UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2012; or

Commission File Number 000-29173

VERENIUM CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (858) 431-8500

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  ¨    No  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes  ¨    No  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of Act).    Yes  ¨    No  x

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2012 was $31.9 million.*

The number of shares outstanding of the Registrant’s common stock was 12,782,894 as of March 25, 2013. The Registrant has no non-voting stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the Registrant’s Annual Meeting of Stockholders to be filed with the Commission on or before April 30, 2013 are incorporated by reference into Part III of this annual report on Form 10-K. With the exception of those portions that are specifically incorporated by reference into this Annual Report on Form 10-K, such proxy statement shall not be deemed filed as part of this report or incorporated by reference herein.

Forward Looking Statements

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:

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 17.

VERENIUM CORPORATION

FORM 10-K

For the Year Ended December 31, 2012

INDEX

EXPLANATORY NOTE

Note Regarding Restatement of Previously Issued Consolidated Financial Statements

In this Annual Report on Form 10-K, we have restated certain historical financial statements as of, and for the year ended, December 31, 2011 and the quarterly periods ended June 30, 2011, September 30, 2011, March 31, 2012, June 30, 2012 and September 30, 2012 to reflect a revision in accounting for our facility lease in San Diego, California, or the Lease.

The error relates to the misapplication of Accounting Standards Codification No. 840, “Accounting for Leases,” or ASC 840. As a result, we did not correctly record the assets and related financing obligation for the Lease. The error does not, however, impact the economic terms or substance of the Lease. At the inception of the Lease in June 2011, we initially determined that we should not be deemed the owner of the building for accounting purposes and that the Lease should be accounted for as an operating lease, pursuant to ASC 840, and after consultation with Ernst & Young LLP, we believed this to be the proper accounting treatment.

During the preparation process for this Annual Report on Form 10-K, we re-evaluated our conclusion and it was determined that, based on the terms of the Lease, we had substantially all of the construction period risks and should have been deemed the owner of the asset for accounting purposes during the construction period. Furthermore, upon completion of construction of the building, we did not meet the sale-leaseback criteria for de-recognition of the building assets and liabilities; therefore, the Lease should have been accounted for as a financing obligation commencing at the inception of the Lease in June 2011.

As a result of this determination, we are required to record an asset representing the total cost of the buildings and improvements, including the costs paid by the lessor (the legal owner of the building), with a corresponding lease financing obligation. The assets will be depreciated over the term of the Lease, and rental payments will be allocated partially to presumed land lease payments and partially to principal and interest payments on the lease financing obligation.

In connection with the restatement, we also corrected certain immaterial amounts related to warrants issued in 2011, and recorded other immaterial corrections. In addition, we revised our consolidated statements of cash flows for the year ended December 31, 2011 and applicable interim periods in 2011 and 2012 for amounts previously reflected as cash paid for equipment purchases related to our new facility, but for which the cash had not been paid as of the applicable balance sheet dates. This adjustment had no impact on our reported cash and cash equivalents balance for such periods.

Throughout this Annual Report on Form 10-K, amounts presented from prior periods and prior period comparisons have been revised and labeled as “restated” and reflect the balances and amounts on a restated basis.

Tables summarizing the effects of the restatements on the specific line items presented in our historical financial statements for the periods indicated are included in Note 2 and Note 14 of the notes to our consolidated financial statements included with this Annual Report on Form 10-K.

Company Overview

We are an industrial biotechnology company with recognized market-leading technology, which we use to develop and commercialize high performance enzymes for use in a broad array of industrial processes. Through the use of our tailored enzyme products, we can help industries replace expensive and oftentimes harmful chemical processes with more efficient and environmentally-friendly biological processes.

Enzymes are proteins that act as biological catalysts. Without enzymes, biological processes would occur too slowly to sustain life. Enzymes have tremendous catalytic power, speeding up chemical reactions by as much

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as 10¹⁷ -fold, and can also be highly selective in the functions they perform. In industrial applications, enzymes are versatile catalysts, and high performance enzymes like ours can be designed to operate under a wide range of temperatures, pressures, and pH levels, offering users more flexibility in how they run their processes. Though they are typically used in very small quantities, enzymes are able to effect highly specific reactions at accelerated rates. As a result, enzymes in very low doses can improve the economics of a variety of industrial processes while reducing the environmental impact of manufacturing, reducing energy usage, waste, and consumption of chemicals and water.

We manufacture and market our proprietary enzyme products in the fields of animal health and nutrition, grain processing, oilfield services and other industrial processes such as pulp and paper and textiles, to enable higher throughput, lower costs, and improved environmental outcomes. Our product development programs consist of a well-defined series of innovative candidates which target needs in the existing markets we serve, as well as existing enzyme markets where we do not currently sell products, such as for use in baking, sweeteners, personal care and detergents. While we focus our current research and development efforts on supporting commercial products and developing our Product Pipeline, we believe our technologies and research and development capabilities could also enable us to develop other potential applications, such as the production of low-cost, biomass-derived sugars for a number of major industrial opportunities, including advanced biofuels and bioproducts.

We have developed or are currently developing either independently or through funding collaborations with partners, a number of high-performance enzyme products and product candidates for use in industrial processes.

Our products are organized into four primary product lines:

Currently, we market nine commercial enzyme products. In addition, we are developing our Product Pipeline of enzyme candidates that we expect to launch independently and/or in collaboration with strategic partners beginning in 2013.

We market our enzymes through a combination of our direct sales force and marketing and distribution agreements with our collaborative partners. DuPont Nutrition Biosciences ApS, or DuPont, and its predecessor Danisco Animal Nutrition has been our largest customer for the past several years, comprising approximately 63%, 54%, and 65% of our total product and contract manufacturing revenue for the years ended December 31, 2012, 2011 and 2010, respectively.

In 2012, we generated $48.9 million in enzyme product and contract manufacturing revenues. Through a combination of increased sales and penetration of existing enzyme products, as well as the launch of new enzyme products, we expect to increase product revenues and related gross margins and achieve profitability over the next several years.

For the years ended December 31, 2012, 2011 and 2010, our research and development expenses were $15.1 million, $11.0 million and $6.2 million, respectively.

In March 2012, we entered into an asset purchase agreement with DSM Food Specialties B.V., or DSM, pursuant to which DSM purchased certain assets related to our oilseed processing business, including Purifine^® PLC, certain product candidates, and the intellectual property covering these products and product candidates for use in the oilseed processing market, and other related assets. DSM assumed our existing oilseed processing customers and our partnership agreements with Bunge, Alfa Laval and Desmet Ballestra. Concurrently with the

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asset purchase agreement, we entered into a license agreement with DSM pursuant to which we granted DSM certain exclusive and non-exclusive worldwide, royalty-bearing licenses, with a right to sublicense, to our alpha-amylase and xylanase enzyme products for use in the food and beverage markets, and provided DSM with access to new gene libraries to be developed by us in exchange for royalty payments. DSM also granted us an exclusive, worldwide, royalty bearing license with respect to the intellectual property purchased by DSM for our use of our alpha-amylase enzyme product in the food and beverage field, and a non-exclusive, worldwide, royalty-free and fully paid, perpetual and irrevocable license with respect to the intellectual property purchased by DSM in the transaction and that we had previously licensed to BP Biofuels North America LLC, or BP, under our September 2010 license agreement with BP.

The Industrial Enzyme Market Opportunity

According to our recent research, the current industrial enzyme market is estimated to be more than $3.5 billion and growing at an annual rate of 5-6%. We estimate that the addressable market for our current commercial products is approximately $1.0 billion, and we expect this to grow to $1.4 billion with the introduction of new products from our Product Pipeline.

Through our Expansion Pipeline, which we define as early to mid-stage product candidates that have the potential to target both markets we serve today and existing or future markets that we have not historically addressed, and supported by anticipated new collaborative partnerships, we intend to develop and/or commercialize new enzyme products for certain enzyme markets our current commercial products and Product Pipeline candidates do not address, such as baking, sweeteners, personal care and detergents. In addition, we expect that new markets for enzymes will continue to be created as companies apply biology to industrial processes traditionally addressed through chemistry. We will continue to explore opportunities to develop biological products for new markets where enzymes have not traditionally been applied.

Our Strategy

Our strategy is to establish a sustainable, high-growth, profitable company by using our enzyme technologies to develop and sell products that improve the performance and economics of industrial processes, as well as to leverage our technologies and expertise in newly-developing markets. The core elements of our strategy include:

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Our Commercial Products

The following table sets forth our nine commercial enzyme products, target end markets, estimated market sizes, and our partners:

Animal Health & Nutrition Product Line

Enzymes are primarily used in the animal health and nutrition market to allow livestock, poultry, aquaculture and companion animals to more readily digest and absorb the nutrients naturally occurring in grains and protein meals. According to industry reports, enzymes in the animal health and nutrition market are experiencing growth due to their ability to provide better nutrition and an improved environmental impact. Global sales of animal feed enzymes are estimated to have reached nearly $600 million in 2012, and are expected to grow 6-7% annually, exceeding $700 million by 2016, making it one of the largest and fastest growing markets for industrial enzymes. Given the trends of global population growth, increased meat consumption in emerging markets and increased grain and micronutrient prices leading to higher feed costs for producers, enzymes are an effective means of improving the sustainability of animal feed production both economically and environmentally.

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Today, our animal health and nutrition product line includes one enzyme product targeted at the animal feed industry, with additional Product Pipeline candidates under development to address the broader market opportunity.

Phyzyme^® XP phytase is an enzyme added to animal feed for poultry and swine that promotes growth by enhancing the nutrition an animal can extract from feed grains. Phyzyme^® XP phytase is one of several commercially-available phytase enzymes; however, animal trials have shown that Phyzyme^® XP phytase has significant performance advantages compared to our competitors’ phytase enzymes.

Some of the product benefits of Phyzyme^® XP phytase include:

Monogastrics, or animals with a single-chambered stomach, such as poultry and swine cannot digest most of the phosphorus that is naturally contained in many feed ingredients, such as grains, soy beans, and their by-products because it is locked up in phytic acid. Historically this has been addressed by adding inorganic phosphorus to the feed which increases the cost and results in the phosphorus that is naturally present as phytic acid being excreted and creating a potential source of ground water pollution. Adding phytase to the feed reduces the need to add inorganic phosphate, saving in feed costs and improving the environmental outcome.

We developed Phyzyme^® XP phytase to improve the bioavailability of phosphorus and other nutrients in grains which promote growth, bone strength and reproduction. In addition, since excretion of inorganic phosphorus is reduced when using phytase enzymes, there is a beneficial environmental outcome as well. We estimate the addressable global market for animal feed phytases to be approximately $350 million in 2012, growing to more than $400 million in 2016.

Grain Processing Product Line

Today, our grain processing product line includes three enzyme products targeted at the bioethanol industry.

Ethanol, or ethyl alcohol, is commonly known as “alcohol,” as it is typically produced by extracting or using sugars derived from the starch within a grain source, such as corn kernels, and fermenting the sugars via fermentation to produce ethanol. Ethanol can be used as a fuel source to power combustion engines in an increasing number of different types of vehicles throughout the United States and the rest of the world. Enzymes are an essential component of the ethanol production process, and the high performance enzymes currently being sold to large-scale ethanol plants can enhance their efficiency and cost-effectiveness.

According to the Renewable Fuels Association, or RFA, the national trade association for the United States ethanol industry, as of January 2013, there were 211 ethanol plants in the U.S. having a combined production capacity of nearly 15 billion gallons of ethanol per year. While the industry has seen an overall decrease in production and demand during 2012 due to, among other factors, the increased price of corn, total ethanol production in the United States has increased by approximately 240% since 2005.

We estimate that the addressable market for enzymes used in bioethanol is approximately $400 million.

Fuelzyme^® alpha-amylase is a high performance enzyme for starch liquefaction, in the production of fuel ethanol and other industrial-use alcohols. We discovered and evolved this enzyme, and sell it directly through our own sales force in the United States and Canada, and internationally through distributors.

Some of the product benefits of Fuelzyme^® alpha-amylase include:

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Discovered from genetic material sampled near hydrothermal vents on the ocean floor, Fuelzyme^® alpha-amylase has been evolved to perform at high temperatures, and over a broader range of pH when compared to competitive products. This translates into greater operating flexibility for ethanol producers using our product, and savings from reducing or eliminating chemicals typically used to adjust pH. Fuelzyme^® alpha-amylase’s high degree of activity enables lower enzyme dosage, reducing customers’ enzyme costs.

We estimate the global addressable market for Fuelzyme^® alpha-amylase to be approximately $200 million annually.

DELTAZYM^® GA L-E5 is a high-activity glucoamylase, or GA, with specific side activities for effective saccharification, or the conversion of starch to sugars, in fuel ethanol production. DELTAZYM^® GA L-E5 is designed to provide optimum ethanol yields in fuel ethanol production resulting in cost-performance benefits.

Some of the product benefits of DELTAZYM^® GA L-E5 include:

DELTAZYM^® GA L-E5 is a registered product of WeissBioTech GmbH, and we distribute it in the United States. We estimate the global addressable market for DELTAZYM^® GA L-E5 to be approximately $200 million annually.

Xylathin^® xylanase is designed to improve the efficiency and economics of fuel ethanol production from cereal grains. The product contains an enzyme that rapidly reduces viscosity, prior to and during liquefaction. The thermal tolerance and broad pH range of Xylathin^® xylanase enzyme enables use over a wide range of process conditions. Some of the product benefits of Xylathin^® xylanase include:

We estimate the global addressable market for Xylathin^® xylanase to be approximately $10 million annually.

In addition to enzymes for bioethanol, we have licensed a commercial product to Tate & Lyle for exclusive use in the development of novel food ingredients for which we are entitled to near-term milestone payments, revenues from enzyme product sales and royalties based on Tate & Lyle future sales.

Oilfield Services Product Line

Our Oilfield Services product line includes three differentiated enzyme products developed to yield superior results in the oil and gas industry, servicing field operations for drilling, hydraulic fracturing and

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reservoir clean-up. According to the National Petroleum Council, hydraulic fracturing will account for nearly 70% of natural gas development in the future.

Our uniquely tailored enzymes are designed to perform under the extreme conditions found downhole, selectively acting on the intended targets without damage to the environment, equipment or the surrounding formation. Our enzyme solutions provide biodegradable and safe alternatives to conventional chemicals often used in oilfield operations, improve production processes, and importantly, preserve the environment. Sales to date from our oilfield services product line have been limited to a small international market. We are evaluating potential field tests in the U.S..

Pyrolase^® cellulase and Pyrolase^® HT cellulase are enzymes that break (or hydrolyze) carbohydrates such as guar gum, derivatized guar and carboxymethyl cellulose in the fluids used in oil and gas well operations (e.g. hydraulic fracturing fluids). These carbohydrates are polymerized to form a gel viscous enough to carry a proppant, such as sand, into hydraulic fractures as they are formed from pumping fluid downhole at extremely high pressure. Once the proppant is placed, the gel is hydrolyzed, or ‘broken’ as known in the industry, allowing fracturing fluids to flow back and enable production of hydrocarbons from the well.

Pyrolase^® cellulase and Pyrolase^® HT cellulase both have the same mechanism of action and can provide the following benefits to oil and gas exploration and production:

We designed our Pyrolase^® HT cellulase to maintain activity at an even higher temperature and pH range than both our current Pyrolase^® cellulase product and other enzymes currently on the market. Pyrolase^® HT cellulase is the first enzyme that can provide these benefits to hydraulic fracturing for wells at temperatures above 180°F.

We estimate the addressable market in the United States for guar breakers in hydraulic fracturing is up to $250 million annually, which includes the market for chemicals that could be replaced by enzymes like Pyrolase^® cellulase and Pyrolase^® HT cellulase. We believe that the currently marketed enzyme products address approximately 10% or $25 million of this $250 million estimate.

Eradicake^TM alpha-amylase breaks down starch, a common ingredient in water based “Drill-In Fluids”. Starches are added to these fluids to form a polymer “filter cake” (or barrier) to prevent further loss of fluid as it permeates into the wellbore wall during drilling. Laboratory tests have shown that Eradicake^TM alpha-amylase removes filter cake more effectively than comparative products. In addition to being highly thermostable, Eradicake^TM alpha-amylase is only active at acidic pH, which allows for a way to control its action. Controlling filter cake removal is critical as premature breakdown results in a costly loss of Drill-In Fluid.

Some of the product benefits of Eradicake^TM alpha-amylase include:

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We estimate the addressable U.S. market for Eradicake^TM alpha-amylase to be approximately $20 million annually, which includes the market for chemicals that could be replaced by enzymes like Eradicake^TM alpha-amylase. We began marketing Eradicake^TM alpha-amylase in the first quarter of 2012.

Other Industrial Processes Product Line

We currently include two enzymes in our other industrial processes product line. In these markets, our enzymes are intended to replace or reduce the use of harsh chemicals that have traditionally been used in the applicable industrial process

Cottonase^® pectate lyase is a textile processing enzyme for cotton. In the textile mill, wet processing, or preparation, removes the natural and man-made impurities from cotton yarn or fabric. The adequate removal or scouring of impurities before dyeing, printing or finishing is essential in producing quality products. Traditionally, cotton scouring has required the use of harsh alkaline chemicals (caustic), extreme temperatures and large volumes of water. Expenses include the cost of the caustic and energy, as well as treating waste water to remove residual caustic and by-products. Cottonase^® pectate lyase cleans better than chemical scouring and also reduces the need for extensive waste water treatment and energy consumption.

Luminase^® PB-100 xylanase enhances the reactivity of pulp fiber to bleaching chemicals, such as chlorine dioxide, chlorine and hydrogen peroxide. In the past, the pulp and paper industry has had limited success using previous generation xylanases because of their ineffectiveness in the harsh processing conditions of the pulp mill. Luminase^® PB-100 xylanase substantially reduces the need for bleaching chemicals and remains active over a wider range of temperature and alkalinity (pH) than competitive enzymes and therefore can be utilized by more mills. It also provides greater operational efficiencies, as it works faster, thus requiring less retention time. In addition, Luminase^® PB-100 xylanase is effective for most types of pulp, thereby expanding its utility and benefit to the mill.

Product Pipeline

Overview

We have a pipeline of enzyme product candidates in various stages of development that we refer to as our Product Pipeline candidates. Our Product Pipeline currently includes product candidates for animal health and nutrition, grain and starch processing, and oilfield services markets. Over time, we plan to regularly add new projects to our Product Pipeline.

We estimate that each product candidate requires $3 million to $5 million in total development costs, including regulatory approvals which are a significant portion of this total, and typically require a total of four-to-six years to reach market. The regulatory approval component included in this timeframe is typically 18 to 24 months, but can be shorter or longer depending on several variables, such as intended use, as products intended for human consumption, for example, require more testing than industrial applications. Also, regulatory requirements are country-specific.

We use a stage-gate process to review and qualify new projects entering the pipeline and to advance them through phases of development, or to stop projects if they do not meet performance criteria, or if the business case does not meet investment criteria. We obtain new product ideas from several sources, including business development contacts with third parties, inbound inquiries from interested third parties, and ideas generated by our staff based on their research and/or contacts in industry.

In parallel with development of product candidates, we develop a path-to-market strategy, and determine whether to market products directly or in collaboration with strategic partners. We explore strategic partnerships in areas where we lack in-house commercial expertise or as a means of expanding our global reach. Strategic partners may fund the development costs or share the costs with us, and/or pay a technology access fee for the right to participate in the commercialization of a pipeline product. In cases where a partner is responsible for marketing, we typically receive licensing fees and milestone payments, or a share of profits generated by the

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product. Historically, our business included more of the former, but in recent years, our strategy has been to either directly market new products ourselves, or to share in the profits with strategic marketing partners.

We have several Product Pipeline candidates that were developed in collaboration with Syngenta Participations AG, and upon completion of that collaboration in 2010, we retained rights to an array of proprietary biomolecules expressed microbially, several of which were well advanced in their development. Among the biomolecules included in this agreement and now in our Product Pipeline are alpha amylases and glucoamylases for starch processing; thermostable phytases for use in the animal feed industry; and xylanases and beta-glucanases also for use in the animal feed industry. Following the sale of our LC business to BP in 2010, these biomolecules are either jointly owned with BP or licensed to BP, and BP has the right to obtain full ownership of the jointly owned biomolecules if Syngenta consents, after which we would receive a non-exclusive license.

The following table sets forth our Product Pipeline candidates, potential 2016 market sizes and estimated launch years:

Animal Health & Nutrition

In June 2011, we entered into a collaboration agreement with Novus International Inc., or Novus, a leading manufacturer of animal and human nutrition and health products, to jointly develop and commercialize a suite of new enzyme products from our product pipeline in the animal health and nutrition area. These enzymes include a

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next-generation phytase, and a cocktail of non-starch polysaccharide (“NSP”) enzymes. Each of these candidates is in the late-stage development phase.

Next-generation phytase enzyme

In January 2012, we announced the selection of a next-generation phytase as the first enzyme candidate from our strategic collaboration with Novus to advance toward commercialization. Our next-generation phytase is designed to have substantially improved performance attributes over existing phytases currently on the market.

We expect that our next-generation phytase product will compete directly with our current Phyzyme^® XP phytase product marketed through DuPont, which we describe as a mature product, as well as other next-generation phytase products our competitors may launch.

We expect to commercially launch our next-generation phytase into select geographies during 2013.

Non-starch polysaccharide (“NSP”) enzymes

Under our collaboration with Novus, we recently selected lead enzyme candidates for the development of a suite of Non Starch Polysaccharide, or NSP, enzyme products designed to enhance the digestibility of feedstuffs for monogastric animals such as poultry and swine.

NSP’s have been shown to have anti-nutritional effects in monogastric diets by inhibiting the ability to uptake important dietary nutrients in the intestine. High levels of NSPs in the diet have been shown to negatively impact health. NSP enzymes added into feed can provide a significant improvement in overall animal health and weight gain.

We estimate the addressable global market for NSP enzymes to be approximately $200 million annually. We expect to launch our NSP enzymes into select geographies in 2014.

Grain Processing

Next-generation Glucoamylase

We expect to launch a next-generation glucoamylase designed to enhance fuel ethanol yields and reduce enzyme costs in late 2013 or early 2014.

Process Enhancer Enzymes

We have two enzyme products in late-stage development which will expand our portfolio of enzyme solutions for the fuel ethanol industry, targeting incremental process improvements, cost reductions, and overall efficiencies within the fuel ethanol production process.

We estimate the addressable markets for the two process enhancer products are $15 and $10 million annually, and both are expected to launch in the United States in 2013.

Starch Modifier Enzyme

We currently have a starch modifying enzyme in late-stage development for exclusive use by a third party. We estimate the addressable market for this enzyme is $5 million annually, and expect to launch it in the United States in 2013.

Oilfield Services

Next-generation Guar Breaker

Based on discussions with both oilfield service companies and the energy and petroleum producers, we have identified additional key unmet needs based on today’s current hydraulic fracturing demands beyond those

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currently addressed by our Pyrolase^® cellulase and Pyrolase^® HT products, as well as the chemical guar breakers available today. To address those additional needs, we have a guar breaker enzyme solution in late-stage development that we expect to launch in 2014.

We estimate the addressable market in the United States for guar breakers in hydraulic fracturing is up to $250 million, which includes the market for chemicals that could be replaced by enzymes. We believe that the currently marketed enzyme products address approximately 10% or $25 million of this $250 million estimate.

Adjacency Opportunities

As part of our development and commercialization strategy, we are also actively exploring adjacency opportunities within our current portfolio of commercialized products. Through this approach, we seek additional applications for existing products in new markets that require minimal incremental development costs, limited additional regulatory requirements and allow for a more rapid time to market. Recent examples of our success in this area include the 2012 launch of our Eradicake^TM alpha-amylase product for oilfield services, in particular the removal of filter cake in the drilling process. Eradicake^TM alpha-amylase was a repurposing of our Fuelzyme^® alpha-amylase product. In 2009 we launched our Xylathin^® xylanase enzyme in fuel ethanol, which was a new application for our Luminase^® PB100 xylanase enzyme.

Expansion Pipeline

We are pursuing opportunities to further develop and commercialize candidates in our Expansion Pipeline through a partnership strategy. We believe we can leverage our technology position and access to a collection of more than 4,000 unique enzymes as potential product candidates into partnerships with companies that have commercial expertise, broad distribution capabilities, and/or the financial resources to accelerate commercialization of these products.

Our partnership strategy for the Expansion Pipeline is two-fold. We are focused on large existing markets, where enzyme product usage has been adopted, including but not limited to baking, sweeteners and detergents. Within this type of industry we are focused on developing enzyme products that target the unmet needs of a certain industry and provide higher performance characteristics than those incumbent enzymes already in the market.

Additionally, we are also targeting large market opportunities where the overall use of enzymes has been non-existent or limited, such as in personal care. We believe these markets hold great promise for our current collection of unique enzymes and that we are well-positioned to penetrate and drive the novel use of enzyme products into these important markets.

Today we are in active discussions with multiple potential partners for Expansion Pipeline product development collaborations. The key components of the commercial terms of such arrangements could include some combination of the following types of fees: exclusivity fees, technology access fees, technology development fees and research support payments, as well as milestone payments, license or commercialization fees, and royalties or profit sharing from the commercialization of any products that result from the alliance.

Technology Platform

Technology Overview

Our technology allows us to discover and evolve high performance enzymes that we may further develop and some of which ultimately become our commercial products. We use unique, proprietary genomic technologies to directly extract microbial DNA from samples such as soil or water harvested from diverse environments around the world. The extracted DNA is used to construct large expression libraries that, together, encompass over a million different microbial species. We then mine this private collection of billions of

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microbial genes using both activity-based and sequence-based assays and our suite of advanced robotic screening systems to identify product candidates. These novel enzymes can then be further optimized for commercial use by applying our industry-leading laboratory evolution platform, called DirectEvolution^® technology. By combining our discovery approach with laboratory evolution technologies, we have successfully developed and commercialized a portfolio of novel, high-performance enzyme products.

Figure 2. Verenium’s Enzyme Discovery and Evolution Platform

Discovery Technology

Our discovery program begins with access to biodiversity. Microbes, such as bacteria and fungi, are the world’s most abundant and varied organisms and can be found in almost every ecosystem. Through generations of natural selection, microbes living in diverse environments have developed broad characteristics that give them the ability to survive in extreme temperatures and to thrive in a variety of acidic, caustic, high or low salt environments. This evolutionary process produces highly diverse genetic material in the microbial world and we have tapped into this vast genetic resource to discover novel enzyme products. Through years of bioprospecting, our teams have collected small samples such as soil and water from environments as varied as volcanoes, deep sea hydrothermal vents, rain forests, soda lakes, deserts, and the extreme cold tundra. These samples are the source material for potential products for industrial processes. We extract microbial DNA directly from collected samples to avoid the slow and often impossible task of culturing individual microbes in a laboratory. Utilizing ultra high-throughput screening technologies, we then mine our collection of billions of microbial genes in search of unique enzymes. By comparison, most of our competitors are limited to culturing living organisms from environmental samples. Because most organisms in a given environmental sample will not grow under laboratory conditions, this approach extracts less than 0.1% of the biodiversity available compared with that obtainable using our DNA extraction and screening methods.

Ultra High Throughput Screening Capabilities

Our approach for discovering novel enzymes generates large collections of microbial genes, called gene libraries. Similarly, our laboratory evolution technologies used for the optimization of enzymes and other proteins also generates large gene libraries. We use a variety of automated, ultra high-throughput screening technologies to mine these large libraries for novel biomolecules. These systems are designed to screen for

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biological activity, known as expression-based screening, as well as for targeted DNA sequences of interest, known as sequence-based screening. An example of one of our key screening technologies is the GigaMatrix^® ultra high-throughput screening platform. The GigaMatrix^® ultra high-throughput screening platform is capable of screening one billion clones per day through the use of state-of-the-art robotics and high-density sample plates. Typical screening systems used by other organizations use disposable 96-, 384-, or 1536-well plates within a standard 3.3” x 5” footprint. GigaMatrix^® plates, using the same footprint, contain from 400,000 up to one million wells per plate, each well being the diameter of a human hair. The increased density of wells greatly enhances our ability to rapidly identify novel enzymes and proteins from large and complex gene libraries. In addition, the GigaMatrix^® plates are reusable and require only miniscule volumes of reagents, making ultra high-throughput screening highly cost-effective.

Enzyme Evolution Technology

The discovery technologies described above enable us to find the best enzymes in nature well-suited for a particular application. In many cases, these novel enzymes meet the specifications to advance into commercial development. In other cases they provide advanced starting points for further optimization using laboratory evolution methods.

We utilize unique gene evolution technologies that enable efficient optimization of proteins at the DNA level. Our suite of DirectEvolution^® technologies provides significant competitive advantages, including the most comprehensive and non-biased gene evolution platform, the ability to make fine changes across an entire gene and the flexibility to recombine the widest variety of genes with ultimate precision. Our technologies enable the modification of gene sequences to achieve not only increased protein performance such as activity, selectivity, and stability, but also other desirable qualities such as increased expression and enhanced product shelf-life for more efficient enzyme product manufacturing.

Two complementary methods underpin the DirectEvolution^® platform:

1). Gene Site Saturation Mutagenesis^SM (GSSM^SM) Technology. This patented technology rapidly generates protein variants by incorporating any or all of the 20 possible amino acids at every position along a protein’s sequence allowing all possibilities to be tested in an unbiased manner. The library of variants created using GSSM^SM technology is then available to be expressed and screened for improved properties. Once individual amino acid changes conferring improvements are identified from GSSM^SM evolution, they can be blended and tested in a fully combinatorial fashion to create a protein variant that has the optimal combination of upmutants. In our experience, a small number of amino acid changes can result in proteins with significantly improved characteristics such as temperature stability, altered pH profiles, increased reaction rate or resistance to deactivating chemicals.

2). GeneReassembly^SM Technology. We use GeneReassembly^SM technology to optimize the characteristics of proteins by combining the best properties of candidate genes into a new, high performance molecule. Flexible but exacting design is at the heart of GeneReassembly^SM technology which, in addition to sequence information, can incorporate supplementary knowledge such as 3-D structural information and codon optimization. GeneReassembly^SM technology allows blending of gene sequences at precise positions, enabling us to create complete combinatorial libraries of all favorable variants from GSSM^SM evolution as well as reassembled genes from the most useful members of an entire protein family. GeneReassembly^SM technology is complementary to GSSM^SM technology, and significantly increases the likelihood of finding gene products that will lead to novel and next generation enzymes.

Applications and Technical Service Capabilities

For each industry we serve, we have developed bench-scale simulations of an industrial process that help predict the value our customers can expect from using our products. These simulations of our customers’ processes allow our research and development team to support our sales efforts, develop optimal operating

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conditions for running a process, trouble-shoot for customers, and develop new products specifically addressing unmet market needs. For example, in our grain processing segment, customers send us samples of their particular grain feedstocks or mixtures of grains they intend to process into ethanol and we run bench-top liquefactions and fermentations to verify the performance of our enzymes and the optimal conditions for the specific samples provided.

Our Gene Expression Capabilities

Since our approach to enzyme discovery typically does not involve culturing organisms from an environmental sample, our lead enzymes usually come from unknown organisms. Therefore, we have developed the skills required to perform heterologous expression, which is modifying commercially relevant production organisms to express our targeted genes at high levels for commercial production. We are a world leader in heterologous expression and use a suite of bacterial and fungal expression systems. Throughout our 15 plus years of experience in gene expression, we have developed decision trees for different lead enzymes by the systematic application of a wide range of expression technologies. The result is the ability to express novel genes at high levels which provides a basis for low cost commercial production.

Figure 3. Verenium’s Technologies

Intellectual Property

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 December 31, 2012, we owned 217 issued patents relating to our technologies and had 152 patents pending. Also, as of December 31, 2012, we either jointly owned or in-licensed from BP, 138 patents and 144 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

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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 Expansion pipeline.

We also rely on trade secrets, technical know-how, and continuing invention to develop and maintain our competitive position. We have taken security measures to protect our trade secrets, proprietary know-how and technologies, and confidential data and continue to explore further methods of protection. Our policy is to execute confidentiality agreements with our employees and consultants upon the commencement of an employment or consulting arrangement with us. These agreements generally require that all confidential information developed or disclosed by us during the course of the employee or consultant’s relationship with us, be kept confidential and not disclosed to third parties. These agreements also generally provide that inventions conceived by the other party in the course of rendering services to us shall be our exclusive property.

Our ability to compete effectively depends in large part on our ability to obtain patents or licenses to patents for our technologies and products, to maintain trade secrets, to operate without infringing the rights of others, and to prevent others from infringing on our proprietary rights. Our intellectual property rights may be challenged by others. We may also become involved in disputes as to whether we infringe the intellectual property rights of others. We cannot assure that if we are sued on any patent we would prevail. If we become involved in such a dispute, we may be exposed to a significant damage award and/or injunction that could have a material adverse effect on our business.

Manufacturing

We currently produce our products through manufacturing partnerships. Our manufacturing strategy is to achieve low cost through economies of scale with low capital investment, by entering into contract manufacturing relationships with qualified third parties, and to add capacity as needed to support the growth of the business. Our strategy is to invest in specialized equipment required for our products while our partners provide the majority of the fermentation equipment and plant infrastructure required for production of our enzyme products. We assure quality standards by providing specifications for raw materials and finished products, and protocols for product quality control testing for monitoring in-process and finished product quality. Further, we maintain sufficient in-house engineering and operational expertise to provide engineering support to operations and projects, to schedule production to meet expected demand, and to develop manufacturing protocols for transferring pilot-scale processes to commercial scale.

We have developed various capabilities required to support commercial scale manufacturing. We operate a bioprocess development plant, or Pilot Plant, on-site in San Diego, CA, for developing manufacturing processes, and for testing improvements to processes. We also utilize the Pilot Plant for making samples of new products to be used for various toxicity and safety studies as required for regulatory approvals. Once regulatory approvals are obtained, we transfer the technology to commercial scale production.

Our primary manufacturing partnership is with Fermic. During 2002, we entered into a manufacturing services agreement with Fermic, a United States Food and Drug Administration-registered fermentation and synthesis plant located in Mexico City, to provide us with the capacity to produce commercial quantities of enzyme products. Based on actual and projected increased product requirements, the agreement was amended in 2004 to provide for additional capacity to be installed over the succeeding four-year period. The agreement was further modified in 2006 to adjust for certain cost increases, and to provide extended timeframes for installing incremental capacity. Under the terms of the agreement, either party can cancel the committed services with thirty months’ notice. Pursuant to our agreement with Fermic, we are also obligated to reimburse certain monthly costs related to manufacturing activities. These costs can increase as our projected manufacturing volume increases.

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In addition, under the terms of the agreement, we fund, in whole or in part, capital expenditures for certain equipment required for fermentation and downstream processing of our enzyme products. Since inception through December 31, 2012, we have incurred costs of more than $23.2 million for property and equipment related to this agreement. Our ongoing strategy is to remove manufacturing bottlenecks, increase manufacturing efficiencies, and reduce manufacturing variability, in order to manufacture more product and reduce our average production cost per unit. In 2012 we made $0.7 million of additional capital investments at Fermic in order to improve our manufacturing capabilities, support growth, and reduce our average unit cost. We expect these investments to continue to improve both our manufacturing yield of enzymes and the profitability of our enzymes over time.

During 2008 we began contract manufacturing of Phyzyme^® XP phytase with Genencor, a division of DuPont, and in 2010 added a second Genencor site for contract manufacturing of this product. Fermic and Genencor are currently our only two suppliers for commercial-scale enzymes.

Competition

We are a leader in the field of biomolecule discovery and optimization from the vast biodiversity of nature. We are not aware of another enzyme company that has the scope and integration of technologies and processes that we have. There are, however, a number of competitors who are competent in various aspects of these technologies. For example, Novozymes A/S, DuPont, and Codexis have enzyme discovery and evolution technologies and are involved in the development, expression, fermentation and purification of enzymes. There are also a number of academic institutions involved in various phases of our technology process.

Our ability to compete successfully depends on our ability to develop proprietary products that reach the market in a timely manner and are technologically superior to, and/or provide compelling economic advantages compared to other products on the market. Any enzyme products that we develop may compete in multiple, highly competitive markets. Many competitors and potential competitors have greater resources and experience than we do and may use their advantages to gain market share at our expense. For example, Novozymes/DSM, AB Vista and BASF Animal Health sell enzyme products to the animal health and nutrition market that compete with the Phyzyme^® XP phytase enzyme product we developed and that is marketed by Danisco Animal Nutrition. Novozymes, DuPont and CTE Global also sell enzyme products to the grain processing industry which can compete with our Fuelzyme^® alpha-amylase product.

We believe that the principal competitive factors in our market are access to genetic material, technological experience and expertise, proprietary position and ability to develop and manufacture differentiated enzymes. We believe that we compete favorably with respect to the foregoing factors.

Government Regulations & Environmental Matters

Non-drug biologically derived enzyme products are regulated in the United States based on their application(s), by either the United States Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), or, in the case of plants and animals, the United States Department of Agriculture (USDA). The FDA also regulates, among other products, food and food additives, feed and feed additives, and Generally Recognized As Safe (GRAS), substances used in food or feed—which are some of the enzyme products we produce. The EPA regulates biologically derived enzyme related chemicals not within the FDA’s jurisdiction. Although the food and industrial regulatory processes can vary significantly in time and expense from application to application, the timelines applicable to obtaining necessary authorizations and entering commerce are burdensome but less burdensome than other regulatory/commercial pathways.

The European regulatory process for biologically derived enzyme products has undergone significant change in the recent past, as the EU attempts to replace country-by-country regulatory procedures with a

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consistent EU regulatory standard in each case. Some country-by-country regulatory oversight remains. Most other regions of the world generally accept either a United States or a European clearance together with a filing of associated data and information for their review of a new biologically-derived enzyme product.

Outside of the United States, scientifically-based standards, guidelines and recommendations pertinent to enzyme products intended for the international marketplace are being developed by, among others, the representatives of national governments within the jurisdiction of the standard-setting bodies, including Codex Alimentarius, the International Plant Protection Convention, and the Office International des Epizooties. The use of the existing standard-setting bodies to address concerns about products of biotechnology is intended to harmonize risk-assessment methodologies and evaluation of specific products or classes of products.

In the future we may be subject to additional or altered laws, regulations, policies, approvals and the like of federal, state, local, municipal and foreign governmental bodies.

Employees

As of December 31, 2012, we had 111 full-time employees, 14 of whom held Ph.D. degrees. None of our employees is represented by a labor union or covered by collective bargaining agreements. We have not experienced any work stoppages and consider our employee relations to be good.

Company History

We were incorporated in Delaware in December 1992 under the name Industrial Genome Sciences, Inc. In August 1997, we changed our name to Diversa Corporation. On June 20, 2007, the company was renamed Verenium Corporation. In connection with the corporate name change, we also changed our NASDAQ ticker symbol from “DVSA” to “VRNM” and began trading under the new ticker symbol effective June 21, 2007.

In conjunction with our merger in June 2007 with Celunol Corporation, a cellulosic ethanol company, we operated the company in two business segments, biofuels and specialty enzymes. On September 2, 2010, we completed a sale of our ligno-cellulosic biofuels business, or LC business, to BP, refocusing our company on our historical strength in enzyme development. As part of the sale, BP acquired all of the capital stock of our wholly-owned subsidiary, Verenium Biofuels Corporation, as well as assets, including intellectual property used in or related to the LC business. We retained certain assets used exclusively in our enzymes business, as well as a license to certain intellectual property.

Investor Information

Financial and other information about us is available on our website (http://www.verenium.com). We make available on our website, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we file such material electronically or otherwise furnish it to the Securities and Exchange Commission. The content on any website referred to in this annual report on Form 10-K is not incorporated herein by reference unless expressly noted.

Except for the historical information contained herein, this annual report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed here. Factors that could cause or contribute to differences in our actual results include those discussed in the following section, as well as those discussed in Part II, Item 7 entitled “Management’s Discussion and

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Analysis of Financial Condition and Results of Operations” and elsewhere throughout this annual report on Form 10-K. You should consider carefully the following risk factors, together with all of the other information included in this annual report on Form 10-K. Each of these risk factors could adversely affect our business, operating results, and financial condition, as well as adversely affect the value of an investment in our common stock.

Risks Applicable to Our Business Generally

We have a history of net losses, we expect to continue to incur net losses, and we may not achieve or maintain profitability.

We have typically incurred net losses from our continuing operations since our inception. As of December 31, 2012, we had an accumulated deficit of approximately $582 million. We expect to continue to incur additional losses in the near term, and if we are unable to successfully execute on our business plan, for the foreseeable future.

Product revenues currently account for the majority of our annual revenues, and we expect that a significant portion of our revenue for 2013 will continue to result from the same sources. Future revenue from collaborations from which we expect to develop and market future products is uncertain and will depend upon our ability to maintain our current collaborations, enter into new collaborations and to meet research and development, and commercialization objectives under new and existing agreements. Our product revenue may not continue to grow in either absolute dollars or as a percentage of total revenues. If product revenue increases, we would expect sales and marketing expenses to increase in support of increased volume, which could negatively affect our operating margins and profitability. We also plan to invest heavily in development efforts to commercialize our Product Pipeline, and the amounts we spend may impact our ability to become profitable.

We may not achieve any or all of our goals, and therefore, we cannot provide assurances that we will ever be profitable on an operating basis or maintain revenues at current levels or grow revenues. If we fail to achieve profitability and maintain or increase revenues, the market price of our common stock will likely decrease.

If we require additional capital to fund our operations, we may need to enter into financing arrangements with unfavorable terms or which could adversely affect the ownership interest and rights of our common stockholders as compared to our other stockholders. If such financing is not available, we may need to cease operations.

We currently anticipate that our available cash resources, cash generated from product revenue and collaborative partners will be sufficient to meet our capital requirements for at least the next 12 months. However, our ability to increase or maintain our product revenue, improve or maintain product gross margins, and drive market acceptance of our Product Pipeline candidates could be slower than anticipated, or we may use a significant amount of our cash to successfully develop and market our products.

Our capital requirements depend on several factors, including:

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If we raise additional funds through the issuance of equity securities, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution or such equity securities may provide for rights or preferences or privileges senior to those of the holders of our common stock. If we raise additional funds through the issuance of debt securities, such debt securities would have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations.

If we are unable to access the capacity to manufacture products in development in sufficient quantity, we may not be able to commercialize our products or generate significant sales.

We have only limited experience in enzyme manufacturing, and we do not have our own internal capacity to manufacture enzyme products on a commercial scale. We expect to be dependent to a significant extent on third parties for commercial scale manufacturing of our enzyme products. We have arrangements with third parties that have the required manufacturing equipment and available capacity to manufacture our commercial and development enzymes. Additionally, one of our third party manufacturers, Fermic, is located in Mexico, and is our sole-source supplier for most of our commercial enzyme products. Any difficulties or interruptions of service with our third party manufacturers such as Fermic could delay commercialization of our enzyme products and harm our relationships with our enzyme strategic partners, collaborators, or customers.

We have a fixed manufacturing capacity commitment to our third party manufacturer, Fermic, and may not be able to adequately manage capacity needs with demand. Our inability to do so could result in idle capacity, which could harm our business.

We rely on our primary third party manufacturer, Fermic, to manufacture our products and have committed to a fixed amount of manufacturing capacity. Because our manufacturing costs are largely fixed, if we are unable to maintain or increase demand for our current and future products, we may experience periods of idle capacity, during which we would pay our fixed rent costs to Fermic whether or not we utilize the fermentation capacity under contract. We are also obligated to pay our fixed rent costs to Fermic during the implementation of improvements to our manufacturing processes, which may require us to incur downtime to one or more of our fermentation vessels for an extended period of time. For example, during the third quarter of 2012, we incurred idle capacity charges related to downtime for in-process upgrades to one of our fermentation vessels, and we expect to incur similar down time in connection with similar upgrades to our two additional fermentation vessels in 2013. In any case, idle capacity has had, and may in the future have, a negative impact on our product gross profit, our results of operations and financial condition.

If demand for our products increases we may not be able to supply our customers with sufficient quantities of product, which could harm our business.

We have in the past, and may experience in the future, manufacturing constraints, inventory losses and decreased manufacturing yields related to product quality and other manufacturing issues, which have prevented us from maintaining adequate supply of inventory to meet our customers’ demands. We may also experience further manufacturing constraints in connection with process improvements or manufacturing expansion and projects we, together with Fermic, have implemented and will continue to implement. For example, during the entire third quarter of 2012, we incurred constrained capacity related to downtime for in-process upgrades to one of our fermentation vessels. If such projects, which are intended to increase manufacturing yields and efficiency, are delayed, or do not adequately resolve manufacturing limitations, we may not be able to produce sufficient quantities of our enzyme products, and our results of operations and financial condition would be adversely affected.

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Failure to manufacture sufficient quantities of Purifine^® PLC and Veretase^® alpha-amylase products or control costs of doing so, under our contract manufacturing relationship with DSM, will adversely affect our results of operations.

In conjunction with our agreement with DSM for the purchase of our oilseed processing business, we concurrently entered into a supply agreement obligating us to manufacture minimum quantities of Purifine and Veretase^® alpha-amylase products for DSM. Following the transaction with DSM, we experienced increases in costs in connection with the manufacture of the Purifine product. We are obligated to share in such cost overruns or increases, in whole or in part, in connection with our manufacturing for DSM, and we may continue to experience higher costs in connection with the manufacture of the Purifine^® PLC product in future periods. In addition, to the extent that we are unable to meet quality specifications associated with manufacturing these products, we may be obligated to incur the additional costs for replacement batches to DSM.

We have experienced inventory losses and decreased manufacturing yields related to our manufacturing processes in the past for our enzyme products, and may continue to experience such losses, which could negatively impact our product gross margins.

We have experienced inventory losses and decreased manufacturing yields of our enzyme products due to shelf-life expiration, quality, and other manufacturing-related issues. While we continue to address inventory quality and manufacturing issues and, in the past, have recovered a substantial portion of such losses from our third party manufacturer, Fermic, there can be no assurance that such losses will not occur in the future or that any amount of future losses will be reimbursed by Fermic. If such issues continue in future periods, or we are not able to otherwise improve our manufacturing yields, our sales would suffer and our results of operations and financial condition would be adversely affected.

If we increase contract manufacturing of our Phyzyme^® XP phytase at Genencor, a subsidiary of DuPont, and decrease its manufacture at Fermic, our gross product revenues will be adversely impacted.

During the year ended December 31, 2012, approximately 65% of Phyzyme^® XP phytase production was manufactured by Genencor, a subsidiary of DuPont. Due to capacity constraints at Fermic in 2008, we were not able to supply adequate quantities of Phyzyme^® XP phytase necessary to meet the increased production demand from DuPont. As a result, we contracted with Genencor to serve as a second-source manufacturer for Phyzyme^® XP phytase. Pursuant to current accounting rules, revenue from Phyzyme^® XP phytase that is supplied to us by Genencor is recognized in an amount equal to the royalty calculated as a percentage of operating profit received from DuPont, as compared to the full value of the manufacturing costs plus the royalty we currently recognize for Phyzyme^® XP phytase we manufacture at Fermic. While this revenue recognition treatment has little or no negative impact on the gross margin we recognize for every sale of Phyzyme^® XP phytase, it does have a negative impact on the gross product revenue we recognize for Phyzyme^® XP phytase as the volume of Phyzyme^® XP phytase manufactured by Genencor increases.

If DuPont exercises its right to assume manufacturing rights of Phyzyme^® XP phytase, we may experience significant excess capacity at Fermic which could adversely affect our financial condition.

In addition, our supply agreement with DuPont for Phyzyme^® XP phytase contains provisions which allow DuPont, with six months’ advance notice, to assume manufacturing rights of Phyzyme^® XP phytase. If DuPont were to exercise this right, we would also have the right to reduce our capacity commitment to Fermic; nevertheless, we may still experience significant excess capacity at Fermic as a result. If we were unable to absorb this excess capacity with other products, our results of operations and financial condition would be adversely affected.

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We continue to rely heavily on product revenues from Phyzyme^® XP phytase. Any unexpected decline in demand for this product will harm our operating results.

Revenues from Phyzyme^® XP phytase represented approximately 63% of total product and contract manufacturing revenues for the year ended December 31, 2012. We expect that revenue from Phyzyme^® XP phytase will decrease due largely to the following factors:

Significant fluctuations in commodity availability and price, or a change in the use of production facilities that use our enzymes, could have a negative effect on demand for our enzymes.

Our product lines may be directly or indirectly dependent upon the pricing of commodities and, therefore, may be subject to changes in availability and price of commodities such as corn, wheat and ethanol in our grain processing product line; and poultry and phosphorous in our animal health and nutrition product line. Competitive conditions, government regulations, natural disasters and other events could limit the production of our customers’ products that use our enzymes. As a result, the price and availability of the raw materials used, or the end products which our enzymes are used to produce, may fluctuate substantially, and could significantly impact both the demand for, and average sales price of, our enzymes. Such fluctuations may result in reduced volumes of our enzymes being used, or may result in our enzymes not being used at all. Any change in the use of production facilities that currently use our enzymes to manufacture products could significantly impact the demand for, and average sales price of, our enzymes.

Any of these factors may materially and adversely affect our business, financial conditions and results of operations.

Because a significant portion of our revenue comes from a few large customers, any decrease in sales to these customers could harm our operating results.

Our revenue and profitability are highly dependent on our relationships with a limited number of customers. For the year ended December 31, 2012, our three largest customers accounted for approximately 75% of total revenue. We are likely to continue to experience a high degree of customer concentration. The loss or a significant reduction of business from any of our major customers would adversely affect our results of operations.

We may not be successful maintaining or increasing demand for our existing and future products for the grain processing industry.

Demand for our grain processing product line has been impacted by adverse business conditions in the corn ethanol industry due largely to the following factors:

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In addition, the market for our Fuelzyme^® alpha-amylase product is highly competitive, and dominated by two major suppliers with more than a 75% market share who have greater resources and experience than we do in serving this market. These factors combined with rising corn prices and the impact of rising gasoline prices on consumer demand, suggest the sustained challenging industry conditions have continued to cause production rate cuts and plant suspensions or closures, which have negatively impacted our business. As a result of these factors, we have experienced increased competitive pressure and delays or extensions of trials which consequently has affected the timing of new customer adoptions. While we have gained new customers in 2012, total ethanol production volume from our customers has declined compared to 2011, which in turn has decreased enzyme usage and demand for our products. We expect that current industry conditions could continue to impact our revenue growth for our grain processing product line into 2013.

We may not be successful marketing and selling our existing and future products into the oilfield services industry.

To date, we have generated only minimal sales from our Pyrolase^® cellulase product and we have only recently begun to actively market our Pyrolase^® HT cellulase and Eradicake^TM alpha-amylase enzyme products into the oilfield services industry. These products, as well as future products under development, are targeted for use in hydraulic fracturing. This is a volatile industry, highly impacted by environmental regulation, subject to variations in demand and prices for oil and natural gas, and highly dependent upon capital spending to support drilling activity. In addition, enzyme usage has not been widely adopted throughout the industry. If we are unsuccessful in increasing demand for our products that serve the hydraulic fracturing industry due to these or other factors, the growth of our business and our future profitability will be negatively impacted.

The existing global economic and financial market environment has had and may continue to have a negative effect on our business and operations.

The existing global economic and financial market environment has caused, among other things, lower consumer and business spending, lower consumer net worth, a general tightening in the credit markets, and lower levels of liquidity, all of which has had and may continue to have a negative effect on our business, results of operations, financial condition and liquidity. Many of our customers have been severely affected by the current economic turmoil. Current or potential customers may no longer be in business, may be unable to fund purchases or determine to reduce purchases, all of which could lead to reduced demand for our products, reduced gross margins, and increased customer payment delays or defaults. Further, suppliers may not be able to supply us with needed raw materials on a timely basis, may increase prices or go out of business, which could result in our inability to meet consumer demand or affect our gross margins. We are also limited in our ability to reduce costs to offset the results of a prolonged or severe economic downturn given certain fixed costs associated with our operations, difficulties if we overstrained our resources, and our long-term business approach that necessitates we remain in position to respond when market conditions improve. The timing and nature of a sustained recovery in the credit and financial markets remains uncertain, and there can be no assurance that market conditions will significantly improve in the near future or that our results will not continue to be materially and adversely affected.

Such conditions make it very difficult to forecast operating results, make business decisions and identify and address material business risks.

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The financial instability of our customers, particularly in the corn ethanol market, has caused and may continue to cause an adverse affect on our business and may result in reduced sales, profits and cash flows.

We sell our products to a limited number of customers, and we are likely to continue to experience a high degree of customer concentration in the future. Therefore, the loss or a significant reduction of business from any of our major customers has and may continue to adversely affect our results of operations. For example, if the general market conditions for corn ethanol were to continue to deteriorate, including as a result of over supply and reduced demand, our Fuelzyme^® alpha-amylase customers will continue to be adversely affected, which could continue to cause us to curtail business with that customer or the customer to reduce its business with us and cancel orders, which would adversely affect our business and result in reduced sales, profits and cash flows.

Additionally, we extend credit to our customers based on an evaluation of each customer’s financial condition, usually without requiring collateral. While customer credit losses have historically been within our expectations and reserves, we cannot assure you that this will continue. Our inability to collect on our trade accounts receivable from any of our major customers could adversely affect our results of operations and financial condition.

Our international enzyme manufacturing operations are subject to a number of risks that could adversely affect our business.

We manufacture a majority of our commercial enzyme products through a manufacturing facility in Mexico City owned by Fermic. As a result, we are subject to the general risks of doing business in countries outside the United States, particularly in Mexico, including, without limitation, work stoppages, transportation delays and interruptions, earthquakes and other acts of nature, political instability, organized criminal activity and violence, expropriation, nationalization, foreign currency fluctuation, changing economic conditions, the imposition of tariffs, import and export controls and other non-tariff barriers, government regulations, and changes in local government administration and government policies, and to factors such as the short-term and long-term effects of health risks. There can be no assurance that these factors will not adversely affect our ability to manufacture our products in international markets, obtain products from foreign suppliers or control costs of our products, or otherwise adversely affect our business, financial condition or results of operations.

We have limited experience and resources in independently developing, manufacturing, marketing, selling, and distributing commercial enzyme products.

We currently have only limited resources and capability to develop, manufacture, market, sell, or distribute enzyme products on a commercial scale. We will determine which enzyme products to pursue independently based on various criteria, including: investment required, estimated time to market, regulatory hurdles, infrastructure requirements, and industry-specific expertise necessary for successful commercialization. At any time, we may modify our strategy and pursue collaborations for the development and commercialization of some enzyme products that we had intended to pursue independently. We may pursue enzyme products that ultimately require more resources than we anticipate or which may be technically unsuccessful. In order for us to commercialize more enzyme products directly, we would need to establish or obtain through outsourcing arrangements additional capability to develop, manufacture, market, sell, and distribute such products. If we are unable to successfully commercialize enzyme products resulting from our internal product development efforts, we will continue to incur losses. Even if we successfully develop a commercial enzyme product, we may not generate significant sales and achieve profitability in our business.

We are dependent on our collaborative partners, and our failure to successfully manage our existing and future collaboration relationships could prevent us from developing and commercializing our enzyme products, and achieving or sustaining profitability.

Since we do not currently possess the resources necessary to independently fund the development and commercialization of all the potential enzyme products that may result from our technologies, we expect to

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continue to pursue, and in the near-term derive additional revenue from, strategic alliance and collaboration agreements to develop and commercialize products and technologies that are core to our current market focus. We will have limited or no control over the resources that any strategic partner or collaborator may devote to our products and technologies. Any of our present or future strategic partners or collaborators may fail to perform their obligations as expected. These strategic partners or collaborators may breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities successfully and in a timely manner. Further, our strategic partners or collaborators may not develop technologies or products arising out of our collaborative arrangements or devote sufficient resources to the development, manufacture, marketing, or sale of these technologies and products. If any of these events occur, or we fail to enter into or maintain strategic alliance or collaboration agreements, we may not be able to commercialize our technologies and products, grow our business, or generate sufficient revenue to support our operations.

Our present or future strategic alliance and collaboration opportunities could be harmed if:

We have relied, and will continue to rely, heavily on strategic partners to support our business.

Historically, we have relied upon a number of strategic partners, including current partners like, Novus, DuPont, WeissBioTech, and Fermic to enhance and support our development and commercialization efforts for our industrial enzymes.

Historically, DuPont and its predecessor, Danisco, has accounted for a significant percentage of our product revenue. However, DuPont is under no obligation to continue to market Phyzyme^® XP phytase and may introduce competing or replacement products at any time. DuPont represented approximately 63% of total product and contract manufacturing revenues for the year ended December 31, 2012. Under our agreement with DuPont, we receive a royalty equal to 50% of DuPont’s operating profit from their sales of Phyzyme^® XP phytase, as defined. We record our quarterly royalty defined by our agreement based on information reported to us by DuPont. We have limited visibility into DuPont’s sales or operating profits related to Phyzyme^® XP phytase, and therefore our ability to accurately estimate the royalty payments we may receive from DuPont is also limited. Although we experienced an increase in the royalty from DuPont for the year ended December 31, 2012 as compared to 2011, we expect to experience future declines with the introduction of competing products that could negatively impact our product revenue and gross profit.

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Our arrangements with existing and future collaborative partners are, and will continue to be, critical to the success of our business. We cannot guarantee that any new collaborative relationship(s) will be entered into, or if entered into, will continue or be successful. Our collaborative partners could experience business difficulties which eliminate or impair their ability to effectively perform under our arrangements with them. Failure to make or maintain these arrangements or a delay or failure in a collaborative partner’s performance under any such arrangements would materially adversely affect our business and financial condition. For example, our strategic collaboration with Novus to develop and commercialize new enzyme products is dependent on Novus’ ability to successfully develop and commercialize products from our product pipeline, and they may not have the resources or expertise to do so, which could delay or prevent the commercialization of our products, which would materially adversely affect our business and financial condition.

We cannot control our collaborative partners’ performance or the resources they devote to our programs. We may not always agree with our partners nor will we have control of our partners’ activities. The performance of our programs may be adversely affected and programs may be delayed or terminated or we may have to use funds, personnel, equipment, facilities and other resources that we have not budgeted to undertake certain activities on our own as a result of these disagreements. Performance issues, program delays or termination or unbudgeted use of our resources may materially adversely affect our business and financial condition. Disputes may arise between us and a collaborative partner and may involve the issue of which of us owns the technology and other intellectual property that is developed during a collaboration or other issues arising out of the collaborative agreements. Such a dispute could delay the program on which we are working or could prevent us from obtaining the right to commercially exploit such developments. It could also result in expensive arbitration or litigation, which may not be resolved in our favor. Our collaborative partners could merge with or be acquired by another company or experience financial or other setbacks unrelated to our collaboration that could, nevertheless, adversely affect us.

We have licensed certain intellectual property from BP, and we must rely on BP to adequately maintain and protect it.

In connection with the sale of our LC business to BP on September 2, 2010, we transferred ownership of certain intellectual property for which BP has granted us a license for use within our enzymes business. While the provisions of the purchase agreement provide that BP maintain and protect such intellectual property, there can be no assurance that BP will continue to do so. In addition, BP may be unsuccessful in protecting the intellectual property which we have a license to, if such intellectual property rights are challenged by third parties. While we have certain rights to take action to maintain or protect such intellectual property, in the event that BP determines not to, we may be unsuccessful in protecting the intellectual property if challenged by third parties. If either of these events were to occur, we may lose our rights to certain intellectual property, which could severely harm our business. Similarly, we license additional intellectual property that we use to manufacture our products and otherwise use in our business. In the event that the licensors of this technology do not adequately protect it, our ability to use that technology will also be restricted, resulting in harm to our business.

In addition, BP’s rights to use the intellectual property that we have licensed are limited only by the non-competition agreements entered in connection with the sale of our LC business, which agreements have an expiration in September 2015. Following expiration of these agreements, BP will have the right to use without limitation the same intellectual property that we have used and still use to develop our products. Should BP elect to compete with us following such expiration, such competition could harm our business.

Funds held in escrow in connection with the sale of the LC business to BP may not be released when expected.

Pursuant to the terms of the sale of the LC business to BP in 2010, $5 million of the purchase price was placed in escrow and is subject to the terms of an escrow agreement, to cover our indemnification obligations for potential liabilities and breaches of representations and warranties made by us, most of which survive for a

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period of 18 months following the closing. BP has provided notice of a potential claim for indemnification by us pursuant to the escrow agreement in connection with a claim made by University of Florida Research Foundation, Inc. (“UFRF”), against BP relating to a license granted by UFRF to a successor of Verenium Biofuels Corporation (now known as BP Biofuels Advanced Technology, Inc.), which was acquired by BP in the 2010 transaction. BP filed an action in the United States District Court for the Northern District of Florida against UFRF on March 5, 2012, for a judgment declaring that the UFRF allegations regarding the license are without merit. Of the $5 million held in escrow, the escrow agent disbursed $2.5 million to us during the first quarter 2012 and the remaining $2.5 million will remain in escrow pending resolution of the UFRF claim against BP. We believe that the UFRF claim against BP, and the potential claim by BP against us for indemnity pertaining to the UFRF claim, are without merit. We cannot be certain of the timing of resolution of the UFRF claim, or whether the UFRF claim against BP, and the BP claim against us for indemnity pertaining to the UFRF claim, will be resolved in a manner that results in release to us of all or any of the amount held in escrow.

We should be viewed as an early stage company with limited experience bringing products to the marketplace.

You must evaluate our business in light of the uncertainties and complexities affecting an early stage industrial biotechnology company. While our existing proprietary technologies are proven and our product portfolio includes several established products, our Product Pipeline includes several candidates in varying stages of development. We may not be successful in the continued commercialization of existing products or in the commercial development of new products, or any further technologies, products or processes. Successful products and processes require significant development and investment, including testing, to demonstrate their cost-effectiveness prior to regulatory approval and commercialization. To date, we have commercialized 15 of our own products, including our Fuelzyme^® alpha-amylase, Xylathin^® xylanase, Pyrolase^® cellulase, Pyrolase^® HT cellulase, and Luminase^® PB-100 xylanase enzymes. In addition, five of our collaborative partners, Life Technologies Corporation, DuPont, Givaudan Flavors Corporation, Cargill Health and Food Technologies, and Syngenta Animal Nutrition (formerly known as Zymetrics, Inc.), have incorporated our technologies or inventions into their own commercial products from which we have generated and/or can generate royalties. Our products and technologies have only recently begun to generate significant revenues. Because of these uncertainties, our discovery process may not result in the identification of product candidates that we or our collaborative partners will successfully commercialize. If we are not able to use our technologies to discover new materials, products, or processes with significant commercial potential, we may continue to have significant losses in the future due to ongoing expenses for research, development and commercialization efforts and we may be unable to obtain additional funding to fund such efforts.

We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment in us.

We anticipate that we will retain our earnings, if any, for future growth and therefore do not anticipate paying cash dividends in the future. As a result, only appreciation of the price of our common stock will provide a return to stockholders. Investors seeking cash dividends should not invest in our common stock.

We may encounter difficulties managing our growth, which could adversely affect our results of operations.

Our strategy includes entering into and working on simultaneous projects, frequently across multiple industries. This strategy places increased demands on our limited human resources and requires us to substantially expand the capabilities of our administrative and operational resources and to attract, train, manage and retain qualified management, technicians, scientists and other personnel. Our ability to effectively manage our operations, growth, and various projects requires us to continue to improve our operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient numbers of talented

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employees, which we may be unable to do. In addition, we may not be able to successfully implement improvements to our management information and control systems in an efficient or timely manner. Moreover, we may discover deficiencies in existing systems and controls. The failure to successfully meet any of these challenges would have a material adverse impact on our financial condition and results of operations.

We will rely heavily on our new Pilot Plant, which has only recently started up, for research and development of our products and we cannot be sure that this new asset will perform as needed.

In connection with our move to our new corporate headquarters, we engineered and built a new bioprocess development plant, or Pilot Plant, which recently completed its start-up phase and became fully functional in the fourth quarter of 2012 and was placed in service in the first quarter of 2013. We rely on our Pilot Plant to develop products, produce test article for regulatory submissions and determine initial commercial scale manufacturing processes. We do not have an operating history with our new Pilot Plant and cannot be sure that it will continue to operate as designed or to meet our needs. In the event the Pilot Plant does not operate as intended, this could delay our introduction of new products, our research and development efforts both on our own and with our collaborative partners, our regulatory submissions and subsequent approvals, and otherwise delay our commercialization efforts. All of which could harm our relationships with strategic partners or customers and have a negative impact on our product gross profit, our results of operations and financial condition.

Our business is subject to complex corporate governance, public disclosure, and accounting requirements that have increased both our costs and the risk of noncompliance.

Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, the SEC, and NASDAQ, have implemented requirements, standards and regulations, including expanded disclosures, accelerated reporting requirements and more complex accounting rules, and continue developing additional requirements. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from operating activities to compliance activities. We may incur additional expenses and commitment of management’s time in connection with further evaluations, either of which could materially increase our operating expenses or accordingly increase our net loss.

Because new and modified laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding financial disclosures and compliance matters and additional costs necessitated by ongoing revisions to our disclosures and governance practices. This further could lead to possible restatements, due to the complex nature of current and future standards and possible misinterpretation or misapplication of such standards.

As of December 31, 2012, we identified a material weakness in internal control over financial reporting. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results. As a result, investors may be misled and lose confidence in our financial reporting and disclosures, and the price of our common stock may be negatively affected.

The Sarbanes-Oxley Act of 2002 requires that we report annually on the effectiveness of our internal control over financial reporting. A “significant deficiency” means a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

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In connection with the assessment of our internal control over financial reporting for the Annual Report on Form 10-K, as further described in Item 9A, we and our independent registered public accounting firm determined that as of December 31, 2012 our internal controls over financial reporting were ineffective due to a material weakness related to our review and accounting associated with significant non-routine transactions.

While we do not believe that the material weakness we identified represents a systemic deficiency in our internal control over financial reporting, we have made and are continuing to make improvements in our internal controls, if we are unsuccessful in remediating the material weakness in our internal control over financial reporting, or if we discover other deficiencies or material weaknesses, it may adversely impact our ability to report accurately and in a timely manner our financial condition and results of operations in the future, which may cause investors to lose confidence in our financial reporting and may negatively affect the price of our common stock. Moreover, effective internal controls are necessary to produce accurate, reliable financial reports and to prevent fraud. If we continue to have deficiencies in our internal controls over financial reporting, these deficiencies may negatively impact our business and operations.

Our ability to compete in the commercial enzymes industry may decline if we do not adequately protect our proprietary technologies.

Our success depends in part on our ability to obtain patents and maintain adequate protection of intellectual property rights to our technologies and products in the United States and foreign countries. If unauthorized parties successfully copy or otherwise obtain and use our products or technology the value of our owned and in-licensed technology could decline. Monitoring and preventing unauthorized use of our intellectual property is difficult, time-consuming and expensive, and we cannot be certain that the steps we have taken or will take in the future will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States or at all. If competitors are able to use our technology, our ability to compete effectively could be significantly harmed. Although we seek patent protection in the United States and in foreign countries with respect to certain of the technologies used in or relating to our products, as well as anticipated production capabilities and processes, others may independently develop and obtain patents for technologies that are similar to or superior to our technologies. If that happens, we may need to license these technologies and we may not be able to obtain licenses on reasonable terms, if at all, which could greatly harm our business and results of operations.

Our commercial success depends in part on not infringing patents and proprietary rights of third parties, and not breaching any licenses or other agreements that we have entered into with regard to our technologies, products, and business. The patent positions of companies whose businesses are based on biotechnology, including our patent position, involve complex legal and factual questions and, therefore, enforceability cannot be predicted with certainty. Although we have and intend to continue to apply for patent protection of our technologies, processes and products, even the resulting patents, if issued, may be challenged, invalidated, or circumvented by third parties. We cannot assure you that patent applications or patents have not been filed or issued that could block our ability to obtain patents or to operate our business as currently planned. In addition, if third parties develop or otherwise obtain technologies that are similar to or duplicate our technologies, there can be no guarantee that our existing intellectual property protections will prevent such third parties from using such similar or duplicative technologies to compete with us. There may be patents in some countries that, if valid, may block our ability to commercialize processes or products in those countries. There also may be claims in patent applications in some countries that, if granted and valid, may block our ability to commercialize our processes or products in those countries. In any such event there can be no assurance that we will be able to secure the rights under such patents to commercialize our processes and products on reasonable terms or at all. Third parties may challenge our intellectual property rights, which, if successful could prevent us from selling products or significantly increase our costs to sell our products and we may be prevented from competing in our industry.

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Disputes concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and extremely costly and could delay or prevent us from achieving profitability.

Our commercial success, if any, will be significantly harmed if we infringe the patent rights of third parties or if we breach any license or other agreements that we have entered into with regard to our technology or business.

We are not currently a party to any litigation, interference, derivation, protest, reexamination, reissue or any other potentially adverse governmental, ex parte or inter-party proceeding with regard to our owned or in-licensed patents or other intellectual property rights. However, the biotechnology industry is characterized by frequent and extensive litigation regarding patents and other intellectual property rights. Many biotechnology companies with substantially greater resources than us have employed intellectual property litigation as a way to gain a competitive advantage. We may become involved in litigation, interference proceedings, derivation proceedings, oppositions, reexamination, protest or other potentially adverse intellectual property proceedings as a result of alleged infringement by us of the rights of others or as a result of priority of invention disputes with third parties. Third parties may also challenge the validity of any of our issued patents. Similarly, we may initiate proceedings to enforce our patent rights and prevent others from infringing our or our licensed intellectual property rights. In any of these circumstances, we might have to spend significant amounts of money, time and effort defending our position and we may not be successful. In addition, any claims relating to the infringement of third party proprietary rights or proprietary determinations, even if not meritorious, could result in costly litigation, lengthy governmental proceedings, divert management’s attention and resources, or require us to enter into royalty or license agreements that are not advantageous to us.

We are aware of a significant number of patents and patent applications relating to aspects of our technologies filed by, and in some cases issued to, third parties. We cannot assure you that if we are sued on these patents we would prevail.

Should any third party have filed, or file in the future, patent applications or obtained patents that claim inventions also claimed by us, we may have to participate in interference, derivation or other proceedings to determine the right to and scope of a patent for these inventions in the United States. Such proceedings could result in loss of patent scope, even if the outcome is favorable. In addition, the litigation or proceedings could result in significant legal fees and other expenses, diversion of management’s time, and disruption in our business. Uncertainties resulting from initiation and continuation of any patent or related litigation could harm our ability to compete and could have a significant adverse effect on our business, financial condition and results of operations.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect our proprietary technology and processes, we also rely in part on trade secret protection for our confidential and proprietary information. We have taken measures to protect our trade secrets and proprietary information, but these measures may not be effective. Our policy is to execute confidentiality agreements with our employees and consultants upon the commencement of an employment or consulting arrangement with us. These agreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. These agreements also generally provide that inventions conceived by the individual in the course of rendering services to us shall be our exclusive property. Nevertheless, our proprietary information may be disclosed, and others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

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Ethical, legal, and social concerns about genetically engineered products and processes could limit or prevent the use of our products, processes, and technologies and limit our revenue.

Some of our current and anticipated products are genetically engineered or involve the use of genetically engineered products or genetic engineering technologies. If we and/or our collaborators are not able to overcome the ethical, legal, and social concerns or requirements relating to genetic engineering, some or all of our products and processes may not be accepted. Any of the risks discussed below could result in expenses, delays, or other impediments to our programs or the public acceptance and commercialization of products and processes dependent on our technologies or inventions. Our ability to develop and commercialize one or more of our technologies, products, or processes could be limited by the following factors:

The subject of genetically modified organisms and products derived from them has received negative publicity, which has aroused public debate in the United States and other countries. This adverse publicity could lead to greater regulation and trade restrictions on imports and exports of genetically altered products.

Compliance with regulatory requirements and obtaining required government approvals may be time consuming and costly, and could delay our introduction of products.

All phases, including research, development, production, and marketing, of our current and potential products and processes are subject to significant federal, state, local, and/or foreign governmental regulation. Regulatory agencies may not allow us to produce and/or market our products in a timely manner or under technically or commercially feasible conditions, or at all, which could harm our business.

In the United States, enzyme products for our target markets are regulated based on their use(s), by either the FDA or the EPA. The FDA regulates drugs, food, and feed, as well as food additives, feed additives, and substances generally recognized as safe that are used in the processing of food or feed. Under current FDA policy, our products, or products of our collaborative partners incorporating our technologies or inventions, to the extent that they come within the FDA’s jurisdiction, may be subject to lengthy FDA reviews and unfavorable FDA determinations if they raise safety questions which cannot be satisfactorily answered, if results from pre-clinical studies do not meet regulatory requirements or if they are deemed to be food additives whose safety cannot be demonstrated. An unfavorable FDA ruling could be difficult to resolve and could delay or possibly prevent a product from being commercialized. Even after investing significant time and expenditures, our collaborators may not obtain regulatory approval for products that incorporate our technologies or inventions on a timely basis, or at all. The EPA regulates biologically-derived enzyme-related chemical substances not within the FDA’s jurisdiction. An unfavorable EPA ruling could delay commercialization or require modification of the production process or product in question, resulting in higher manufacturing costs, thereby making the product uneconomical.

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New yet-to-be implemented portions of and new regulations yet to be written under the Food Safety Modernization Act may affect or cause us to alter the way we manufacture products in ways we cannot predict, and compliance may be costly and/or interrupt our ability to manufacture products.

The Food Safety Modernization Act, or FSMA, which was signed into law in January 2011, has significantly modified the Food, Drug, and Cosmetic Act. Many provisions of FSMA have yet to be implemented and implementation will require new rule making by the FDA in the form of additional regulations. Such rule-making could, among other things, require Verenium to significantly amend certain operational policies and procedures. Unforeseen issues and requirements may arise as the FDA promulgates new regulations provided for by FSMA, and there likely will be additional costs of compliance associated with these new requirements. Once FSMA is fully implemented, the FDA may audit or review our activities in a more in-depth manner and require that we take additional action and/or make modifications to our current practices and policies. If we are unable to fully comply with such new requirements, it could lead to sanctions and/ or complete or partial loss of our ability to manufacture products, which would have an adverse impact on our business.

Our results of operations may be adversely affected by environmental, health and safety laws, regulations and liabilities.

We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees. In addition, some of these laws and regulations require our contemplated facilities to operate under permits that are subject to renewal or modification. These laws, regulations and permits can often require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or facility shutdowns.

Furthermore, as we operate our business, we may become liable for the investigation and cleanup of environmental contamination at each of the properties that we own or operate and at off-site locations where we may arrange for the disposal of hazardous substances. If these substances have been or are disposed of or released at sites that undergo investigation and/or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act, or other environmental laws for all or part of the costs of investigation and/or remediation, and for damages to natural resources. We may also be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from those properties. Some of these matters may require expending significant amounts for investigation, cleanup, or other costs.

In addition, new laws, new interpretations of existing laws, increased government enforcement of environmental laws, or other developments could require us to make additional significant expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at ethanol production facilities. Present and future environmental laws and regulations and interpretations thereof, more vigorous enforcement of policies and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results of operations and financial position.

We use hazardous materials in our business. Any claims relating to improper handling, storage, or disposal of these materials could be time consuming and costly and could adversely affect our business and results of operations.

Our research and development processes involve the controlled use of hazardous materials, including chemical, radioactive, and biological materials. Our operations also produce hazardous waste products. We cannot eliminate entirely the risk of accidental contamination or discharge and any resultant injury from these

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materials. Federal, state, and local laws and regulations govern the use, manufacture, storage, handling, and disposal of these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets. In addition, compliance with applicable environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development, or production efforts.

Many competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or may use their greater resources to gain market share at our expense.

The biotechnology industry is characterized by rapid technological change, and the area of biomolecule discovery and optimization from biodiversity is a rapidly evolving field. Our future success will depend on our ability to maintain a competitive position with respect to technological advances. Technological development by others may result in our products and technologies becoming obsolete.

We face, and will continue to face, intense competition in our business. There are a number of companies who compete with us in various steps throughout our technology process. For example, Dyadic, Codexis and Direvo have alternative evolution technologies; Novozymes A/S and DuPont are involved in development, expression, fermentation, and purification of enzymes. There are also a number of academic institutions involved in various phases of our technology process. Many of these competitors have significantly greater financial and human resources than we do. These organizations may develop technologies that are superior alternatives to our technologies. Further, our competitors may be more effective at implementing their technologies for modifying DNA to develop commercial products.

Our ability to compete successfully will depend on our ability to develop proprietary products that reach the market in a timely manner and are technologically superior to and/or are less expensive than other products on the market. Current competitors or other companies may develop technologies and products that are more effective than ours. Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors. The existing approaches of our competitors or new approaches or technology developed by our competitors may be more effective than those developed by us.

If we lose key personnel or are unable to attract and retain additional personnel, it could delay our product development programs, harm our research and development efforts, and we may be unable to pursue collaborations or develop our own products.

The loss of any key members of our senior management, or business development or scientific staff, or failure to attract or retain other key management, business development or scientific employees, could prevent us from developing and commercializing new products and entering into collaborations or licensing arrangements to execute on our business strategy. We may not be able to attract or retain qualified employees in the future due to the intense competition for qualified personnel among biotechnology and other technology-based businesses, particularly in the San Diego area. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will adversely affect our ability to meet the demands of our collaborative partners in a timely fashion or to support our internal research and development programs. In particular, our product and process development programs are dependent on our ability to attract and retain highly skilled scientists, including molecular biologists, biochemists, and engineers. Competition for experienced scientists and other technical personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms. All of our employees are at-will employees, which means that either the employee or we may terminate their employment at any time.

Members of our senior management team have not worked together for a significant length of time and they may not be able to work together effectively to develop and implement our business strategies and achieve our

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business objectives. Management will need to devote significant attention and resources to preserve and strengthen relationships with employees, customers and others. If our management team is unable to develop successful business strategies, achieve our business objectives, or maintain positive relationships with employees, customers, suppliers or other key constituencies, including our strategic collaborators and partners, our ability to grow our business and successfully meet operational challenges could be impaired.

Our planned activities will require additional expertise in specific industries and areas applicable to the products and processes developed through our technologies or acquired through strategic or other transactions. These activities may require the addition of new personnel, including management, and the development of additional expertise by existing management and other personnel. The inability to acquire these services or to develop this expertise could impair the growth, if any, of our business.

We may be sued for product liability.

We may be held liable if any product or process we develop, or any product which is made or process which is performed with the use of any of our technologies, causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing, or sale. We currently have limited product liability insurance covering claims up to $10 million that may not fully cover our potential liabilities. In addition, if we attempt to obtain additional product liability insurance coverage, this additional insurance may be prohibitively expensive, or may not fully cover our potential liabilities. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of products or processes developed by us or our collaborative partners. If we are sued for any injury caused by our products, our liability could exceed our total assets.

Macroeconomic conditions beyond our control could lead to decreases in demand for our products, reduced profitability or deterioration in the quality of our accounts receivable.

Domestic and international economic, political and social conditions are uncertain due to a variety of factors, including

Our business depends on our customers’ demand for our products and services, the general economic health of current and prospective customers, and their desire or ability to make investments in technology. A deterioration of global, regional or local political, economic or social conditions could affect potential customers in a way that reduces demand for our products and disrupts our manufacturing and sales plans and efforts. These global, regional or local conditions also could disrupt commerce in ways that could interrupt our supply chain and our ability to get products to our customers. These conditions may also affect our ability to conduct business as usual. Changes in foreign currency exchange rates may negatively impact reported revenue and expenses. In addition, our sales are typically made on unsecured credit terms that are generally consistent with the prevailing business practices in the country in which the customer is located. A deterioration of political, economic or social conditions in a given country or region could reduce or eliminate our ability to collect accounts receivable in that country or region. In any of these events, our results of operations could be materially and adversely affected.

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The instruments governing our indebtedness contain covenants that we may not be able to meet and place restrictions on our operating and financial flexibility.

Our $22.5 million secured term loan or the Term Loan, with Athyrium Opportunities Fund, or Athyrium, bears interest at 11.5% per annum and is secured by substantially all of our assets, including our intellectual property. The credit agreement governing the Term Loan contains customary affirmative and negative covenants and events of default. For example, pursuant to the terms of the credit agreement, our total revenues for any fiscal quarter may not be less than $7.5 million. Should we not meet these quarterly minimum revenue covenants, the lender has the right to demand repayment of the obligations under the Term Loan. There can be no assurance that we will be able to satisfy the operating and financial covenants under the credit agreement, and we cannot predict whether the lender would demand repayment of the outstanding balance of the Term Loan or exercise any other remedies available to it if we were unable to meet the minimum quarterly revenue covenants. In addition, the covenants in the credit agreement restrict our ability to, among other things, grant certain liens, make certain investments, incur certain debt, engage in certain mergers and acquisitions, dispose of assets, make certain restricted payments such as dividend payments, engage in any business not related to our current business strategy, enter into certain transactions with affiliates and insiders, enter into certain agreements that encumber or restrict our ability to satisfy our obligations under the credit agreement, use the proceeds from the Term Loan to purchase margin stock, make certain voluntary prepayments on outstanding debt, make certain fundamental changes to our corporate organization, and make certain changes to our existing revolving credit facility with Comerica Bank, or Comerica. In the event of certain disposition transactions, we are required to apply 50% of the net cash proceeds from such transaction to prepay amounts outstanding under the Term Loan, and we are required to apply 100% of the net cash proceeds from any such transaction to prepay amounts outstanding under the Term Loan if the disposition transaction was done involuntarily. Additionally, subject to certain exceptions and annual caps, we are required to apply 50% of the net cash proceeds from any enumerated extraordinary event, such as pension plan reversions, proceeds of insurance, condemnation awards, indemnity payments and purchase price adjustments, to prepay amounts outstanding under the Term Loan. Prepayments of amounts outstanding under the Term Loan are subject to a 15% prepayment premium if made prior to December 7, 2014, or a lesser premium based on the number of months elapsed from December 1, 2014 if made after December 7, 2014. The covenants and restrictions contained in the credit agreement could significantly limit our ability to respond to changes in our business or competitive activities or take advantage of business opportunities that may create value for our stockholders. In addition, our inability to meet or otherwise comply with the covenants under the credit agreement could have an adverse impact on our financial position and results of operations and could result in an event of default under the terms of our loan and security agreement with Comerica. We recently obtained a waiver from the lender under the credit agreement for defaults caused by the restatement of certain of our historical financial statements that is described elsewhere in this Annual Report on Form 10-K. In the event of future defaults under the credit agreement for which we are not able to obtain waivers, the lender may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate the credit agreement and Term Loan on terms less favorable to us, or to immediately cease operations.

We have also entered into a $7.5 million revolving credit facility with Comerica, or the Credit Line. Advances under the Credit Line bear interest at a rate equal to the London Interbank Offered Rate plus a margin of 4.75%, and are secured by substantially all of our assets, excluding our intellectual property. The loan and security agreement governing the Credit Line contains customary affirmative and negative covenants and events of default. Pursuant to the terms of the loan and security agreement, our tangible net worth may not fall below $10 million, plus an escalation of 50% of any equity proceeds received by us from the sale of our equity securities up to an aggregate increase of no more than $5.0 million, and we must maintain an aggregate balance of cash at Comerica covered by a control agreement of not less than $3.0 million. Should we not meet the tangible net worth or cash balance requirements, the lender may eliminate its commitment to make further credit available to us, declare due all unpaid principal amounts outstanding and foreclose on all collateral to satisfy any unpaid obligations. There can be no assurance that we will be able to satisfy the operating and financial covenants under the loan and security agreement, and we cannot predict whether the lender would demand

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repayment of outstanding advances under the Credit Line or exercise any other remedies available to it if we were unable to meet these covenants. In addition, in the event of our default or failure to perform under any agreement to which we are a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any indebtedness in an amount in excess of $0.5 million, or that would reasonably be expected to have a material adverse effect on our business, we would be in default under the loan and security agreement. The loan and security agreement also places limitations (subject to customary baskets and exceptions) on our ability to, among other things, dispose of assets, engage in any business not related to our current business strategy, engage in certain mergers and acquisitions, incur debt, grant liens, make certain restricted payments such as dividend payments, make certain investments, enter into certain transactions with affiliates, make payments on subordinated debt, and store inventory or equipment with certain third parties, and contains usual and customary covenants for an arrangement of its type. These and other restrictions contained in the loan and security agreement could significantly limit our ability to respond to changes in our business or competitive activities or take advantage of business opportunities that may create value for our stockholders.

On March 29, 2013, we received a letter from Comerica stating that Comerica intends to work with us to issue, within 45 days, a waiver under the Credit Line for defaults caused by the restatement of certain of the Company’s historical financial statements which is more fully described elsewhere in this Annual Report on Form 10-K. If Comerica does not issue the waiver, or in the event of future defaults, Comerica may, among other remedies, eliminate its commitment to make further credit available, declare due all unpaid principal amounts outstanding, and foreclose on all collateral to satisfy any unpaid obligations. As of December 31, 2012, we had a $1.6 million letter of credit, and no borrowings, outstanding under the Credit Line. If Comerica does not issue the waiver, we intend to terminate the Credit Facility with Comerica to prevent a cross-default under the Aythrium credit agreement, at which time we would likely be required to cash-secure our $1.6 million letter of credit.

If we enter into additional debt or credit financing arrangements with the consent of our existing lenders, the terms of such additional debt or credit arrangements could further restrict our operating and financial flexibility. In the event we must cease operations and liquidate our assets, the rights of our existing lenders and any other holder of our outstanding debt would be senior to the rights of the holders of our common stock to receive any proceeds from the liquidation.

Risks Related to Owning Our Common Stock

We are subject to anti-takeover provisions in our certificate of incorporation, bylaws, and Delaware law that could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders.

Provisions of our certificate of incorporation, our bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These provisions in our charter documents and under Delaware law could discourage potential takeover attempts and could adversely affect the market price of our common stock. Because of these provisions, our common stockholders might not be able to receive a premium on their investment.

We expect that our quarterly results of operations will fluctuate, and this fluctuation could cause our stock price to decline, causing investor losses.

Our quarterly operating results have fluctuated in the past and are likely to do so in the future. These fluctuations could cause our stock price to fluctuate significantly or decline. Revenue and expenses in future periods may be greater or less than in the immediately preceding period or in the comparable period of the prior year. Some of the factors that could cause our operating results to fluctuate include:

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A large portion of our expenses, including expenses for facilities, equipment and personnel, are relatively fixed. Failure to achieve anticipated levels of revenue could therefore significantly harm our operating results for a particular fiscal period.

Due to the possibility of fluctuations in our revenue and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. Our operating results in some quarters may not meet the expectations of stock market analysts and investors. In that case, our stock price would probably decline.

The restatement of our historical financial statements has already consumed, and may continue to consume, a significant amount of our time and resources and may have a material adverse effect on our business and stock price.

We have restated certain historical financial statements as of, and for the year ended, December 31, 2011 and the quarterly periods ended June 30, 2011, September 30, 2011, March 31, 2012, June 30, 2012 and September 30, 2012, primarily to reflect a revision in our accounting for our facility lease.

The restatement process was highly time and resource-intensive and involved substantial attention from management and significant legal costs. Although we have now completed the restatement, we cannot guarantee that we will have no inquiries from the SEC or NASDAQ regarding our restated financial statements or matters relating thereto.

Any future inquiries from the SEC as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with the restatement itself.

Moreover, many companies that have been required to restate their historical financial statements have experienced a decline in stock price and stockholder lawsuits related to the restatement. We cannot guarantee that we will not be similarly affected.

Our stock price has been and may continue to be particularly volatile.

The market price of our common stock has in the past been, and is likely to continue to be, subject to significant fluctuations. Between January 1, 2006 and March 25, 2013, the closing market price of our common stock has ranged from a low of $1.42 to a high of $138.95. Since the completion of our merger with Celunol

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Corp. on June 20, 2007, the closing market price of our common stock has ranged from $1.42 to $81.96. The closing market price of our common stock on December 31, 2012 was $2.16, and the closing price of our common stock on March 25, 2013 was $2.57. Some of the factors that may cause the market price of our common stock to fluctuate include:

Moreover, the stock markets in general have experienced substantial volatility related to general economic conditions and may continue to experience volatility for some time. The stock markets have experienced in the past substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management’s attention and resources, which could significantly harm our profitability and reputation.

Concentration of ownership among our existing officers, directors and principal stockholders may prevent other stockholders from influencing significant corporate decisions and depress our stock price.

Our officers, directors, and stockholders with at least 10% of our stock together controlled approximately 19% of our outstanding common stock as of December 31, 2012. If these officers, directors, and principal

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stockholders act together, they will be able to exert a significant degree of influence over our management and affairs and matters requiring stockholder approval, including the election of directors and approval of mergers or other business combination transactions. The interests of this concentration of ownership may not always coincide with our interests or the interests of other stockholders. For instance, officers, directors, and principal stockholders, acting together, could heavily contribute to our entering into transactions or agreements that we would not otherwise consider. Similarly, this concentration of ownership may have the effect of delaying or preventing a change in control of our company otherwise favored by our other stockholders. This concentration of ownership could depress our stock price.

Future sales of our common stock in the public market could cause our stock price to fall.

As of December 31, 2012, we had 12,782,894 shares of common stock outstanding. Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Likewise the issuance of additional shares of our common stock, including upon the exercise of some or all of our outstanding warrants, could adversely affect the trading price of our common stock. In addition, the existence of these warrants may encourage short selling of our common stock by market participants. Moreover, we may need to raise additional capital in the future to fund our operations. If we raise additional capital by issuing equity securities or convertible debt, or couple any debt, receivables or royalty financings with an equity component, the market price of our common stock may decline and our existing stockholders may experience significant dilution.

None.

In June 2012, we commenced our facility lease agreement for 59,199 square feet of office and laboratory space in San Diego for a term of 126 months from the first day of the first full month after the commencement date.

We also lease approximately 21,000 square feet of office space in a building in Cambridge, Massachusetts. The offices are leased to us under an operating lease with a term through December 2013. We completed a sublease agreement in May 2011 for the full Cambridge facility through the end of the lease term.

We believe our current facilities are adequate to meet our needs for the foreseeable future.

From time to time, we are subject to legal proceedings, asserted claims and investigations in the ordinary course of business, including commercial claims, employment and other matters, which management considers to be immaterial, individually and in the aggregate. In accordance with generally accepted accounting principles, or GAAP, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our consolidated financial position, cash flows or results of operations could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations.

Not applicable.

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PART II

Set forth below is a table and chart comparing the cumulative total return on an indexed basis of $100 invested on December 31, 2007 in our common stock, the NASDAQ Market Index (total return) and our Verenium Peer Groups, as identified in (a) below. The total return assumes reinvestment of dividends.

(a) Our peer group for purposes of this table consisted of the following companies: Amyris Inc, Codexis Inc, Dyadic International Inc, Metabolix Inc, and Novozymes A-S.

Our common stock is traded on NASDAQ Global Market under the ticker symbol “VRNM.” The following table sets forth the high and low sale prices for our common stock for the periods indicated, as reported on the NASDAQ Global Market.

The following is an analysis of our stock performance by quarter:

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As of March 25, 2013, there were approximately 96 holders of record of our common stock. We have never declared or paid any cash dividends on our capital stock. On March 25, 2013, the last sale price reported on the NASDAQ Global Market for our common stock was $2.57 per share. We currently intend to retain future earnings, if any, for development of our business and, therefore, do not anticipate that we will declare or pay cash dividends on our capital stock in the foreseeable future.

The selected consolidated financial data set forth below with respect to our consolidated statements of operations for the years ended December 31, 2012, 2011, and 2010, and with respect to our balance sheets at December 31, 2012 and 2011, is derived from our audited consolidated financial statements included elsewhere in this report. The consolidated statement of operations data for the years ended December 31, 2009 and 2008 and the balance sheet data as of December 31, 2010, 2009, and 2008 is derived from our audited consolidated financial statements that are not included in this report. The selected consolidated financial data set forth below have been retrospectively adjusted to reflect discontinued operations for the LC business sale that occurred on September 2, 2010. All share and per share data has been retroactively adjusted for our 1-for-12 reverse stock split, which was effective September 9, 2009.

The selected financial information presented in the following table for the year ended December 31, 2011 has been restated as a result of the restatement more fully described in the “Explanatory Note” preceding Part 1, Item 1 and in Note 2 to our consolidated financial statements.

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The selected financial information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this annual report on Form 10-K.

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Explanatory Note Regarding Restatement

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes the impact of our financial restatement as of and for the year ended December 31, 2011, as more fully described in the “Explanatory Note Regarding Restatement” immediately preceding Part I, Item 1 of this Annual Report on Form 10-K. The restatements are the result of a correction for the manner in which we account for our building lease at 3550 John Hopkins Court in San Diego, CA. In connection with the restatement, we also corrected certain immaterial amounts related to warrants issued in 2011, and recorded other immaterial corrections. In addition, we revised our consolidated statements of cash flows for the year ended December 31, 2011 and applicable interim periods in 2011 and 2012 for amounts previously reflected as cash paid for equipment purchases related to our new facility, but for which the cash had not been paid as of the applicable balance sheet dates. This adjustment had no impact on our reported cash and cash equivalents balance for such periods.

For more information regarding the impact of this revision on our financial results, see our Consolidated Financial Statements included in Part II, Item 8, including Note 2, “Restatement” and Note 14, “Selected Quarterly Data (Unaudited).”

Forward Looking Statements

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:

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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 17.

Overview

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 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, and distribution efforts.

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As of December 31, 2012, we owned 217 issued patents relating to our technologies and had 152 patents pending. Also, as of December 31, 2012, we either jointly owned or in-licensed from BP Biofuels North America LLC, or BP, 138 patents and 144 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. We believe that we can leverage our owned and licensed intellectual property estate to enhance and improve our technology development and commercialization efforts while maintaining protection on key intellectual property assets.

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 December 31, 2012, we had an accumulated deficit of $582.2 million. Our results of operations have fluctuated from period to period and likely will continue to fluctuate substantially in the future. During the year ended December 31, 2012, excluding the one-time gain on sale to DSM, we generated an operating loss of $9.6 million. We expect to incur losses throughout 2013, as a result of any combination of one or more of the following:

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.

Results of Operations—Continuing Operations

Consolidated Results of Operations

Revenue

Revenue for the years ended December 31, 2012 and 2011 are as follows (in thousands):

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The decreased product revenue for the year ended December 31, 2012 was primarily attributed to a decline in grain processing revenue due to adverse business conditions impacting the corn ethanol industry, lower revenue from oilseed processing as a result of the sale of this product line to DSM in March 2012, and a decrease in animal health and nutrition due to toll manufacturing revenue included in 2011.

In conjunction with the sale to DSM, we entered into a supply agreement to continue to produce and sell Purifine and Veretase to DSM at lower sales prices then prior periods when we sold directly to end customers. Revenue from the DSM supply agreement is reported as contract manufacturing above, while pre-DSM sale revenue for Purifine^® PLC and Veretase^® alpha-amylase is included in oilseed processing and grain processing revenue respectively.

Animal Health and Nutrition

Revenues from the animal health and nutrition product line, primarily Phyzyme^® XP phytase, decreased 9%, or $3.0 million for the year ended December 31, 2012, as compared to 2011 due to a decrease of $3.6 million in toll manufacturing included in animal health and nutrition revenues for the year ended December 31, 2011.

This decrease was partially offset by

We have contracted with Genencor, a division of DuPont, to serve as a second-source manufacturer of Phyzyme^® XP phytase . We recognize revenue from Phyzyme^® XP phytase manufactured at Fermic equal to the full value of the manufacturing costs plus royalties, as compared to revenue associated with product manufactured by Genencor which is recognized on a net basis equal to the royalty received from DuPont. While this revenue recognition treatment has little or no negative impact on the gross margin in absolute dollars we recognize for every sale of Phyzyme^® XP phytase, it does have a negative impact on the gross product revenue we recognize for Phyzyme^® XP phytase as the volume of Phyzyme^® XP phytase manufactured by Genencor increases. Approximately 65% of PhyzymeXP^® phytase production was manufactured by DuPont during both the years ended December 31, 2012 and December 31, 2011.

As our Product Pipeline candidates reach commercialization and demand for other product lines increase, we expect over time we will transition a greater proportion of our Phyzyme^® XP phytase manufacturing to Genencor resulting in lower reported Phyzyme^® XP phytase product revenue; however, we believe this will make available existing capacity to accommodate expected growth for other enzyme products.

Phyzyme^® XP phytase represented approximately 63% of total product and contract manufacturing revenues for the year ended December 31, 2012 and 54% for the comparable period in 2011. We expect that revenue from Phyzyme^® XP phytase will gradually decrease due to the launch of a competing next-generation phytase enzyme by DuPont.

Grain Processing

Grain processing sales decreased by 32%, or $5.1 million over the year ended December 31, 2012 as compared to the same period in 2011, primarily attributed to a decrease in sales of Veretase^® alpha-amylase as a result of the license granted to DSM in the first quarter of 2012 and all subsequent revenue reflected as contract manufacturing revenue, and a decrease in sales of Fuelzyme^® alpha-amylase and DELTAZYM^® GA L-E5 gluco-

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amylase enzymes which is being impacted by adverse business conditions in the corn ethanol industry due largely to the following factors:

These factors combined with rising corn prices and the impact of rising gasoline prices on consumer demand, suggest the sustained challenging industry conditions have continued to cause production rate cuts and plant suspensions or closures, which have negatively impacted our business. As a result of these factors, we experienced increased competitive pressure and delays or extensions of trials which consequently has affected the timing of new customer adoptions. While we have gained new customers in 2012, total ethanol production volume from our customers has declined compared to 2011, which in turn has decreased enzyme usage and demand for our products. We expect current industry conditions could continue to impact our revenue growth for our grain processing product line into 2013. In addition, reduced or idle operating rates combined with higher wheat prices in Europe impacting our Xylathin™ xylanase product sales have contributed to the overall decrease.

Collaborative and license

Collaborative revenue increased $3.0 million, or 57%, to $8.3 million for the year ended December 31, 2012 as compared to the same periods in 2011. The increase for the year ended December 31, 2012 was attributed to the following:

We expect to have collaborative and license revenue attributable to our collaborations with Novus, Tate & Lyle and DSM into 2013. We continue to pursue opportunities to expand, renew, or enter into new collaborations that we believe fit our strategic focus and represent product commercialization opportunities in the future; however, there can be no assurance that we will be successful in renewing or expanding existing collaborations, or securing new collaboration partners.

Our revenues have historically fluctuated from period to period and likely will continue to fluctuate in the future based upon the adoption rates of our new and existing commercial products, timing and composition of funding under existing and future collaboration agreements, as well as regulatory approval timelines for new products. In addition, due to authoritative accounting guidance, cash may be received in advance of revenue recognition.

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Product and Contract Manufacturing Gross Profit and Margin

Product and contract manufacturing gross profit and margin for the year ended December 31, 2012 and 2011 are as follows (in thousands):

Cost of product and contract manufacturing revenue includes both internal and third party fixed and variable costs, including materials and supplies, labor, facilities, royalties, idle capacity charges and other overhead costs associated with our product and contract manufacturing revenues. Excluded from cost of product and contract manufacturing revenue are costs associated with the scale-up of manufacturing processes for new products that have not reached commercial-scale production volumes, which we include in our research and development expenses. Cost of product and contract manufacturing revenue decreased 7%, or $2.4 million, to $32.1 million for the year ended December 31, 2012, as compared to the same periods in 2011, primarily due to lower overall product and contract manufacturing revenue.

Product and contract manufacturing gross profit totaled $16.8 million for the year ended December 31, 2012 compared to $21.5 million for the year ended December 31, 2011. Gross margin decreased to 34% of product and contract manufacturing revenue for the year ended December 31, 2012, compared to 38% for the year ended December 31, 2011. The decrease in our product and contract manufacturing gross profit was due to the following factors:

Gross margins are dependent upon the mix of product sales as the cost of product and contract manufacturing revenue varies from product to product. We typically experience lower margins in the early stages of commercial production for our newer enzyme products, as we optimize the manufacturing process for each particular product.

Our cost of product and contract manufacturing revenues will generally grow in proportion to revenues, although we expect to achieve benefits from the additional investments we are making at Fermic to improve our enzyme manufacturing capabilities. Because a large percentage of total manufacturing costs are fixed, we should realize margin improvements as product revenues increase; however, margins could be negatively impacted in the future by several factors, including the following:

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Because Phyzyme^® XP phytase represents a significant percentage of our product and contract manufacturing revenue, our product and contract manufacturing gross profit is impacted to a great degree by the royalty achieved on sales of Phyzyme^® XP phytase. Under our manufacturing and sales agreement with DuPont, we sell our Phyzyme^® XP phytase inventory to DuPont at our cost and, under a license agreement, receive a royalty equal to 50% of DuPont’s profit from the sale of the product, as defined, when the product is sold to DuPont’s customer. As a result, our total cost of product revenue for Phyzyme^® XP phytase is incurred as we ship product to DuPont, and the royalty calculated as a share of profits, as defined by our agreement, is recognized in the period in which the product is sold to DuPont’s customers as reported to us by DuPont. We may record our quarterly royalty based on estimates from DuPont, and the final calculation of profit share is sometimes finalized in the subsequent quarter; accordingly, we are subject to potential adjustments to our actual royalty from quarter-to-quarter. These adjustments, while typically considered immaterial in absolute dollars, could have a significant impact on our reported product and contract manufacturing gross profit from quarter-to-quarter.

In addition, our supply agreement with DuPont for Phyzyme^® XP phytase contains provisions which allow DuPont, with six months’ advance notice, to assume manufacturing rights for Phyzyme^® XP phytase. If DuPont decides to exercise this right, we would also have the right to reduce our capacity commitment to Fermic; nevertheless we may still experience significant excess capacity at Fermic as a result. If we are unable to absorb this excess capacity with other products in the event that DuPont assumes all or a portion of Phyzyme^® XP phytase manufacturing rights, this may have a negative impact on our revenues and our product gross profit.

Research and Development

Our research and development expenses for the year ended December 31, 2012 and 2011 were as follows (in thousands):