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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 September 30, 2009
 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.)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 þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o 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 September 30, 2009 and December 31, 2008
    
    
    1Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    16ITEM 4.
    
    Controls and Procedures
    
    
    16PART II. OTHER INFORMATIONITEM 1.A.
    
    Risk Factors
    
    
    17ITEM 6.
    
    Exhibits
    
    
    17SIGNATURES
    
    
    18Exhibit 31.1Exhibit 31.2Exhibit 32.1




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED
 LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Balance Sheets
 September 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,830
    
    
    $
    9,447Short-term investments
    
    
    
    
    
    
    10,000Prepaids and other current assets
    
    
    746
    
    
    
    785Total current assets
    
    
    6,576
    
    
    
    20,232Property and equipment, net
    
    
    
    
    
    
    357Patent costs and other assets, net
    
    
    
    
    
    
    250Total assets
    
    $
    6,576
    
    
    $
    20,839LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    692
    
    
    $
    4,626Accrued clinical/regulatory expenses
    
    
    
    
    
    
    3,957Accrued expenses
    
    
    235
    
    
    
    1,008Accrued payroll and related expenses
    
    
    98
    
    
    
    1,549Credit facility
    
    
    
    
    
    
    5,933Current portion of obligations under notes payable
    
    
    
    
    
    
    152Current portion of obligations under capital leases
    
    
    
    
    
    
    11Total current liabilities
    
    
    1,025
    
    
    
    17,236Noncurrent portion of obligations under notes payable
    
    
    
    
    
    
    179Noncurrent portion of obligations under capital leases
    
    
    
    
    
    
    34CommitmentsStockholders equity:Common stock
    
    
    657
    
    
    
    555Additional paid-in capital
    
    
    427,574
    
    
    
    418,522Accumulated deficit
    
    
    (422,680
    )
    
    
    (415,687
    )Total stockholders equity
    
    
    5,551
    
    
    
    3,390Total liabilities and stockholders equity
    
    $
    6,576
    
    
    $
    20,839
    1




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Operations
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue from collaboration agreement
    
    $
    
    
    
    $
    
    
    
    $
    8,125
    
    
    $
    Expenses:Research and development
    
    
    (240
    )
    
    
    14,099
    
    
    
    9,567
    
    
    
    38,170General and administrative
    
    
    992
    
    
    
    2,791
    
    
    
    5,602
    
    
    
    6,766Total expenses
    
    
    752
    
    
    
    16,890
    
    
    
    15,169
    
    
    
    44,936Loss from operations
    
    
    (752
    )
    
    
    (16,890
    )
    
    
    (7,044
    )
    
    
    (44,936
    )Interest and other income
    
    
    54
    
    
    
    163
    
    
    
    64
    
    
    
    653Interest expense
    
    
    
    
    
    
    (12
    )
    
    
    (13
    )
    
    
    (71
    )Realized loss on investments, net
    
    
    
    
    
    
    (395
    )
    
    
    
    
    
    
    (1,352
    )Net loss
    
    $
    (698
    )
    
    $
    (17,134
    )
    
    $
    (6,993
    )
    
    $
    (45,706
    )Basic and diluted net loss per share
    
    $
    (0.01
    )
    
    $
    (0.31
    )
    
    $
    (0.11
    )
    
    $
    (0.96
    )Shares used in computing basic and
diluted net loss per share
    
    
    65,723
    
    
    
    55,327
    
    
    
    62,555
    
    
    
    47,764
   2




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Cash Flows
 Nine Months EndedSeptember 30,2009
    
    
    2008Operating activities:Net loss
    
    $
    (6,993
    )
    
    $
    (45,706
    )Adjustments to reconcile net loss to net cash used for
operating activities:Depreciation and amortization
    
    
    116
    
    
    
    758(Gain) loss on write-off/disposal of patents and
property and equipment
    
    
    (326
    )
    
    
    193Share-based compensation expense
    
    
    2,344
    
    
    
    3,400Expense reduction from settlement of vendor obligations
    
    
    (2,645
    )
    
    
    Realized loss on investments, net
    
    
    
    
    
    
    1,352Amortization of premium on investments
    
    
    
    
    
    
    341Change in operating assets and liabilities:Prepaids and other current assets
    
    
    39
    
    
    
    33Accounts payable and accrued liabilities
    
    
    (6,019
    )
    
    
    491Accrued payroll and related expenses
    
    
    (1,451
    )
    
    
    29Net cash used for operating activities
    
    
    (14,935
    )
    
    
    (39,109
    )Investing activities:Sales of short-term investments
    
    
    10,000
    
    
    
    24,665Net proceeds from sale of patents and property and equipment
    
    
    841
    
    
    
    43Additions to property and equipment
    
    
    (18
    )
    
    
    (484
    )Increase in patent costs and other assets
    
    
    (6
    )
    
    
    (179
    )Net cash provided by investing activities
    
    
    10,817
    
    
    
    24,045Financing activities:Net proceeds from issuance of common stock
    
    
    
    
    
    
    28,263Net proceeds from issuance of preferred stock
    
    
    6,810
    
    
    
    Payments on credit facility
    
    
    (5,933
    )
    
    
    Payments on obligations under notes payable
    
    
    (331
    )
    
    
    (112
    )Payments on obligations under capital leases
    
    
    (45
    )
    
    
    (6
    )Net cash provided by financing activities
    
    
    501
    
    
    
    28,145Net (decrease) increase in cash and cash equivalents
    
    
    (3,617
    )
    
    
    13,081Cash and cash equivalents at beginning of period
    
    
    9,447
    
    
    
    4,373Cash and cash equivalents at end of period
    
    $
    5,830
    
    
    $
    17,454
   3




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Notes to Condensed Consolidated Financial Statements
 September 30, 2009
 1. Basis of Presentation
       4




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2. Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Recent Accounting Pronouncements
 The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles The Accounting Standards Codification Topic of Generally Accepted Accounting
Principles
 The ASC Topic of
Subsequent Events The ASC Topic of Subsequent Events
  5




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Revenue Recognition
   Net Loss Per Share
   Comprehensive Loss
  Impairment of Long-Lived Assets and Assets to Be Disposed Of
     6




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3. Fair Value of Financial Instruments
 The ASC Topic of Fair Value Measurements and Disclosures The ASC Topic of Fair Value Measurements
and Disclosures
 
    
    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.
    4. Development and Stock Purchase Agreements
     7




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5. Stockholders Equity
 Share-Based Compensation
        8




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Research and development
    
    $
    
    
    
    $
    563
    
    
    $
    632
    
    
    $
    1,565General and administrative
    
    
    311
    
    
    
    556
    
    
    
    1,712
    
    
    
    1,844Share-based compensation
expense included in
operating expenses
    
    $
    311
    
    
    $
    1,119
    
    
    $
    2,344
    
    
    $
    3,409
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,Options:
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Risk-free interest rate
    
    
    
    
    
    
    3.3
    %
    
    
    0.6
    %
    
    
    3.2
    %Dividend yield
    
    
    
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    
    
    
    
    106.4
    %
    
    
    295.0
    %
    
    
    115.2
    %Expected life (years)
    
    
    
    
    
    
    5.6
    
    
    
    1.0
    
    
    
    5.6
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,ESPP:
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Risk-free interest rate
    
    
    
    
    
    
    1.6
    %
    
    
    
    
    
    
    1.7
    %Dividend yield
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Volatility
    
    
    
    
    
    
    54.5
    %
    
    
    
    
    
    
    65.8
    %Expected life (months)
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    3.0
     9




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Outstanding OptionsWeighted-Number of
    
    
    AverageShares
    
    
    Exercise     PriceBalance at December 31, 2008
    
    
    5,626,960
    
    
    $
    6.80Granted
    
    
    691,875
    
    
    $
    1.73Exercised
    
    
    
    
    
    $
    Forfeited or expired
    
    
    (2,502,942
    )
    
    $
    5.23Balance at September 30, 2009
    
    
    3,815,893
    
    
    $
    6.91
 6. Restructuring Costs
  7. Commitments and Contingencies
    8. Settlement of Liabilities
    10




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9. Subsequent Events
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
  Overview and Recent Developments
     11




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12




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Critical Accounting Policies and Estimates
   Revenue Recognition
  Impairment and useful lives of long-lived assets
   Share-Based Compensation
   13




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Recent Accounting Pronouncements
 The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles The Accounting Standards Codification Topic of Generally Accepted Accounting
Principles
 The ASC Topic of Subsequent Events The ASC Topic of Subsequent Events
 Results of Operations
    14




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Liquidity and Capital Resources
    15




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Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
   16




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PART II. OTHER INFORMATION
 
 ITEM 1.A. Risk Factors
  II. RISK FACTORS RELATED SPECIFICALLY TO OUR STOCK.
 Our common stock is at risk of being delisted from The Nasdaq Stock Market. If it is
delisted, our stock price and the liquidity of our common stock would be impacted.
  
 ITEM 6. 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
 
 *
    
    Filed herewith.  17




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SIGNATURES
  La Jolla Pharmaceutical CompanyDate: November 13, 2009
    /s/ Deirdre Y. GillespieDeirdre Y. Gillespie, M.D.President and Chief Executive
Officer
(On behalf of the Registrant)/s/ Gail A. SloanGail A. SloanVice President of Finance and Secretary
(As Principal Financial and Accounting Officer)  18




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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
  19