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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 March 31, 2011
 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
(State or other jurisdiction of 
incorporation or organization)
    
    33-0361285
(I.R.S. Employer
Identification No.)4365 Executive Drive, Suite 300San Diego, CA
    
    92121(Address of principal executive offices)
    
    (Zip Code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 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 March 31, 2011 and
December 31, 2010
    
    
    1Condensed Consolidated Statements of Operations for the three months
ended March 31, 2011 and 2010
    
    
    2Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2011 and 2010
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    19ITEM 4. Controls and Procedures
    
    
    23PART II. OTHER INFORMATIONITEM 1A. Risk Factors
    
    
    24ITEM 6. Exhibits
    
    
    24SIGNATURES
    
    
    25Exhibit 31.1Exhibit 32.1Exhibit 32.1




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PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    CONDENSED FINANCIAL STATEMENTS  UNAUDITED
 LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Balance Sheets
 March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,502
    
    
    $
    6,866Prepaids and other current assets
    
    
    2
    
    
    
    67Total current assets
    
    
    6,504
    
    
    
    6,933Other assets
    
    
    243
    
    
    
    Total assets
    
    $
    6,747
    
    
    $
    6,933LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS (DEFICIT)
EQUITYCurrent liabilities:Accounts payable
    
    $
    27
    
    
    $
    39Accrued expenses
    
    
    404
    
    
    
    178Accrued payroll and related expenses
    
    
    97
    
    
    
    85Derivative liabilities
    
    
    12,059
    
    
    
    6,102Total current liabilities
    
    
    12,587
    
    
    
    6,404Series C-11 redeemable
convertible preferred stock, $0.0001 par
value; 11,000 shares authorized, 5,573
shares issued and outstanding at March 31,
2011 and December 31, 2010, (redemption
value and liquidation preference in the
aggregate of $5,573 at March 31, 2011 and
$5,652 at December 31, 2010) (see Notes 1
and 5)
    
    
    5,573
    
    
    
    47CommitmentsStockholders (deficit) equity:Common stock
    
    
    
    
    
    
    Additional paid-in capital
    
    
    423,177
    
    
    
    428,563Accumulated deficit
    
    
    (434,590
    )
    
    
    (428,081
    )Total stockholders (deficit) equity
    
    
    (11,413
    )
    
    
    482Total liabilities, redeemable
convertible preferred stock and
stockholders (deficit) equity
    
    $
    6,747
    
    
    $
    6,933
    1




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Operations
 Three Months EndedMarch 31,2011
    
    
    2010Expenses:Research and development
    
    $
    
    
    
    $
    General and administrative
    
    
    478
    
    
    
    1,767Total expenses
    
    
    478
    
    
    
    1,767Loss from operations
    
    
    (478
    )
    
    
    (1,767
    )Other income (expense):Adjustments to fair value of derivative liabilities
    
    
    (6,029
    )
    
    
    Other expense and interest income, net
    
    
    (2
    )
    
    
    Net loss and comprehensive loss attributable to common
stockholders
    
    $
    (6,509
    )
    
    $
    (1,767
    )Basic and diluted net loss per share
    
    $
    (6.87
    )
    
    $
    (2.69
    )Shares used in computing basic and diluted net loss per
share (1)
    
    
    947
    
    
    
    657
 
 (1)
    
    On April 14, 2011, the Company effected a one-for-one hundred reverse stock split, which has
been applied retroactively to the quarters ended March 31, 2011 and 2010 for purposes of this
presentation.   2




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Cash Flows
 Three Months EndedMarch 31,2011
    
    
    2010Operating activities:Net loss
    
    $
    (6,509
    )
    
    $
    (1,767
    )Adjustments to reconcile net loss to net cash used for operating
activities:Share-based compensation expense
    
    
    68
    
    
    
    223Loss on adjustments to fair value of derivative liabilities
    
    
    6,029
    
    
    
    Change in operating assets and liabilities:Prepaids and other current assets
    
    
    65
    
    
    
    505Accounts payable
    
    
    (12
    )
    
    
    (41
    )Accrued expenses
    
    
    226
    
    
    
    (21
    )Accrued payroll and related expenses
    
    
    12
    
    
    
    474Net cash used for operating activities
    
    
    (121
    )
    
    
    (627
    )Investing activities:Purchase of patent assets
    
    
    (243
    )
    
    
    Net cash used for investing activities
    
    
    (243
    )
    
    
    Net decrease in cash and cash equivalents
    
    
    (364
    )
    
    
    (627
    )Cash and cash equivalents at beginning of period
    
    
    6,866
    
    
    
    4,254Cash and cash equivalents at end of period
    
    $
    6,502
    
    
    $
    3,627Supplemental schedule of noncash investing and financing activities:Reclassification of preferred stock currently redeemable
    
    $
    5,532
    
    
    $
    Suspension of preferred stock dividends
    
    $
    (78
    )
    
    $
    
   3




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Notes to Condensed Consolidated Financial Statements
 March 31, 2011
 1. Basis of Presentation
    1 1 1 1 1 1 1 1 1 1 1 1 1
  4




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1 1 1 1 1 1
  2. Accounting Policies
 Principles of Consolidation
  Use of Estimates
   5




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Recent Accounting Pronouncements
  Impairment of Long-Lived Assets
  Reverse Stock Split
  Net Loss Per Share
    6




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Derivative Liabilities
   3. 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.
     7




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Fair Value Measurements at March 31, 2011Balance at
    
    
    Quoted Prices in
    
    
    Significant Other
    
    
    SignificantMarch 31,
    
    
    Active Markets
    
    
    Observable Inputs
    
    
    Unobservable Inputs2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Embedded derivative
liabilities
    
    $
    5,257
    
    
    $
    
    
    
    $
    
    
    
    $
    5,257Warrant derivative
liabilities
    
    
    6,802
    
    
    
    
    
    
    
    
    
    
    
    6,802Total
    
    $
    12,059
    
    
    $
    
    
    
    $
    
    
    
    $
    12,059
  Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Embedded Derivative
    
    
    Warrant DerivativeLiabilities
    
    
    Liabilities
    
    
    TotalBeginning balance at December 31,
2010
    
    $
    5,170
    
    
    $
    932
    
    
    $
    6,102Issuances
    
    
    
    
    
    
    
    
    
    
    Suspended accrued dividends
payable in Series C-11
Preferred Stock
    
    
    (72
    )
    
    
    
    
    
    
    (72
    )Adjustments to estimated fair value
    
    
    159
    
    
    
    5,870
    
    
    
    6,029Ending balance at March 31, 2011
    
    $
    5,257
    
    
    $
    6,802
    
    
    $
    12,059
  4. GliaMed Assets Purchased
    8




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5. Securities Purchase Agreement
 1 1 1 1 1 1 1
 1 1 1
 Allocation of Proceeds
 1 1 1 1
 Common Stock
  Preferred Stock
 1 1
  9




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Voting Rights
  Dividends
 1 th th 1 1 1 1
 1 1 1 1
 Conversion Rights
 1 1 1 1 1 1 1 1 1
 1 1 1 1 1 1 1 1 1 1
  10




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Liquidation Preference
 1 1
 Redemption Rights
 1 1 1 1
 1 1 1 1 1 1
 Restrictions
 1
  11




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Accounting Treatment
 1 1 1
 1 1
 1 1
 1 1 1
 1 1 1 1
 Derivative Liabilities
 1 1 1 1 1 1 1 1
 1 1 1 1 1 1 1
  12




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Accounting Treatment
 1 1
 1 1 1 1 1 1 1 1
  Fair Value Measurements atDecember 31,
    
    
    March 31,2010
    
    
    2011Embedded Derivatives of Series
C-11 Preferred
(including dividends paid in Series 

C-11 Preferred in
November 2010)
    
    $
    5,098
    
    
    $
    5,257Embedded Derivatives of accrued
dividends payable in Series
C-11 Preferred
    
    
    72
    
    
    
    Series D-11 Warrants
    
    
    702
    
    
    
    1,894Series C-21 Warrants for:Series C-21 Preferred
    
    
    (1,175
    )
    
    
    981Series D-21 Warrants
    
    
    1,405
    
    
    
    3,927$
    6,102
    
    
    $
    12,059
  13




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1 1
 1
 1
 December 31,
  
    
    March 31,2010
 
    
    2011Closing price per share of common stock
    
    $
    2.60
    
    
    $
    3.15Conversion price per share
    
    $
    1.50
    
    
    $
    1.50Volatility
    
    
    84.6
    %
    
    
    84.0
    %Risk-free interest rate
    
    
    2.19
    %
    
    
    2.57
    %Credit spread
    
    
    14.2
    %
    
    
    14.4
    %Remaining expected lives of underlying
securities (years)
    
    
    6.3
    
    
    
    6.0
 1 1 1
 1
 December 31,
    
    
    March 31,2010
    
    
    2011Closing price per share of common stock
    
    $
    2.60
    
    
    $
    3.15Conversion price per share
    
    $
    1.50
    
    
    $
    1.50Volatility
    
    
    98.9
    %
    
    
    79.2
    %Risk-free interest rate
    
    
    1.02
    %
    
    
    0.80
    %Remaining expected lives of underlying securities (years)
    
    
    2.8
    
    
    
    2.1
 1 1 1 1 1 1 1 1
  14




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1 1 1
 December 31,
    
    
    March 31,2010
    
    
    2011Closing price per share of common stock
    
    $
    2.60
    
    
    $
    3.15Conversion price per share
    
    $
    1.50
    
    
    $
    1.50Volatility
    
    
    84.6
    %
    
    
    84.0
    %Risk-free interest rate
    
    
    2.19
    %
    
    
    2.57
    %Credit spread
    
    
    14.2
    %
    
    
    14.4
    %Remaining expected lives of underlying securities (years)
    
    
    6.3
    
    
    
    6.0
 1 1 1 1 1
 6. Stockholders Equity
 Share-Based Compensation
      15




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Three Months EndedMarch 31,2011
    
    
    2010Research and development
    
    $
    
    
    
    $
    General and administrative
    
    
    68
    
    
    
    223Share-based compensation expense included in operating expenses
    
    $
    68
    
    
    $
    223
    Outstanding OptionsWeighted-AverageNumber of
    
    
    ExerciseShares
    
    
    PriceBalance at December 31, 2010
    
    
    98,015
    
    
    $
    203.70Granted
    
    
    
    
    
    $
    Forfeited / Expired
    
    
    (509
    )
    
    $
    2,312.50Balance at March 31, 2011
    
    
    97,506
    
    
    $
    192.70
 Restricted Stock Units
   16




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Weighted-AverageGrant DateNumber of
    
    
    Fair ValueShares
    
    
    per ShareRestricted stock units outstanding at December 31, 2009
    
    
    20,209
    
    
    $
    17.00Cancelled
    
    
    (20,209
    )
    
    $
    17.00Restricted stock units outstanding at March 31, 2010
    
    
    
    
    
    $
    
 7. Retention Payments
      17




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8. 401(k) Plan
   9. Commitments and Contingencies
   1 1 1 1
 10. Subsequent Event
 1 1 1 1
  18




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
  Overview and Recent Developments
    19




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1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
 1
 1 1 1 1 1 1 1
   20




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1 1 1
 1 1 1 1 1 1
 1 1
 1 1 1
 Critical Accounting Policies and Estimates
    21




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Recent Accounting Pronouncements
  Results of Operations
   1
 Liquidity and Capital Resources
  1
 1 1
  22




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1 1 1 1 1
 Off-Balance Sheet Arrangements
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
   23




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PART II. OTHER INFORMATION
 
 ITEM 1A.
    
    Risk Factors
 I. RISK FACTORS RELATING TO THE COMPANY AND THE INDUSTRY IN WHICH WE OPERATE.
  
 ITEM 6.
    
    EXHIBITS
 ExhibitNumber
    
    
    Description2.1
    
    
    Asset Purchase Agreement by and among La Jolla Pharmaceutical Company,
GliaMed, Inc., and Jewel Merger Sub, Inc., dated as of March 29, 2011
(1)3.1
    
    
    Certificate of Amendment (2)3.2
    
    
    Amended and Restated Bylaws (2)3.3
    
    
    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
(1)3.4
    
    
    Certificate of Designations, Preferences and Rights of Series E
Convertible Preferred Stock (1)9.1
    
    
    Voting Agreement by and between La Jolla Pharmaceutical Company and
GliaMed, Inc., dated as of March 31, 2011 (1)10.1
    
    
    La Jolla Pharmaceutical Company 2010 Equity Incentive Plan (3)*10.2
    
    
    La Jolla Pharmaceutical Company 1995 Employee Stock Purchase Plan
(Amended and Restated as of August 12, 2010) (3)*10.3
    
    
    Consent and Amendment Agreement, dated March 29, 2011, by and between
La Jolla Pharmaceutical Company and the Holders identified therein (1)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
 
 *
    
    This exhibit is a management contract or compensatory plan or arrangement.(1)
    
    Previously filed with the Companys Current Report on Form 8-K filed April 5, 2011 and
incorporated by reference herein(2)
    
    Previously filed with the Companys Current Report on Form 8-K filed April 19, 2011 and
incorporated by reference herein.(3)
    
    Previously filed with the Companys Registration Statement on Form S-8 (Registration No.
333-169140) filed September 1, 2010 and incorporated by reference herein  24




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SIGNATURES
  La Jolla Pharmaceutical CompanyDate:  May 16, 2011
    /s/ Deirdre Y. GillespieDeirdre Y. Gillespie, M.D.President and Chief Executive Officer
(On behalf of the Registrant)/s/ Gail A. SloanGail A. SloanChief Financial Officer and Secretary

(As Principal Financial and Accounting Officer)  25