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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, 2010
 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 300
San Diego, CA
(Address of principal executive offices)
    
    92121
(Zip Code)
  Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 Yes o No 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, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13ITEM
4T. Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONITEM 1A. Risk Factors
    
    
    17ITEM 6. Exhibits
    
    
    20SIGNATURES
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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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 31,2010
    
    
    2009(Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,627
    
    
    $
    4,254Prepaids and other current assets
    
    
    81
    
    
    
    586Total current assets
    
    
    3,708
    
    
    
    4,840Total assets
    
    $
    3,708
    
    
    $
    4,840LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    84
    
    
    $
    125Accrued expenses
    
    
    302
    
    
    
    323Accrued payroll and related expenses
    
    
    647
    
    
    
    173Total current liabilities
    
    
    1,033
    
    
    
    621CommitmentsStockholders equity:Common stock
    
    
    657
    
    
    
    657Additional paid-in capital
    
    
    428,106
    
    
    
    427,883Accumulated deficit
    
    
    (426,088
    )
    
    
    (424,321
    )Total stockholders equity
    
    
    2,675
    
    
    
    4,219Total liabilities and stockholders equity
    
    $
    3,708
    
    
    $
    4,840
 Note:
    
    The condensed consolidated balance sheet at December 31, 2009 has been derived from the
audited consolidated financial statements as of that date but does not include all of the
information and disclosures required by U.S. generally accepted accounting principles.   3




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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Operations
   Three Months EndedMarch 31,2010
    
    
    2009Revenue from collaboration agreement
    
    $
    
    
    
    $
    8,125Expenses:Research and development
    
    
    
    
    
    
    9,893General and administrative
    
    
    1,767
    
    
    
    2,487Total expenses
    
    
    1,767
    
    
    
    12,380Loss from operations
    
    
    (1,767
    )
    
    
    (4,255
    )Interest income
    
    
    
    
    
    
    12Interest expense
    
    
    
    
    
    
    (9
    )Net loss
    
    $
    (1,767
    )
    
    $
    (4,252
    )Basic and diluted net loss per share
    
    $
    (0.03
    )
    
    $
    (0.08
    )Shares used in computing basic and diluted net
loss per share
    
    
    65,723
    
    
    
    56,115
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LA JOLLA PHARMACEUTICAL COMPANY
 
 Condensed Consolidated Statements of Cash Flows
   Three Months EndedMarch 31,2010
    
    
    2009Operating activities:Net loss
    
    $
    (1,767
    )
    
    $
    (4,252
    )Adjustments to reconcile net loss to net cash used for
operating activities:Depreciation and amortization
    
    
    
    
    
    
    74Share-based compensation expense
    
    
    223
    
    
    
    542Change in operating assets and liabilities:Prepaids and other current assets
    
    
    505
    
    
    
    (776
    )Accounts payable
    
    
    (41
    )
    
    
    5,145Accrued clinical/regulatory expenses
    
    
    
    
    
    
    (3,048
    )Accrued expenses
    
    
    (21
    )
    
    
    (677
    )Accrued payroll and related expenses
    
    
    474
    
    
    
    281Net cash used for operating activities
    
    
    (627
    )
    
    
    (2,711
    )Investing activities:Sales of short-term investments
    
    
    
    
    
    
    10,000Additions to property and equipment
    
    
    
    
    
    
    (18
    )Increase in patent costs and other assets
    
    
    
    
    
    
    (3
    )Net cash provided by investing activities
    
    
    
    
    
    
    9,979Financing activities:Net proceeds from issuance of preferred stock
    
    
    
    
    
    
    6,810Payments on credit facility
    
    
    
    
    
    
    (5,933
    )Payments on obligations under notes payable
    
    
    
    
    
    
    (27
    )Payments on obligations under capital leases
    
    
    
    
    
    
    (2
    )Net cash provided by financing activities
    
    
    
    
    
    
    848Net (decrease) increase in cash and cash equivalents
    
    
    (627
    )
    
    
    8,116Cash and cash equivalents at beginning of period
    
    
    4,254
    
    
    
    9,447Cash and cash equivalents at end of period
    
    $
    3,627
    
    
    $
    17,563
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LA JOLLA PHARMACEUTICAL COMPANY
 
 Notes to Condensed Consolidated Financial Statements
  March 31, 2010
 1. Basis of Presentation
  ®
    6




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
    
    Sell or out-license the Riquent program, although the Company may not receive any
significant value upon any such sale or license;
    
    Pursue potential other strategic transactions for new technologies, which could include
mergers, license agreements or other collaborations, with third parties where the Company acquires
new compounds for development and seeks additional capital;
    
    Implement a wind down of the Company if other alternatives are not deemed viable and in the
best interests of the Company; or
    
    Raise additional capital from third parties to develop existing assets and/or acquire new
assets for development.
 2. Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Recent Accounting Pronouncements
   7




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Revenue Recognition
 ASC Topic of Revenue
Recognition
  Impairment of Long-Lived Assets
   Accrued Clinical/Regulatory Expenses
   Net Loss Per Share
   8




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March 31,2010
    
    
    2009Stock options
    
    
    3,430,471
    
    
    
    5,902,079Warrants
    
    
    8,303,700
    
    
    
    8,303,700Total anti-dilutive shares
    
    
    11,734,171
    
    
    
    14,205,779
 3. Cash and Cash Equivalents
  4. Development and Stock Purchase Agreements
      9




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5. Stockholders Equity
 Share-Based Compensation
      Three Months EndedMarch 31,2010
    
    
    2009Research and development
    
    $
    
    
    
    $
    66General and administrative
    
    
    223
    
    
    
    476Share-based compensation expense included in operating expenses
    
    $
    223
    
    
    $
    542
   10




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March 31,2009Options:Risk-free interest rate
    
    
    0.6
    %Dividend yield
    
    
    0.0
    %Volatility
    
    
    295.0
    %Expected life (years)
    
    
    5.6
   Outstanding OptionsWeighted-AverageNumber of
    
    
    ExerciseShares
    
    
    PriceBalance at December 31, 2009
    
    
    3,508,568
    
    
    $
    6.99Granted
    
    
    
    
    
    $
    Forfeited / Expired
    
    
    (78,097
    )
    
    $
    11.62Balance at March 31, 2010
    
    
    3,430,471
    
    
    $
    6.88
 Restricted Stock Units
    11




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Weighted-AverageGrant DateNumber of
    
    
    Fair ValueShares
    
    
    per ShareRestricted stock units outstanding at December 31, 2009
    
    
    2,021,024
    
    
    $
    0.17Cancelled
    
    
    (2,021,024
    )
    
    $
    0.17Restricted stock units outstanding at March 31, 2010
    
    
    
    
    
    $
    
 6. Restructuring Costs
       12




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7. Commitments and Contingencies
    
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
  Overview and Recent Developments
   
    
    Sell or out-license our Riquent program, although we may not receive any
significant value upon such a sale or license;
 
    
    Pursue potential other strategic transactions, which could include
mergers, license agreements or other collaborations, with third
parties where we seek new compounds for development and seek
additional capital;
 
    
    Implement a wind down of the Company if other alternatives are not deemed
viable and in the best interests of the Company; or
 
    
    Raise additional capital from third parties to develop existing assets
and/or acquire new assets for development.
  13




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
    
    In January 2009 we entered into a development and commercialization agreement (the
Development Agreement) with BioMarin CF Limited (BioMarin CF), a wholly-owned
subsidiary of BioMarin Pharmaceutical Inc. (BioMarin Pharma) for which we received a
non-refundable commencement payment of $7.5 million pursuant to the Development
Agreement from BioMarin CF and $7.5 million from BioMarin Pharma in exchange for a
newly designated series of our preferred stock pursuant to the securities purchase
agreement. Following the futile results of the first interim efficacy analysis of
Riquent, the Development Agreement was terminated on March 27, 2009 and all of the
Companys Series B-1 preferred shares purchased by BioMarin Pharma were converted into
common shares. Additionally, all rights to Riquent were returned to us.
 
    
    In February 2009, an Independent Monitoring Board for the Riquent Phase 3 ASPEN
study informed us that, per its review of the first interim efficacy analysis of
Riquent, continuing the study was futile. We subsequently unblinded the data and found
that there was no statistical difference in the primary endpoint, delaying time to
renal flare, between the Riquent-treated group and the placebo-treated group, although
there was a significant difference in the reduction of antibodies to double-stranded
DNA. There were 56 renal flares in 587 patients treated with either 300-mg or 900-mg
of Riquent, and 28 renal flares in 283 patients treated with placebo.
  
    
    In October 2009, we attempted to obtain stockholder approval for a Plan of Complete
Liquidation and Dissolution but the majority of our stockholders failed to return
their proxy cards or otherwise indicate their votes with respect to this proposal.
Accordingly, we were not able to obtain the requisite quorum to conduct business at
the special meeting and were therefore unable to proceed with dissolution.
 
    
    In December 2009, we entered into an Agreement and Plan of Reorganization (the
Merger Agreement) by and among the Company, Jewel Merger Sub, Inc. (Merger Sub)
and Adamis Pharmaceuticals Corporation (Adamis). The transaction contemplated by the
Merger Agreement was structured as a reverse triangular merger, in which Merger Sub, a
wholly-owned subsidiary of the Company, would merge with and into Adamis, with Adamis
surviving (the Merger). On March 3, 2010, the Company and Adamis agreed to terminate
the Merger Agreement as the majority of our stockholders failed to return their proxy
cards or otherwise indicate their votes with respect to the proposals related to the
Merger. Accordingly, we were not able to obtain the requisite quorum to conduct
business at the special meeting. The solicitation of further votes was cancelled due
to the delisting of our common stock from Nasdaq.
  14




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Critical Accounting Policies and Estimates
   Recent Accounting Pronouncements
  Results of Operations
     15




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Liquidity and Capital Resources
       
    
    our ability to sell, out-license or otherwise develop our Riquent
program;
 
    
    our ability to consummate a strategic transaction such as a merger,
license agreement or other collaboration with a third party;
 
    
    our implementation of a wind down of the Company if other alternatives
are not deemed viable and in the best interests of the Company; or
 
    
    our ability to raise capital from third parties to fund operations.
   Off-Balance Sheet Arrangements
   16




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ITEM 4T.
    
    CONTROLS AND PROCEDURES
   
 PART II. OTHER INFORMATION
 
 ITEM 1A.
    
    RISK FACTORS
 I. RISK FACTORS RELATING TO LA JOLLA PHARMACEUTICAL COMPANY AND THE INDUSTRY IN WHICH WE OPERATE.
  We have only limited assets, no ongoing clinical trials and no products, and will need to raise
additional capital if we are to continue as a going concern, and if we are successful in raising
capital, it would likely be highly dilutive and result in the issuance of securities with special
rights, preferences and privileges.
   17




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Although we are attempting to pursue potential strategic transactions, there is no assurance that
we will be successful and, even if we are successful, our stockholders may suffer dilution or other
reductions in value as part of our acquisition of new assets.
    The recent delisting of our common stock could have a substantial effect on the price and liquidity
of our common stock.
   18




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The price of our common stock has been, and will be, volatile and may continue to decline.
  
    
    limited financial resources;
    
    announcements regarding financings, mergers or other strategic transactions;
    
    future sales of significant amounts of our capital stock by us or our stockholders;
    
    developments in patent or other proprietary rights;
    
    developments concerning potential agreements with collaborators; and
    
    general market conditions and comments by securities analysts.
   19




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ITEM 6.
    
    EXHIBITS
 ExhibitNumber
    
    Description10.1
    
    
    Termination of Merger Agreement, dated as of March 3, 2010, by and
between the Company and Adamis Pharmaceuticals Corporation (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)
    
    Filed as Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the
Securities and Exchange Commission on March 5, 2010 and incorporated herein by reference.  20




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SIGNATURES
  La Jolla Pharmaceutical CompanyDate:  May 21, 2010
    /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)  21