-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RUimNsPFpnJyJL44aCUKyFK6fBY0HorhjMpOybMX23jFIxs3HZo8D6x4HMqu7bNL hi+rxMPe0S3Gl9e/QwiQ1Q== /in/edgar/work/20000719/0000936392-00-000376/0000936392-00-000376.txt : 20000920 0000936392-00-000376.hdr.sgml : 20000920 ACCESSION NUMBER: 0000936392-00-000376 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000719 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LA JOLLA PHARMACEUTICAL CO CENTRAL INDEX KEY: 0000920465 STANDARD INDUSTRIAL CLASSIFICATION: [2836 ] IRS NUMBER: 330361285 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-24274 FILM NUMBER: 675013 BUSINESS ADDRESS: STREET 1: 6455 NANCY RIDGE DR CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6194526600 MAIL ADDRESS: STREET 1: 6455 NANCY RIDGE DR CITY: SAN DIEGO STATE: CA ZIP: 92121 10-K405/A 1 e10-k405a.txt AMENDMENT NO. 1 TO FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1999 [ ] 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 (Exact name of registrant as specified in its charter) DELAWARE 33-0361285 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 6455 NANCY RIDGE DRIVE, SAN DIEGO, CA 92121 (Address of principal executive offices) Registrant's telephone number, including area code: (858) 452-6600 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 Warrants 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 [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the closing price of such stock on the Nasdaq Stock Market on January 31, 2000, was $78,542,398. The number of shares of the Registrant's common stock, $.01 par value, outstanding at January 31, 2000 was 20,269,006. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates certain information by reference from the Registrant's definitive proxy statement for its annual meeting of stockholders held on May 11, 2000, which was filed on April 10, 2000. The Registrant hereby amends the footnotes to the financial statements included in Item 14 of its Annual Report on Form 10-K filed on February 25, 2000 as follows: 1 2 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) Documents filed as part of this report: 1. Financial Statements. The following financial statements of La Jolla Pharmaceutical Company are included in Item 8: Report of Independent Auditors ........................................ F-1 Balance Sheets at December 31, 1999 and 1998........................... F-2 Statements of Operations for each of the three years in the periods ended December 31, 1999, 1998 and 1997................................. F-3 Statements of Stockholders' Equity for each of the three years in the periods ended December 31, 1999, 1998 and 1997.................. F-4 Statements of Cash Flows for each of the three years in the periods ended December 31, 1999, 1998 and 1997................................. F-5 Notes to Financial Statements.......................................... F-6
2. Financial Statement Schedules. No financial statement schedules are required. 2 3 3. Exhibits.
Exhibit Number Description - ------- ----------- 3.1 Intentionally omitted 3.2 Amended and Restated Bylaws of the Company(14) 3.3 Amended and Restated Certificate of Incorporation of the Company(14) 4.0 Rights Agreement dated as of December 3, 1998 between the Company and American Stock Transfer & Trust Company(11) 4.1 Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Company(13) 10.1 Intentionally omitted 10.2 Stock Option Agreement dated February 4, 1993 entitling Joseph Stemler to purchase 35,000 shares of Common Stock(1) * 10.3 Intentionally omitted 10.4 Intentionally omitted 10.5 Intentionally omitted 10.6 Steven B. Engle Employment Agreement(1), Amendment No. 1(9) and Amendment No. 2(15)* 10.7 Form of Directors and Officers Indemnification Agreement(1) 10.8 Intentionally omitted 10.9 Intentionally omitted 10.10 Option and Collaborative Research Agreement dated June 10, 1991 regarding certain compounds for potential treatment of muscular dystrophies or myasthenia gravis between the Company and CepTor Corporation(1) 10.11 Intentionally omitted 10.12 Intentionally omitted 10.13 Form of Employee Invention and Confidential Information Agreement(1) 10.14 Industrial Real Estate Lease(1) 10.15 Intentionally omitted 10.16 Master Lease Agreement dated June 22, 1993 with Aberlyn Capital Management Limited Partnership ("ACM") and related Agreements to Issue Warrant with Warrants issued to ACM and Aberlyn Holding Company, Inc.(1) 10.17 La Jolla Pharmaceutical Company 1989 Incentive Stock Option Plan and 1989 Nonstatutory Stock Option Plan(1)* 10.18 Form of Stock Option Agreement under the 1989 Nonstatutory Stock Option Plan(1) 10.19 Amended La Jolla Pharmaceutical Company 1994 Incentive Stock Option Plan(13)* 10.20 Intentionally omitted 10.21 Letter of Agreement dated June 7, 1993 between the Company and Vector Securities International regarding Vector's engagement as financial advisor to the Company with respect to potential corporate strategic alliances(1) 10.22 Intentionally omitted
3 4 10.23 Intentionally omitted 10.24 Intentionally omitted 10.25 Second Amendment to Lease dated June 30, 1994 by and between the Company and BRE Properties, Inc.(2) 10.26 Intentionally omitted 10.27 Third Amendment to Lease dated January 26, 1995 by and between the Company and BRE Properties, Inc.(3) 10.28 Intentionally omitted 10.29 Master Lease Agreement dated September 13, 1995 by and between the Company and Comdisco Electronics Group(4) 10.30 Intentionally omitted 10.31 Agreement dated September 22, 1995 between the Company and Joseph Stemler regarding option vesting(5)* 10.32 Intentionally omitted 10.33 Building Lease Agreement effective November 1, 1996 by and between the Company and WCB II-S BRD Limited Partnership(6) 10.34 Master Lease Agreement dated December 20, 1996 by and between the Company and Transamerica Business Credit Corporation(8) 10.35 License and Supply Agreement dated December 23, 1996 by and between the Company and Abbott Laboratories(7),(8) 10.36 Stock Purchase Agreement dated December 23, 1996 by and between the Company and Abbott Laboratories(8) 10.37 Intentionally omitted 10.38 Master Lease Agreement No. 2 dated June 23, 1998 by and between the Company and Transamerica Business Credit Corporation(10) 10.39 William J. Welch Employment Agreement and Attachment A(12)* 10.40 Supplement to employment offer letter for Matthew Linnik, Ph.D.(15)* 23.1 Consent of Independent Auditors(16) 27 Financial Data Schedule(15)
- --------------- * This exhibit is a management contract or compensatory plan or arrangement. (1) Previously filed with the Company's Registration Statement on Form S-1 (No. 33-76480) as declared effective by the Securities and Exchange Commission on June 3, 1994. (2) Previously filed with the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1994 and incorporated by reference herein. (3) Previously filed with the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated by reference herein. (4) Previously filed with the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1995 and incorporated by reference herein. (5) Previously filed with the Company's annual report on Form 10-K for the fiscal year ended December 31, 1995 and incorporated by reference herein. (6) Previously filed with the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1996 and incorporated by reference herein. (7) Portions of the Exhibit 10.35 have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934. 4 5 (8) Previously filed with the Company's annual report on Form 10-K for the fiscal year ended December 31, 1996 and incorporated by reference herein. (9) Previously filed with the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1997 and incorporated by reference herein. (10) Previously filed with the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1998 and incorporated by reference herein. (11) Previously filed with the Company's Registration Statement on Form 8-A (No. 000-24274) as filed with the Securities and Exchange Commission on December 4, 1998. (12) Previously filed with the Company's annual report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated by reference herein (13) Previously filed with the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1999 and incorporated by reference herein. (14) Previously filed with the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1999 and incorporated by reference herein. (15) Previously filed. (16) Filed herein. (b) Reports on Form 8-K: None. 5 6 Report of Independent Auditors The Board of Directors and Stockholders La Jolla Pharmaceutical Company We have audited the accompanying balance sheets of La Jolla Pharmaceutical Company as of December 31, 1999 and 1998, and the related statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of La Jolla Pharmaceutical Company at December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP San Diego, California February 11, 2000 F-1 7 La Jolla Pharmaceutical Company Balance Sheets (In thousands, except share and per share data)
DECEMBER 31, ----------------------- 1999 1998 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 4,409 $ 11,176 Short-term investments 6,994 12,174 Other current assets 464 517 -------- -------- Total current assets 11,867 23,867 Property and equipment, net 658 659 Patent costs and other assets, net 1,518 1,289 -------- -------- $ 14,043 $ 25,815 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 225 $ 1,254 Accrued expenses 520 575 Accrued payroll and related expenses 262 355 Current portion of obligations under capital leases 199 3 Deferred revenue - related party -- 1,769 -------- -------- Total current liabilities 1,206 3,956 Noncurrent portion of obligations under capital leases 44 -- Commitments Stockholders' equity: Preferred stock, $.01 par value; 8,000,000 shares authorized, no shares issued or outstanding -- -- Common stock, $.01 par value; 100,000,000 shares authorized, 20,204,424 and 20,106,303 shares issued and outstanding at December 31, 1999 and 1998, respectively 202 201 Additional paid-in capital 84,358 84,276 Accumulated deficit (71,767) (62,618) -------- -------- Total stockholders' equity 12,793 21,859 -------- -------- $ 14,043 $ 25,815 ======== ========
See accompanying notes. F-2 8 La Jolla Pharmaceutical Company Statements of Operations (In thousands, except per share data)
YEARS ENDED DECEMBER 31, -------------------------------------- 1999 1998 1997 -------- -------- -------- Revenues: Revenue from collaborative agreement - related party $ 4,690 $ 8,600 $ 9,860 Expenses: Research and development 11,686 14,627 14,676 General and administrative 2,944 3,076 2,937 -------- -------- -------- Total expenses 14,630 17,703 17,613 -------- -------- -------- Loss from operations (9,940) (9,103) (7,753) Interest expense (20) (6) (56) Interest income 811 1,232 1,441 -------- -------- -------- Net loss $ (9,149) $ (7,877) $ (6,368) ======== ======== ======== Basic and diluted net loss per share $ (0.45) $ (0.42) $ (0.36) ======== ======== ======== Shares used in computing basic and diluted net loss per share 20,135 18,649 17,547 ======== ======== ========
See accompanying notes. F-3 9 La Jolla Pharmaceutical Company Statements of Stockholders' Equity For the Years Ended December 31, 1997, 1998 and 1999
(In thousands) COMMON STOCK ADDITIONAL TOTAL ------------------ PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS' SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY ------ ------ ---------- ------------ ----------- ------------- Balance at December 31, 1996 17,279 $173 $ 76,307 $(169) $(48,373) $ 27,938 Issuance of common stock 831 8 3,852 -- -- 3,860 Issuance of common stock under Employee Stock Purchase Plan 41 1 150 -- -- 151 Exercise of stock options 9 -- 11 -- -- 11 Amortization of deferred compensation -- -- -- 123 -- 123 Adjustment to deferred compensation for terminations -- -- (16) 16 -- -- Net loss -- -- -- -- (6,368) (6,368) ------ ---- -------- ----- -------- -------- Balance at December 31, 1997 18,160 182 80,304 (30) (54,741) 25,715 Issuance of common stock 1,538 15 3,767 -- -- 3,782 Issuance of common stock under Employee Stock Purchase Plan 43 -- 128 -- -- 128 Exercise of stock options 365 4 85 -- -- 89 Amortization of deferred compensation -- -- -- 22 -- 22 Adjustment to deferred compensation for terminations -- -- (8) 8 -- -- Net loss -- -- -- -- (7,877) (7,877) ------ ---- -------- ----- -------- -------- Balance at December 31, 1998 20,106 201 84,276 -- (62,618) 21,859 Issuance of common stock under Employee Stock Purchase Plan 78 1 53 -- -- 54 Exercise of stock options 20 -- 29 -- -- 29 Net loss -- -- -- -- (9,149) (9,149) ------ ---- -------- ----- -------- -------- Balance at December 31, 1999 20,204 $202 $ 84,358 $ -- $(71,767) $ 12,793 ====== ==== ======== ===== ======== ========
See accompanying notes. F-4 10 La Jolla Pharmaceutical Company Statements of Cash Flows (In thousands)
YEARS ENDED DECEMBER 31, ---------------------------------------- 1999 1998 1997 -------- -------- -------- OPERATING ACTIVITIES Net loss $ (9,149) $ (7,877) $ (6,368) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 357 367 642 Write-off of patent costs -- -- 7 Write-off of property and equipment -- 8 76 Deferred compensation amortization -- 22 123 Changes in operating assets and liabilities: Receivable - related party -- -- 4,000 Other current assets 53 141 434 Accounts payable and accrued expenses (1,084) (307) (509) Accrued payroll and related expenses (93) (22) 83 Deferred revenue - related party (1,769) 492 1,277 -------- -------- -------- Net cash used for operating activities (11,685) (7,176) (235) INVESTING ACTIVITIES Purchases of short-term investments (12,289) (20,576) (21,842) Sales of short-term investments 6,667 2,500 5,493 Maturities of short-term investments 10,802 20,881 18,991 Additions to property and equipment (180) (55) (124) Deletions to property and equipment 275 -- -- Increase in patent costs and other assets (275) (258) (250) -------- -------- -------- Net cash provided by investing activities 5,000 2,492 2,268 FINANCING ACTIVITIES Net proceeds from issuance of common stock 83 217 162 Net proceeds from issuance of common stock to related party -- 3,782 3,860 Payments on obligations under capital leases (165) (138) (669) -------- -------- -------- Net cash (used for) provided by financing activities (82) 3,861 3,353 -------- -------- -------- (Decrease) increase in cash and cash equivalents (6,767) (823) 5,386 Cash and cash equivalents at beginning of period 11,176 11,999 6,613 -------- -------- -------- Cash and cash equivalents at end of period $ 4,409 $ 11,176 $ 11,999 ======== ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 20 $ 6 $ 56 ======== ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Capital lease obligations incurred for property and equipment $ 405 $ -- $ -- ======== ======== ======== Adjustment to deferred compensation for terminations $ -- $ 8 $ 16 ======== ======== ======== See accompanying notes.
F-5 11 La Jolla Pharmaceutical Company Notes to Financial Statements 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND BUSINESS ACTIVITY La Jolla Pharmaceutical Company (the "Company") is a biopharmaceutical company focused on the research and development of highly specific therapeutics for the treatment of certain life-threatening antibody-mediated diseases. These diseases, including autoimmune conditions such as systemic lupus erythematosus ("lupus") and antibody-mediated stroke, are caused by abnormal B cell production of antibodies that attack healthy tissues. Current therapies for these autoimmune disorders target the symptoms of the disease or nonspecifically suppress the normal operation of the immune system, frequently resulting in severe, adverse side effects and hospitalization. The Company's drug candidates, called Toleragens(R), are designed to treat the underlying cause of many antibody-mediated diseases without these severe, adverse side effects. The Company's clinical drug candidate is known as LJP 394, a lupus treatment drug. All of the Company's revenues to date have been primarily derived from its former collaborative agreement with Abbott Laboratories ("Abbott"), a related party (See Note 2). As part of its planned business operations, the Company seeks to pursue collaborations with pharmaceutical companies in an effort to access their research, drug development, manufacturing and financial resources. Prior to generating product revenues, the Company must complete the development of its products, including several years of clinical testing, and receive regulatory approvals prior to selling these products commercially. There can be no assurance that the Company's product development efforts with respect to LJP 394 or any other drug candidate will be successfully completed, that required regulatory approvals will be obtained, or that any product, if introduced, will be successfully marketed or achieve commercial acceptance. In addition, there can be no assurance that the Company can successfully manufacture and market any such products at prices that would permit the Company to operate profitably. In May 1999, Abbott and the Company elected to stop enrollment and treatment of the more than 200 patients enrolled in the jointly conducted Phase II/III clinical trial of LJP 394. In September 1999, Abbott and the Company terminated their agreement and all rights to LJP 394 were returned to the Company. The Company actively seeks additional financing to fund its research and development efforts and commercialize its technologies. There is no assurance such financing will be available to the Company when required or that such financing would be available under favorable terms. The Company believes that patents and other proprietary rights are important to its business. The Company's policy is to file patent applications to protect technology, inventions and improvements to its inventions that are considered important to the development of its business. The patent positions of biotechnology firms, including the Company, are uncertain and involve complex legal and factual questions for which important legal principles are largely unresolved. There can be no assurance that any additional patents will be issued, or that the scope of any patent protection will be sufficient, or that any current or future issued patent will be held valid if subsequently challenged. F-6 12 La Jolla Pharmaceutical Company Notes to Financial Statements 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Actual results could differ from those estimates. RECLASSIFICATION Certain amounts in the 1998 and 1997 financial statements have been reclassified to conform with the 1999 presentation. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash and cash equivalents consist of cash and highly liquid investments which include debt securities with remaining maturities when acquired of three months or less and are stated at market. Short-term investments mainly consist of debt securities with maturities greater than three months. Management has classified the Company's cash equivalents and short-term investments as available-for-sale securities in the accompanying financial statements. Available-for-sale securities are stated at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. CONCENTRATION OF RISK Cash, cash equivalents and short-term investments are financial instruments which potentially subject the Company to concentrations of credit risk. The Company deposits its cash in financial institutions. At times, such deposits may be in excess of insured limits. The Company invests its excess cash in United States Government securities and debt instruments of financial institutions and corporations with strong credit ratings. The Company has established guidelines relative to diversification of its cash investments and their maturities in an effort to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. To date, the Company has not experienced any impairment losses on its cash, cash equivalents and short-term investments. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. SFAS 133 is effective January 1, 2001. The adoption of this statement is not expected to have a significant effect on the financial position or results of operations of the Company. F-7 13 La Jolla Pharmaceutical Company Notes to Financial Statements 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets (primarily five years). Leasehold improvements and equipment under capital leases are stated at cost and amortized on a straignt-line basis over the shorter of the estimated useful life or the lease term. Property and equipment is comprised of the following (in thousands):
DECEMBER 31, ---------------------- 1999 1998 ------- ------- Laboratory equipment $ 3,279 $ 2,972 Computer equipment 297 291 Furniture and fixtures 108 134 Leasehold improvements 702 718 ------- ------- 4,386 4,115 Less: Accumulated depreciation and amortization (3,728) (3,456) ------- ------- $ 658 $ 659 ======= =======
IMPAIRMENT OF LONG-LIVED ASSETS The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company also records the assets to be disposed of at the lower of their carrying amount or fair value less cost to sell. To date, the Company has not experienced any impairment losses on its long-lived assets used in operations. While the Company's current and historical operating and cash flow losses are indicators of impairment, the Company believes the future cash flows to be received support the carrying value of its long-lived assets and accordingly, the Company has not recognized any impairment losses as of December 31, 1999. PATENTS The Company has filed several patent applications with the United States Patent and Trademark Office and in foreign countries. Legal costs and expenses incurred in connection with pending patent applications have been deferred. Costs related to successful patent applications are amortized using the straight-line method over the lesser of the remaining useful life of the related technology or the remaining patent life, commencing on the date the patent is issued. Accumulated amortization at December 31, 1999 and 1998 was $166,000 and $120,000, respectively. Deferred costs related to patent applications are charged to operations at the time a determination is made not to pursue such applications. F-8 14 La Jolla Pharmaceutical Company Notes to Financial Statements 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STOCK-BASED COMPENSATION As allowed under Statement of Financial Accounting Standard No. 123, "Accounting and Disclosure of Stock-Based Compensation" ("SFAS 123"), the Company has elected to continue to account for stock option grants in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations. Pursuant to APB 25, compensation expense for employee or director stock options represents the difference between the exercise price and the fair value of the common stock on the date of grant. This compensation expense is amortized to expense in accordance with FASB Interpretation No. 28 over the vesting period of the options. The Company generally grants stock options for a fixed number of shares to employees and directors with an exercise price equal to the fair value of the shares at the date of grant and therefore, under APB 25, recognized no compensation expense for such stock option grants. Options or stock awards issued to non-employees have been determined in accordance with SFAS 123 and EITF 96-18. Deferred charges for options granted to non-employees are periodically remeasured as the options vest. There were no options granted to non-employees or charges related to non-employee stock options in the current period. REVENUE RECOGNITION Revenue from collaborative agreements typically consists of ongoing research and development funding and milestone, royalty and other payments which are nonrefundable. Revenue from ongoing research and development funding is recorded as the expenses are incurred. Revenue from milestone, royalty and other payments will be recognized when the achievement of the milestone criteria, royalty generating events or other criteria according to the collaborative agreement have occurred. Payments received in advance under these agreements are recorded as deferred revenue until earned. In December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 formalizes the basic revenue recognition criteria that must be met in order to record revenue. SAB 101 is required to be adopted in the second quarter of 2000. The Company believes that the adoption of SAB 101 would not have a material impact on the Company's financial statements. NET LOSS PER SHARE Basic and diluted net loss per share is computed using the weighted-average number of common shares outstanding during the periods in accordance with Statement of Financial Accounting Standard No. 128, "Earnings per Share". As the Company has incurred a net loss for all three years presented, stock options and warrants are not included in the computation of net loss per share since their effect is anti-dilutive. F-9 15 La Jolla Pharmaceutical Company Notes to Financial Statements 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) COMPREHENSIVE LOSS Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income (Loss)" ("SFAS 130"), requires that all components of comprehensive income (loss), including net income (loss), be reported in the financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources. Net income (loss) and other comprehensive income (loss), including unrealized gains and losses on investments, shall be reported, net of their related tax effect, to arrive at comprehensive income (loss). The Company's comprehensive net loss and net loss are the same and therefore the adoption of SFAS 130 did not have an impact on the financial statements. SEGMENT INFORMATION On January 1, 1998, the Company adopted Statement of Financial Accounting Standard No. 131, "Segment Information" ("SFAS 131"). SFAS 131 redefines segments and requires companies to report financial and descriptive information about their operating segments. The Company has determined that it operates in one business segment. 2. COLLABORATIVE AGREEMENTS In December 1996, the Company entered into a collaborative agreement with Abbott, a diversified health-care company. Under this agreement, in exchange for an exclusive, worldwide license to market and sell LJP 394, Abbott agreed to pay an initial nonrefundable license fee of $4,000,000 upon signing, and agreed to fund the development of the Company's lupus drug candidate, LJP 394, in accordance with a mutually agreed upon budget, and to make certain payments to the Company upon the attainment of specific milestones, as well as royalty and sales incentive payments to the Company on sales of LJP 394. The Company retained worldwide manufacturing rights and ownership rights of all of its patents relating to the drug. Under a separate stock purchase agreement, Abbott also purchased common stock of the Company in December 1996, September 1997 and October 1998 for an aggregate purchase price of $4,000,000 on each date at values based on the reported last sale price of the common stock on each of the 20 trading days immediately preceding each purchase date. The stock purchase agreement allows Abbott certain registration rights, allows the Company certain rights of first refusal and contains no future performance obligations. Both Abbott and the Company had the right to terminate the collaborative agreement under certain circumstances. In September 1999, Abbott and the Company terminated this collaborative agreement and all rights to LJP 394 were returned to the Company following the May 1999 suspension of the jointly conducted Phase II/III clinical trial of LJP 394. Under the collaborative agreement with Abbott, the Company incurred research and development costs of approximately $4,690,000, $8,600,000 and $9,860,000 during the years ended December 31, 1999, 1998 and 1997, respectively, for the development of LJP 394. In 1999, the Company recorded revenue of $4,690,000 from Abbott for the development of LJP 394, of which $2,921,000 was received in cash in 1999 and $1,769,000 was revenue recognized from previously deferred revenue. In 1998, the Company received $9,077,000 from Abbott for the development of LJP 394, of which $8,600,000 was recorded as F-10 16 La Jolla Pharmaceutical Company Notes to Financial Statements 2. COLLABORATIVE AGREEMENTS (CONTINUED) revenue. In 1997, the Company received $11,137,000 from Abbott for the development of LJP 394, of which $9,860,000 was recorded as revenue. 3. RESTRUCTURING CHARGES As a result of the termination of the Company's collaborative agreement with Abbott in September 1999, the Company restructured its operations in order to reduce expenses and to focus its resources on its remaining potential drug candidates. In September 1999, the Company recorded estimated restructuring charges of approximately $742,000. When the restructuring was completed in December 1999, actual total restructuring expenses paid and charged against the restructuring liability were approximately $640,000 and approximately $108,000 of the estimated liability was reversed in November and December 1999. Total restructuring expenses paid consisted of termination benefits paid to 38 employees terminated from various company departments, and are included in both research and development and general and administrative expense. There were no material changes to the restructuring liability subsequent to December 31, 1999. 4. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The following is a summary of the estimated fair value of available-for-sale securities (in thousands):
DECEMBER 31, --------------------- 1999 1998 ------- ------- Money market accounts $ 570 $ 1,117 United States corporate debt securities 4,899 16,181 Government-asset-backed securities 4,500 5,000 ------- ------- $ 9,969 $22,298 ======= =======
As of December 31, 1999 and 1998, the difference between cost and estimated fair value of available-for-sale securities was not significant. Included in cash and cash equivalents at December 31, 1999 and 1998 were $2,975,000 and $10,124,000, respectively, of securities classified as available-for-sale. As of December 31, 1999, available-for-sale securities of $9,969,000 mature in one year or less. 5. COMMITMENTS LEASES In July 1992, the Company entered into a non-cancellable operating lease for the rental of its office and research and development facilities, which expires in July 2004. The lease is subject to an escalation clause that provides for annual increases based on the Consumer Price Index. The lease also contains an option to extend the lease term for an additional five years and a one-time cancellation option effective any time after August 1, 1998 with the payment of certain penalties. The lease also contains a construction allowance in the amount of $1,434,000 for approved tenant improvements to the facility. F-11 17 La Jolla Pharmaceutical Company Notes to Financial Statements 5. COMMITMENTS (CONTINUED) In October 1996, the Company entered into a non-cancellable operating lease for the rental of office and research and development facilities, which expires in October 2001. The lease contains a provision for scheduled annual rent increases and an option to extend the lease term for an additional five years. The lease also contains a construction allowance in the amount of $168,000 for approved tenant improvements to the facility. The Company leases certain equipment under capital leases. The total amount of equipment financed under these capital leases as of December 31, 1999 was $564,000. The Company leases certain other equipment and leasehold improvements under operating leases. As of December 31, 1999, the total amount of equipment and leasehold improvements financed under these operating leases was $5,908,000. Annual future minimum lease payments as of December 31, 1999, which excludes $885,000 for the effect of exercising the facility operating lease cancellation option as management does not intend to exercise this cancellation option, are as follows (in thousands):
OPERATING CAPITAL YEARS ENDED DECEMBER 31, LEASES LEASES - ------------------------ --------- ------- 2000 $2,260 $205 2001 1,475 44 2002 434 -- 2003 18 -- 2004 -- -- ------ ---- Total $4,187 249 ====== Less amount representing interest (6) ----- Present value of net minimum lease payments 243 Less current portion (199) ----- Noncurrent portion of capital lease obligations $ 44 =====
Rent expense under all operating leases totaled $2,360,000, $2,179,000, and $1,853,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Equipment acquired under capital leases included in property and equipment totaled $233,000 and $44,000 (net of accumulated amortization of $331,000 and $152,000) at December 31, 1999 and 1998, respectively. 6. STOCKHOLDERS' EQUITY PREFERRED STOCK As of December 31, 1999, the Company is authorized to issue 8,000,000 shares of preferred stock with a par value of $0.01 per share, in one or more series. F-12 18 La Jolla Pharmaceutical Company Notes to Financial Statements 6. STOCKHOLDERS' EQUITY (CONTINUED) The Board of Directors has designated 75,000 of preferred stock as nonredeemable Series A Junior Participating Preferred Stock ("Series A Preferred Stock"). In the event of liquidation, each share of Series A Preferred Stock is entitled to receive a preferential liquidation payment of $1,000 per share plus the amount of accrued unpaid dividends. The Series A Preferred Stock is subject to certain anti-dilution adjustments, and the holder of each share is entitled to 1,000 votes, subject to adjustments. Cumulative quarterly dividends of the greater of $0.25 or, subject to certain adjustments, 1,000 times any dividend declared on shares of common stock, are payable when, as and if declared by the Board of Directors, from funds legally available for this purpose. COMMON STOCK In May 1999, the Company increased the number of shares of common stock the Company is authorized to issue to 100,000,000 shares with a par value of $0.01 per share. WARRANTS In connection with the Company's initial public offering ("IPO") in June 1994, including the conversion of the principal and accrued interest on stockholder bridge notes, the Company issued 3,823,517 redeemable warrants. The redeemable warrant holders are entitled to purchase one-half of one share of common stock for each warrant at an exercise price of $3.00 per one-half share. In May 1999, the Company extended the expiration date of these warrants to June 3, 2000. The warrants are redeemable only at the option of the Company. The Company is entitled to redeem the warrants on not less than 30 days written notice at $0.05 per warrant if the average closing bid price of the common stock exceeds 150% of the then-effective warrant exercise price for one share of common stock, over a period of 20 consecutive trading days, ending within 15 days of the date of notice of redemption. At December 31, 1999, 3,822,617 redeemable warrants were outstanding to purchase 1,911,309 shares of common stock. The terms of the stockholder bridge notes also provided for the granting of additional warrants to the holders. Those additional warrants permit the holders to purchase 166,697 shares of common stock at $5.00 per share. In May 1999, the Company extended the expiration date of these warrants to June 3, 2000. At December 31, 1999, warrants to purchase 154,460 shares of common stock were outstanding. Also in connection with the IPO, the Underwriter was granted the option to purchase up to 260,000 additional shares of common stock and 260,000 redeemable warrants to purchase one-half of one share of common stock at an exercise price of $3.60 per one-half share. In May 1999, the Company extended the expiration date of the purchase option to June 3, 2000. At December 31, 1999, warrants to purchase 130,000 shares of common stock were outstanding. There are no future performance obligations, or any stated or unstated rights or privileges associated with the issuance of the above warrants. As of December 31, 1999, 4,237,077 warrants were outstanding and 2,195,769 shares of common stock are reserved for issuance upon exercise of warrants. F-13 19 La Jolla Pharmaceutical Company Notes to Financial Statements 6. STOCKHOLDERS' EQUITY (CONTINUED) STOCK OPTION PLANS In May 1989, the Company adopted the 1989 Stock Option Plan and the 1989 Nonstatutory Stock Option Plan (the "1989 Plan"), under which 904,000 shares of common stock have been authorized for issuance upon exercise of options granted by the Company. The 1989 Plan expired in 1999. In June 1994, the Company adopted the 1994 Stock Incentive Plan (the "1994 Plan"), under which 2,500,000 shares of common stock have been authorized for issuance upon exercise of options granted by the Company. The 1994 Plan provides for the grant of incentive and non-qualified stock options, as well as other stock-based awards, to employees, consultants and advisors of the Company with various vesting periods as determined by the compensation committee, as well as automatic fixed grants to non-employee directors of the Company. A summary of the Company's stock option activity and related data follows:
OUTSTANDING OPTIONS ----------------------------- OPTIONS AVAILABLE NUMBER OF PRICE PER FOR GRANT SHARES SHARE --------- ----------- ----------- Balance at December 31, 1996 327,542 1,715,084 $1.00-$8.31 Additional shares authorized 500,000 -- -- Granted (312,700) 312,700 $4.00-$5.38 Exercised -- (8,620) $1.00-$4.31 Cancelled 56,101 (56,101) $1.00-$7.88 --------- ----------- Balance at December 31, 1997 570,943 1,963,063 $1.00-$8.31 Granted (723,800) 723,800 $2.41-$4.38 Exercised -- (364,903) $1.00-$3.75 Cancelled 388,192 (388,192) $1.00-$7.88 --------- ----------- Balance at December 31, 1998 235,335 1,933,768 $1.00-$8.31 Additional shares authorized 750,000 -- -- Expired (225,743) -- -- Granted (905,206) 905,206 $0.34-$4.81 Exercised -- (19,919) $1.00-$4.75 Cancelled 559,204 (559,204) $1.00-$7.88 --------- ----------- Balance at December 31, 1999 413,590 2,259,851 $0.34-$8.31 ========= ===========
F-14 20 La Jolla Pharmaceutical Company Notes to Financial Statements 6. STOCKHOLDERS' EQUITY (CONTINUED)
YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------------------------- 1999 1998 1997 ----------------------------- ----------------------------- ----------------------------- WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE ---------- ---------------- ---------- ---------------- ---------- ---------------- Outstanding - beginning of year 1,933,768 $3.75 1,963,063 $3.25 1,715,084 $3.00 Granted 905,206 $0.64 723,800 $3.54 312,700 $4.82 Exercised (19,919) $1.49 (364,903) $1.06 (8,620) $1.38 Forfeited (559,204) $3.89 (388,192) $3.37 (56,101) $4.55 --------- --------- ---------- Outstanding - end of year 2,259,851 $2.49 1,933,768 $3.75 1,963,063 $3.25 ========= ========== ========== Exercisable at end of year 1,660,777 $2.43 879,502 $3.55 1,171,376 $2.43 Expired 225,743 $1.00 -- -- -- -- Weighted-average fair value of options granted during the year $0.52 $1.62 $2.72
Exercise prices and weighted-average remaining contractual lives for the options outstanding as of December 31, 1999 follow:
WEIGHTED-AVERAGE OPTIONS RANGE OF EXERCISE REMAINING WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE OUTSTANDING PRICES CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE ----------- ----------------- ---------------- ---------------- ----------- ---------------- 119,786 $0.34 9.84 $0.34 83,621 $0.34 732,020 $0.48 9.74 $0.48 561,056 $0.48 666,745 $1.00 - $3.63 7.07 $2.65 419,188 $2.20 469,400 $3.75 - $4.75 6.67 $4.22 350,212 $4.18 271,900 $4.88 - $8.31 6.70 $5.49 246,700 $5.47 --------- --------- 2,259,851 $0.34 - $8.31 7.95 $2.49 1,660,777 $2.43 ========= =========
At December 31, 1999, the Company has reserved 2,666,635 shares of common stock for future issuance under the 1989 and 1994 Plans. F-15 21 La Jolla Pharmaceutical Company Notes to Financial Statements 6. STOCKHOLDERS' EQUITY (CONTINUED) EMPLOYEE STOCK PURCHASE PLAN Effective August 1, 1995, the Company adopted the 1995 Employee Stock Purchase Plan (the "Purchase Plan") which was amended in July 1996. Under the amended Purchase Plan, a total of 300,000 shares of common stock are reserved for sale to full-time employees with six months of service. Employees may purchase common stock under the Purchase Plan every six months (up to but not exceeding 10% of each employee's earnings) over the offering period at 85% of the fair market value of the common stock at certain specified dates. The offering period may not exceed 24 months. For the year ended December 31, 1999, 78,202 shares of common stock had been issued under the Purchase Plan (43,191 shares for the year ended December 31, 1998). To date, 189,893 shares of common stock have been issued under the Purchase Plan and 110,107 shares of common stock are available for issuance.
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ----- ----- ----- Weighted-average fair value of employee stock purchase plan purchases $0.91 $1.54 $1.87
STOCK-BASED COMPENSATION Pro forma information regarding net loss and net loss per share is required by SFAS 123, which also requires that the information be determined as if the Company has accounted for its employee stock plans granted after December 31, 1994 under the fair value method of that statement. The fair value was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1999, 1998 and 1997, respectively: risk-free interest rate of 6.8%, 4.8% and 5.5%; volatility factor of the expected market price of the Company's common stock of 1.09, 0.60 and 0.60; and a dividend yield of 0% and a weighted-average expected life of five years for all three years presented. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. F-16 22 La Jolla Pharmaceutical Company Notes to Financial Statements 6. STOCKHOLDERS' EQUITY (CONTINUED) For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows (in thousands except for net loss per share information):
YEARS ENDED DECEMBER 31, ---------------------------------- 1999 1998 1997 -------- -------- -------- Pro forma net loss $(9,985) $(8,500) $(6,873) ======= ======= ======= Pro forma basic and diluted net loss per share $ (0.50) $ (0.46) $ (0.39) ======= ======= =======
The effects of applying SFAS 123 for either recognizing compensation expense or providing pro forma disclosures are not likely to be representative of the effects on reported net loss for future years. STOCKHOLDER RIGHTS PLAN The Company has adopted a Stockholder Rights Plan (the "Rights Plan"). The Rights Plan provides for a dividend of one right (a "Right") to purchase fractions of shares of the Company's Series A Preferred Stock for each share of the Company's common stock. Under certain conditions involving an acquisition by any person or group of 15% or more of the common stock, the Rights permit the holders (other than the 15% holder) to purchase the Company's common stock at a 50% discount upon payment of an exercise price of $30 per Right. In addition, in the event of certain business combinations, the Rights permit the purchase of the common stock of an acquirer at a 50% discount. Under certain conditions, the Rights may be redeemed by the Board of Directors in whole, but not in part, at a price of $.001 per Right. The Rights have no voting privileges and are attached to and automatically trade with the Company's common stock. The Rights expire on December 2, 2008. 7. 401(k) PLAN The Company has established a 401(k) defined contribution retirement plan (the "401(k) Plan"), which was amended in July 1997, to cover all employees with six months of service. The 401(k) Plan provides for voluntary employee contributions up to 20% of annual compensation (as defined). The Company does not match employee contributions or otherwise contribute to the 401(k) Plan. 8. INCOME TAXES At December 31, 1999, the Company had federal and California income tax net operating loss carryforwards of approximately $68,789,000 and $8,297,000, respectively. The difference between the federal and California tax loss carryforwards is primarily attributable to the capitalization of research and development expenses for California income tax purposes and the 50% percent limitation on California loss carryforwards. The Company also had federal and California research tax credit carryforwards of $3,067,000 and $1,462,000, respectively. The federal net operating loss and tax credit carryforwards will begin to expire in 2005 unless previously utilized. A portion of the California net operating loss carryforwards totaling $1,272,000 expired in 1999, and will continue to expire in 2000. F-17 23 La Jolla Pharmaceutical Company Notes to Financial Statements 7. INCOME TAXES (CONTINUED) 8. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of the Company's net operating loss and credit carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within a three-year period. Significant components of the Company's deferred tax assets are shown below (in thousands):
DECEMBER 31, ------------------------ 1999 1998 -------- -------- Deferred tax assets: Net operating loss carryforwards $ 24,553 $ 21,100 Research and development credits 4,017 3,300 Capitalized research and development 416 2,800 -------- -------- Total deferred tax assets 28,986 27,200 Valuation allowance for deferred tax assets (28,986) (27,200) -------- -------- Net deferred tax assets $ -- $ -- ======== ========
A valuation allowance of $28,986,000 has been recognized to offset the deferred tax assets as realization of such assets is uncertain. 9. SUBSEQUENT EVENT In February 2000, the Company issued 4,040,000 shares of common stock in a private placement to selected institutional investors and other accredited investors for gross proceeds of approximately $13,635,000 at a discounted per share value based on the reported last sale price of the common stock on the purchase date. The Company is required to register these shares within 10 business days from the date of closing. There are no other stated or unstated rights or privileges associated with the sale of these shares. F-18 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LA JOLLA PHARMACEUTICAL COMPANY By: /s/ Steven B. Engle --------------------------------- July 18, 2000 Name: Steven B. Engle Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Steven B. Engle Chairman of the Board and Chief July 18, 2000 - ------------------------------ Executive Officer Steven B. Engle (PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR) /s/ Gail A. Sloan Controller and Secretary July 18, 2000 - ------------------------------ (PRINCIPAL FINANCIAL AND ACCOUNTING Gail A. Sloan OFFICER) /s/ Thomas H. Adams Director July 18, 2000 - ------------------------------ Thomas H. Adams, Ph.D. /s/ William E. Engbers Director July 18, 2000 - ------------------------------ William E. Engbers /s/ Robert A. Fildes Director July 18, 2000 - ------------------------------ Robert A Fildes, Ph.D. /s/ Stephen M. Martin Director July 18, 2000 - ------------------------------ Stephen M. Martin /s/ W. Leigh Thompson Director July 18, 2000 - ------------------------------ W. Leigh Thompson, M.D., Ph.D.
6 EX-23.1 2 ex23-1.txt EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-14285) pertaining to the 1994 Stock Incentive Plan, and the Registration Statement (Form S-8 No. 33-94830) pertaining to the 1995 Employee Stock Purchase Plan of La Jolla Pharmaceutical Company of our report dated February 11, 2000, with respect to the financial statements of La Jolla Pharmaceutical Company included in the Annual Report (Form 10-K/A) for the year ended December 31, 1999. ERNST & YOUNG LLP San Diego, California July 17, 2000 -----END PRIVACY-ENHANCED MESSAGE-----