<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
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: 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 or Organization) Identification No.)
6455 NANCY RIDGE DRIVE 92121
SAN DIEGO, CA (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (619) 452-6600
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 __
The number of shares of the Registrant's common stock, $.01 par value,
outstanding at June 30, 1997 was 17,308,668.
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LA JOLLA PHARMACEUTICAL COMPANY
FORM 10-Q
QUARTERLY REPORT
INDEX
<TABLE>
<CAPTION>
<S> <C>
COVER PAGE..............................................................................................1
INDEX...................................................................................................2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Balance Sheets as of June 30, 1997 and December 31, 1996..................................3
Statements of Operations for the three months and six months ended
June 30, 1997 and 1996....................................................................4
Statements of Cash Flows for the six months ended June 30, 1997 and 1996..................5
Notes to Financial Statements.............................................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................7
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.......................*
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings................................................................*
ITEM 2. Changes in Securities............................................................*
ITEM 3. Defaults upon Senior Securities..................................................*
ITEM 4. Submission of Matters to a Vote of Security Holders..............................10
ITEM 5. Other information................................................................*
ITEM 6. Exhibits and Reports on Form 8-K.................................................10
SIGNATURE...............................................................................................13
</TABLE>
* No information provided due to inapplicability of item.
2
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LA JOLLA PHARMACEUTICAL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,633 $ 6,613
Short-term investments 17,653 17,621
Receivable -- 4,000
Other current assets 881 1,233
------------ ------------
Total current assets 27,167 29,467
Property and equipment, net 1,086 1,361
Patent costs and other assets, net 1,003 859
------------ ------------
Total Assets $ 29,256 $ 31,687
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 272 $ 1,539
Accrued expenses 487 1,106
Accrued payroll and related expenses 413 294
Deferred liabilities 2,547 --
Current portion of obligations under capital leases 290 642
------------ ------------
Total current liabilities 4,009 3,581
Noncurrent portion of obligations under capital leases 42 168
Commitments
Stockholders' equity:
Common stock 173 173
Additional paid-in capital 76,349 76,307
Deferred compensation (88) (169)
Accumulated deficit (51,229) (48,373)
------------ ------------
Total stockholders' equity 25,205 27,938
------------ ------------
Total Liabilities and Stockholders' Equity $ 29,256 $ 31,687
============ ============
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
balance sheets.
See accompanying notes.
3
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LA JOLLA PHARMACEUTICAL COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue from collaborative agreement $ 2,130 $ -- $ 4,494 $ --
Expenses:
Research and development 3,337 2,583 6,474 5,142
General and administrative 766 592 1,546 1,180
-------- -------- -------- --------
Total expenses 4,103 3,175 8,020 6,322
-------- -------- -------- --------
Loss from operations (1,973) (3,175) (3,526) (6,322)
Interest expense (16) (51) (40) (108)
Interest income 355 336 710 622
-------- -------- -------- --------
Net loss $ (1,634) $ (2,890) $ (2,856) $ (5,808)
======== ======== ======== ========
Net loss per share $ (.09) $ (.21) $ (.17) $ (.41)
======== ======== ======== ========
Shares used in computing net loss per share
17,284 14,096 17,284 14,078
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
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LA JOLLA PHARMACEUTICAL COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (2,856) $ (5,808)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization 321 380
Deferred compensation amortization 65 162
Change in operating assets and liabilities:
Receivables 4,000 --
Other current assets 352 (701)
Accounts payable and accrued expenses (1,886) 151
Accrued payroll and related expenses 119 (95)
Deferred liabilities 2,547 --
-------- --------
Net cash provided by (used for) operating activities 2,662 (5,911)
INVESTING ACTIVITIES
Increase in short-term investments (32) (9,251)
Additions to property and equipment (38) (80)
Increase in patent costs and other assets (152) (153)
-------- --------
Net cash used for investing activities (222) (9,484)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock 58 35
Payments on obligations under capital leases (478) (413)
-------- --------
Net cash used for financing activities (420) (378)
Net increase (decrease) in cash and cash equivalents 2,020 (15,773)
Cash and cash equivalents at beginning of period 6,613 19,804
-------- --------
Cash and cash equivalents at end of period $ 8,633 $ 4,031
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 40 $ 108
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Adjustment to deferred compensation for terminations $ 16 $ --
======== ========
</TABLE>
See accompanying notes.
5
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LA JOLLA PHARMACEUTICAL COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of La Jolla Pharmaceutical
Company (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six months ended June 30, 1997 are not necessarily indicative of the
results that may be expected for other quarters or the year ended December 31,
1997. For more complete financial information, these financial statements, and
the notes thereto, should be read in conjunction with the audited financial
statements for the year ended December 31, 1996 included in the Company's Form
10-K filed with the Securities and Exchange Commission.
2. ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue from collaborative agreements is recorded when earned as defined under
the terms of the agreements. Payments received in advance under these agreements
are recorded as deferred revenue and are included in deferred liabilities on the
balance sheet until earned.
ACCOUNTING STANDARD ON EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings per Share" (Statement No. 128),
which supercedes Accounting Principles Board Opinion 15. Statement No. 128
replaces the presentation of "primary earnings per share" with "basic earnings
per share" which includes no dilution and is based on weighted-average common
shares outstanding for the period. Statement No. 128 is effective for financial
statements issued for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. The adoption of this statement is
not expected to have a material impact as the Company is currently in a net loss
position and therefore stock options and warrants are not included in the
computation of earnings per share since their effect is anti-dilutive.
6
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LA JOLLA PHARMACEUTICAL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion below includes forward-looking statements, including without
limitation those dealing with the Company's drug development plans and clinical
trials, its relationship with Abbott Laboratories ("Abbott"), and other matters
described in terms of the Company's plans and expectations. The forward-looking
statements involve risks and uncertainties and a number of factors, both
foreseen and unforeseen, could cause actual results to differ from the Company's
current expectations. The Company's ongoing Phase II/III clinical trial of LJP
394, the Company's drug candidate for the treatment of lupus, could result in a
finding that LJP 394 is not effective in producing a sustained reduction of
dsDNA antibodies in large patient populations or does not provide a meaningful
clinical benefit. The Company's other potential drug candidates are at earlier
stages of development and involve comparable risks. Payments by Abbott to the
Company are contingent upon progress of clinical trials and the Company's
achievement of certain other milestones that might not be met. The relationship
with Abbott could be terminated by either party for various reasons. Clinical
trials could be delayed and could have negative or inconclusive results.
Additional risk factors include the uncertainty of future revenue from product
sales or other sources such as collaborative relationships, the uncertainty of
future profitability, the Company's dependence on patents and other proprietary
rights, the Company's limited manufacturing capabilities and the Company's lack
of marketing experience. Readers are cautioned not to place undue reliance upon
forward-looking statements, which speak only as of the date hereof, and the
Company undertakes no obligation to update forward-looking statements to reflect
events or circumstances occurring after the date hereof. Interested parties are
urged to review the risks described below and in other reports and registration
statements of the Company filed with the SEC from time to time.
OVERVIEW
Since its inception in May 1989, the Company has devoted substantially all
of its resources to the research and development of technology and potential
drugs to treat antibody-mediated diseases. The Company has never generated any
revenue from product sales and has relied upon private and public investors,
revenues from collaborative agreements, equipment lease financings and interest
income on invested cash balances for its working capital. The Company has been
unprofitable since inception and expects to incur substantial additional
operating losses for at least the next several years as it increases
expenditures on research and development and allocates significant and
increasing resources to its manufacturing, clinical trials, and marketing
activities. The Company's activities to date are not as broad in depth or scope
as the activities it must undertake in the future, and the Company's historical
operations and the financial information reported below are not indicative of
its future operating results or financial condition.
The Company expects that losses will fluctuate from quarter to quarter as a
result of differences in the timing of expenses incurred and potential revenues
from collaborative arrangements. Some of these fluctuations may be significant.
The Company's research and development expenses are expected to increase
significantly in the future as the Company increases its development efforts. As
of June 30, 1997, the Company's accumulated deficit was approximately $51.2
million.
The Company's business is subject to significant risks including, but not
limited to, the risks inherent in its research and development efforts,
including clinical trials, uncertainties associated with both obtaining and
enforcing its patents and with the patent rights of others, the lengthy,
expensive and uncertain process of seeking regulatory approvals, uncertainties
regarding government reforms and of product pricing and reimbursement levels,
technological change and competition, manufacturing uncertainties and dependence
on its collaborative relationship with Abbott. Even if the Company's product
7
<PAGE> 8
LA JOLLA PHARMACEUTICAL COMPANY
candidates appear promising at an early stage of development, they may not reach
the market for numerous reasons. Such reasons include the possibilities that the
products will be ineffective or unsafe during clinical trials, will fail to
receive necessary regulatory approvals, will be difficult to manufacture on a
large scale, will be uneconomical to market or will be precluded from
commercialization by proprietary rights of third parties. All of the Company's
product development efforts are based upon technologies and therapeutic
approaches that are unproven. There can be no assurance that LJP 394 will
reliably induce or sustain suppression of disease-causing antibodies, or that
LJP 394 will prove to be safe or effective. Furthermore, clinical trials of LJP
394 may be viewed as a test of the Company's entire Tolerance Technology
approach. If these clinical trials are unsuccessful, the applicability of the
Company's Tolerance Technology to other antibody-mediated diseases will be
highly uncertain.
RESULTS OF OPERATIONS
The Company earned $2.1 and $4.5 million in revenue from its collaborative
agreement with Abbott in the three and six months ended June 30, 1997,
respectively, and earned no revenues for the same periods in 1996. Revenue from
collaborative agreements is recorded when earned as defined under the terms of
the agreements. Payments received in advance under these agreements are recorded
as deferred revenue and are included in deferred liabilities on the balance
sheet until earned. Total revenue payments of approximately $7.0 million were
received in advance under the collaborative agreement with Abbott in the first
six months of 1997, of which approximately $2.5 million was unearned as of June
30, 1997. The receipt of payments and the recognition of revenue from the
collaborative agreement with Abbott may vary significantly from quarter to
quarter and from year to year depending on the level of research effort expended
and the timing of milestone payments. There can be no assurance that the Company
will realize any further revenue from the Abbott arrangement or any other
collaborative arrangement.
Research and development expenses increased to $3.3 million for the second
quarter of 1997 from $2.6 million for the same period in 1996. For the six
months ended June 30, 1997, research and development expense increased to $6.5
million from $5.1 million for the same period in 1996. The increase was due
primarily to the conduct of the Company's toxicology and clinical programs
including the Phase II/III clinical trial of LJP 394, increased facilities
expenditures and the expansion of the Company's research and development
programs. The Company's research and development expenses are expected to
increase significantly in the future as the organization grows, efforts to
develop additional drug candidates are intensified and potential products
progress into and through clinical trials.
General and administrative expenses increased to $766,000 for the second
quarter of 1997, from $592,000 for the same period in 1996. For the six months
ended June 30, 1997, general and administrative expense increased to $1.5
million from $1.2 million for the same period in 1996. Several factors
contributed to this increase, including increased personnel to support increased
research and development and clinical activities, increased facilities
expenditures and expanded business development activities. The Company expects
general and administrative expenses to increase at a greater rate in the future
because, among other reasons, the Company has leased additional space to house
expanded research and development and manufacturing activities. In the future,
general and administrative expenses may increase due to payment obligations to a
financial consultant arising in connection with certain payments expected from
Abbott under the collaborative agreement.
Interest income increased to $355,000 for the second quarter of 1997 from
$336,000 for the same period in 1996. For the six months ended June 30, 1997,
interest income increased to $710,000 from $622,000 for the same period in 1996.
The increase was due to higher investment balances following receipt of the net
proceeds of the Company's follow-on public offering in July and August 1996, its
sale of stock to Abbott in December 1996, the initial license payment from
Abbott received in January 1997 and the receipt of revenue payments under the
collaborative agreement with Abbott during the first six months
8
<PAGE> 9
LA JOLLA PHARMACEUTICAL COMPANY
of 1997. For the second quarter of 1997, interest expense decreased to $16,000
from $51,000 for the same period in 1996. For the six months ended June 30,
1997, interest expense decreased to $40,000 from $108,000 for the same period in
1997. The decrease was the result of decreases in the Company's capital lease
obligations as compared to the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had incurred a cumulative net loss since
inception of approximately $51.2 million, and had financed its operations
through private and public offerings of its securities, payments under
collaborative agreements, capital and operating lease transactions, and interest
income on its invested cash balances. As of June 30, 1997, the Company had
raised $75.7 million in net proceeds since inception from sales of equity
securities.
At June 30, 1997, the Company had $26.3 million in cash, cash equivalents
and short-term investments, as compared to $24.2 million at December 31, 1996.
The Company's working capital at June 30, 1997 was $23.2 million, as compared to
$25.9 million at December 31, 1996. The increases in cash, cash equivalents and
short-term investments resulted from the receipt of the initial license fee and
revenue payments under the Company's collaborative agreement with Abbott and the
financing of property and equipment under operating leases, partially offset by
the continued use of the Company's cash toward expenses of ongoing clinical and
research and development programs and related general and administrative
expenses. The decrease in working capital resulted from use of cash to fund
operations and the deferral of unearned advance revenue payments under the
collaborative agreement with Abbott. The Company invests its cash in corporate
and U.S. Government backed debt instruments.
As of June 30, 1997, the Company had acquired an aggregate of $4.6 million
in property and equipment, of which approximately $3.2 million had been acquired
through capital lease obligations. In addition, the Company leases its office
and laboratory facilities and certain property and equipment under operating
leases. The Company has no material commitments for the acquisition of property
and equipment but anticipates increasing investment in property and equipment in
connection with the enhancement of its manufacturing and research capabilities.
The Company intends to use its financial resources to fund research and
development, manufacturing scale-up and for working capital and other general
corporate purposes. Anticipated near-term expenses include the expansion of
manufacturing and research activities, including development of other drug
candidates in addition to LJP 394. The amounts actually expended for each
purpose may vary significantly depending upon numerous factors, including the
results of clinical studies, the timing of regulatory applications and
approvals, and technological advances. Expenditures will also depend upon the
establishment and progress of collaborative arrangements, contract research and
the availability of other financing. There can be no assurance that these funds
will be available on acceptable terms, if at all.
The Company anticipates that its existing capital and interest earned
thereon will be sufficient to fund the Company's operations as currently planned
through 1998. The Company's future capital requirements will depend on many
factors, including continued scientific progress in its research and development
programs, the size and complexity of these programs, the scope and results of
clinical trials, the time and costs involved in applying for regulatory
approvals, the costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims, competing technological and market developments, the
ability of the Company to maintain its collaborative arrangement with Abbott and
to establish and maintain additional collaborative relationships and the cost of
manufacturing scale-up and effective commercialization activities and
arrangements. The Company expects to incur significant losses each year for at
least the next several years as it expands its current research and development
programs and invests increasing amounts of capital in manufacturing scale-up and
administration of a more complex
9
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LA JOLLA PHARMACEUTICAL COMPANY
organization. It is possible that the Company's cash requirements will exceed
current projections and that the Company will therefore need additional
financing sooner than currently expected.
The Company has no current means of generating cash flow from operations,
and its lead drug candidate, LJP 394, will not generate revenues, if at all,
until it has been proven safe and effective, has received regulatory approval,
and has been successfully commercialized, a process that is expected to take at
least the next several years. The Company's other drug candidates are much less
developed than LJP 394. 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. Accordingly, the Company must continue to rely upon
outside sources of financing to meet its capital needs for the foreseeable
future.
Abbott's funding of the development costs for LJP 394 and milestone
payments are expected to enhance the Company's short-term liquidity by
minimizing the expenditure of the Company's own funds on further development of
LJP 394. However, the Company anticipates increasing expenditures on
manufacturing activities and the development of other drug candidates, and in
the long run, the Company's consumption of cash will necessitate additional
sources of financing. Furthermore, the Company has no internal sources of
liquidity, and termination of the Abbott arrangement would have a serious
adverse effect on the Company's ability to generate sufficient cash to meet its
needs.
The Company will continue to seek capital through any appropriate means,
including issuance of its securities and establishment of additional
collaborative arrangements. However, there can be no assurance that additional
financing will be available on acceptable terms, and the Company's negotiating
position in its capital-raising efforts may worsen as it continues to use its
existing resources. Financing through collaborative arrangements is uncertain
because payments under the Company's collaborative agreement with Abbott are
subject to certain termination rights, including related to progress in clinical
trials for LJP 394, and there is no assurance that the Company will be able to
enter into further collaborative relationships.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on May 13, 1997. All of the
Company's directors were re-elected. In addition, the Company's stockholders
voted to amend the Company's 1994 Stock Incentive Plan to increase by 500,000
(subject to antidilution adjustments specified in the plan), the total number of
shares of the Company's Common Stock that may be issued pursuant to such plan. A
total of 11,047,593 shares were voted for the amendment, 3,529,195 against and
42,768 abstained. Also, the Company's stockholders voted to amend the Company's
1994 Stock Incentive Plan to conform with Section 162(m) of the Internal Revenue
Code so as to preserve the Company's ability to take income tax deductions for
compensation in excess of $1 million paid to the Chief Executive Officer and
each of the other four most highly compensated executives. A total of 14,228,253
shares were voted for the amendment, 104,287 against and 52,186 abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10
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LA JOLLA PHARMACEUTICAL COMPANY
Exhibit No. Description
- ----------- -----------
3.1 Intentionally omitted
3.2 Bylaws of the Company (1)
3.3 Restated Certificate of Incorporation of the Company (3)
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 Letter regarding terms of employment and potential severance of
Stephen M. Coutts (1) and the modification to this letter (10)*
10.4 Intentionally omitted
10.5 Intentionally omitted
10.6 Steven B. Engle Employment Agreement (1) and Amendment No. 1
(10)*
10.7 Form of Directors and Officers Indemnification Agreement (1)
10.8 Intentionally omitted
10.9 Exclusive License Agreement dated September 1, 1991 regarding
PLA2 inhibition technology between the Company and the Regents
of the University of California (1)
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 Consulting Agreement dated September 1, 1991 between the Company
and Dr. Edward A. Dennis (1)
10.12 Agreement dated September 1, 1991 regarding stock purchase
between the Company and Dr. Edward A. Dennis (1)
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 La Jolla Pharmaceutical Company 1994 Incentive Stock Option Plan
(1) *
10.20 Intentionally omitted
10.21 Letter 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 Letter Agreement dated December 23, 1993 between the Company and
Aberlyn Holding Company, Inc. regarding Aberlyn's engagement as
financial and investment banking advisor to the Company with
respect to potential strategic alliances with Korean
pharmaceutical companies (1)
10.23 Intentionally omitted
11
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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. (4)
10.28 Intentionally omitted
10.29 Master Lease Agreement dated September 13, 1995 by and between
the Company and Comdisco Electronics Group (5)
10.30 Intentionally omitted
10.31 Agreement dated September 22, 1995 between the Company and
Joseph Stemler regarding option vesting *(6)
10.32 Consulting Agreement dated January 1, 1996 between the Company
and Joseph Stemler*(6)
10.33 Building Lease Agreement effective November 1, 1996 by and
between the Company and WCB II-S BRD Limited Partnership (7)
10.34 Master Lease Agreement dated December 20, 1996 by and between
the Company and Transamerica Business Credit Corporation
10.35 License and Supply Agreement dated December 23, 1996 by and
between the Company and Abbott Laboratories (8)
10.36 Stock Purchase Agreement dated December 23, 1996 by and between
the Company and Abbott Laboratories (9)
23.1 Consent of Ernst & Young LLP, independent auditors
27 Financial Data Schedule
- ------------------------------------
* 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 annual report on Form 10-K for the
fiscal year ended December 31, 1994 and incorporated by reference herein.
(4) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1995 and incorporated by reference herein.
(5) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1995 and incorporated by reference herein.
(6) 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.
(7) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated by reference herein.
(8) 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.
(9) 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.
(10) Filed herein.
(B) REPORTS ON FORM 8-K
None
12
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LA JOLLA PHARMACEUTICAL COMPANY
SIGNATURE
JUNE 30, 1997
Pursuant to the requirements of the Securities and 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
Date: August 12, 1997 By: /s/ Wood C. Erwin
--------------------------------
Wood C. Erwin
Vice President Finance
Chief Financial Officer
Signed both on behalf of the
Registrant and as Principal Accounting
Officer.
13
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LA JOLLA PHARMACEUTICAL COMPANY
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------ ------- ------------
<S> <C> <C>
10.3 Modification to the Letter regarding terms of employment and potential
severance of Stephen M. Coutts 15
10.6 Amendment No. 1 to Employment Agreement with Steven B. Engle 16
27 Financial Data Schedule 18
</TABLE>
14
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EXHIBIT 10.3
August 11, 1997
Stephen M. Coutts, Ph.D.
P.O. Box 675666
Rancho Santa Fe, CA 92067-5666
Dear Stephen:
Upon your countersignature below, this letter will be an agreement between you
and La Jolla Pharmaceutical Company (the "Company") and will modify your
existing employment arrangement.
If your employment with the Company is terminated by the Company without cause
(as defined below), you will be entitled to receive from the Company a severance
payment equal to your then-current base salary for a period of nine full
calendar months from the date of termination.
In addition, if a change in control of the Company (as defined in the Company's
1994 Stock Incentive Plan in its form as of the date hereof) occurs and your
employment with the Company or its successor is terminated by the Company or its
successor without cause, then in addition to the severance payment described
above, all employee stock options and other performance awards granted to you
before December 31, 1997 shall automatically vest and become fully exercisable
as of the date of termination of your employment, notwithstanding any vesting or
performance conditions applicable thereto, and shall remain exercisable for a
period of one year following the date of termination of your employment or such
longer period as is provided by the plan or grant pursuant to which such options
or awards were received, provided that in no case will such options or awards be
exercisable beyond the duration of their original term. However, the exercise
period of incentive stock options shall not be extended beyond the termination
date otherwise provided by the award grant unless you elect to forego incentive
stock option treatment and extend the exercise period thereof as provided
herein.
"Cause" means you have (i) engaged in serious criminal activity or other
wrongful conduct that has an adverse impact on the Company, (ii) disregarded
instructions given to you under the authority of the Company's Board of
Directors, (iii) performed services for any other period or entity (other than
the Company and appropriate civic organizations), or (iv) otherwise materially
breached your employment or fiduciary responsibilities to the Company.
Sincerely,
/s/ Steven B. Engle
- ----------------------------------
Steven B. Engle
Chairman & Chief Executive Officer
AGREED:
/s/ Stephen M. Coutts
- ----------------------------------
Stephen M. Coutts, Ph.D.
Executive Vice President
Research & Development
Date 8/8/97
------------------------------
<PAGE> 1
EXHIBIT 10.6
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (this "AMENDMENT") is made
effective as of June 26, 1997 by and between La Jolla Pharmaceutical Company, a
Delaware corporation (the "COMPANY") and Steven B. Engle ("EXECUTIVE").
Executive and the Company are parties to that certain Employment Agreement
(the "AGREEMENT") dated as of December 30, 1993 pursuant to which Executive is
employed by the Company, and desire to amend the Agreement as set forth herein
in consideration of Executive's ongoing employment.
Therefore, notwithstanding anything in the Agreement to the contrary, the
Company and Executive hereby agree as follows:
1. Executive shall be employed by the Company as its President and Chief
Executive Officer, shall perform such duties as are consistent with such
position, and shall report to the Company's Board of Directors.
2. As compensation for his services to the Company, Executive shall receive
a base salary of at least $240,000 per annum (as such amount may be increased
from time to time by the Company's Board of Directors, the "BASE SALARY").
3. (a) If Executive's employment with the Company is terminated by the
Company other than for cause as defined in Section 6.1 of the Agreement, or if a
Change in Control of the Company (as defined in the Company's 1994 Stock
Incentive Plan in its form as of the date hereof) occurs and Executive's
employment with the Company or its successor is terminated by the Company or its
successor, or if such a Change in Control occurs and Executive's employment with
the Company or its successor is terminated by Executive following any change in
Executive's title to any position other than President or CEO of the surviving
company, or any change in Executive's reporting responsibility such that he does
not report directly to the CEO or board of directors of the surviving company on
all matters, or any material reduction by the Company or its successor in
Executive's responsibilities (other than any such reduction that is commensurate
with Executive's assumption of the position of President of the surviving
company with another person serving as CEO), or any requirement that Executive's
place of employment be in other than the San Diego area, then, in addition to
any other benefits provided under the Agreement that may be applicable:
(i) the Company (or its successor, as the case may be) shall pay to
Executive a severance payment (the "SEVERANCE PAYMENT") equal to the
then-current Base Salary for a period of twelve full calendar months from the
date of termination of Executive's employment (the "TERMINATION DATE"); and
(ii) the Company (or its successor, as the case may be) shall
continue, at its sole expense, all of Executive's medical, dental and life
insurance coverage until the earlier of
<PAGE> 2
(A) twelve full calendar months from the Termination Date, or (B) such time as
Executive receives similar paid coverage from another employer; and
(iii) all employee stock options and other performance awards granted
to Executive before December 31, 1997 shall automatically vest and become fully
exercisable as of the Termination Date, notwithstanding any vesting or
performance conditions applicable thereto, and shall remain exercisable for a
period of one year following the Termination Date or such longer period as is
provided by the plan or grant pursuant to which such options or awards were
received, provided that in no case will such options or awards be exercisable
beyond the duration of the original term thereof, and provided further that
nothing herein is intended to require the extension of the exercise period of
any option that qualifies as an incentive stock option under the Internal
Revenue Code and applicable regulations thereunder, and the exercise period
thereof shall not be extended beyond the termination date otherwise provided by
the award grant unless Executive, in his sole and unqualified discretion, elects
to forego incentive stock option treatment and extend the exercise period
thereof as provided herein.
(b) The Severance Payment shall be payable in equal periodic
installments from the Termination Date consistent with the normal payroll
practices of the Company (or its successor, as the case may be), provided,
however, that Executive shall have the right, at any time in his discretion, to
receive the remaining balance of the Severance Payment in a lump sum discounted
to present value at a rate equal to the "Reference Rate" announced by Bank of
America NT & SA as of the time of Executive's election to receive a lump sum.
Executive shall exercise his right to receive a lump sum payment of the
Severance Payment by delivering written notice to the Company, and the Company
shall pay the lump sum within ten (10) days of receipt of such notice.
4. To the extent of any inconsistency between the text of the original
Agreement and this Amendment, this Amendment shall govern, provided that nothing
in this Amendment shall be construed to limit benefits to which Executive is
entitled under the Agreement in addition to those conferred by this Amendment,
and to the extent not subsumed within the benefits provided by this Amendment,
benefits provided under the Agreement shall remain in effect.
IN WITNESS WHEREOF, Executive and the Company have entered into this
Amendment as of the date written above.
LA JOLLA PHARMACEUTICAL COMPANY
By: /s/ Wood Erwin /s/ Steven B. Engle
------------------------------- -----------------------------------
Name: Wood Erwin STEVEN B. ENGLE
-----------------------------
Title: V.P. Finance & CFO
----------------------------
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