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, 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




---



##### 



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, 2008 and
December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations for the three and nine months
ended September 30, 2008 and 2007
    
    
    2Condensed Consolidated Statements of Cash Flows for the nine months
ended September 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
    
    
    18ITEM 4. Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONITEM 1. Risk Factors
    
    
    19ITEM 6. Exhibits
    
    
    19SIGNATURES
    
    
    21




---



##### 



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED
 LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Balance Sheets
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    17,454
    
    
    $
    4,373Short-term investments
    
    
    8,615
    
    
    
    34,986Prepaids and other current assets
    
    
    985
    
    
    
    1,018Total current assets
    
    
    27,054
    
    
    
    40,377Property and equipment, net
    
    
    1,118
    
    
    
    1,271Patent costs and other assets, net
    
    
    2,579
    
    
    
    2,757Total assets
    
    $
    30,751
    
    
    $
    44,405LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,933
    
    
    $
    2,203Accrued clinical/regulatory expenses
    
    
    4,664
    
    
    
    6,282Accrued expenses
    
    
    1,043
    
    
    
    664Accrued payroll and related expenses
    
    
    1,228
    
    
    
    1,199Current portion of obligations under notes payable
    
    
    148
    
    
    
    138Current portion of obligations under capital leases
    
    
    11
    
    
    
    10Total current liabilities
    
    
    11,027
    
    
    
    10,496Noncurrent portion of obligations under notes payable
    
    
    222
    
    
    
    344Noncurrent portion of obligations under capital leases
    
    
    37
    
    
    
    44CommitmentsStockholders equity:Common stock
    
    
    554
    
    
    
    396Additional paid-in capital
    
    
    417,449
    
    
    
    385,944Other comprehensive income
    
    
    1
    
    
    
    14Accumulated deficit
    
    
    (398,539
    )
    
    
    (352,833
    )Total stockholders equity
    
    
    19,465
    
    
    
    33,521Total liabilities and stockholders equity
    
    $
    30,751
    
    
    $
    44,405
   1




---



##### 



LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Operations
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Expenses:Research and development
    
    $
    14,099
    
    
    $
    11,448
    
    
    $
    38,170
    
    
    $
    34,009General and administrative
    
    
    2,791
    
    
    
    2,585
    
    
    
    6,766
    
    
    
    6,677Total expenses
    
    
    16,890
    
    
    
    14,033
    
    
    
    44,936
    
    
    
    40,686Loss from operations
    
    
    (16,890
    )
    
    
    (14,033
    )
    
    
    (44,936
    )
    
    
    (40,686
    )Interest income
    
    
    163
    
    
    
    752
    
    
    
    653
    
    
    
    2,084Interest expense
    
    
    (12
    )
    
    
    (8
    )
    
    
    (71
    )
    
    
    (74
    )Realized loss on investments, net
    
    
    (395
    )
    
    
    
    
    
    
    (1,352
    )
    
    
    Net loss
    
    $
    (17,134
    )
    
    $
    (13,289
    )
    
    $
    (45,706
    )
    
    $
    (38,676
    )Basic and diluted net loss per share
    
    $
    (0.31
    )
    
    $
    (0.34
    )
    
    $
    (0.96
    )
    
    $
    (1.04
    )Shares used in computing basic and
diluted net loss per share
    
    
    55,327
    
    
    
    39,577
    
    
    
    47,764
    
    
    
    37,215
  2




---



##### 



LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Cash Flows
 Nine Months EndedSeptember 30,2008
    
    
    2007Operating activities:Net loss
    
    $
    (45,706
    )
    
    $
    (38,676
    )Adjustments to reconcile net loss to net cash used for operating
activities:Depreciation and amortization
    
    
    758
    
    
    
    1,300Loss on write-off/disposal of patents and property and equipment
    
    
    236
    
    
    
    691Share-based compensation expense
    
    
    3,400
    
    
    
    3,715Realized loss on investments, net
    
    
    1,352
    
    
    
    Amortization of premium (discount) on investments
    
    
    341
    
    
    
    (140
    )Change in operating assets and liabilities:Prepaids and other current assets
    
    
    33
    
    
    
    51Accounts payable
    
    
    1,730
    
    
    
    (259
    )Accrued clinical/regulatory expenses
    
    
    (1,618
    )
    
    
    2,402Accrued expenses
    
    
    379
    
    
    
    379Accrued payroll and related expenses
    
    
    29
    
    
    
    (254
    )Net cash used for operating activities
    
    
    (39,066
    )
    
    
    (30,791
    )Investing activities:Purchases of short-term investments
    
    
    
    
    
    
    (47,415
    )Sales of short-term investments
    
    
    24,665
    
    
    
    41,750Additions to property and equipment
    
    
    (484
    )
    
    
    (117
    )Increase in patent costs and other assets
    
    
    (179
    )
    
    
    (599
    )Net cash provided by (used for) investing activities
    
    
    24,002
    
    
    
    (6,381
    )Financing activities:Net proceeds from issuance of common stock
    
    
    28,263
    
    
    
    38,610Proceeds from issuance of notes payable
    
    
    
    
    
    
    75Payments on obligations under notes payable
    
    
    (112
    )
    
    
    (173
    )Payments on obligations under capital leases
    
    
    (6
    )
    
    
    Net cash provided by financing activities
    
    
    28,145
    
    
    
    38,512Net increase in cash and cash equivalents
    
    
    13,081
    
    
    
    1,340Cash and cash equivalents at beginning of period
    
    
    4,373
    
    
    
    3,829Cash and cash equivalents at end of period
    
    $
    17,454
    
    
    $
    5,169Supplemental disclosure of cash flow information:Interest paid
    
    $
    71
    
    
    $
    74Supplemental schedule of noncash investing and financing
activities:Net unrealized losses (gains) on available-for-sale investments
    
    $
    13
    
    
    $
    (17
    )
  3




---



##### 



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




---



##### 



Use of Estimates
  Recent Accounting Pronouncements
 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




---



##### 



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




---



##### 



Fair Value Measurements at Reporting Date UsingQuoted prices inactive markets
    
    
    Significant other
    
    
    SignificantBalance at
    
    
    for identical
    
    
    observable
    
    
    unobservableSeptember 30,
    
    
    assets
    
    
    inputs
    
    
    inputsDescription
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalents
    
    $
    17,454
    
    
    $
    17,454
    
    
    $
    
    
    
    $
    Short-term investments
    
    
    8,615
    
    
    
    
    
    
    
    
    
    
    
    8,615Total
    
    $
    26,069
    
    
    $
    17,454
    
    
    $
    
    
    
    $
    8,615
  Fair Value Measurement UsingSignificant Unobservable Inputs(Level 3)Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2008
    
    
    2008Beginning balance
    
    $
    9,021
    
    
    $
    Transfers in to Level 3
    
    
    
    
    
    
    10,000Changes in interest receivable balance
    
    
    (11
    )
    
    
    Total realized/unrealized lossesIncluded in net loss
    
    
    (395
    )
    
    
    (1,385
    )Included in comprehensive loss
    
    
    
    
    
    
    Purchases, issuances and settlements
    
    
    
    
    
    
    Ending balance
    
    $
    8,615
    
    
    $
    8,615
  4. Severance Charges
  5. Stockholders Equity
 Common Stock
  7




---



##### 



Share-Based Compensation
      Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Research and development
    
    $
    563
    
    
    $
    378
    
    
    $
    1,565
    
    
    $
    1,560General and administrative
    
    
    556
    
    
    
    756
    
    
    
    1,844
    
    
    
    2,153Share-based compensation expense
included in operating expenses
    
    $
    1,119
    
    
    $
    1,134
    
    
    $
    3,409
    
    
    $
    3,713
  8




---



##### 



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Options:
    
    2008
    
    2007
    
    2008
    
    2007Risk-free interest rate
    
    
    3.3
    %
    
    
    4.6
    %
    
    
    3.2
    %
    
    
    4.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    106.4
    %
    
    
    108.6
    %
    
    
    115.2
    %
    
    
    118.5
    %Expected life (years)
    
    
    5.6
    
    
    
    6.0 - 6.1
    
    
    
    5.6
    
    
    
    5.5 - 6.1
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,ESPP:
    
    2008
    
    2007
    
    2008
    
    2007Risk-free interest rate
    
    
    1.6
    %
    
    
    4.4
    %
    
    
    1.7
    %
    
    
    4.8
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    54.5
    %
    
    
    47.3
    %
    
    
    65.8
    %
    
    
    72.1
    %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
    
    
    1,456,900
    
    
    $
    2.04Exercised
    
    
    (1,097
    )
    
    $
    2.51Forfeited or expired
    
    
    (508,068
    )
    
    $
    7.82Balance at September 30, 2008
    
    
    5,757,310
    
    
    $
    6.98
 6. Income Taxes
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
 9




---



##### 



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




---



##### 



Developments in 2008
  Previously Announced During 2008
   
    
    Positive 12-month interim antibody data  analyses of 12-month interim antibody data
in the first 125 patients randomized in the study indicated 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 was added to each interim efficacy analysis. The
first analysis was 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 were active and more than 670 patients
had been enrolled;
    
    Extension of treatment period  the treatment period was extended beyond 12
months until the required number of renal flares is achieved, which is 128 renal
flares;
    
    Increase in patient enrollment  we estimated that at
least 800 patients would be
enrolled in the study and that the trial would be completed in the second half of
2009; and
    
    Independent Data Monitoring Board (DMB) review
 the DMB had completed three
reviews of the safety data and had not indicated any safety issues.
 11




---



##### 



Overview
    Critical Accounting Policies and Estimates
  12




---



##### 



Impairment and useful lives of long-lived assets
   Accrued clinical/regulatory expenses
  Share-Based Compensation
 Share-Based Payments
 13




---



##### 



Fair Value of Financial Instruments
 Fair Value Measurements Effective Date of FASB Statement No. 157
  
    
    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
  14




---



##### 



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
 ® ® ®
    15




---



##### 



Liquidity and Capital Resources
      16




---



##### 



Payment due by periodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLong-Term Debt Obligations
    
    $
    422
    
    
    $
    177
    
    
    $
    245
    
    
    $
    
    
    
    $
    Capital Lease Obligations
    
    
    58
    
    
    
    15
    
    
    
    42
    
    
    
    1
    
    
    
    Operating Lease Obligations
    
    
    807
    
    
    
    699
    
    
    
    101
    
    
    
    7
    
    
    
    Purchase Obligations
    
    
    2,011
    
    
    
    2,011
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    3,298
    
    
    $
    2,902
    
    
    $
    388
    
    
    $
    8
    
    
    $
    
     Off-Balance Sheet Arrangements
  17




---



##### 



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      
 ITEM 4. CONTROLS AND PROCEDURES
  18




---



##### 



PART II. OTHER INFORMATION
 
 ITEM 1. RISK FACTORS
  The current volatility and disruption in the capital and credit markets may continue to exert
downward pressure on our stock price and we may cease to be in compliance with the continued
listing standards set forth by The Nasdaq Global Market. If we cease to be in compliance with the
continued listing standards, The Nasdaq Global Market may commence delisting proceedings against
us.
  
 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
 19




---



##### 



(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. 20




---



##### 



SIGNATURES
  La Jolla Pharmaceutical CompanyDate:  November 7, 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) 21




---



##### 



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