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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, 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 Drive
    
    92121San Diego, CA
    
    (Zip Code)(Address of principal executive offices)
   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 Financial Statements  UnauditedCondensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007
    
    
    2Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 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
    
    
    17PART II. OTHER INFORMATIONITEM 1. A. Risk Factors
    
    
    18ITEM 6. Exhibits
    
    
    22SIGNATURES
    
    
    23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 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 31,2008
    
    
    2007(Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,035
    
    
    $
    4,373Short-term investments
    
    
    9,327
    
    
    
    34,986Prepaids and other current assets
    
    
    970
    
    
    
    1,018Total current assets
    
    
    26,332
    
    
    
    40,377Property and equipment, net
    
    
    1,082
    
    
    
    1,271Patent costs and other assets, net
    
    
    2,770
    
    
    
    2,757Total assets
    
    $
    30,184
    
    
    $
    44,405LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,078
    
    
    $
    2,203Accrued clinical/regulatory expenses
    
    
    4,107
    
    
    
    6,282Accrued expenses
    
    
    749
    
    
    
    664Accrued payroll and related expenses
    
    
    701
    
    
    
    1,199Current portion of obligations under notes payable
    
    
    136
    
    
    
    138Current portion of obligations under capital leases
    
    
    9
    
    
    
    10Total current liabilities
    
    
    8,780
    
    
    
    10,496Non-current portion of obligations under notes payable
    
    
    304
    
    
    
    344Non-current portion of obligations under capital leases
    
    
    42
    
    
    
    44CommitmentsStockholders equity:Common stock
    
    
    397
    
    
    
    396Additional paid-in capital
    
    
    387,131
    
    
    
    385,944Other comprehensive income
    
    
    
    
    
    
    14Accumulated deficit
    
    
    (366,470
    )
    
    
    (352,833
    )Total stockholders equity
    
    
    21,058
    
    
    
    33,521Total liabilities and stockholders equity
    
    $
    30,184
    
    
    $
    44,405
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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Operations
 Three Months EndedMarch 31,2008
    
    
    2007Expenses:Research and development
    
    $
    11,338
    
    
    $
    10,375General and administrative
    
    
    1,906
    
    
    
    1,980Total expenses
    
    
    13,244
    
    
    
    12,355Loss from operations
    
    
    (13,244
    )
    
    
    (12,355
    )Interest income
    
    
    360
    
    
    
    494Interest expense
    
    
    (16
    )
    
    
    (9
    )Realized loss on investments, net
    
    
    (737
    )
    
    
    Net loss
    
    $
    (13,637
    )
    
    $
    (11,870
    )Basic and diluted net loss per share
    
    $
    (0.34
    )
    
    $
    (0.36
    )Shares used in computing basic and
diluted net loss per share
    
    
    39,631
    
    
    
    32,737
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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Cash Flows
 Three Months EndedMarch 31,2008
    
    
    2007Operating activities:Net loss
    
    $
    (13,637
    )
    
    $
    (11,870
    )Adjustments to reconcile net loss to net cash used for operating
activities:Depreciation and amortization
    
    
    284
    
    
    
    460Loss on write-off/disposal of patents and property and equipment
    
    
    23
    
    
    
    75Share-based compensation expense
    
    
    1,117
    
    
    
    1,116Realized loss on investments, net
    
    
    737
    
    
    
    Accretion of interest income, net
    
    
    243
    
    
    
    (6
    )Change in operating assets and liabilities:Prepaids and other current assets
    
    
    48
    
    
    
    396Accounts payable
    
    
    875
    
    
    
    456Accrued clinical/regulatory expenses
    
    
    (2,175
    )
    
    
    452Accrued expenses
    
    
    85
    
    
    
    (277
    )Accrued payroll and related expenses
    
    
    (498
    )
    
    
    (480
    )Net cash used for operating activities
    
    
    (12,898
    )
    
    
    (9,678
    )Investing activities:Purchases of short-term investments
    
    
    
    
    
    
    (3,000
    )Sales of short-term investments
    
    
    24,665
    
    
    
    12,000Additions to property and equipment
    
    
    (32
    )
    
    
    (45
    )Increase in patent costs and other assets
    
    
    (99
    )
    
    
    (157
    )Net cash provided by investing activities
    
    
    24,534
    
    
    
    8,798Financing activities:Net proceeds from issuance of common stock
    
    
    71
    
    
    
    241Payments on obligations under notes payable
    
    
    (42
    )
    
    
    (69
    )Payments on obligations under capital leases
    
    
    (3
    )
    
    
    Net cash provided by financing activities
    
    
    26
    
    
    
    172Net increase (decrease) in cash and cash equivalents
    
    
    11,662
    
    
    
    (708
    )Cash and cash equivalents at beginning of period
    
    
    4,373
    
    
    
    3,829Cash and cash equivalents at end of period
    
    $
    16,035
    
    
    $
    3,121Supplemental disclosure of cash flow information:Interest paid
    
    $
    16
    
    
    $
    9
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LA JOLLA PHARMACEUTICAL COMPANY
 Notes to Condensed Consolidated Financial Statements
 March 31, 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 in
    
    
    Significant other
    
    
    Significantactive markets for
    
    
    observable
    
    
    unobservableBalance at
    
    
    identical assets
    
    
    inputs
    
    
    inputsDescription
    
    March 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalents
    
    $
    16,035
    
    
    $
    16,035
    
    
    $
    
    
    
    $
    Short-term investments
    
    
    9,327
    
    
    
    
    
    
    
    
    
    
    
    9,327Total
    
    $
    25,362
    
    
    $
    16,035
    
    
    $
    
    
    
    $
    9,327
  Fair Value Measurement UsingSignificant Unobservable Inputs(Level 3)Beginning balance
    
    $
    Transfers in to Level 3
    
    
    10,000Interest income
    
    
    97Total realized/unrealized lossesIncluded in net loss
    
    
    (770
    )Included in comprehensive loss
    
    
    Purchases, issuances and settlements
    
    
    Ending balance
    
    $
    9,327
 4. Severance Charges
  5. Stockholders Equity
 Share-Based Compensation
    7




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Share-Based Payment Accounting and Disclosure of Stock-Based Compensation
 Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services
   Three Months EndedMarch 31,2008
    
    
    2007Research and development
    
    $
    465
    
    
    $
    427General and administrative
    
    
    652
    
    
    
    689Share-based compensation expense included in operating expenses
    
    $
    1,117
    
    
    $
    1,116
  8




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Options:
 March 31,2008
    
    2007Risk-free interest rate
    
    
    3.0
    %
    
    
    4.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    108.9
    %
    
    
    128.1
    %Expected life (years)
    
    
    5.6
    
    
    
    6.0  6.1
 ESPP:
 March 31,2008
    
    2007Risk-free interest rate
    
    
    2.1
    %
    
    
    5.1
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    90.9
    %
    
    
    115.4
    %Expected life (months)
    
    
    3
    
    
    
    3
   Outstanding OptionsWeighted-AverageNumber of
    
    ExerciseShares
    
    PriceBalance at December 31, 2007
    
    
    4,809,575
    
    
    $
    8.56Granted
    
    
    671,900
    
    
    $
    2.42Exercised
    
    
    (1,097
    )
    
    $
    2.51Forfeited or expired
    
    
    (37,024
    )
    
    $
    8.87Balance at March 31, 2008
    
    
    5,443,354
    
    
    $
    7.80
 6. Income Taxes
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
   9




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7. Subsequent Events
  
 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 anlaysis 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;
    
    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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Critical Accounting Policies and Estimates
   Impairment and useful lives of long-lived assets
   12




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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
 Results of Operations
 ®
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Liquidity and Capital Resources
   15




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Payment due by periodLess than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 Year
    
    13 Years
    
    35 Years
    
    5 YearsLong-Term Debt Obligations
    
    $
    512
    
    
    $
    171
    
    
    $
    341
    
    
    $
    
    
    
    $
    Capital Lease Obligations
    
    
    64
    
    
    
    14
    
    
    
    42
    
    
    
    8
    
    
    
    Operating Lease Obligations
    
    
    1,257
    
    
    
    837
    
    
    
    406
    
    
    
    14
    
    
    
    Purchase Obligations
    
    
    1,298
    
    
    
    1,298
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    3,131
    
    
    $
    2,320
    
    
    $
    789
    
    
    $
    22
    
    
    $
    
     16




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Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      
 ITEM 4. CONTROLS AND PROCEDURES
  17




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PART II. OTHER INFORMATION
 
 ITEM 1.A. Risk Factors
 I. RISK FACTORS RELATING TO LA JOLLA PHARMACEUTICAL COMPANY AND THE INDUSTRY IN WHICH WE OPERATE.
  We do not have sufficient financial resources to complete the current Phase 3 ASPEN study of
Riquent and may not have sufficient resources to continue to operate unless we are able to raise
sufficient additional capital.
  Negative conditions in the global credit markets may further impair the liquidity of a portion of
our investment portfolio.
    18




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In order to complete our current Phase 3 ASPEN study, we will need to accrue a sufficient number of
renal flares by enrolling a sufficient number of patients who meet the trial criteria. If we are
unable to successfully complete the trial, our business will be adversely affected and it may be
difficult or impossible for us to continue to operate.
  Current and future clinical trials 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 observed renal flare rate is lower than we expect;
    
    the products are not effective;
    
    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.
  19




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We will need additional funds to support our operations.
  
    
    the scope and results of our clinical trials;
    
    our ability to manufacture sufficient quantities of drug to support clinical trials;
    
    our ability to obtain regulatory approval for Riquent;
    
    the time and costs involved in applying for regulatory approvals;
    
    continued scientific progress in our development programs;
    
    the size and complexity of our development programs;
    
    the costs involved in preparing, filing, processing, maintaining and enforcing patent
claims;
    
    competing technological and market developments;
    
    our ability to establish and maintain collaborative research and development arrangements;
    
    our need to establish commercial manufacturing capabilities; and
    
    our ability to develop effective marketing and sales programs.
  We may have experienced an ownership change that could result in a significant reduction in our
available net operating loss and research tax credit carryforwards.
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II. RISK FACTORS RELATED SPECIFICALLY TO OUR STOCK.
 Future sales of our stock by our stockholders could negatively affect the market price of our
stock.
  
    
    Approximately 39,660,730 shares of common stock that have been issued in registered
offerings or were otherwise freely tradable in the public markets.
    
    Approximately 10,761 shares of common stock eligible for resale in the public market
pursuant to SEC Rule 144.
    
    4,399,992 shares of common stock underlying warrants which have been registered for
resale under a Registration Statement on Form S-3.
    
    5,443,354 shares of common stock that may be issued on the exercise of outstanding
stock options granted under our various stock option plans at a weighted average exercise
price of $7.80 per share.
    
    Approximately 351,765 shares of common stock reserved for future issuance pursuant to
awards granted under our equity incentive and employee stock purchase plans, which shares
are covered by effective registration statements under the Securities Act of 1933, as
amended (the Securities Act).
    
    Pursuant to a registration statement on Form S-3 filed on December 10, 2002, we
registered an aggregate amount of $125,000,000 of our common stock for issuance from time to
time. As of March 31, 2008, there was $13,917,500 of our common stock available for future
issuance, which expires on December 1, 2008. We expect to use the entire amount remaining
for future issuance under this registration statement in connection with the Offering.
    
    Pursuant to a registration statement on Form S-3 filed on August 20, 2007, we
registered an aggregate amount of $77,000,000 of our common stock, preferred stock and
warrants for issuance from time to time. As of March 31, 2008, no shares of common stock,
preferred stock or warrants had been issued under this registration statement, which
expires on August 23, 2010. After the Offering, approximately $52.5 million of our common
stock, preferred stock and warrants will be available for sale under this registration
statement.
  There is no public market for the warrants to purchase common stock in the Offering.
  21




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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)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. 22




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SIGNATURES
  La Jolla Pharmaceutical CompanyDate:  May 12, 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
and Financial Officer
(As Principal Financial Officer)/s/ Gail A. SloanGail A. SloanVice President of Finance and Secretary
(As Principal Accounting Officer) 23




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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