates regarding market sizes and opportunities, as well as our future revenue, product and contract manufacturing revenue, profitability and capital requirements;

our ability to increase or maintain our product revenue and improve or maintain product gross margins;

the timing and amount of expected revenue from our pipeline of enzyme candidates, or our Product Pipeline, that we expect to launch independently and/or in collaboration with strategic partners beginning in 2013;

our ability to secure partnerships for, and advance products from, our early- to mid-stage product candidates, or our Expansion Pipeline, that have the potential to address both markets we serve today and existing or future markets that we have not historically addressed;

the opportunities in our target markets and our ability to exploit them;

our plans for managing the growth of our business;

the benefits to be derived from our current and future strategic alliances;

our anticipated revenues from collaborative agreements and licenses granted to third parties and our ability to maintain existing or enter into new collaborative relationships with third parties;

our expected cash needs, our ability to manage our cash and expenses and our ability to access future financing;

our ability to improve manufacturing processes, reduce inventory losses and increase manufacturing yields in order to improve margins and enable us to continue to manage capacity in response to market conditions, such as the state of the corn ethanol industry;

our ability to maintain good relationships with the companies with whom we contract for the manufacture of certain of our products;

our expected future research and development expenses, sales and marketing expenses, and general and administrative expenses;

our plans regarding future research, product development, business development, commercialization, growth, independent project development, collaboration, licensing, intellectual property, regulatory and financing activities;

investments in our core technologies and in our internal product candidates;

our strategy;

the impact of dilution to our stockholders and a decline in our share price and our market capitalization from future issuances of shares of our common stock or equity-linked securities;

the impact of litigation matters on our operations and financial results; and

the effect of critical accounting policies on our financial results.

Factors that could cause or contribute to differences include, but are not limited to, our operations and ability to continue as a going concern, risks involved with our new and uncertain technologies, risks involving manufacturing constraints which may prevent us from maintaining adequate supply of inventory to meet our customers' demands, risks associated with our dependence on patents and proprietary rights, risks associated with our protection and enforcement of our patents and proprietary rights, our dependence on existing collaborations, our ability to enter into and/or maintain collaboration and joint venture agreements, our ability to commercialize products directly and through our collaborators, the timing of anticipated regulatory approvals and product launches, and the development or availability of competitive products or technologies, as well as other risks and uncertainties set forth below and in the section of this report entitled Risk Factors beginning on page 32.

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We are an industrial biotechnology company that develops and commercializes high performance enzymes for a broad array of industrial processes to enable higher productivity, lower costs, and improved environmental outcomes. We operate in one business segment with four main product lines: animal health and nutrition, grain processing, oilfield services and other industrial processes. We believe the most significant near-term commercial opportunity for our business will be derived from continued sales and gross product margins from our existing portfolio of enzyme products; however, our long-term growth opportunities will be heavily dependent upon our continued development and commercialization of products from our Product Pipeline and Expansion Pipeline.

Our business is supported by a research and development team with expertise in gene discovery and optimization, cell engineering, bioprocess development, biochemistry and microbiology. Over the past 20 years, our research and development team has developed a proprietary technology platform that has enabled us to apply advancements in science to discovering and developing unique solutions in complex industrial or commercial applications. We have dedicated substantial resources to the development of capabilities for sample collection from the world's microbial populations, generation of DNA libraries, screening of these libraries using ultra high-throughput methods capable of analyzing more than one billion genes per day, and optimization based on our gene evolution technologies. We have continued to shift more of our resources from technology development to commercialization efforts for our existing and future technologies and products. While our technologies have the potential to serve many large markets, our primary areas of focus for product development are enzymes for animal health and nutrition, grain processing, oilfield services, and other industrial enzyme markets. We have current collaborations and agreements with key partners such as Novus International, Inc. ("Novus"), DuPont Nutrition Biosciences ApS ("DuPont"), Fermic S.A. ("Fermic"), Tate & Lyle Ingredients Americas LLC ("Tate & Lyle"), WeissBioTech ("Weiss"), and DSM Food Specialties B.V. ("DSM"), each of which complement our internal technology, product development efforts, production and distribution efforts.

Our intellectual property consists of patents, trademarks, copyrights, trade secrets, and know-how. Protection of our intellectual property is a strategic priority for our business. As of June 30, 2013, we owned 222 issued patents relating to our technologies and had 177 patents pending. Also, as of June 30, 2013, we either jointly owned or in-licensed from BP Biofuels North America LLC, or BP, more than 160 patents and more than 185 patents pending. Our rights to sell our products and products in development are largely covered by the patents and patent applications we own, and to a lesser extent by patents and patent applications we jointly own with BP. Our rights to practice the discovery and evolution technology which we originally developed are covered by patents we in-license from BP. In addition, we also have the right to file patent applications and own other intellectual property rights to improvements we create relating to our discovery and evolution technology, as well as any newly developed discovery and evolution technology. We also in-license more than 100 patents from other parties that we believe strengthen our ability to efficiently manufacture our products and protect a portion of our future products we expect to launch from our Product Pipeline and Expansion Pipeline.

Excluding our gain on sale of assets to DSM in 2012 and our non-cash gains related to our debt repurchases in 2011, we have typically incurred net losses from our continuing operations since our inception. As of June 30, 2013, we had an accumulated deficit of $592.9 million. Our results of operations have fluctuated from period to period and likely will continue to fluctuate substantially in the future. During the six months ended June 30, 2013 we generated an operating loss of $10.6 million. We expect to incur losses throughout 2013, as a result of any combination of one or more of the following:

uncertainties surrounding our ability to adequately maintain and grow our revenue base for our current products due to unfavorable market conditions in the corn ethanol industry; slower-than-anticipated customer adoption of our products for hydraulic fracturing; and/or the impact of the of launch next-generation-products by DuPont and other competitors in animal health and nutrition;

continued research and development expenses for the progression of Product Pipeline and Expansion Pipeline candidates;

our continued investment in manufacturing facilities and/or capabilities necessary to meet anticipated demand for our products or improve manufacturing yields;

additional idle manufacturing capacity related to downtime to complete upgrades at Fermic, our contracted manufacturing facility in Mexico City;

maintaining or increasing our sales and marketing infrastructure to support our current products and the commercial launch of our Product Pipeline and Expansion Pipeline candidates; and

lower gross margins as a result of the contract pricing under the DSM supply agreement.

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Results of operations for any period may be unrelated to results of operations for any other period. In addition, we believe that our historical results are not a good indicator of our future operating results.

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