Verenium Reports Financial Results for the First Quarter 2008

Specialty enzyme business delivers record growth; biofuels business advancing toward commercialization of next-generation cellulosic ethanol

CAMBRIDGE, Mass., May 5 /PRNewswire-FirstCall/ -- Verenium Corporation , a pioneer in the development of next-generation cellulosic ethanol and high-performance specialty enzymes, today reported financial results for the first quarter of 2008 and provided updated 2008 financial guidance.

"I am encouraged by the overall results and achievements of the first quarter," said Carlos A. Riva, President and Chief Executive Officer of Verenium. "As planned, our demonstration-scale cellulosic ethanol facility -- the first of its kind in the nation -- entered the start-up phase and is proceeding on schedule despite significant cost escalation and labor shortages being experienced across the energy sector. At the same time, we achieved record quarterly product revenues and maintained healthy gross margins in our specialty enzyme business through our continued focus on achieving strong commercial results," Riva continued. "We will now build on these solid gains with a focus on prudently accelerating the development of both our business units."

  Financial Results
                      Selected Financial Information
                        (unaudited, in thousands)

                                                     Three Months Ended
                                                          March 31,
                                                     2008           2007
  Revenues:
    Product:
      Phyzyme(R) phytase                            $7,402         $3,778
      All other products                             3,799          1,574
        Total product                               11,201          5,352
    Collaborative                                    3,475          4,735
    Grant                                              559          1,221
    Total Revenues                                  15,235         11,308

  Product Gross Profit                               3,324            460
  Product Gross Margin                                 30%             9%

  Total Operating Expenses                          24,544         16,969

  Loss from Operations                            $(17,186)      $(10,553)

Total revenues for the quarter ended March 31, 2008 were $15.2 million compared to $11.3 million for first quarter of 2007. The increase in total revenue resulted from solid growth in product revenue, offset in part by a decrease in collaborative and grant revenue, consistent with earlier guidance provided by the Company.

The Company reported $11.2 million in product revenue for the first quarter of 2008, representing a 109 percent increase compared to the first quarter of 2007. The increase in product revenue was primarily due to increased sales of Phyzyme(R) XP by Danisco Animal Nutrition, which continues to expand its global phytase market share position in the animal feed industry. The Company also experienced solid sales growth for its other enzyme products, including Fuelzyme(R)- LF, the Company's alpha amylase product sold directly by its own sales team into the ethanol industry. The Company also reported $1.7 million in product revenue from two discontinued products, Bayovac(R) and Quantum(R), which will not occur in future quarters. Product revenue accounted for 74 percent of total revenue during the first quarter of 2008, compared to 47 percent during the first quarter of 2007.

Product gross profit (product revenue less cost of product revenue) and product gross margin (product gross profit divided by product revenue) improved in the first quarter of 2008 versus the first quarter of 2007 due primarily to growth in Phyzyme sales, as well as incremental margin improvement contributed by other product growth. Over time, the Company believes that product volume growth and a higher mix of company-marketed products in the portfolio should yield improvement in both product gross profit and margin.

Total operating expenses were higher in the first quarter of 2008 compared to the first quarter of 2007, primarily due to the incremental operating expenses associated with inclusion of Company's Biofuels business since its June 2007 merger with Celunol. Approximately $0.7 million of the increase in Selling, General and Administrative expense between first quarter 2008 and 2007 resulted from increased legal expenses that represent levels not expected to continue through the balance of the year. Additionally, for the first quarter of 2007, approximately $1.2 million in expenses related to the Company's intellectual property and regulatory activities were reclassified from Research and Development expense to Selling, General and Administrative Expense in order to conform to the 2008 classification of these expenses.

Non-cash, stock-based compensation expense included in operating expenses, (apportioned roughly 40 percent / 60 percent between Research and Development and Selling, General and Administrative expenses, respectively) for the first quarter of 2008 was $3.5 million compared to $1.1 million for the first quarter of 2007. The increase in stock-based compensation is related primarily to additional options granted during 2007 in connection with the Celunol merger, together with equity awards to several senior-level hires since that time.