Verenium Hangs Tough Despite Losses, On-target for Biofuel Commercialization

Verenium Corporation (Nasdaq: VRNM) a developer of next-generation cellulosic ethanol from biomass and high-performance specialty enzymes, reported significant second quarter losses.

The second quarter came to an end on June 30; and for this period, Verenium calculated it lost $28.9 million.  The company blames the losses on declining revenue and higher operating expenses.

Slightly more than $8.9 million of the total loss was attributed by Verenium to its “non-controlling interest in consolidated entities,” so the net loss on the part of the Cambridge, MA, company was $19.9 million. That was an increase of nearly 30 percent over the comparable period in 2008.

Despite the losses, Carols Riva, president and CEO, told analysts that Verenium continues to make “significant progress on many fronts.”  For example, the company recently announce a joint venture with BP, called Vercipia Biofuels, that will get underway this year, as it gears up for eventual commercial biofuel production.

The company, Riva said, has continued its aggressive expense management initiatives to control operating expenses and to conserve cash. Verenium also amended financial covenants related to its 8 percent convertible notes to eliminate some of their “onerous restrictions.” Riva says this move will simplify its financial structure and give the company financial flexibility.

Riva states that despite the significant challenges the ethanol industry has endured over the past three years, government support for biofuels ”remains strong as our government leaders realize that an overdependence on imported oil remains a critical weakness in our economy.“

The $300 million Vercipia 50/50 venture was selected in June to proceed with due diligence on a Department of Energy loan guarantee for Verenium’s first commercial project in Highlands County, FL. That project is scheduled to break ground in 2010.

Riva says the federal loan guarantee “could extend the project debt covering up to 80 percent of eligible costs.”

The company is also making progress on the “optimization phase” at its demonstration plant in Jennings, LA.  The plant operates on sugarcane bagasse and energy cane.

Furthermore, Riva says Verenium remains optimistic that the markets for its products “will stabilize and improve as economic activity recovers.” He acknowledged that softening market conditions have affected revenues, which declined 11 percent to 16.3 million during the second quarter. The revenue decline was mainly on the enzyme side of the business, regarding a change in “revenue recognition,” and the discontinuation of two product lines.

“We’re at a very exciting and pivotal time in our development,” he told analysts during the earnings call.

SeekingAlpha has the complete transcript of the earnings call.