Stockholders' Equity

6 Months Ended

Jun. 30, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

6. Stockholders’ Equity

Share-Based Compensation

In June 1994, the Company adopted the La Jolla Pharmaceutical Company 1994 Stock Incentive Plan (the “1994 Plan”), under which, as amended, 16,400 shares of common stock were authorized for issuance. The 1994 Plan expired in June 2004 and there were 3,027 options outstanding under the 1994 Plan as of June 30, 2011.

In May 2004, the Company adopted the La Jolla Pharmaceutical Company 2004 Equity Incentive Plan (the “2004 Plan”), under which, as amended, 64,000 shares of common stock have been authorized for issuance. The 2004 Plan provides for the grant of incentive and non-qualified stock options, as well as other share-based payment awards, to employees, directors, consultants and advisors of the Company with up to a 10-year contractual life and various vesting periods as determined by the Company’s Compensation Committee or the Board of Directors, as well as automatic fixed grants to non-employee directors of the Company. As of June 30, 2011, there were a total of 27,147 options outstanding under the 2004 Plan and 34,113 shares remained available for future grant.

In May 2010, the Company granted options to purchase a total of 58,000 shares of common stock to two employees. These grants were made outside of the Company’s existing stockholder-approved equity compensation plans but were otherwise legally binding awards and did not require stockholder approval. These stock options are treated in all respects as if granted under the Company’s 2010 Equity Incentive Plan (the “2010 Plan”).

In August 2010, the Company adopted the 2010 Plan under which 99,300 shares of common stock have been authorized for issuance. The 2010 Plan is similar to the 2004 Plan, other than with regard to the number of shares authorized for issuance thereunder. The 2010 Plan provides for automatic increases to the number of authorized shares available for grant under the 2010 Plan and as such, in May 2011, the number of authorized shares was increased by 3,300 shares of common stock. As of June 30, 2011, there were a total of 3,000 options outstanding and 96,300 shares remained available for future grant under the 2010 Plan.

In August 1995, the Company adopted the La Jolla Pharmaceutical Company 1995 Employee Stock Purchase Plan (the “ESPP”), under which, as amended, 48,499 shares of common stock are reserved for sale to eligible employees, as defined in the ESPP. Employees may purchase common stock under the ESPP every three months (up to but not exceeding 10% of each employee’s base salary or hourly compensation, and any cash bonus paid, subject to certain limitations) over the offering period at 85% of the fair market value of the common stock at specified dates. The offering period may not exceed 24 months. As of June 30, 2011, 7,155 shares of common stock have been issued under the ESPP and 41,344 shares of common stock are available for future issuance.

Share-based compensation expense for the three-month periods ended June 30, 2011 and 2010 was $63,000 and $81,000, respectively and $131,000 and $304,000 for the six months ended June 30, 2011 and 2010, respectively. As of June 30, 2011, there was $317,000 of total unrecognized compensation cost related to non-vested share-based payment awards granted under all equity compensation plans. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize this compensation cost over a weighted-average period of one year.

The following table summarizes share-based compensation expense related to employee and director stock options and ESPP purchases by expense category (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Research and development	$	—	$	—	$	—	$	—
General and administrative		63		81		131		304
Share-based compensation expense included in operating expenses	$	63	$	81	$	131	$	304

The Company determines the fair value of share-based payment awards on the date of grant using the Black-Scholes option-pricing model, which is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Although the fair value of employee and director stock options granted by the Company is determined using an option-pricing model, that value may not be indicative of the fair value observed in a willing-buyer/willing-seller market transaction.

The Company estimated the fair value of each option grant and ESPP purchase right on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Three and Six Months
	Ended
	June 30,
Options:	2011		2010
Risk-free interest rate		—		2.6	%
Dividend yield		—		0.0	%
Volatility		—		106.5	%
Expected life (years)		—		5.8

	Three and Six Months
	Ended
	June 30,
ESPP:	2011		2010
Risk-free interest rate		—		0.2	%
Dividend yield		—		0.0	%
Volatility		—		90.5	%
Expected life (months)		—		3

There were no option grants during the three and six months ended June 30, 2011. The weighted-average fair value of options granted for both the three and six months ended June 30, 2010 was $4.48. For the ESPP, there were no purchases under the ESPP for the three and six months ended June 30, 2011. The weighted-average fair value for purchases under the ESPP for both the three and six months ended June 30, 2010 was $2.21.

A summary of the Company’s stock option activity and related data for the six months ended June 30, 2011 follows:

	Outstanding Options
				Weighted-
				Average
	Number of			Exercise
	Shares			Price
Balance at December 31, 2010		98,015		$	203.70
Granted		—		$	—
Forfeited / Expired		(6,841	)	$	211.72
Balance at June 30, 2011		91,174		$	203.10

Restricted Stock Units

Under the 2004 Plan, the Company granted 20,209 restricted stock units (“RSUs”) to the Company’s three employees on December 31, 2009, where each RSU represents a contingent right to receive one share of the Company’s common stock. The RSUs were to vest upon the closing of a proposed merger with a third party. (the “Merger”), subject to the continued employment of the recipient through the closing date of the Merger. As a result of the termination of the Merger in March 2010, the RSUs were cancelled.

Stock-based compensation cost of RSUs is measured by the market value of the Company’s common stock on the date of grant. The grant date intrinsic value of awards granted is amortized on a straight-line basis over the requisite service periods of the awards, which are the vesting periods. The weighted average grant date intrinsic value was $17.00 per RSU. Due to their cancellation, no stock-based compensation expense related to the RSUs was recognized during the three and six months ended June 30, 2010.

A summary of the Company’s RSU activity and related data follows:

				Weighted-
				Average
				Grant Date
	Number of			Fair Value
	Shares			per Share
Restricted stock units outstanding at December 31, 2009		20,209		$	17.00
Cancelled		(20,209	)	$	17.00
Restricted stock units outstanding at June 30, 2010		—		$	—