Company Quick10K Filing
La Jolla Pharmaceutical
Price9.27 EPS-3
Shares27 P/E-3
MCap252 P/FCF-4
Net Debt-106 EBIT-91
TEV146 TEV/EBIT-2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-05-07
10-K 2020-12-31 Filed 2021-03-08
10-Q 2020-09-30 Filed 2020-11-09
10-Q 2020-06-30 Filed 2020-08-06
10-Q 2020-03-31 Filed 2020-05-04
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-06
10-K 2018-12-31 Filed 2019-03-04
10-Q 2018-09-30 Filed 2018-10-24
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-10-26
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-08
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-02-25
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-04-29
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-12
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-04-30
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-07-19
10-Q 2013-03-31 Filed 2013-05-13
10-K 2012-12-31 Filed 2013-04-01
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-10
10-Q 2012-03-31 Filed 2012-05-21
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-04-14
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-20
10-Q 2010-03-31 Filed 2010-05-21
10-K 2009-12-31 Filed 2010-04-15
8-K 2020-11-01
8-K 2020-10-29
8-K 2020-09-30
8-K 2020-09-11
8-K 2020-08-11
8-K 2020-07-28
8-K 2020-06-25
8-K 2020-06-24
8-K 2020-06-19
8-K 2020-05-28
8-K 2020-05-26
8-K 2020-05-11
8-K 2020-05-06
8-K 2020-04-29
8-K 2020-03-13
8-K 2020-01-09
8-K 2019-12-18
8-K 2019-12-02
8-K 2019-11-23
8-K 2019-10-08
8-K 2019-08-01
8-K 2019-05-06
8-K 2019-03-04
8-K 2019-01-07
8-K 2018-10-24
8-K 2018-09-12
8-K 2018-08-08
8-K 2018-05-10
8-K 2018-03-14
8-K 2018-01-30

LJPC 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ljpc-ex311_9.htm
EX-31.2 ljpc-ex312_6.htm
EX-32.1 ljpc-ex321_8.htm

La Jolla Pharmaceutical Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
2752121498623-402012201420172020
Assets, Equity
10.0-3.0-16.0-29.0-42.0-55.02013201520172020
Rev, G Profit, Net Income
130945822-14-502012201420172020
Ops, Inv, Fin

ljpc-10q_20210331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

 

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: 1-36282

 

LA JOLLA PHARMACEUTICAL COMPANY

(Exact name of registrant as specified in its charter)

 

 

California

 

33-0361285

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

201 Jones Road,

Suite 400, Waltham, MA

 

02451

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (617715-3600

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

LJPC

 

The Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No 

As of April 3, 2021, there were 27,448,571 shares of common stock outstanding.

 


 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

1

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020

1

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (Unaudited)

2

 

 

Condensed Consolidated Statements of Shareholders’ Deficit for the Three Months Ended March 31, 2021 and 2020 (Unaudited)

3

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited)

4

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

5

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

25

 

 

Item 4. Controls and Procedures

25

 

 

PART II. OTHER INFORMATION

26

 

 

Item 1. Legal Proceedings

26

 

 

Item 1A. Risk Factors

26

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

26

 

 

Item 3. Defaults upon Senior Securities

26

 

 

Item 4. Mine Safety Disclosures

26

 

 

Item 5. Other Information

26

 

 

Item 6. Exhibits

26

 

 

SIGNATURES

27

 

 

 

 


 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LA JOLLA PHARMACEUTICAL COMPANY

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,634

 

 

$

21,221

 

Accounts receivable, net

 

 

4,153

 

 

 

5,834

 

Inventory, net

 

 

5,374

 

 

 

6,013

 

Prepaid expenses and other current assets

 

 

6,104

 

 

 

3,388

 

Total current assets

 

 

54,265

 

 

 

36,456

 

Goodwill

 

 

20,123

 

 

 

20,123

 

Intangible assets, net

 

 

14,485

 

 

 

14,873

 

Right-of-use lease assets

 

 

490

 

 

 

536

 

Property and equipment, net

 

 

186

 

 

 

215

 

Restricted cash

 

 

40

 

 

 

40

 

Total assets

 

$

89,589

 

 

$

72,243

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,098

 

 

$

2,762

 

Accrued expenses

 

 

8,721

 

 

 

6,494

 

Accrued payroll and related expenses

 

 

1,693

 

 

 

2,878

 

Lease liabilities, current portion

 

 

196

 

 

 

204

 

Total current liabilities

 

 

11,708

 

 

 

12,338

 

Deferred royalty obligation, net

 

 

124,453

 

 

 

124,437

 

Accrued interest expense on deferred royalty obligation, less current portion

 

 

20,884

 

 

 

19,111

 

Lease liabilities, less current portion

 

 

294

 

 

 

332

 

Other noncurrent liabilities

 

 

4,568

 

 

 

4,112

 

Total liabilities

 

 

161,907

 

 

 

160,330

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Shareholders’ deficit:

 

 

 

 

 

 

 

 

Common Stock, $0.0001 par value; 100,000,000 shares authorized, 27,448,571 and 27,402,648 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

3

 

 

 

3

 

Series C-12 Convertible Preferred Stock, $0.0001 par value; 11,000 shares authorized, 3,906 shares issued and outstanding at March 31, 2021 and December 31, 2020; and liquidation preference of $3,906 at March 31, 2021 and December 31, 2020

 

 

3,906

 

 

 

3,906

 

Additional paid-in capital

 

 

986,107

 

 

 

984,756

 

Accumulated deficit

 

 

(1,062,334

)

 

 

(1,076,752

)

Total shareholders’ deficit

 

 

(72,318

)

 

 

(88,087

)

Total liabilities and shareholders’ deficit

 

$

89,589

 

 

$

72,243

 

 

See accompanying notes to the condensed consolidated financial statements.

 

1


 

 

LA JOLLA PHARMACEUTICAL COMPANY

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Revenue

 

 

 

 

 

 

 

 

Net product sales

 

$

8,637

 

 

$

7,591

 

License revenue

 

 

25,500

 

 

 

-

 

Total revenue

 

 

34,137

 

 

 

7,591

 

Operating expenses

 

 

 

 

 

 

 

 

Cost of product sales

 

 

2,731

 

 

 

716

 

Cost of license revenue

 

 

3,600

 

 

 

-

 

Selling, general and administrative

 

 

8,755

 

 

 

8,152

 

Research and development

 

 

1,558

 

 

 

9,183

 

Total operating expenses

 

 

16,644

 

 

 

18,051

 

Income (loss) from operations

 

 

17,493

 

 

 

(10,460

)

Other (expense) income

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,609

)

 

 

(2,406

)

Interest income

 

 

2

 

 

 

190

 

Other income—related party

 

 

-

 

 

 

4,085

 

Other expense

 

 

(450

)

 

 

-

 

Total other (expense) income, net

 

 

(3,057

)

 

 

1,869

 

Income (loss) before income taxes

 

 

14,436

 

 

 

(8,591

)

Provision for income taxes

 

 

18

 

 

 

-

 

Net income (loss)

 

$

14,418

 

 

$

(8,591

)

Earnings (loss) per share

 

 

 

 

 

 

 

 

Basic

 

$

0.53

 

 

$

(0.32

)

Diluted

 

$

0.42

 

 

$

(0.32

)

Shares used in computing earnings (loss) per share

 

 

 

 

 

 

 

 

Basic

 

 

27,427

 

 

 

27,238

 

Diluted

 

 

34,183

 

 

 

27,238

 

 

See accompanying notes to the condensed consolidated financial statements.

 

 

 

2


 

 

 

LA JOLLA PHARMACEUTICAL COMPANY

Condensed Consolidated Statements of Shareholders Deficit

(Unaudited)

(in thousands)

 

 

 

Series C-12

Convertible

Preferred Stock

 

 

Common

Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2020

 

 

4

 

 

$

3,906

 

 

 

27,403

 

 

$

3

 

 

$

984,756

 

 

$

(1,076,752

)

 

$

(88,087

)

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,116

 

 

 

-

 

 

 

1,116

 

Issuance of common stock under 2013 Equity Plan

 

 

-

 

 

 

-

 

 

 

29

 

 

 

-

 

 

 

154

 

 

 

-

 

 

 

154

 

Issuance of common stock under ESPP

 

 

-

 

 

 

-

 

 

 

17

 

 

 

-

 

 

 

81

 

 

 

-

 

 

 

81

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,418

 

 

 

14,418

 

Balance at March 31, 2021

 

 

4

 

 

$

3,906

 

 

 

27,449

 

 

$

3

 

 

$

986,107

 

 

$

(1,062,334

)

 

$

(72,318

)

 

 

 

 

Series C-12

Convertible

Preferred Stock

 

 

Common

Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Shareholders'

(Deficit)

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

4

 

 

$

3,906

 

 

 

27,195

 

 

$

3

 

 

$

977,432

 

 

$

(1,037,331

)

 

$

(55,990

)

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,407

 

 

 

-

 

 

 

2,407

 

Issuance of common stock under 2013 Equity Plan

 

 

-

 

 

 

-

 

 

 

44

 

 

 

-

 

 

 

305

 

 

 

-

 

 

 

305

 

Issuance of common stock under ESPP

 

 

-

 

 

 

-

 

 

 

38

 

 

 

-

 

 

 

200

 

 

 

-

 

 

 

200

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,591

)

 

 

(8,591

)

Balance at March 31, 2020

 

 

4

 

 

$

3,906

 

 

 

27,277

 

 

$

3

 

 

$

980,344

 

 

$

(1,045,922

)

 

$

(61,669

)

 

See accompanying notes to the condensed consolidated financial statements.

 

 

3


 

 

 

LA JOLLA PHARMACEUTICAL COMPANY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

14,418

 

 

$

(8,591

)

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

1,116

 

 

 

2,407

 

Depreciation expense

 

 

29

 

 

 

1,060

 

Non-cash interest expense

 

 

1,736

 

 

 

1,682

 

Inventory fair value step-up adjustment included in cost of product sales

 

 

850

 

 

 

-

 

Amortization of intangible assets

 

 

388

 

 

 

-

 

Loss on change in fair value of contingent value rights

 

 

450

 

 

 

-

 

Amortization of right-of-use lease assets

 

 

46

 

 

 

345

 

Loss on disposal of property and equipment

 

 

-

 

 

 

148

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

1,681

 

 

 

(592

)

Inventory, net

 

 

(211

)

 

 

251

 

Prepaid expenses and other current assets

 

 

(2,716

)

 

 

1,084

 

Accounts payable

 

 

(1,664

)

 

 

(2,282

)

Accrued expenses

 

 

2,286

 

 

 

(2,404

)

Accrued payroll and related expenses

 

 

(1,185

)

 

 

(4,683

)

Lease liabilities

 

 

(46

)

 

 

(674

)

Net cash provided by (used for) operating activities

 

 

17,178

 

 

 

(12,249

)

Investing activities

 

 

 

 

 

 

 

 

Proceeds from the sale of property and equipment

 

 

-

 

 

 

1,143

 

Net cash provided by investing activities

 

 

-

 

 

 

1,143

 

Financing activities

 

 

 

 

 

 

 

 

Net proceeds from issuance of common stock under 2013 Equity Plan

 

 

154

 

 

 

305

 

Net proceeds from issuance of common stock under ESPP

 

 

81

 

 

 

200

 

Net cash provided by financing activities

 

 

235

 

 

 

505

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

17,413

 

 

 

(10,601

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

21,261

 

 

 

88,729

 

Cash, cash equivalents and restricted cash, end of period

 

$

38,674

 

 

$

78,128

 

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,634

 

 

$

77,219

 

Restricted cash

 

 

40

 

 

 

909

 

Total cash, cash equivalents and restricted cash

 

$

38,674

 

 

$

78,128

 

 

See accompanying notes to the condensed consolidated financial statements.

4


 

LA JOLLA PHARMACEUTICAL COMPANY

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1.  Business

La Jolla Pharmaceutical Company (collectively with its wholly owned subsidiaries, “La Jolla” or the “Company”) is dedicated to the development and commercialization of innovative therapies that improve outcomes in patients suffering from life-threatening diseases. GIAPREZA (angiotensin II) injection is approved by the U.S. Food and Drug Administration (“FDA”) as a vasoconstrictor indicated to increase blood pressure in adults with septic or other distributive shock. XERAVA (eravacycline) for injection is approved by the FDA as a tetracycline class antibacterial indicated for the treatment of complicated intra-abdominal infections (“cIAI”) in patients 18 years of age and older.

On July 28, 2020, La Jolla completed its acquisition of Tetraphase Pharmaceuticals, Inc. and its subsidiaries (“Tetraphase”), a biopharmaceutical company focused on commercializing XERAVA, for $43 million in upfront cash plus potential future cash payments of up to $16 million. The Company’s consolidated financial results exclude Tetraphase’s financial results prior to the acquisition closing date of July 28, 2020 (see Note 11).

In January 2021, La Jolla and certain of its wholly owned subsidiaries, including La Jolla Pharma, LLC, entered into a license agreement with PAION AG to commercialize GIAPREZA and XERAVA in the European Economic Area, the United Kingdom and Switzerland. Pursuant to the agreement: (i) the Company has received an upfront cash payment of $22.5 million, less a 15% refundable withholding tax; and (ii) the Company is entitled to receive potential commercial milestone payments of up to $109.5 million and royalties on net sales of GIAPREZA and XERAVA.

In March 2021, under its license agreement with Everest Medicines Limited (“Everest”), the Company received a $3.0 million milestone payment associated with the submission of a New Drug Application (“NDA”) with the China National Medical Products Administration (“NMPA”) for XERAVA for the treatment of cIAI in patients in China. The Company previously granted Everest an exclusive license to develop and commercialize XERAVA for the treatment of cIAI and other indications in mainland China, Taiwan, Hong Kong, Macau, South Korea, Singapore, the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines. The Company is eligible to receive an additional $8.0 million regulatory milestone payment and up to an aggregate of $20.0 million in sales milestone payments. The Company is also entitled to receive royalties from Everest on sales, if any, by Everest of products containing eravacycline.

As of March 31, 2021 and December 31, 2020, the Company had cash and cash equivalents of $38.6 million and $21.2 million, respectively. Based on the Company’s current operating plans and projections, the Company expects that its existing cash and cash equivalents will be sufficient to fund operations for at least one year from the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (the “SEC”).

2.  Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, certain information and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 8, 2021 (the “Form 10-K”). The accompanying condensed consolidated financial statements include the accounts of La Jolla Pharmaceutical Company and its wholly owned subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.

The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s condensed consolidated financial statements and the accompanying notes. Actual results may differ materially from these estimates. Certain amounts previously

5


 

reported in the financial statements have been reclassified to conform to the current year presentation. Such reclassifications did not affect net loss, shareholders’ deficit or cash flows. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year or any future interim periods. The accompanying condensed consolidated balance sheet as of December 31, 2020 has been derived from the audited consolidated balance sheet as of December 31, 2020 contained in the Form 10-K.

Summary of Significant Accounting Policies

During the three months ended March 31, 2021, other than the license revenue recognition policy described below, there have been no changes to the Company’s significant accounting policies as described in Note 2 of the Form 10-K.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash. The Company maintains its cash in checking and savings accounts at federally insured financial institutions in excess of federally insured limits.

During the three months ended March 31, 2021, 291 hospitals in the U.S. purchased GIAPREZA. During the three months ended March 31, 2021, 390 hospitals and other healthcare organizations in the U.S. purchased XERAVA. Hospitals and other healthcare organizations purchase our products through a network of specialty and wholesale distributors. These specialty and wholesale distributors are considered our customers for accounting purposes. The Company does not believe that the loss of one of these distributors would significantly impact the ability to distribute our products, as the Company expects that sales volume would be absorbed by the remaining distributors. The following table includes the percentage of U.S. net product sales and accounts receivable balances for the Company’s three major customers, each of which comprised 10% or more of its U.S. net product sales:

 

 

 

U.S. Net Product

Sales

 

 

 

Accounts

Receivable

 

 

 

Three Months Ended

March 31, 2021

 

 

 

As of March 31, 2021

 

Customer A

 

 

38

%

 

 

 

30

%

Customer B

 

 

33

%

 

 

 

39

%

Customer C

 

 

25

%

 

 

 

29

%

Total

 

 

96

%

 

 

 

98

%

 

Business Combinations

The Company accounts for business combinations using the acquisition method pursuant to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 805. This method requires, among other things, that results of operations of acquired companies are included in La Jolla's financial results beginning on the respective acquisition dates, and that assets acquired and liabilities assumed are recognized at fair value as of the acquisition date. Intangible assets acquired in a business combination are recorded at fair value using a discounted cash flow model. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, the cost of capital and terminal values from the perspective of a market participant. Any excess of the fair value of consideration transferred (the “Purchase Price”) over the fair values of the net assets acquired is recognized as goodwill. Contingent consideration liabilities are recognized as part of the Purchase Price at the estimated fair value on the acquisition date. Subsequent changes to the fair value of contingent consideration liabilities will be included in other (expense) income, net in the consolidated statements of operations. The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed 12 months from the acquisition date. Legal costs, due diligence costs, business valuation costs and all other acquisition-related costs are expensed when incurred.

Intangible Assets

Intangible assets acquired in a business combination are initially recorded at fair value. Intangible assets with a definite useful life are amortized on a straight-line basis over the estimated useful life of the related assets. Intangible assets with an indefinite useful life are not amortized.

6


 

The Company reviews its intangible assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the asset, including its eventual residual value, is compared to the carrying value to determine whether impairment exists. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values. Fair value is estimated through discounted cash flow models to project cash flows from the asset.

The Company recognized no impairment charge for the three months ended March 31, 2021.

Goodwill

Goodwill represents the excess of the Purchase Price over the fair value of the net assets acquired as of the acquisition date. Goodwill has an indefinite useful life and is not amortized.

The Company reviews its goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the Company may exceed its fair value. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the Company is less than its carrying amount, including goodwill. If that is the case, the Company performs a quantitative impairment test, and, if the carrying amount of the Company exceeds its fair value, then the Company will recognize an impairment charge for the amount by which its carrying amount exceeds its fair value, not to exceed the carrying amount of the goodwill.

The Company recognized no impairment charge for the three months ended March 31, 2021.

Revenue Recognition

Pursuant to FASB ASC Topic 606—Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when its customers obtain control of the Company’s product, which typically occurs on delivery. Revenue is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods. To determine revenue recognition for contracts with customers within the scope of ASC 606, the Company performs the following 5 steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies the relevant performance obligations.

Product Sales

Revenue from product sales is recorded at the transaction price, net of estimates for variable consideration consisting of chargebacks, discounts, returns, Medicaid rebates and administrative fees. Variable consideration is estimated using the expected-value amount method, which is the sum of probability-weighted amounts in a range of possible consideration amounts. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results vary materially from the Company’s estimates, the Company will adjust these estimates, which will affect revenue from product sales and earnings in the period such estimates are adjusted. These items include:

 

Chargebacks—Chargebacks are discounts the Company provides to distributors in the event that the sales prices to end users are below the distributors’ acquisition price. This may occur due to a direct contract with a health system, a group purchasing organization (“GPO”) agreement or a sale to a government facility. Chargebacks are estimated based on known chargeback rates and recorded as a reduction of revenue on delivery to the Company’s customers.

 

Discounts—The Company offers customers various forms of incentives and consideration, including prompt-pay and other discounts. The Company estimates discounts primarily based on contractual terms. These discounts are recorded as a reduction of revenue on delivery to the Company’s customers.

 

Returns—The Company offers customers a limited right of return, generally for damaged or expired product. The Company estimates returns based on an internal analysis, which includes actual experience. The estimates for returns are recorded as a reduction of revenue on delivery to the Company’s customers.

 

Medicaid Rebates—We participate in Medicaid rebate programs, which provide assistance to certain low-income patients based on each individual state’s guidelines regarding eligibility and services. Under the Medicaid rebate programs, we pay a rebate to each participating state, generally within three months after the

7


 

 

quarter in which product was sold. The estimates for rebates are recorded as a reduction of revenue on delivery to the Company’s customers.

 

Administrative Fees—The Company pays administrative fees to GPOs for services and access to data. Additionally, the Company pays an Industrial Funding Fee as part of the U.S. General Services Administration’s Federal Supply Schedules program. These fees are based on contracted terms and are paid after the quarter in which the product was purchased by the applicable GPO or government agency. Administrative fees are recorded as a reduction of revenue on delivery to customers.

The Company will continue to assess its estimates of variable consideration as it accumulates additional historical data and will adjust these estimates accordingly.

License Revenue

We enter into out-license agreements with counterparties to develop and/or commercialize our products in territories outside of the U.S. in exchange for: (i) nonrefundable, upfront license fees; (ii) development and regulatory milestone payments; and/or (iii) sales-based royalties and milestones.

If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from nonrefundable, upfront fees allocated to the license when the license is transferred to the customer and the customer can benefit from the license. For licenses that are bundled with other performance obligations, management uses judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of progress and related revenue recognition.

At the inception of each arrangement that include milestone and other payments, other than sales-based milestone payments and nonrefundable, upfront license fees, we evaluate whether achieving each milestone payment or other payment is considered probable and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is included in the transaction price. Milestone payments that are not within our control, such as approvals from regulators or where attainment of the specified event is dependent on the development activities of a third party, are not considered probable of being achieved until those approvals are received or the specified event occurs.

For arrangements that include sales-based royalties and milestone payments, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of: (i) when the related sales occur; or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position and results of operations.

3.  Earnings (Loss) per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period, without consideration of potential common shares. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding plus potential common shares. Convertible preferred stock and stock options are considered potential common shares and are included in the calculation of diluted earnings (loss) per share using the treasury stock method when their effect is dilutive. Potential common shares are excluded from the calculation of diluted earnings (loss) per share when their effect is anti-dilutive. For the three months ended March 31, 2021, there were 6.8 million potential common shares that were included in the calculation of diluted earnings per share, which consists of: (i) 6.7 million shares of common stock issuable upon conversion of existing convertible preferred stock; and (ii) 21,000 stock options. For the three months ended March 31, 2021 and 2020, there were 4.1 million and 11.6 million, respectively, of potential common shares that were excluded from the calculation of diluted loss per share because their effect was anti-dilutive.

8


 

4.  Balance Sheet Details

Restricted Cash

Restricted cash as of March 31, 2021 and December 31, 2020 consisted of a $40,000 security deposit for the Company’s corporate purchasing credit card.

Inventory, Net

Inventory, net consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Raw materials

 

$

802

 

 

$

802

 

Work-in-process

 

 

3,235

 

 

 

3,213

 

Finished goods

 

 

1,337

 

 

 

1,998

 

Total inventory, net

 

$

5,374

 

 

$

6,013

 

 

As of March 31, 2021 and December 31, 2020, inventory, net included zero and $0.9 million, respectively, of the fair value step-up adjustment to Tetraphase’s inventory recorded in connection with the acquisition of Tetraphase (see Note 11). As of March 31, 2021 and December 31, 2020, total inventory is recorded net of inventory reserves of $1.1 million and $0.9 million, respectively.

Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Refundable withholding tax

 

$

3,375

 

 

$

-

 

Prepaid manufacturing costs

 

 

529

 

 

 

930

 

Prepaid clinical costs

 

 

294

 

 

 

820

 

Prepaid insurance

 

 

319

 

 

 

505

 

Other prepaid expenses and current assets

 

 

1,587

 

 

 

1,133

 

Total prepaid expenses and other current assets

 

$

6,104

 

 

$

3,388

 

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Computer hardware

 

$

310

 

 

$

310

 

Furniture and fixtures

 

 

309

 

 

 

309

 

Software

 

 

203

 

 

 

733

 

Total property and equipment, gross

 

 

822

 

 

 

1,352

 

Accumulated depreciation and amortization

 

 

(636

)

 

 

(1,137

)

Total property and equipment, net

 

$

186

 

 

$

215

 

9


 

 

Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):

 

 

 

Weighted-average

 

March 31,

 

 

December 31,

 

 

 

Years

 

2021

 

 

2020

 

Technology

 

10

 

$

14,000

 

 

$

14,000

 

Trade name

 

10

 

 

1,520

 

 

 

1,520

 

Total intangible assets, gross

 

 

 

 

15,520

 

 

 

15,520

 

Accumulated amortization

 

 

 

 

(1,035

)

 

 

(647

)

Total intangible assets, net

 

 

 

$

14,485

 

 

$

14,873

 

The intangible assets were recorded in connection with the acquisition of Tetraphase (see Note 11). The Company recorded amortization expense of $0.4 million and zero for the three months ended March 31, 2021 and 2020, respectively.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Accrued interest expense on deferred royalty obligation, current portion

 

$

3,514

 

 

$

3,567

 

Accrued royalties and in-license fees

 

 

2,445

 

 

 

685

 

Accrued manufacturing costs

 

 

1,306

 

 

 

627

 

Accrued professional fees

 

 

581

 

 

 

660

 

Accrued clinical costs

 

 

22

 

 

 

20

 

Accrued other

 

 

853

 

 

 

935

 

Total accrued expenses

 

$

8,721

 

 

$

6,494

 

 

Other Noncurrent Liabilities

Other noncurrent liabilities consisted of the following (in thousands):