BP Acquires Verenium's Cellulosic Ethanol Interests for

Acknowledging that the cellulosic ethanol business is a capital intensive industry requiring deep pockets that it didn't have, Verenium finally threw in the towel today and sold off all its biofuels assets to its biofuels partner, BP, for $98,300,000. Importantly, Verenium will retain its commercial enzyme business, including its biofuels enzymes products and have the right to develop its own lignocellulosic enzyme program. Verenium will also retain select R&D capabilities, as well as rights to access select biofuels technology developed by BP using the technology it is acquiring from Verenium through this agreement.

I'd venture to speculate that the disastrous BP oil spill played into Verenium's decision to throw in the towel. As BP oil continued to gush into the gulf, the hoped for DOE loan guarantee for the VRNM/BP flagship commercial cellulosic ethanol plant in Highlands Florida became more doubtful due to unprecedented political pressures on BP. Verenium will now re-focus back to its basic business of enzyme technology where it has had recent success with both royalty and product sales growth. The $98 million dollar payment will allow Verenium to clear out almost all of the long term convertible debt on its balance sheet if it chooses to do so.

This ends a disastrous chapter in the history of Verenium, a company formed by the ill fated June 2007 merger of Diversa, a once high flying enzyme biotechnology company and Celunol Corporation - a developer of cellulosic ethanol process technologies, that wiped out hundreds of millions in Diversa shareholder value while management continued to get paid handsomely. It will be interesting to see how the valuation the stock market places on the growth prospects of the enzyme business without the overhang of the capital intensive and risky cellolosic business. We'll find out more today during Verenium's conference call but I'd view this as a definitive positive in a company that has lacked any substantiate positive shareholder news for years.