Verenium, Shorn of Biofuels Business, Returns to San Diego and its Diversa Roots

3/22/11Follow @bvbigelow

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part of the deal, and they still are. Levine says BP got rights to the cellulosic enzymes—along with a copy of the entire Verenium enzyme library as part of its $98.3 million buyout of Verenium’s biofuels business.

So what’s the difference between Verenium in 2011 and Diversa in 2006?

“Diversa had a business model that aspired to be a products business,” Levine said. “But when you look at their revenue streams, it was largely from contract research.”

Today, Levine says Verenium is generating 90 to 95 percent of its revenue from nine products, industrial enzymes developed for target markets in animal health and nutrition, grain processing (into biofuels or beverage alcohols), and oil seed processing for edible oils. Such sales amounted to $50.3 million in 2010—double the $25 million that Verenium generated from product sales in 2007.

Levine, a former Goldman Sachs banker, is taking a pragmatic approach that recognizes Verenium’s technology and vast enzyme library has enormous potential value—but it can only be realized by building a commercial operating business that targets existing markets for industrial enzymes. Though last year’s deal with BP did not preclude Verenium from moving back into the cellulosic biofuels business, “I’d rather come up with the next big thing in animal health and nutrition, where it’s a $400 million or $500 million market,” Levine says. “I can double, triple, quadruple our revenue without having to touch markets [such as cellulosic ethanol] that don’t exist today a whole lot faster and with a whole lot more certainty.”

So it’s back to the future for Verenium, which has returned to its original focus on developing industrial enzymes. When we talk about our technology, we still say it’s very much about enzyme discovery in nature,” Levine said. “It’s very much about using the libraries that Diversa went out and created, and we continue to create libraries. But we no longer have the luxury of talking about ourselves as a platform technology developer, even though we are. We cannot move backwards. We have to move forward to being a profitable and sustainable enzyme seller.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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