##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 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 of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)6455 Nancy Ridge DriveSan Diego, CA
    
    92121(Address of principal executive offices)
    
    (Zip Code)
   þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



LA JOLLA PHARMACEUTICAL COMPANY
FORM 10-Q
QUARTERLY REPORT
 INDEX
 PART I. FINANCIAL INFORMATIONITEM 1. Condensed Consolidated Financial Statements  UnauditedCondensed Consolidated Balance Sheets as of June 30, 2008 and
December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations for the three and six months
ended June 30, 2008 and 2007
    
    
    2Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 2008 and 2007
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    10ITEM 3. Quantitative and Qualitative Disclosures About Market Risk .
    
    
    17ITEM 4. Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONITEM 1. Risk Factors
    
    
    18ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    18ITEM 6. Exhibits
    
    
    19SIGNATURES
    
    
    20EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED
 LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Balance Sheets
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    31,719
    
    
    $
    4,373Short-term investments
    
    
    9,021
    
    
    
    34,986Prepaids and other current assets
    
    
    1,490
    
    
    
    1,018Total current assets
    
    
    42,230
    
    
    
    40,377Property and equipment, net
    
    
    1,268
    
    
    
    1,271Patent costs and other assets, net
    
    
    2,710
    
    
    
    2,757Total assets
    
    $
    46,208
    
    
    $
    44,405LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,184
    
    
    $
    2,203Accrued clinical/regulatory expenses
    
    
    6,108
    
    
    
    6,282Accrued expenses
    
    
    661
    
    
    
    664Accrued payroll and related expenses
    
    
    1,321
    
    
    
    1,199Current portion of obligations under notes payable
    
    
    144
    
    
    
    138Current portion of obligations under capital leases
    
    
    9
    
    
    
    10Total current liabilities
    
    
    10,427
    
    
    
    10,496Noncurrent portion of obligations under notes payable
    
    
    263
    
    
    
    344Noncurrent portion of obligations under capital leases
    
    
    40
    
    
    
    44CommitmentsStockholders equity:Common stock
    
    
    553
    
    
    
    396Additional paid-in capital
    
    
    416,330
    
    
    
    385,944Other comprehensive income
    
    
    
    
    
    
    14Accumulated deficit
    
    
    (381,405
    )
    
    
    (352,833
    )Total stockholders equity
    
    
    35,478
    
    
    
    33,521Total liabilities and stockholders equity
    
    $
    46,208
    
    
    $
    44,405
   1




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Operations
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Expenses:Research and development
    
    $
    12,732
    
    
    $
    12,186
    
    
    $
    24,070
    
    
    $
    22,561General and administrative
    
    
    2,069
    
    
    
    2,112
    
    
    
    3,975
    
    
    
    4,092Total expenses
    
    
    14,801
    
    
    
    14,298
    
    
    
    28,045
    
    
    
    26,653Loss from operations
    
    
    (14,801
    )
    
    
    (14,298
    )
    
    
    (28,045
    )
    
    
    (26,653
    )Interest income
    
    
    130
    
    
    
    838
    
    
    
    490
    
    
    
    1,332Interest expense
    
    
    (44
    )
    
    
    (57
    )
    
    
    (60
    )
    
    
    (66
    )Realized loss on investments, net
    
    
    (220
    )
    
    
    
    
    
    
    (957
    )
    
    
    Net loss
    
    $
    (14,935
    )
    
    $
    (13,517
    )
    
    $
    (28,572
    )
    
    $
    (25,387
    )Basic and diluted net loss per share
    
    $
    (0.31
    )
    
    $
    (0.34
    )
    
    $
    (0.65
    )
    
    $
    (0.70
    )Shares used in computing basic and
diluted net loss per share
    
    
    48,252
    
    
    
    39,256
    
    
    
    43,941
    
    
    
    36,015
  2




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Cash Flows
 Six Months EndedJune 30,2008
    
    
    2007Operating activities:Net loss
    
    $
    (28,572
    )
    
    $
    (25,387
    )Adjustments to reconcile net loss to net cash used for operating
activities:Depreciation and amortization
    
    
    519
    
    
    
    885Loss on write-off/disposal of patents and property and equipment
    
    
    138
    
    
    
    75Share-based compensation expense
    
    
    2,297
    
    
    
    2,579Realized loss on investments, net
    
    
    957
    
    
    
    Amortization of premium (discount) on investments
    
    
    329
    
    
    
    (91
    )Change in operating assets and liabilities:Prepaids and other current assets
    
    
    (472
    )
    
    
    (165
    )Accounts payable
    
    
    (19
    )
    
    
    (1,009
    )Accrued clinical/regulatory expenses
    
    
    (174
    )
    
    
    2,339Accrued expenses
    
    
    (3
    )
    
    
    135Accrued payroll and related expenses
    
    
    122
    
    
    
    (100
    )Net cash used for operating activities
    
    
    (24,878
    )
    
    
    (20,739
    )Investing activities:Purchases of short-term investments
    
    
    
    
    
    
    (38,415
    )Sales of short-term investments
    
    
    24,665
    
    
    
    20,750Additions to property and equipment
    
    
    (446
    )
    
    
    (81
    )Increase in patent costs and other assets
    
    
    (161
    )
    
    
    (462
    )Net cash provided by (used for) investing activities
    
    
    24,058
    
    
    
    (18,208
    )Financing activities:Net proceeds from issuance of common stock
    
    
    28,246
    
    
    
    38,527Proceeds from issuance of notes payable
    
    
    
    
    
    
    75Payments on obligations under notes payable
    
    
    (75
    )
    
    
    (127
    )Payments on obligations under capital leases
    
    
    (5
    )
    
    
    Net cash provided by financing activities
    
    
    28,166
    
    
    
    38,475Net increase (decrease) in cash and cash equivalents
    
    
    27,346
    
    
    
    (472
    )Cash and cash equivalents at beginning of period
    
    
    4,373
    
    
    
    3,829Cash and cash equivalents at end of period
    
    $
    31,719
    
    
    $
    3,357Supplemental disclosure of cash flow information:Interest paid
    
    $
    60
    
    
    $
    66Supplemental schedule of noncash investing and financing
activities:Net unrealized losses (gains) on available-for-sale investments
    
    $
    14
    
    
    $
    (14
    )
  3




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Notes to Condensed Consolidated Financial Statements
(
 June 30, 2008
 1. Basis of Presentation
    2. Accounting Policies
 Principles of Consolidation
  4




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Use of Estimates
  Recent Accounting Pronouncement
 Fair Value Measurements
 The Fair Value Option
for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used
in Future Research and Development Activities
 Net Loss Per Share
 Earnings per Share
  5




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Comprehensive Loss
 Reporting Comprehensive Income (Loss)
 3. Fair Value of Financial Instruments
 Accounting for Certain Investments in Debt and Equity Securities
 
 6




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Fair Value Measurements at Reporting Date UsingQuoted prices inactive markets
    
    Significant other
    
    SignificantBalance at
    
    for identical
    
    observable
    
    unobservableJune 30,
    
    assets
    
    inputs
    
    inputsDescription
    
    2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Cash and cash equivalents
    
    
    $
    31,719
    
    
    $
    31,719
    
    
    $
    
    
    
    $
    Short-term investments
    
    
    
    9,021
    
    
    
    
    
    
    
    
    
    
    
    9,021Total
    
    
    $
    40,740
    
    
    $
    31,719
    
    
    $
    
    
    
    $
    9,021
  Fair Value Measurement UsingSignificant Unobservable Inputs(Level 3)Three Months
    
    Six MonthsEnded
    
    EndedJune 30, 2008
    
    June 30, 2008Beginning balance
    
    
    $
    9,327
    
    
    $
    Transfers in to Level 3
    
    
    
    
    
    
    
    10,000Changes in interest receivable balance
    
    
    
    (86
    )
    
    
    11Total realized/unrealized lossesIncluded in net loss
    
    
    
    (220
    )
    
    
    (990
    )Included in comprehensive loss
    
    
    
    
    
    
    
    Purchases, issuances and settlements
    
    
    
    
    
    
    
    Ending balance
    
    
    $
    9,021
    
    
    $
    9,021
 4. Severance Charges
  5. Stockholders Equity
 Common Stock
  Share-Based Compensation
  7




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(in thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Research and development
    
    $
    536
    
    
    $
    755
    
    
    $
    1,001
    
    
    $
    1,182General and administrative
    
    
    636
    
    
    
    708
    
    
    
    1,288
    
    
    
    1,397Share-based compensation
expense included in
operating expenses
    
    $
    1,172
    
    
    $
    1,463
    
    
    $
    2,289
    
    
    $
    2,579
  8




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Options:
    
    2008
    
    2007
    
    2008
    
    2007Risk-free interest rate
    
    
    3.3
    %
    
    
    4.8
    %
    
    
    3.1
    %
    
    
    4.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    126.2
    %
    
    
    109.4
    %
    
    
    116.8
    %
    
    
    119.6
    %Expected life (years)
    
    
    5.6
    
    
    
    5.9
    
    
    
    5.6
    
    
    
    6.0
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,ESPP:
    
    2008
    
    2007
    
    2008
    
    2007Risk-free interest rate
    
    
    1.7
    %
    
    
    4.9
    %
    
    
    1.9
    %
    
    
    5.0
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    67.5
    %
    
    
    67.9
    %
    
    
    79.4
    %
    
    
    87.6
    %Expected life (months)
    
    
    3.0
    
    
    
    3.0
    
    
    
    3.0
    
    
    
    3.0
  Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services
  Outstanding OptionsWeighted-AverageNumber of
    
    ExerciseShares
    
    PriceBalance at December 31, 2007
    
    
    4,809,575
    
    
    $
    8.56Granted
    
    
    1,231,900
    
    
    $
    2.15Exercised
    
    
    (1,097
    )
    
    $
    2.51Forfeited or expired
    
    
    (375,584
    )
    
    $
    9.09Balance at June 30, 2008
    
    
    5,664,794
    
    
    $
    7.13
 6. Income Taxes
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
 9




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
 ®
 10




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Developments in 2008
   
    
    Positive 12-month interim antibody data  analyses of 12-month interim antibody data
in the first 125 patients randomized in the study indicate that for all patients
treated with 900 mg, 300 mg, or 100 mg of Riquent per week compared with placebo, there
were significantly greater reductions in antibodies to double-stranded DNA (p <
0.0001);
    
    Interim efficacy analyses  two interim efficacy analyses are planned, each with
target p values of p < 0.001 and a final p value of p < 0.05 at the end of the
study. A futility analysis has been added to each interim efficacy analysis. The
first analysis is expected to occur around the fourth quarter of 2008 and the second is
expected to occur about midway between the first analysis and the expected end of the
study;
    
    Progression of the trial  more than 140 sites are active and more than 670 patients
have been enrolled;
    
    Extension of treatment period  the treatment period has been extended beyond 12
months until the required number of renal flares is achieved, which is 128 renal
flares.
    
    Increase in patient enrollment  we now estimate that at least 800 patients will be
enrolled in the study and that the trial should be completed in the second half of
2009; and
    
    Independent Data Monitoring Board (DMB) review
 the DMB has completed three
reviews of the safety data and has not indicated any safety issues.
  Overview
  11




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##### Table of Contents



Critical Accounting Policies and Estimates
   Impairment and useful lives of long-lived assets
   12




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##### Table of Contents



Accrued clinical/regulatory expenses
  Share-Based Compensation
 Share-Based Payments
  Fair Value of Financial Instruments
 Fair Value Measurements Effective Date of FASB Statement No. 157
  13




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
    
    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.
  Recent Accounting Pronouncements
  The Fair Value Option for
Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 Accounting for Nonrefundable Advance Payments for Goods or Services to Be
Used in Future Research and Development Activities
 14




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##### Table of Contents



Results of Operations
 ® ® ®
     Liquidity and Capital Resources
    15




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##### Table of Contents



Payment due by periodLess than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsLong-Term Debt Obligations
    
    $
    470
    
    
    $
    177
    
    
    $
    293
    
    
    $
    
    
    
    $
    Capital Lease Obligations
    
    
    61
    
    
    
    14
    
    
    
    42
    
    
    
    5
    
    
    
    Operating Lease Obligations
    
    
    1,036
    
    
    
    846
    
    
    
    180
    
    
    
    10
    
    
    
    Purchase Obligations
    
    
    1,258
    
    
    
    1,258
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    2,825
    
    
    $
    2,295
    
    
    $
    515
    
    
    $
    15
    
    
    $
    
    16




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##### Table of Contents



Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      17




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
   
 PART II. OTHER INFORMATION
 
 ITEM 1. RISK FACTORS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Director Nominee
    
    Term
    
    Votes in Favor
    
    Votes WithheldRobert A. Fildes
    
    Three years
    
    
    36,241,495
    
    
    
    606,530Martin P. Sutter
    
    Three years
    
    
    36,250,215
    
    
    
    597,810James N. Topper
    
    Three years
    
    
    36,269,271
    
    
    
    578,754
  BrokerProposal Description
    
    Votes in Favor
    
    Votes Against
    
    Abstaining
    
    Non-VotesAmendment to the La
Jolla
Pharmaceutical
Company 2004 Equity
Incentive Plan to
increase the number
of shares of common
stock available
under the plan by
1,400,000 shares
    
    26,915,247
    
    
    463,791
    
    
    
    29,410
    
    
    
    9,439,578
 18




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##### Table of Contents



BrokerProposal Description
    
    Votes in Favor
    
    Votes Against
    
    Abstaining
    
    Non-VotesAmendment to the La
Jolla
Pharmaceutical
Company 1995
Employee Stock
Purchase Plan to
increase the number
of shares of common
stock available
under the plan by 150,000
    
    27,042,821
    
    
    342,792
    
    
    
    22,835
    
    
    
    9,439,578Ratification of the
appointment of
Ernst & Young LLP
as our independent
registered public
accounting firm for
the fiscal year
ending December 31,
2008
    
    36,677,499
    
    
    140,565
    
    
    
    29,961
    
    
    
    
 
 ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description3.1
    
    Restated Certificate of Incorporation (1)3.2
    
    Amended and Restated Bylaws (2)4.1
    
    Rights Agreement, dated as of December 3, 1998, between the Company
and American Stock Transfer & Trust Company (3)4.2
    
    Amendment No. 1 to the Rights Agreement, dated as of July 21, 2000,
between the Company and American Stock Transfer & Trust Company (4)4.3
    
    Amendment No. 2 to the Rights Agreement, dated as of December 14,
2005, between the Company and American Stock Transfer & Trust Company
(5)4.4
    
    Amendment No. 3 to the Rights Agreement, dated as of March 1, 2006,
between the Company and American Stock Transfer & Trust Company (1)4.5
    
    Amendment No. 4, effective May 12, 2008, to Rights Agreement dated
December 3, 1998, as amended, by and between La Jolla Pharmaceutical
Company and American Stock Transfer & Trust Company, including the
Summary of Rights to be distributed to stockholders (6)31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (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 8-A (Registration No.
000-24274) filed December 4, 1998 and incorporated by reference herein.(4)
    
    Previously filed with the Companys Current Report on Form 8-K filed January 26, 2001 and
incorporated by reference herein. The changes effected by the Amendment are also reflected in
the Amendment to Application for Registration on Form 8-A/A filed on January 26, 2001.(5)
    
    Previously filed with the Companys Current Report on Form 8-K filed December 16, 2005 and
incorporated by reference herein.(6)
    
    Previously filed with the Companys Current Report on Form 8-K filed May 12, 2008 and
incorporated by reference herein. 19




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##### Table of Contents



SIGNATURES
   Date:  August 8, 2008
    /s/ Deirdre Y. GillespieDeirdre Y. Gillespie, M.D.President and Chief Executive Officer
(On behalf of the Registrant) /s/ Niv E. CaviarNiv E. CaviarExecutive Vice President, Chief
Business Officer 
and Chief Financial Officer
(As Principal Financial Officer) /s/ Gail A. SloanGail A. SloanVice President of Finance and
Secretary
(As Principal Accounting Officer) 20




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LA JOLLA PHARMACEUTICAL COMPANY
 
 INDEX TO EXHIBITS
 ExhibitNumber
    
    Description31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002