Diversa + Celunol = Verenium

Peanut Butter and Jelly. Gin and tonic. Laverne and Shirley. All examples of things that are ho-hum on their own but exceptional when put together.

Perhaps it's time to add Diversa and Celunol to the list.

Last month the two companies completed their merger and launched the new company as Verenium (VRNM). On the surface, the move seems to be a smart combination of compatible expertise: Massachusetts-based Celunol has been working on non-feedstock (cellulostic) sources of ethanol. Over on the Left Coast, California-based Diversa's focus is on producing enzymes designed to speed various industrial reactions.

The primary challenge with cellulostic ethanol, of course, is that the cell walls of agricultural waste (the target source for Celunol) are notoriously tough to break down. The hope is that Diversa's patented enzymes will speed this process. By acquiring Celunol's expertise in biofuel systems, Diversa (now Verenium) immediately becomes a potential leader in this burgeoning industry. A pilot facility in Jennings, LA will shortly be joined by a demonstration scale facility.

On the heels of the merger being finalized, Verenium confirmed that it is a member of a team led by Oak Ridge National Laboratory that won a bid from the DoE for a $125 million research center that will seek new ways to produce biofuels. As part of the group, Verenium will receive $4.6 million over 5 years "to discover and develop new enzymes and enzyme cocktails to break down various types of biomass."

The US federal government is a big believer in this market, and continues to advocate for more renewable fuels. The Senate recently passed a bill that would increase the 7.5-billion-gallon renewable fuel standard to 36 billion gallons by 2022 . Verenium is well positioned to grab a portion of this potentially $70 billion market.

It's not all milk and honey (yet another good combination...) Other companies are moving quickly in this space as well (Range Fuels and Iogen, to name two), so Verenium will have to move quickly to smooth out any rough edges of the merger and capitalize on the promise of their combined expertise.

Still, if they execute, Verenium will undoubtedly produce an abundance of dollars and cents (ok, I know, enough already...)