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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended DECEMBER 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-24274
 LA JOLLA PHARMACEUTICAL COMPANY
  Delaware
    
    33-0361285(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)
 4365 Executive Drive, Suite 300, San Diego, CA 92121
 (858) 452-6600
   Common Stock, Par Value $0.0001 per share
 Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ
  DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    6Item 1B. Unresolved Staff Comments
    
    
    12Item 2. Properties
    
    
    12Item 3. Legal Proceedings
    
    
    12Item 4. Reserved
    
    
    12PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    13Item 6. Selected Financial Data
    
    
    13Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 8. Financial Statements and Supplementary Data
    
    
    19Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    19Item 9A. Controls and Procedures
    
    
    20Item 9B. Other Information
    
    
    20PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    21Item 11. Executive Compensation
    
    
    24Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    31Item 14. Principal Accountant Fees and Services
    
    
    34PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    35Signatures
    
    
    36Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1




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PART I
  
 Item 1.
    
    Business
 Overview
   Recent Developments
     1




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2




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Patents and Proprietary Technologies
  Competition
   Government Regulation
 United States
   3




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4




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Foreign
     Employees
  Available Information
   5




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Item 1A.
    
    Risk Factors
 I. RISK FACTORS RELATING TO LA JOLLA PHARMACEUTICAL COMPANY AND THE INDUSTRY IN WHICH WE OPERATE.
 If the confirmatory preclinical animal study of LJP1485 is unsuccessful, we will likely be forced
to liquidate the Company.
  We have only limited assets.
  The technology underlying LJP1485 is uncertain and unproven.
   6




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Our ability to raise additional capital and enter into strategic transactions requires the approval
of certain investors from the May 2010 financing.
  Our financial reporting is complicated and may confuse investors.
 FASB Topic of Derivatives and Hedging
 Results from any future clinical trials we may undertake may not be sufficient to obtain regulatory
approvals to market our drug candidates in the United States or other countries on a timely basis,
if at all.
   Future clinical trials that we may undertake may be delayed or halted.
  
    
    we do not have sufficient financial resources;
    
    supplies of drug product are not sufficient to treat the patients in the studies;
    
    patients do not enroll in the studies at the rate we expect;
    
    the products are not effective;
  7




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
    
    patients experience negative side effects or other safety concerns are raised during treatment;
    
    the trials are not conducted in accordance with applicable clinical practices;
    
    there is political unrest at foreign clinical sites; or
    
    there are natural disasters at any of our clinical sites.
  If the third party manufacturers upon which we rely fail to produce our drug candidates that we
require on a timely basis, or to comply with stringent regulations applicable to pharmaceutical
drug manufacturers, we may face delays in the trials, regulatory submissions, required approvals or
commercialization of our drug candidates.
    Any regulatory approvals that we may obtain for our drug candidates may be limited and subsequent
issues regarding safety or efficacy could cause us to remove products from the market.
  Our drug candidates may not achieve market acceptance.
   8




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Our success in developing and marketing our drug candidates depends significantly on our ability to
obtain patent protection. In addition, we will need to successfully preserve our trade secrets and
operate without infringing on the rights of others.
     
    
    others, including competitors, will develop inventions relevant to our business;
    
    our confidentiality agreements will be breached, and we may not have, or be successful in
obtaining, adequate remedies for such a breach; or
    
    our trade secrets will otherwise become known or be independently discovered by competitors.
  Because a number of companies compete with us, many of which have greater resources than we do, and
because we face rapid changes in technology in our industry, we cannot be certain that our products
will be accepted in the marketplace or capture market share.
   9




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II. RISK FACTORS RELATED SPECIFICALLY TO OUR STOCK.
 Future adjustments to the conversion prices of our convertible securities may result in further
dilution of our stockholders ownership upon conversion of such securities.
    The May 2010 financing has already caused, and will continue to cause, our existing stockholders to
suffer substantial dilution.
   10




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The delisting of our common stock could have a substantial effect on the price and liquidity of our
common stock.
   The price of our common stock has been, and will be, volatile and may continue to decline.
  
    
    results from our preclinical studies and clinical trials;
    
    limited financial resources;
    
    announcements regarding financings, mergers or other strategic transactions;
    
    future sales of significant amounts of our capital stock by us or our stockholders;
    
    developments in patent or other proprietary rights;
    
    developments concerning potential agreements with collaborators; and
    
    general market conditions and comments by securities analysts.
  Our common stock is considered a penny stock and does not qualify for exemption from the penny
stock restrictions, which may make it more difficult for you to sell your shares.
   11




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Item 1B.
    
    Unresolved Staff Comments.
  
 Item 2.
    
    Properties.
  
 Item 3.
    
    Legal Proceedings.
  
 Item 4.
    
    Removed and Reserved.
  12




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PART II
 
 Item 5.
    
    Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
 Information About Our Common Stock
  PricesHigh
    
    
    LowYear Ended December 31, 2010First Quarter
    
    $
    0.26
    
    
    $
    0.06Second Quarter
    
    
    0.08
    
    
    
    0.04Third Quarter
    
    
    0.05
    
    
    
    0.03Fourth Quarter
    
    
    0.04
    
    
    
    0.02Year Ended December 31, 2009First Quarter
    
    $
    3.20
    
    
    $
    0.04Second Quarter
    
    
    0.64
    
    
    
    0.13Third Quarter
    
    
    0.36
    
    
    
    0.14Fourth Quarter
    
    
    0.32
    
    
    
    0.06
  Information About Our Equity Compensation Plans
  
 Item 6.
    
    Selected Financial Data
   13




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Introduction
  
    
    Overview and recent developments. This section provides a general description of our
business and operating history and a general description of recent events and significant
transactions that we believe are important in understanding our financial condition and
results of operations.
 
    
    Critical accounting policies and estimates. This section contains a discussion of the
accounting policies that we believe are important to our financial condition and results of
operations and that require significant judgment and estimates on the part of management in
their application. In addition, all of our significant accounting policies, including the
critical accounting policies and estimates, are summarized in Note 1 to the accompanying
consolidated financial statements.
 
    
    Results of operations. This section provides an analysis of our results of operations
presented in the accompanying consolidated statements of operations by comparing the
results for the year ended December 31, 2010 to the results for the year ended December 31,
2009.
 
    
    Liquidity and capital resources. This section provides an analysis of our cash flows as
well as material subsequent changes.
 Overview and Recent Developments
     14




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15




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Critical Accounting Policies and Estimates
   Revenue recognition
 FASB Topic of Revenue Recognition
   16




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Share-based compensation
   Derivative Liabilities
   New Accounting Pronouncements
  Results of Operations
 Years Ended December 31, 2010 and 2009
 Revenue.
  17




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Research and Development Expense.
 General and Administrative Expense.
 Other Expense.
  Other Income.
 Preferred Stock Dividend.
 Net Operating Loss and Research Tax Credit Carryforwards
 Liquidity and Capital Resources
    18




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Off-Balance Sheet Arrangements
  Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 8.
    
    Financial Statements and Supplementary Data.
  
 Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
   19




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Item 9A.
    
    Controls and Procedures.
 (a) Disclosure Controls and Procedures; Changes in Internal Control Over Financial Reporting
 Exchange
Act
 (b) Management Report on Internal Control Over Financial Reporting
  
    
    Pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our assets;
 
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
 
    
    Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material
effect on our financial statements.
     
 Item 9B.
    
    Other Information.
   20




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PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance.
  Name
    
    Age
    
    Position(s)Robert A. Fildes, Ph.D.
    
    72
    
    Director, Chairman of the BoardDeirdre Y. Gillespie, M.D.
    
    55
    
    President, Chief Executive Officer and Assistant SecretaryGail A. Sloan, CPA
    
    48
    
    Chief Financial Officer and SecretaryBertrand C. Liang, M.D.
    
    48
    
    DirectorStephen M. Martin
    
    64
    
    Director
  Robert A. Fildes Ph.D.
 Deirdre Y. Gillespie M.D.
 Gail A. Sloan CPA
  21




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Bertrand C. Liang, M.D.
  Stephen M. Martin
 Director Independence
  Committees of the Board of Directors
  Audit Committee
  22




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Compensation Committee
  Corporate Governance and Nominating Committee
  Meetings of Non-Management Directors
 Section 16(a) Beneficial Ownership Reporting Compliance
   23




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Code of Conduct
  
 Item 11.
    
    Executive Compensation.
 Equity Compensation .
   Benefits.
    24




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Retention and Separation Agreements.
     25




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Employment Agreements.
 Deirdre Y. Gillespie, M.D.
    26




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Gail A. Sloan.
     27




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Summary Compensation Table
 Non-QualifiedNon-Equity
    
    
    DeferredStock
    
    
    Option
    
    
    Incentive Plan
    
    
    Compensation
    
    
    All OtherName and
    
    
    
    
    
    Salary
    
    
    Bonus ($)
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    TotalPrincipal Position
    
    Year
    
    
    ($)
    
    
    (1)
    
    
    ($)
    
    
    ($) (2)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Deirdre Y. Gillespie, M.D.
    
    
    2010
    
    
    $
    405,600
    
    
    $
    608,400
    
    
    $
    
    
    
    $
    179,200
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,193,200President, Chief
    
    
    2009
    
    
    
    421,200
    
    
    
    202,800
    
    
    
    
    
    
    
    211,013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    835,013Executive Officer and Assistant SecretaryGail A. Sloan
    
    
    2010
    
    
    
    198,551
    
    
    
    201,860
    
    
    
    
    
    
    
    80,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    481,051Chief Financial Officer and Secretary
    
    
    2009
    
    
    
    206,187
    
    
    
    66,184
    
    
    
    
    
    
    
    34,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306,647
 (1)
    
    The 2010 and 2009 amounts consist of severance payments and retention payments made on
June 1, 2010 and December 18, 2009, respectively, in accordance with the Retention Agreements
dated December 4, 2009. See Note 6 to our audited consolidated financial statements.(2)
    
    The amounts in this column reflect the grant date fair value of stock options granted during
the fiscal years ended December 31, 2010 and December 31, 2009. Assumptions used in the
calculation of these amounts are included in Note 1 to our audited consolidated financial
statements.
  28




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Outstanding Equity Awards at 2010 Fiscal Year End
 Number of
    
    
    Number ofSecurities
    
    
    SecuritiesUnderlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised
    
    
    OptionOptions
    
    
    Options
    
    
    Exercise
    
    
    Option(#)
    
    
    (#)
    
    
    Price
    
    
    ExpirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    ($)
    
    
    Date(1)Deirdre Y. Gillespie
    
    
    800,000
    
    
    
    
    
    
    $
    5.26
    
    
    
    03/15/2016143,750
    
    
    
    6,250
    (2)
    
    
    3.08
    
    
    
    02/05/2017106,250
    
    
    
    43,750
    (2)
    
    
    2.42
    
    
    
    02/21/201871,875
    
    
    
    78,125
    (2)
    
    
    1.42
    
    
    
    01/22/2019777,778
    
    
    
    3,222,222
    (3)
    
    
    0.06
    
    
    
    05/28/2020Gail A. Sloan
    
    
    3,000
    
    
    
    
    
    
    
    38.25
    
    
    
    07/19/20112,999
    
    
    
    
    
    
    
    35.50
    
    
    
    12/14/20115,999
    
    
    
    
    
    
    
    25.45
    
    
    
    07/18/20125,999
    
    
    
    
    
    
    
    29.50
    
    
    
    11/21/20125,999
    
    
    
    
    
    
    
    14.85
    
    
    
    05/12/20136,000
    
    
    
    
    
    
    
    23.55
    
    
    
    09/18/201314,000
    
    
    
    
    
    
    
    14.80
    
    
    
    05/21/201410,583
    
    
    
    
    
    
    
    2.40
    
    
    
    04/25/20155,415
    
    
    
    
    
    
    
    2.15
    
    
    
    05/19/201521,199
    
    
    
    
    
    
    
    4.20
    
    
    
    10/10/2015184,548
    
    
    
    
    
    
    
    4.46
    
    
    
    04/17/201623,958
    
    
    
    1,042
    (2)
    
    
    3.08
    
    
    
    02/05/201717,708
    
    
    
    7,292
    (2)
    
    
    2.42
    
    
    
    02/21/201811,979
    
    
    
    13,021
    (2)
    
    
    1.42
    
    
    
    01/22/2019350,000
    
    
    
    1,450,000
    (3)
    
    
    0.06
    
    
    
    05/28/2020
 (1)
    
    All stock options expire ten years from the date of grant.(2)
    
    The stock options vest and become exercisable ratably on a monthly basis over four years from
the date of grant.(3)
    
    The stock options vest and become exercisable ratably on a monthly basis over three years
from the date of grant.
 Option Exercises and Stock Vested in Fiscal Year 2010
  Director Compensation Table  2010
 Fees Earned orPaid in Cash
    
    
    Stock Awards
    
    
    Option Awards
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($) (1)
    
    
    ($)Robert A. Fildes
    
    
    39,750
    
    
    
    
    
    
    
    13,440
    
    
    
    53,190Bertrand C. Liang (2)
    
    
    1,060
    
    
    
    
    
    
    
    5,100
    
    
    
    6,160Stephen M. Martin
    
    
    50,250
    
    
    
    
    
    
    
    13,440
    
    
    
    63,690Craig R. Smith (3)
    
    
    35,742
    
    
    
    
    
    
    
    
    
    
    
    35,742Frank E. Young (3)
    
    
    15,071
    
    
    
    
    
    
    
    
    
    
    
    15,071
 (1)
    
    The amounts in this column reflect the grant date fair value of stock options granted
during the fiscal year ended December 31, 2010. Assumptions used in the calculation of these
amounts are included in Note 1 to our consolidated financial statements.(2)
    
    Dr. Liang was appointed to the Board of Directors effective December 6, 2010.(3)
    
    Doctors Smith and Young elected not to stand for reelection at our combined 2010 and 2009
annual meeting of stockholders held on August 12, 2010 (the Annual Meeting) and their terms
expired. As a result, Doctors Smith and Young were no longer directors as of the date of the
Annual Meeting.
  29




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Director Compensation
 Retainers and Fees
  Retainer Policy Prior to October 1, 2010
  Retainer Policy Effective Beginning October 1, 2010
   Option Grants Under the 2010 Plan
  30




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Option Grants Under the 2004 Plan
 
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
 Equity Compensation Plan Information
  Number ofSecuritiesRemainingAvailable forNumber of
    
    
    
    
    
    
    Future IssuanceSecurities to be
    
    
    Weighted-
    
    
    Under EquityIssued upon
    
    
    Average Exercise
    
    
    CompensationExercise of
    
    
    Price of
    
    
    Plans (ExcludingOutstanding
    
    
    Outstanding
    
    
    SecuritiesOptions, Warrants
    
    
    Options, Warrants
    
    
    Reflected inand Rights
    
    
    and Rights
    
    
    Column (a))Plan CategoryEquity Compensation
plans approved by
security holders
    
    
    4,003,835
    (1)
    
    $
    4.91
    
    
    
    16,077,478
    (2)Equity Compensation
plans not approved
by security holders
    
    
    5,800,000
    (3)
    
    $
    0.06
    
    
    
    
 
 (1)
    
    Outstanding options to purchase shares of our common stock under the La Jolla
Pharmaceutical Company 1994 Stock Incentive Plan and under the 2004 and 2010 Plans.(2)
    
    Includes 12,077,477 shares subject to the 2004 and 2010 Plans and 4,000,001 shares
subject to the 1995 Plan (each stated as of December 31, 2010).(3)
    
    Outstanding options to purchase shares of our common stock granted to the Named
Executive Officers outside of our stockholder-approved equity compensation plans. These stock
option grants did not require stockholder approval and are treated in all respect as if
granted under the 2010 Plan.
  31




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Security Ownership of Certain Beneficial Owners and Management
  
    
    each of our directors;
    
    each of our named executive officers as defined by SEC rules;
    
    all of our current directors and executive officers as a group; and
    
    each person or group of affiliated persons known by us to be the
beneficial owner of more than 5% of our common stock.
   SharesShares of
    
    
    with Right toCommon
    
    
    Acquire
    
    
    Total
    
    
    PercentageStock
    
    
    within 60
    
    
    Beneficial
    
    
    of CommonName and Address
    
    Owned
    
    
    Days
    
    
    Ownership
    
    
    StockTang Capital Partners, LP 
4401 Eastgate Mall
San Diego, CA 92121
    
    
    8,837,137
    (2)
    
    
    1,886
    (2)
    
    
    8,839,023
    (2)
    
    
    9.3
    %Kevin C. Tang
4401 Eastgate Mall
San Diego, CA 92121
    
    
    9,468,361
    (2)
    
    
    1,886
    (2)
    
    
    9,470,247
    (2)
    
    
    9.9
    %Boxer Capital, LLC
445 Marine View Ave, 100
Del Mar, CA 92014
    
    
    9,468,361
    (3)
    
    
    1,886
    (5)
    
    
    9,470,247
    
    
    
    9.9
    %RTW Investments, LLC
1350 Avenue of the Americas, 28th Floor
New York, NY 10019
    
    
    9,468,361
    (4)
    
    
    1,886
    (5)
    
    
    9,470,247
    
    
    
    9.9
    %Robert A. Fildes, Ph.D.
    
    
    
    
    
    
    196,400
    (6)
    
    
    196,400
    
    
    
    *
    %Bertrand C. Liang, M.D.
    
    
    
    
    
    
    75,000
    (6)
    
    
    75,000
    
    
    
    *
    %Stephen M. Martin
    
    
    40
    
    
    
    197,400
    (6)
    
    
    197,440
    
    
    
    *
    %Deirdre Y. Gillespie, M.D.
    
    
    437,649
    
    
    
    9,946,079
    (7)
    
    
    10,383,728
    
    
    
    9.9
    %Gail A. Sloan
    
    
    108,083
    
    
    
    2,502,312
    (8)
    
    
    2,610,395
    
    
    
    2.7
    %All current executive officers and directors as a group
(5 persons)(1)
    
    
    545,772
    
    
    
    12,917,191
    
    
    
    13,462,963
    
    
    
    12.5
    %
 *
    
    Less than one percent.
  32




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(1)
    
    The five current executive officers and directors are comprised of Dr.
Fildes, Dr. Liang, Mr. Martin, Dr. Gillespie and Ms. Sloan (each of whom
is included within the table above).(2)
    
    Such information is based upon our review of a Schedule 13G/A filed by
the holder with the SEC on February 14, 2011. The Schedule 13G/A was
filed by Tang Capital Partners, LP (Tang Capital), Tang Capital
Management, LLC (Tang Management) and Kevin C. Tang. Tang Management
is the general partner of Tang Capital and Kevin Tang is the manager of
Tang Management. Tang Capital is the beneficial owner of 8,839,023
shares of common stock and shares voting and dispositive powers over such
shares with Tang Management and Kevin Tang. Tang Management, as general
partner of Tang Capital, may be deemed to beneficially own the 8,839,023
shares held or acquirable by Tang Capital and the preferred stock and
warrants owned by Tang Capital. Tang Management shares voting and
dispositive power over such shares with Tang Capital and Kevin Tang.
Kevin Tang may be deemed to beneficially own 9,470,247 shares of common
stock, consisting of 8,839,023 shares held or acquirable by Tang Capital
and 631,224 additional shares of common stock over which Kevin Tang has
separate voting and dispositive power. Kevin Tang disclaims beneficial
ownership of all shares except to the extent of his pecuniary interest
therein.(3)
    
    Such information is based upon our review of a Schedule 13G filed by the
holder with the SEC on June 3, 2010. The Schedule 13G was filed jointly
by Boxer Capital, LLC (Boxer Capital), Boxer Asset Management Inc.
(Boxer Management), Joseph Lewis and MVA Investors, LLC (MVA, and
together with Boxer Capital, Boxer Management and Joseph Lewis, the
Reporting Persons). Boxer Management is the managing member and
majority owner of Boxer Capital. Joseph Lewis is the sole indirect owner
and controls Boxer Management. MVA is the independent, personal
investment vehicle of certain employees of Boxer Capital and Tavistock
Life Sciences Company, which is an affiliate of Boxer Capital. MVA is
not controlled by Boxer Capital, Boxer Management and Joseph Lewis. MVA
has sole power to vote and dispose of the 1,190,927 shares of common
stock it beneficially owns. Boxer Capital, Boxer Management and Joseph
Lewis have shared voting power and shared dispositive power with respect
to the 8,277,434 shares of common stock they beneficially own. The
Reporting Persons may be deemed to beneficially own 9,468,361 shares of
common stock.(4)
    
    Such information is based upon our review of a Schedule 13G filed by the
holder with the SEC on June 3, 2010. The Schedule 13G was filed jointly
by RTW Investments, LLC (RTW), RTW Master Fund, Ltd. (Master Fund)
and Roderick Wong (Wong). RTW, Master Fund and Wong may be deemed to
beneficially own 9,468,361 shares of common stock and they share voting
and dispositive power over such shares.(5)
    
    This share amount was calculated by the Company due to the Certificate of
Designations for the Series C-1 Preferred preventing the holder and its
affiliates from beneficially owning more than 9.999% of common stock
outstanding. This calculation assumed the maximum contractual conversion
rate during the 60 day period.(6)
    
    Consists of shares subject to options that are exercisable within 60 days.(7)
    
    Consists of 2,492,708 shares subject to options that are exercisable
within 60 days and Series C-1 Preferred convertible into 7,453,371 shares
within 60 days. The Certificate of Designations for the Series C-1
Preferred prevents the holder from beneficially owning more than 9.999%
of common stock outstanding. The calculation of the Series C-1 Preferred
convertible within 60 days assumes the maximum contractual conversion
rate during the 60 day period.(8)
    
    Consists of 925,637 shares subject to options that are exercisable within
60 days and Series C-1 Preferred convertible into 1,576,675 shares within
60 days. The Certificate of Designations for the Series C-1 Preferred
prevents the holder from beneficially owning more than 9.999% of common
stock outstanding. The calculation of the Series C-1 Preferred
convertible within 60 days assumes the maximum contractual conversion
rate during the 60 day period.
  33




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##### Table of Contents



Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14.
    
    Principal Accountant Fees and Services.
  2009
    
    
    2010Audit Fees  Ernst & Young LLP
    
    $
    141,210
    
    
    $
    135,024Audit Fees  BDO USA, LLP
    
    
    
    
    
    
    51,500Audit Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    17,000
    
    
    
    10,000All Other Fees
    
    
    
    
    
    
    Total
    
    $
    158,210
    
    
    $
    196,524
  Audit Fees
 Tax Fees
 All Other Fees.
 Pre-approval Policy.
  34




---



##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits, Financial Statement Schedules.
 (a)
    
    Documents filed as part of this report.
 1.
    
    The following consolidated financial statements of La Jolla Pharmaceutical Company are filed
as part of this report under Item 8  Financial Statements and Supplementary Data:
 Reports of Independent Registered Public Accounting Firms
    
    
    F-1Consolidated Balance Sheets at December 31, 2010 and 2009
    
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2010 and 2009
    
    
    F-4Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders
Equity for the years ended December 31, 2010 and 2009
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 2.
    
    Financial Statement Schedules.These schedules are omitted because they are not required, or are not applicable, or the
required information is shown in the consolidated financial statements or notes thereto.3.
    
    Exhibits.The exhibit index attached to this report is incorporated by reference herein.
  35




---



##### Table of Contents



SIGNATURES
  LA JOLLA PHARMACEUTICAL COMPANYApril 13, 2011
    By:
    /s/ Deirdre Y. GillespieDeirdre Y. Gillespie, M.D.President, Chief Executive Officer and
Assistant Secretary  Signature
    
    Title
    
    Date/s/ Deirdre Y. Gillespie

Deirdre Y. Gillespie, M.D
    
    Director, President, Chief Executive Officer and Assistant
Secretary (Principal Executive Officer)
    
    April 13, 2011/s/ Gail A. Sloan

Gail A. Sloan
    
    Chief Financial Officer and Secretary (Principal
Financial and Accounting Officer)
    
    April 13, 2011/s/ Robert A. Fildes

Robert A. Fildes, Ph.D.
    
    Director, Chairman of the Board
    
    April 13, 2011/s/ Stephen M. Martin

Stephen M. Martin
    
    Director
    
    April 13, 2011/s/ Bertrand C. Liang

Bertrand C. Liang, M.D.
    
    Director
    
    April 13, 2011
  36




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
   F-1




---



##### Table of Contents



F-2




---



##### Table of Contents



December 31,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    6,866
    
    
    $
    4,254Prepaids and other current assets
    
    
    67
    
    
    
    586Total current assets
    
    
    6,933
    
    
    
    4,840$
    6,933
    
    
    $
    4,840Liabilities, redeemable convertible preferred stock and stockholders equityCurrent liabilities:Accounts payable
    
    $
    39
    
    
    $
    125Accrued expenses
    
    
    178
    
    
    
    323Accrued payroll and related expenses
    
    
    85
    
    
    
    173Derivative liabilities
    
    
    6,102
    
    
    
    Total current liabilities
    
    
    6,404
    
    
    
    621Series C-1 redeemable convertible preferred stock, $0.0001 par value;
11,000 shares authorized, 5,573 and no shares issued and outstanding at
December 31, 2010 and 2009, respectively (redemption value and liquidation
preference in the aggregate of $5,652 at December 31, 2010)
    
    
    47
    
    
    
    CommitmentsStockholders equity:Common stock, $0.0001 par value; 6,000,000,000 shares authorized,
94,710,059 and 65,722,648 shares issued and outstanding at December 31,
2010 and 2009, respectively
    
    
    9
    
    
    
    7Additional paid-in capital
    
    
    428,554
    
    
    
    428,533Accumulated deficit
    
    
    (428,081
    )
    
    
    (424,321
    )Total stockholders equity
    
    
    482
    
    
    
    4,219$
    6,933
    
    
    $
    4,840
 See accompanying notes.
  F-3




---



##### Table of Contents



Years Ended December 31,2010
    
    
    2009Revenue from collaboration agreement
    
    $
    
    
    
    $
    8,125Expenses:Research and development
    
    
    13
    
    
    
    9,576General and administrative
    
    
    3,915
    
    
    
    7,193Total expenses
    
    
    3,928
    
    
    
    16,769Loss from operations
    
    
    (3,928
    )
    
    
    (8,644
    )Other income (expense):Fair value of derivative liabilities in excess of proceeds
    
    
    (5,015
    )
    
    
    Adjustments to fair value of derivative liabilities
    
    
    5,347
    
    
    
    Financing transaction costs
    
    
    (163
    )
    
    
    Interest income and other expense, net
    
    
    (1
    )
    
    
    10Net loss
    
    
    (3,760
    )
    
    
    (8,634
    )Preferred stock dividend
    
    
    (466
    )
    
    
    Net loss and comprehensive loss attributable to common stockholders
    
    $
    (4,226
    )
    
    $
    (8,634
    )Basic and diluted net loss per share
    
    $
    (0.05
    )
    
    $
    (0.14
    )Shares used in computing basic and diluted net loss per share
    
    
    83,190
    
    
    
    63,326
 See accompanying notes.
  F-4




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##### Table of Contents



Series C-1 RedeemableConvertible Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    TotalStock
    
    
    Preferred stock
    
    
    Common stock
    
    
    paid-in
    
    
    Accumulated
    
    
    stockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    deficit
    
    
    EquityBalance at December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    55,550
    
    
    $
    6
    
    
    $
    419,071
    
    
    $
    (415,687
    )
    
    $
    3,390Issuance of Series B
preferred stock
    
    
    
    
    
    
    
    
    
    
    339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,810
    
    
    
    
    
    
    
    6,810Conversion of preferred
stock, net
    
    
    
    
    
    
    
    
    
    
    (339
    )
    
    
    
    
    
    
    10,173
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    Share-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,653
    
    
    
    
    
    
    
    2,653Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,634
    )
    
    
    (8,634
    )Balance at December 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,723
    
    
    
    7
    
    
    
    428,533
    
    
    
    (424,321
    )
    
    
    4,219Issuance of common stock, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,970
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    Issuance of Series C-1
preferred stock for cash
    
    
    5,134
    
    
    
    Issuance of Series C-1
preferred stock first right
of negotiation
    
    
    50
    
    
    
    12Issuance of Series C-1
preferred stock dividends
    
    
    389
    
    
    
    35Issuance of common stock
under Employee Stock Purchase
Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489
    
    
    
    
    
    
    
    489Series C-1 preferred stock
dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (466
    )
    
    
    
    
    
    
    (466
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,760
    )
    
    
    (3,760
    )Balance at December 31, 2010
    
    
    5,573
    
    
    $
    47
    
    
    
    
    
    
    $
    
    
    
    
    94,710
    
    
    $
    9
    
    
    $
    428,554
    
    
    $
    (428,081
    )
    
    $
    482
 See accompanying notes.
  F-5




---



##### Table of Contents



Years Ended December 31,2010
    
    
    2009Operating activitiesNet loss
    
    $
    (3,760
    )
    
    $
    (8,634
    )Adjustments to reconcile net loss to net cash used for operating activities:Depreciation and amortization
    
    
    
    
    
    
    117Gain on write-off/disposal of patents, property and equipment
    
    
    
    
    
    
    (347
    )Share-based compensation expense
    
    
    489
    
    
    
    2,653Settlement of accounts payable and accrued liabilities
    
    
    
    
    
    
    (2,743
    )Issuance of Series C-1 Preferred Stock for services
    
    
    12
    
    
    
    Fair value of derivative liabilities in excess of proceeds
    
    
    5,015
    
    
    
    Gain on adjustment to fair value of derivative liabilities
    
    
    (5,347
    )
    
    
    Changes in operating assets and liabilities:Prepaids and other current assets
    
    
    519
    
    
    
    199Accounts payable and accrued expenses
    
    
    (231
    )
    
    
    (6,400
    )Accrued payroll and related expenses
    
    
    (88
    )
    
    
    (1,376
    )Net cash used for operating activities
    
    
    (3,391
    )
    
    
    (16,531
    )Investing activitiesSales of short-term investments
    
    
    
    
    
    
    10,000Net proceeds from sale of patents and property and equipment
    
    
    
    
    
    
    861Additions to property and equipment
    
    
    
    
    
    
    (18
    )Increase in patent costs and other assets
    
    
    
    
    
    
    (6
    )Net cash provided by investing activities
    
    
    
    
    
    
    10,837Financing activitiesProceeds from issuance of derivative obligations
    
    
    6,003
    
    
    
    Net proceeds from issuance of Series B Preferred Stock
    
    
    
    
    
    
    6,810Payments on credit facility
    
    
    
    
    
    
    (5,933
    )Payments on obligations under notes payable
    
    
    
    
    
    
    (331
    )Payments on obligations under capital leases
    
    
    
    
    
    
    (45
    )Net cash provided by financing activities
    
    
    6,003
    
    
    
    501Net increase (decrease) in cash and cash equivalents
    
    
    2,612
    
    
    
    (5,193
    )Cash and cash equivalents at beginning of period
    
    
    4,254
    
    
    
    9,447Cash and cash equivalents at end of period
    
    $
    6,866
    
    
    $
    4,254Supplemental disclosure of cash flow information:Interest paid
    
    $
    
    
    
    $
    13Change in par value of capital stock
    
    $
    (938
    )
    
    $
    Issuance of common stock at par value, offset by paid-in capital reduction
    
    $
    290
    
    
    $
    Accrued dividends payable in Series C-1 Preferred Stock
    
    $
    78
    
    
    $
    Dividends paid in Series C-1 Preferred Stock
    
    $
    388
    
    
    $
    
 See accompanying notes.
  F-6




---



##### Table of Contents



1. Organization and Summary of Significant Accounting Policies
 Organization and Business Activity
  Basis of Presentation
  Significant 2011 Events
    F-7




---



##### Table of Contents



1 1 1 1 1 1 1 1 1
  Significant 2010 Events
   F-8




---



##### Table of Contents



Principles of Consolidation
  Use of Estimates
 GAAP
 Revenue Recognition
 FASB Topic of Revenue
Recognition
   F-9




---



##### Table of Contents



Property and Equipment
  Patents
   Share-Based Compensation
    Share-Based Award Valuation and Expense Information
  December 31,2010
    
    
    2009Research and development
    
    $
    
    
    
    $
    632General and administrative
    
    
    489
    
    
    
    2,021Share-based compensation expense included in operating expenses
    
    $
    489
    
    
    $
    2,653
  F-10




---



##### Table of Contents



Options:
 December 31,2010
    
    
    2009Risk-free interest rate
    
    
    2.6
    %
    
    
    0.6
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    106.5
    %
    
    
    295.0
    %Expected life (years)
    
    
    5.8
    
    
    
    5.6
  ESPP:
 December 31,2010Risk-free interest rate
    
    
    0.15
    %Dividend yield
    
    
    0.0
    %Volatility
    
    
    90.5
    %Expected life
    
    3 months
    ®
  F-11




---



##### Table of Contents



Restricted Stock Units
  Net Loss Per Share
   Derivative Liabilities
    F-12




---



##### Table of Contents



Recently Issued Accounting Standards
  2. Fair Value of Financial Instruments
  
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data for substantially the full term
of the assets or liabilities.
    
    Level 3  Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or
liabilities.
     Fair Value Measurements at December 31, 2010Balance at
    
    
    Quoted Prices in
    
    
    Significant Other
    
    
    SignificantDecember 31,
    
    
    Active Markets
    
    
    Observable Inputs
    
    
    Unobservable Inputs2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Embedded derivative
liabilities
    
    $
    5,170
    
    
    $
    
    
    
    $
    
    
    
    $
    5,170Warrant derivative
liabilities
    
    
    932
    
    
    
    
    
    
    
    
    
    
    
    932Total
    
    $
    6,102
    
    
    $
    
    
    
    $
    
    
    
    $
    6,102
  F-13




---



##### Table of Contents



Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Embedded Derivative
    
    
    Warrant DerivativeLiabilities
    
    
    Liabilities
    
    
    TotalBeginning balance at December 31, 2009
    
    $
    
    
    
    $
    
    
    
    $
    Issuances
    
    
    5,524
    
    
    
    5,494
    
    
    
    11,018Adjustments to estimated fair value
    
    
    (785
    )
    
    
    (4,562
    )
    
    
    (5,347
    )Dividends paid in Series C-1 Preferred Stock
    
    
    359
    
    
    
    
    
    
    
    359Accrued dividends payable in Series C-1 Preferred Stock
    
    
    72
    
    
    
    
    
    
    
    72Ending balance at December 31, 2010
    
    $
    5,170
    
    
    $
    932
    
    
    $
    6,102
  3. Development and Stock Purchase Agreements
      F-14




---



##### Table of Contents



4. Securities Purchase Agreement
  Allocation of Proceeds
  Common Stock
  Accounting Treatment
  Redeemable Preferred Stock
  Voting Rights
  Dividends
 th th
  F-15




---



##### Table of Contents



Conversion Rights
   Liquidation Preference
  Redemption Rights
   F-16




---



##### Table of Contents



Restrictions
  Accounting Treatment
      F-17




---



##### Table of Contents



Derivative Liabilities
   Accounting Treatment
    F-18




---



##### Table of Contents



Fair Value Measurements atMay 26, 2010
    
    
    December 31, 2010Embedded Derivatives of Series C-1
Preferred
    
    $
    5,524
    
    
    $
    4,739Embedded Derivatives of dividends
paid in Series C-1 Preferred
    
    
    
    
    
    
    359Embedded Derivatives of accrued
dividends payable in Series C-1
Preferred
    
    
    
    
    
    
    72Series D-1 Warrants
    
    
    815
    
    
    
    702Series C-2 Warrants for:Series C-2 Preferred
    
    
    3,049
    
    
    
    (1,175
    )Series D-2 Warrants
    
    
    1,630
    
    
    
    1,405$
    11,018
    
    
    $
    6,102
     May 26, 2010
    
    
    November 25, 2010
    
    
    December 31, 2010Closing price per share of common stock
    
    $
    0.061
    
    
    $
    0.030
    
    
    $
    0.026Conversion price per share
    
    $
    0.015
    
    
    $
    0.015
    
    
    $
    0.015Volatility
    
    
    109.2
    %
    
    
    84.2
    %
    
    
    84.6
    %Risk-free interest rate
    
    
    2.68
    %
    
    
    1.73
    %
    
    
    2.19
    %Credit spread
    
    
    17.3
    %
    
    
    14.7
    %
    
    
    14.2
    %Remaining expected lives of underlying
securities (years)
    
    
    6.9
    
    
    
    6.4
    
    
    
    6.3
  F-19




---



##### Table of Contents



May 26, 2010
    
    
    December 31, 2010Closing price per share of common stock
    
    $
    0.061
    
    
    $
    0.026Conversion price per share
    
    $
    0.015
    
    
    $
    0.015Volatility
    
    
    84.4
    %
    
    
    98.9
    %Risk-free interest rate
    
    
    1.28
    %
    
    
    1.02
    %Remaining expected lives of underlying securities (years)
    
    
    3.3
    
    
    
    2.8
   May 26, 2010
    
    
    December 31, 2010Closing price per share of common stock
    
    $
    0.061
    
    
    $
    0.026Conversion price per share
    
    $
    0.015
    
    
    $
    0.015Volatility
    
    
    109.2
    %
    
    
    84.6
    %Risk-free interest rate
    
    
    2.68
    %
    
    
    2.19
    %Credit spread
    
    
    17.3
    %
    
    
    14.2
    %Remaining expected lives of underlying securities (years)
    
    
    6.9
    
    
    
    6.3
  5. Commitments
    F-20




---



##### Table of Contents



6.
Restructuring Costs and Retention Payments
        F-21




---



##### Table of Contents



7. Settlement of Liabilities
   8. Stockholders Equity
 Preferred Stock
  Warrants
   Stock Option Plans
 1994 Plan
 2004 Plan
    F-22




---



##### Table of Contents



Outstanding OptionsWeighted-Number of
    
    
    AverageShares
    
    
    Exercise PriceBalance at December 31, 2008
    
    
    5,626,961
    
    
    $
    6.80Granted
    
    
    691,875
    
    
    $
    1.73Forfeited/Expired
    
    
    (2,810,268
    )
    
    $
    5.31Balance at December 31, 2009
    
    
    3,508,568
    
    
    $
    6.99Granted
    
    
    7,200,000
    
    
    $
    0.05Forfeited/Expired
    
    
    (904,733
    )
    
    $
    5.41Balance at December 31, 2010
    
    
    9,803,835
    
    
    $
    2.04
  Years Ended December 31,2010
    
    
    2009Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceExercisable at end of year
    
    
    3,819,738
    
    
    $
    5.08
    
    
    
    3,175,233
    
    
    $
    7.47Weighted-average fair value of
options granted during the
year
    
    $
    0.04
    
    
    
    
    
    
    $
    1.72
  Weighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    
    Weighted-
    
    
    
    
    
    
    ExerciseContractual
    
    
    Average
    
    
    
    
    
    
    Price ofOptions
    
    
    Range of
    
    Life
    
    
    Exercise
    
    
    Options
    
    
    OptionsOutstanding
    
    
    Exercise Prices
    
    (in years)
    
    
    Price
    
    
    Exercisable
    
    
    Exercisable500,000
    
    
    $0.02  $0.04
    
    
    9.85
    
    
    $
    0.03
    
    
    
    75,000
    
    
    $
    0.026,700,000
    
    
    $0.06
    
    
    9.41
    
    
    $
    0.06
    
    
    
    1,302,778
    
    
    $
    0.061,082,296
    
    
    $1.42  $4.20
    
    
    6.29
    
    
    $
    2.84
    
    
    
    920,421
    
    
    $
    3.02994,548
    
    
    $4.46   $5.26
    
    
    5.22
    
    
    $
    5.11
    
    
    
    994,548
    
    
    $
    5.11366,995
    
    
    $5.97   $26.05
    
    
    3.33
    
    
    $
    15.89
    
    
    
    366,995
    
    
    $
    15.8935,999
    
    
    $29.50
    
    
    1.89
    
    
    $
    29.50
    
    
    
    35,999
    
    
    $
    29.5042,999
    
    
    $35.25
    
    
    1.25
    
    
    $
    35.25
    
    
    
    42,999
    
    
    $
    35.2515,999
    
    
    $35.50
    
    
    0.95
    
    
    $
    35.50
    
    
    
    15,999
    
    
    $
    35.506,000
    
    
    $36.75
    
    
    0.38
    
    
    $
    36.75
    
    
    
    6,000
    
    
    $
    36.7558,999
    
    
    $38.25
    
    
    0.55
    
    
    $
    38.25
    
    
    
    58,999
    
    
    $
    38.259,803,835
    
    
    $0.02  $38.25
    
    
    8.30
    
    
    $
    2.04
    
    
    
    3,819,738
    
    
    $
    5.08
   F-23




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##### Table of Contents



Restricted Stock Units
   Weighted-AverageGrant DateFair ValueShares
    
    
    per ShareRestricted stock units outstanding at December 31, 2009
    
    
    2,021,024
    
    
    $
    0.17Cancelled
    
    
    (2,021,024
    )
    
    $
    0.17Restricted stock units outstanding at December 31, 2010
    
    
    
    
    
    $
    
 Employee Stock Purchase Plan
  Year EndedDecember 31,2010Weighted-average fair value of Employee Stock Purchase Plan purchases
    
    $
    0.02
 9. 401(k) Plan
    F-24




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##### Table of Contents



10. Income Taxes
 FASB Topic on Income Taxes
   AmountUnrecognized tax benefits balance at December 31, 2009
    
    $
    45Increases related to current and prior year tax positions
    
    
    Settlements and lapses in statutes of limitations
    
    
    Unrecognized tax benefits balance at December 31, 2010
    
    $
    45
      F-25




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##### Table of Contents



December 31,2010
    
    
    2009Deferred tax assets:Net operating loss carryforwards
    
    $
    
    
    
    $
    Research and development credits
    
    
    
    
    
    
    Capitalized research and development and other
    
    
    10,989
    
    
    
    12,881Total deferred tax assets
    
    
    10,989
    
    
    
    12,881Net deferred tax assets
    
    
    10,989
    
    
    
    12,881Valuation allowance for deferred tax assets
    
    
    (10,989
    )
    
    
    (12,881
    )Net deferred taxes
    
    $
    
    
    
    $
    
   December 31,2010
    
    
    2009Income tax benefit at statutory federal rate
    
    $
    (1,611
    )
    
    $
    (3,022
    )State tax benefit, net of federal
    
    
    (264
    )
    
    
    (496
    )Generation of research and development credits
    
    
    
    
    
    
    (347
    )Expired tax attributes
    
    
    3,521
    
    
    
    4,347Removal of net operating losses and research and
development credits
    
    
    1,156
    
    
    
    767Stock compensation expense
    
    
    36
    
    
    
    281Change in valuation allowance
    
    
    (1,892
    )
    
    
    (81
    )Other
    
    
    (946
    )
    
    
    (1,449
    )Provision for income taxes
    
    $
    
    
    
    $
    
 11. Subsequent Events
  Asset Purchase Agreement
   1 1 1 1
  F-26




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##### Table of Contents



1 1 1 1 1
 1 1 1 1 1 1 1 1 1
   
    
    The holders of New Preferred Stock and Series E Preferred Stock (collectively,
the  C/D/E Preferred Stock) do not have voting rights unless required by the Delaware
General Corporation Law or as set forth below.
 
    
    Cumulative dividends are payable on the Series C-11 Stock and
Series C-21 Stock (together referred to herein as the Series C Preferred) at a
rate of 15% per annum and on the Series E Preferred Stock at a rate of 5% per annum, each
accruing from the date of issuance through the date of conversion or redemption, payable
semi-annually in shares of Series C-11 Stock, Series C-21 Stock and
Series E Preferred Stock, respectively, but subject to the temporary suspension of
dividends with respect to the Series C Preferred, as described above. Neither the Series
D-11 Stock nor the Series D-21 Stock is entitled to dividends.
 
    
    The C/D/E Preferred Stock is convertible into common stock, initially at a
rate of 66,667 shares of common stock for each share of C/D/E Preferred Stock, subject to
certain limitations discussed below, at the election of the holders of C/D/E Preferred
Stock. The conversion rate will be adjusted for certain events, such as stock splits,
stock dividends, reclassifications and recapitalizations, and the New Preferred Stock is
subject to full-ratchet anti-dilution protection such that any subsequent issuance of
common stock below the effective conversion price of the C/D/E Preferred Stock at the time
of such issuance automatically adjusts the conversion price of the C/D/E Preferred Stock to
such lower price. There are also limits on the amount of C/D/E Preferred Stock that can be
converted and the timing of such conversions. The New Preferred Stock may be converted
starting the first Monday following the Closing of the asset purchase. The Series E
Preferred Stock may not be converted until the first Monday following the achievement of the
Preclinical Milestone under the Agreement.
  F-27




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##### Table of Contents




    
    Upon a Liquidation Event (as defined in each Certificate), no other class or
series of capital stock can receive any payment unless the New Preferred Stock has first
received a payment in an amount equal to $1,000 per share, plus all accrued and unpaid
dividends, if applicable. Once the New Preferred Stock has received its liquidation
payment, the Series E Preferred Stock is entitled to receive a payment in an amount equal
to $1,000 per share, plus all accrued and unpaid dividends, if applicable.
 
    
    In the event that certain actions occur without the prior written consent of
the holders of two-thirds of the then outstanding shares of New Preferred Stock (the
Requisite Holders), such as the Companys material breach of any material representation
or warranty under the Securities Agreement, a suspension of the trading of the Companys
common stock, the failure to timely deliver shares on conversion of the C/D/E Preferred
Stock, or the consummation of a Change of Control (as defined in the Certificate of
Designations), then the holders of the Series C Preferred shall have the right, upon the
delivery of a notice to the Company by the Requisite Holders, to have such shares redeemed
by the Company for an amount equal to the greater of $1,000 per share, plus accrued and
unpaid dividends, or the fair market value of the underlying common stock issuable upon
conversion of the Series C Preferred. The Series E Preferred Stock does not have similar
redemption rights.
 
    
    Upon certain redemption events, such as the Companys breach of covenants or
material representations or warranties under the Purchase Agreement, the conversion price
of the C/D/E Preferred Stock decreases to 10% of the conversion price in effect immediately
before such redemption event.
 
    
    So long as at least 1,000 shares of New Preferred Stock remain outstanding (or
at least 3,000 shares of New Preferred Stock remain outstanding if the Cash Warrants have
been fully exercised), the Company may not take a variety of actions (such as altering the
rights, powers, preferences or privileges of the New Preferred Stock so as to effect the
New Preferred Stock adversely, amending any provision of the Companys certificate of
incorporation, entering into an agreement for a Strategic Transaction or Change of Control
(as each is defined in the Series C/D Certificate) and may not consummate any financing or
file a registration statement with the Securities and Exchange Commission without the prior
approval of the Requisite Holders. The Series E Preferred Stock does not have similar
protective provisions.
 Reverse Stock Split
    F-28




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##### Table of Contents



Redemption Rights
   F-29




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description2.1
    
    
    Agreement and Plan of Reorganization, by and among La Jolla Pharmaceutical
Company, Adamis Pharmaceuticals Corporation and Jewel Merger Sub, Inc.,
dated as of December 4, 2009 (9)2.2
    
    
    Asset Purchase Agreement by and among La Jolla Pharmaceutical Company,
GliaMed, Inc., and Jewel Merger Sub, Inc., dated as of March 29, 2011 (10)3.1
    
    
    Restated Certificate of Incorporation (1)3.2
    
    
    Amended and Restated Bylaws (2)3.3
    
    
    Certificate of Designations, Preferences and Rights of Series C-1
Convertible Preferred Stock, Series C-2 Convertible Preferred Stock, Series
D-1 Convertible Preferred Stock and Series D-2 Convertible Preferred
Stock (11)3.4
    
    
    Certificate of Designations, Preferences and Rights of Series
C-11 Convertible Preferred Stock, Series
C-21 Convertible Preferred Stock, Series
D-11 Convertible Preferred Stock and Series
D-21 Convertible Preferred Stock (10)3.5
    
    
    Certificate of Designations, Preferences and Rights of Series E Convertible
Preferred Stock (15)4.1
    
    
    Form of Common Stock Certificate (3)9.1
    
    
    Voting Agreement by and between La Jolla Pharmaceutical Company and GliaMed,
Inc., dated as of March 31, 2011 (10)10.1
    
    
    Form of Indemnification Agreement (4)*10.2
    
    
    La Jolla Pharmaceutical Company 1994 Stock Incentive Plan (Amended and
Restated as of May 16, 2003) (5)*10.3
    
    
    La Jolla Pharmaceutical Company 1995 Employee Stock Purchase Plan (Amended
and Restated as of June 20, 2008) (6)*10.4
    
    
    La Jolla Pharmaceutical Company 2004 Equity Incentive Plan (Amended and
Restated as of June 20, 2008) (6)*10.5
    
    
    Form of Option Grant under the La Jolla Pharmaceutical Company 2004 Equity
Incentive Plan (6)*10.6
    
    
    Form of Warrant Agreement (7)10.7
    
    
    Development and Commercialization Agreement, dated as of January 4, 2009, by
and between the Company and BioMarin CF Limited (8)10.8
    
    
    Securities Purchase Agreement, dated as of January 4, 2009, by and between
the Company and BioMarin Pharmaceutical Inc.(8)10.9
    
    
    Amendment No. 1 to Development and Commercialization Agreement, dated as of
January 4, 2009, by and between the Company and BioMarin CF Limited (8)10.10
    
    
    Amendment No. 1 to Securities Purchase Agreement, dated as of January 4,
2009, by and between the Company and BioMarin Pharmaceutical Inc. (8)




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##### Table of Contents



Exhibit Number
    
    Description10.11
    
    
    Retention and Separation Agreement and General Release of All Claims, dated
December 4, 2009, by and between the Company and Deirdre Y. Gillespie, M.D.
(9)*10.12
    
    
    Retention and Separation Agreement and General Release of All Claims, dated
December 4, 2009, by and between the Company and Gail A. Sloan (9)*10.13
    
    
    Form of Voting Agreement (9)10.14
    
    
    Securities Purchase Agreement, dated as of May 24, 2010 by and among the
Company and the Purchasers named therein (11)10.15
    
    
    Form of Series C-2 Preferred Stock Purchase Warrant (11)10.16
    
    
    Form of Series D-1 Preferred Stock Purchase Warrant (11)10.17
    
    
    Form of Series D-2 Preferred Stock Purchase Warrant (11)10.18
    
    
    Chief Executive Officer Employment Agreement, dated as of May 24, 2010, by
and between the Company and Deirdre Y. Gillespie, M.D. (11)*10.19
    
    
    Confidential Retention Agreement, dated as of May 24, 2010, by and between
the Company and Deirdre Y. Gillespie, M.D. (11)*10.20
    
    
    Executive Employment Agreement, dated as of May 24, 2010, by and between the
Company and Gail A. Sloan (11)*10.21
    
    
    Confidential Retention Agreement, dated as of May 24, 2010, by and between
the Company and Gail A. Sloan (11)*10.22
    
    
    La Jolla Pharmaceutical Company Retirement Savings Plan (12)*10.23
    
    
    Consent and Amendment Agreement by and among La Jolla Pharmaceutical Company
and the undersigned parties thereto, dated as of March 29, 2011 (10)21.1
    
    
    Subsidiaries of La Jolla Pharmaceutical Company **23.1
    
    
    Consent of Independent Registered Public Accounting Firm BDO LLP **23.2
    
    
    Consent of Independent Registered Public Accounting Firm Ernst & Young LLP **31.1
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **31.2
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **32.1
    
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
 
 *
    
    This exhibit is a management contract or compensatory plan or arrangement.**
    
    Filed herewith.
    
    Confidential treatment for certain provisions of this exhibit.(1)
    
    Previously filed with the Companys Current Report on Form 8-K filed March 1, 2006 and
incorporated by reference herein.(2)
    
    Previously filed with the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000 and incorporated by reference herein.(3)
    
    Previously filed with the Companys Registration Statement on Form S-3 (Registration No.
333-131246) filed January 24, 2006 and incorporated by reference herein.(4)
    
    Previously filed with the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005 and incorporated by reference herein.




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##### Table of Contents



(5)
    
    Previously filed with the Companys Quarterly Report on Form 10-Q for the quarter ended June
30, 2003 and incorporated by reference herein.(6)
    
    Previously filed with the Companys Registration Statement on Form S-8 (Registration No.
333-151825) filed June 20, 2008 and incorporated by reference herein.(7)
    
    Previously filed with the Companys Current Report on Form 8-K filed May 7, 2008 and
incorporated by reference herein.(8)
    
    Previously filed with the Companys Quarterly Report on Form 10-Q for the quarter ended March
31, 2009 and incorporated by reference herein.(9)
    
    Previously filed with the Companys Current Report on Form 8-K filed on December 7, 2009 and
incorporated by reference herein.(10)
    
    Previously filed with the Companys Current Report on Form 8-K filed April 5, 2011 and
incorporated by reference herein.(11)
    
    Previously filed with the Companys Current Report on Form 8-K filed May 28, 2010 and
incorporated by reference herein.(12)
    
    Previously filed with the Companys Current Report on Form 10-Q for the quarter ended
September 30, 2010 and incorporated by reference herein.