8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report: July 28, 2020

(Date of earliest event reported)

LA JOLLA PHARMACEUTICAL COMPANY

(Exact name of registrant as specified in its charter)

Commission File Number: 1-36282

California	33-0361285
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4550 Towne Centre Court, San Diego, California 92121

(Address of principal executive offices, including zip code)

(858) 207-4264

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	LJPC	The Nasdaq Capital Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

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

EXPLANATORY NOTE

As previously disclosed, on July 28, 2020, La Jolla Pharmaceutical Company (“La Jolla”) completed the acquisition of Tetraphase Pharmaceuticals, Inc. (“Tetraphase”) for $43.0 million upfront cash plus potential future cash payments of up to $16.0 million pursuant to contingent value rights (“CVRs”). Following the acquisition, Tetraphase became a wholly owned subsidiary of La Jolla.

This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on July 29, 2020 to provide the consolidated financial statements of Tetraphase as required under Item 9.01(a) and the pro forma financial information required under Item 9.01(b).

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

The audited consolidated financial statements of Tetraphase as of December 31, 2019 and 2018 and for the years then ended, and the notes related thereto, are filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated herein by reference. The consent of Ernst & Young LLP, the independent registered public accounting firm of Tetraphase, is attached hereto as Exhibit 23.1 to this Current Report on Form 8-K/A.

The unaudited condensed consolidated financial statements of Tetraphase as of June 30, 2020 and for the six months ended June 30, 2020 and 2019, and the notes related thereto, are filed as Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined financial statements as of and for the six months ended June 30, 2020 and for the year ended December 31, 2019, and the notes related thereto, each giving effect to the acquisition of Tetraphase, are included as Exhibit 99.3 to this Current Report on Form 8-K/A and are incorporated herein by reference.

(d) Exhibits

Exhibit No.	Description
23.1	Consent of Ernst & Young LLP, independent registered public accounting firm of Tetraphase.
99.1	Audited consolidated financial statements of Tetraphase as of and for the years ended December 31, 2019 and 2018, and the notes related thereto (incorporated by reference to Tetraphase’s Annual Report on Form 10-K (File No. 001-35837) for the year ended December 31, 2019, as filed with the SEC on March 12, 2020).
99.2	Unaudited condensed consolidated financial statements of Tetraphase as of June 30, 2020 and for the six months ended June 30, 2020 and 2019, and the notes related thereto.
99.3	Unaudited pro forma condensed combined financial statements as of and for the six months ended June 30, 2020 and for the year ended December 31, 2019, and the notes related thereto.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	LA JOLLA PHARMACEUTICAL COMPANY
Date: October 13, 2020	By:	/s/ Michael Hearne
		Michael Hearne
		Chief Financial Officer

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-214721, 333-221198 and 333-227818 and Form S-8 Nos. 333-184909, 333-193016, 333-207212, 333-214722, 333-221197 and 333-227819) of La Jolla Pharmaceutical Company of our report dated March 11, 2020, relating to the consolidated financial statements of Tetraphase Pharmaceuticals, Inc. as of and for the years ended December 31, 2019 and 2018, incorporated by reference in this Current Report on Form 8-K/A of La Jolla Pharmaceutical Company.

/s/ Ernst & Young LLP

Boston, Massachusetts

October 13, 2020

EX-99.2

Exhibit 99.2

TETRAPHASE PHARMACEUTICALS, INC.

Index to the Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (Unaudited)	1
Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2020 and 2019 (Unaudited)	2
Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2020 and 2019 (Unaudited)	3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (Unaudited)	4
Notes to Condensed Consolidated Financial Statements	5

TETRAPHASE PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value)

	June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	15,389		$	21,239
Accounts receivable, net		877			1,503
Assets held for sale		—			53
Inventory		1,503			1,595
Prepaid expenses and other current assets		2,880			2,103
Total current assets		20,649			26,493
Property and equipment, net		60			98
Right-of-use assets		2,376			4,836
Intangible assets, net		4,062			4,259
Restricted cash		699			699
Total assets	$	27,846		$	36,385
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		1,389			2,429
Accrued expenses		5,147			5,794
Lease liabilities, current portion		958			1,547
Total current liabilities		7,494			9,770
Lease liabilities, less current portion		1,504			3,448
Paycheck Protection Program loan		2,286			—
Total liabilities		11,284			13,218
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, par value $0.001; 125,000 shares authorized; 7,263 and 3,466 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		7			3
Additional paid-in capital		644,234			627,291
Accumulated deficit		(627,679	)		(604,127	)
Total stockholders’ equity		16,562			23,167
Total liabilities and stockholders’ equity	$	27,846		$	36,385

See the accompanying notes to the condensed consolidated financial statements.

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TETRAPHASE PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

	Six Months Ended June 30,
	2020			2019
Revenue
Product sales	$	3,228		$	1,137
Government revenue		—			1,209
Total revenue		3,228			2,346
Operating expenses
Cost of revenue—product sales		1,637			471
Cost of revenue—intangible asset amortization		197			197
Selling, general and administrative		21,727			28,427
Research and development		3,352			14,903
Total operating expenses		26,913			43,998
Loss from operations		(23,685	)		(41,652	)
Other income (expense)
Interest income		72			923
Interest expense		—			(1,930	)
Other income		61			250
Total other income (expense), net		133			(757	)
Net loss	$	(23,552	)	$	(42,409	)
Net loss per share, basic and diluted	$	(2.35	)	$	(15.71	)
Weighted-average common stock outstanding, basic and diluted		10,015			2,700

See the accompanying notes to the condensed consolidated financial statements.

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TETRAPHASE PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands)

	Common Stock				Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount
Balance at December 31, 2019		3,466	$	3	$	627,291	$	(604,127	)	$	23,167
Issuance of common stock and prefunded warrants under a concurrent private placement and registered direct offering, less issuance costs		3,650		4		15,927		—			15,931
Issuance of common stock under stock plans		27		—		1		—			1
Issuance of common stock from warrant exercise		120		—		—		—			—
Stock-based compensation expense		—		—		1,015		—			1,015
Net loss		—		—		—		(23,552	)		(23,552	)
Balance at June 30, 2020		7,263	$	7	$	644,234	$	(627,679	)	$	16,562
	Common Stock				Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount
Balance at December 31, 2018		2,684	$	3	$	613,721	$	(534,042	)	$	79,682
Issuance of common stock under stock plans		29		—		—		—			—
Issuance of common stock under employee stock purchase plan		3		—		40		—			40
Stock-based compensation expense		—		—		4,432		—			4,432
Net loss		—		—		—		(42,409	)		(42,409	)
Balance at June 30, 2019		2,716	$	3	$	618,193	$	(576,451	)	$	41,745

See the accompanying notes to the condensed consolidated financial statements.

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TETRAPHASE PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Six Months Ended June 30,
	2020			2019
Operating activities
Net loss	$	(23,552	)	$	(42,409	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		1,015			4,432
Depreciation and amortization expense		218			405
Non-cash rent expense		582			689
Gain on disposal of asset		(61	)		—
Gain on lease modification		(68	)		—
Non-cash interest expense		—			457
Impairment of equipment related to restructuring		—			334
Changes in operating assets and liabilities:
Accounts receivable, net		626			546
Inventory		91			(2,216	)
Prepaid expenses and other current assets		(775	)		(372	)
Contract asset		—			3,000
Accounts payable		(1,040	)		(1,131	)
Accrued expenses		(647	)		177
Deferred revenue		—			(6	)
Lease liabilities		(587	)		(661	)
Net cash used for operating activities		(24,198	)		(36,755	)
Investing activities
Proceeds from sale of property and equipment		130			—
Purchases of property and equipment		—			(106	)
Net cash provided by (used for) investing activities		130			(106	)
Financing activities
Proceeds from sale of common stock and prefunded warrants under a concurrent private placement and registered direct offering, net of issuance costs		15,931			—
Proceeds from Paycheck Protection Program loan		2,286			—
Proceeds from issuance of common stock under stock plans		1			39
Net cash provided by financing activities		18,218			39
Net decrease in cash, cash equivalents and restricted cash		(5,850	)		(36,822	)
Cash, cash equivalents and restricted cash at beginning of period		21,938			108,475
Cash, cash equivalents and restricted cash at end of period	$	16,088		$	71,653
Supplemental disclosure of cash flow from investing activities
Cash paid for interest	$	—		$	1,474

See the accompanying notes to the condensed consolidated financial statements.

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TETRAPHASE PHARMACEUTICALS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Operations

Tetraphase Pharmaceuticals, Inc. (the “Company” or “Tetraphase”) is a biopharmaceutical company focused on commercializing its novel tetracycline, XERAVA^TM (eravacycline), to treat serious and life-threatening infections. XERAVA^TM (eravacycline) for injection is a novel fluorocycline of the tetracycline class of antibacterials that is approved by the FDA for the treatment of complicated intra-abdominal infections (“cIAI”) in patients 18 years of age and older. XERAVA is approved by the European Commission (“EC”) for the treatment of cIAI in adults.

On July 28, 2020, La Jolla Pharmaceutical Company (“La Jolla”) completed its acquisition of Tetraphase for $43 million in upfront cash plus potential future cash payments of up to $16 million. See Note 12.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, certain information and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 12, 2020 (the “Form 10-K”). The accompanying condensed consolidated financial statements include the accounts of Tetraphase and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s condensed consolidated financial statements and the accompanying notes. Actual results may differ materially from these estimates. The results of operations for the six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year or any future interim periods. The accompanying condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited consolidated balance sheet as of December 31, 2019 contained in the Form 10-K.

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Summary of Significant Accounting Policies

During the six months ended June 30, 2020, there were no changes to the Company’s significant accounting policies as described in Note 2 to the audited financial statements included in the Company’s Annual Report on the Form 10-K for the year ended December 31, 2019.

Recent Accounting Pronouncements

The Company has considered all recently issued accounting pronouncements and has concluded that there are no recently issued accounting pronouncements that may have a material impact on its results of operations, financial condition or cash flows based on current information.

3. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration of potential common stock. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of common stock outstanding plus potential common stock. Shares of common stock underlying pre-funded warrants are considered outstanding on issuance as the exercise price was deemed non-substantive and are thus included in the basic net loss per share. Other warrants, outstanding stock options and unvested restricted stock units are considered potential common stock and are included in the calculation of diluted net loss per share using the treasury stock method when their effect is dilutive.

Potential common stock that were excluded from the calculation of diluted net loss per share because their effect was anti-dilutive are as follows:

	June 30,
	2020		2019
Warrants		7,984,650		20,718
Outstanding stock options		135,659		343,257
Unvested restricted stock units		45,618		129,535
Total potential common stock		8,165,927		493,510

4. Inventory

Inventory consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Raw materials	$	802	$	—
Work-in-process		115		115
Finished goods		586		1,480
Total inventory	$	1,503	$	1,595

The Company did not record a reserve for inventory as of June 30, 2020 and December 31, 2019. There were no charges against inventory during the six months ended June 30, 2020 and 2019.

5. License Agreements and Government Contracts

License Agreements

Harvard License Agreement

In August 2006, the Company and Harvard University (“Harvard”) entered into a license agreement for certain intellectual property (the “Harvard License Agreement”). Under the license agreement, as of June 30, 2020, the Company has paid an aggregate $17.1 million and has issued 1,568 shares of common stock to Harvard. For each product covered by the Harvard License Agreement, the

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Company is obligated to make certain payments totaling up to approximately $15.1 million upon achievement of certain development and regulatory milestones, and to pay Harvard tiered royalties at percentages in the single digits based on annual worldwide net sales, if any, of licensed products by the Company, its affiliates and sublicensees in certain circumstances. The Company is also obligated to pay Harvard a specified share of non-royalty sublicensing and other revenues that it receives from sublicensees for the grant of sublicenses in certain circumstances, including the Everest License Agreement (see below), and to reimburse Harvard for specified patent prosecution and maintenance costs. During the six months ended June 30, 2020 the Company did not make any payments to Harvard related to regulatory milestone payments. During the six months ended June 30, 2019, the Company paid Harvard $25,000 in regulatory milestone payments.

Paratek License Agreement

In March 2019, the Company and Paratek Pharmaceuticals, Inc. (“Paratek”) entered into a license agreement (the “Paratek License Agreement”). Under the terms of the Paratek License Agreement, Paratek granted Tetraphase a non-exclusive, worldwide, royalty-bearing license to certain Paratek patents, with the right to grant sublicenses. The terms of the Paratek License Agreement provide for the Company to pay Paratek royalties at a low single digit percent based on net sales of XERAVA sold in the U.S. The Company’s obligation to pay royalties with respect to the licensed product is retroactive to the date of the first commercial sale of XERAVA in the U.S. and shall continue until there is no longer any valid claims of the Paratek patents, which will expire in October 2023.

Everest License Agreement

In February 2018, the Company and Everest Medicines Limited (“Everest”) entered into a license agreement (the “Everest License Agreement”), whereby the Company granted Everest Medicines an exclusive license to develop and commercialize XERAVA for the treatment of cIAI and other indications in mainland China, Taiwan, Hong Kong, Macau, South Korea and Singapore. In addition, in July 2019, the Company amended its original agreement with Everest to extend Everest’s exclusive license to develop and commercialize XERAVA to the jurisdictions of the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines (together with those regions in Everest License Agreement, the “Territory”).

Under the terms of the Everest License Agreement, the Company received from Everest: (1) an upfront cash payment of $7.0 million in the first quarter of 2018; (2) a cash payment of $2.5 million in the second quarter of 2018 related to Everest’s submission of an Investigational New Drug (“IND”) application with the National Medical Products Administration (formerly, the China Food and Drug Administration); and (3) a cash payment of $3.0 million in the second quarter of 2019 related to Everest’s initiation of a Phase 3 clinical trial. Under the terms of the amendment of the Everest License Agreement, the Company also received an upfront cash payment of $2.0 million in September 2019.

The Company is eligible to receive up to an aggregate of $11.0 million in future clinical development and regulatory milestone payments and up to an aggregate of $20.0 million in sales milestone payments. There can be no guarantee that any such milestones or sales thresholds will be met.

The Company is also entitled to receive tiered royalties from Everest at percentages in the low double digits on sales, if any, in the Territory of products containing eravacycline. Royalties are payable with respect to each jurisdiction in the Territory until the latest to occur of: (1) the last-to-expire of specified patent rights in such jurisdiction in the Territory; (2) expiration of marketing or regulatory exclusivity in such jurisdiction in the Territory; or (3) 10 years after the first commercial sale of a product in such jurisdiction in the Territory. In addition, royalties payable under the Everest License Agreement will be subject to reduction on account of generic competition and after patent expiration in a jurisdiction, with any such reductions capped at certain percentages of the amounts otherwise payable during the applicable royalty payment period.

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Under the Everest License Agreement, Everest will be solely responsible for the development and commercialization of licensed products in the Territory. The Company agreed to use commercially reasonable efforts to manufacture drug product for clinical development, which will be paid by Everest at the cost to manufacture, as well as manufacture drug product for commercial supply, which will be paid by Everest at cost plus a reasonable margin. The Company has not yet entered into a commercial supply agreement with Everest, which would set the quantity and timing of commercial supply.

Government Contracts

BARDA Contract for Eravacycline

In January 2012, the Biomedical Advanced Research and Development Authority (“BARDA”), an agency of the U.S. Department of Health and Human Services (the “HHS”), awarded a five-year contract, which was subsequently extended, that provided for up to a total of $67.3 million in funding for the development, manufacturing and clinical evaluation of eravacycline for the treatment of disease caused by bacterial biothreat pathogens (the “BARDA Contract”). The funding under the BARDA Contract was also used for the development, manufacturing and clinical evaluation of XERAVA to treat certain infections caused by life-threatening multiple-drug-resistant (“MDR”) bacteria. The BARDA Contract expired on December 31, 2019. During the six months ended June 30, 2020, the Company did not recognize revenue from the BARDA Contract. During the six months ended June 30, 2019, the Company recognized $0.6 million of revenue from the BARDA Contract.

CARB-X Award for TP-6076

In March 2017, the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (“CARB-X”) awarded the Company eligibility to receive up to $4.0 million in research funding over 18 months for TP-6076, a fully-synthetic fluorocycline derivative developed by Tetraphase (the “CARB-X Award”). The Company began recognizing revenue from the CARB-X Award in April 2017. The CARB-X Award expired on June 30, 2019. During the six months ended June 30, 2020, the Company did not recognize any revenue from the CARB-X Award. During the six months ended June 30, 2019, the Company recognized $0.5 million of revenue from the CARB-X Award.

NIAID Grant for TP-271

The Company received funding under a grant for its phase 1 compound TP-271, a fully-synthetic fluorocycline, from the National Institute of Allergy and Infectious Diseases (“NIAID”), an agency of the HHS, for the development, manufacturing and clinical evaluation of TP-271 for respiratory diseases caused by biothreat and antibiotic-resistant public health pathogens, as well as bacterial pathogens associated with community-acquired bacterial pneumonia (the “NIAID Grant”). The NIAID Grant was awarded in September 2011, provided up to a total of approximately $35.8 million and expired on March 31, 2019. During the six months ended June 30, 2020, the Company did not recognize revenue from the NIAID Grant. During the six months ended June 30, 2019, the Company recognized $0.1 million of revenue from the NIAID Grant.

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6. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Professional fees	$	2,563	$	573
Salaries and benefits		1,271		1,825
Drug supply and development		557		2,608
Commercial		527		516
Clinical trials		104		111
Other		125		161
Total accrued expenses	$	5,147	$	5,794

7. Stock-based Compensation

In January 2020, the number of shares reserved for issuance under the Tetraphase Pharmaceuticals, Inc. 2013 Stock Incentive Plan, as amended (the “2013 Plan”), was increased by 138,642 shares as a result of the automatic annual increase provision of the 2013 Plan. As of June 30, 2020, 413,407 shares of common stock remained available for future grants under the 2013 Plan.

Stock-based Compensation Expense

The classification of stock-based compensation expense is summarized as follows (in thousands):

	Six Months Ended June 30,
	2020		2019
Selling, general and administrative	$	814	$	2,959
Research and development		201		1,473
Total stock-based compensation expense	$	1,015	$	4,432
	Six Months Ended June 30,
	2020		2019
Restricted stock units	$	730	$	830
Stock options		285		3,565
Employee stock purchase plan		—		37
Total stock-based compensation expense	$	1,015	$	4,432

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Stock Options

The activity related to stock options during the six months ended June 30, 2020 is summarized as follows:

	Shares			Weighted-average     Exercise Price     per Share
Outstanding at December 31, 2019		177,768		$	223.53
Cancelled		(42,109	)	$	251.48
Outstanding at June 30, 2020		135,659		$	214.86
Exercisable at June 30, 2020		106,968		$	247.17

As of June 30, 2020, there was $1.8 million of total unrecognized stock-based compensation cost related to employee unvested stock options granted under the 2013 Plan with a remaining weighted-average expense recognition period of 1.5 years.

Restricted Stock Units and Performance Stock Units

The activity related to restricted stock units (“RSUs”) and performance stock units (“PSUs”) during the six months ended June 30, 2020 is summarized as follows:

	Shares			Weighted-average     Exercise Price     per Share
Unvested at December 31, 2019		91,981		$	28.62
Vested/released		(26,363	)	$	33.35
Cancelled		(20,000	)	$	34.51
Unvested at June 30, 2020		45,618		$	23.31

As of June 30, 2020, there was total unrecognized stock-based expense of $0.5 million related to RSUs and $31,000 related to PSUs. The expense is to be recognized over a weighted-average period of 1.3 years.

Employee Stock Purchase Plan

On March 15, 2020, the Company’s 2014 Employee Stock Purchase Plan, as amended, was terminated.

8. Stockholders’ Equity

In November 2019, the Company completed a registered direct offering with Armistice Capital, LLC (“Armistice”), a healthcare-focused institutional investor, comprised of: (1) 300,000 shares of common stock and accompanying warrants to purchase an aggregate of 300,000 shares of common stock; and (2) pre-funded warrants to purchase up to an aggregate of 1,830,493 shares of common stock and accompanying warrants to purchase an aggregate of 1,830,493 shares of common stock. Each share of common stock and accompanying common stock warrant were sold together at a combined price of $3.755, and each pre-funded warrant and accompanying common stock warrant were sold together at a combined price of $3.745. Each pre-funded warrant has an exercise price of $0.01 per share, is exercisable immediately and is exercisable until exercised in full. Each common stock warrant has an exercise price of $3.62 per share, is exercisable immediately and expires five years from the date of issuance. The net proceeds to the Company from the offering, after deducting the placement agent’s fees and other offering expenses payable by the Company, was approximately $7.1 million. The fair value allocated to the common stock, warrants and pre-funded warrants, less issuance costs, was $0.6 million, $2.9 million and $3.6 million, respectively. In November 2019, 400,000 of the pre-funded warrants were exercised.

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In January 2020, the Company completed a private placement with Armistice comprised of: (1) 1,270,000 shares of common stock and accompanying warrants to purchase an aggregate of 1,270,000 shares of common stock; and (2) pre-funded warrants to purchase up to an aggregate of 2,063,334 shares of common stock and accompanying warrants to purchase up to an aggregate of 2,063,334 shares of common stock. Each share of common stock and accompanying common stock warrant were sold together at a combined price of $3.00, and each pre-funded warrant and accompanying common stock warrant were sold together at a combined price of $2.999, for gross proceeds of approximately $10.0 million. Each pre-funded warrant had an exercise price of $0.001 per share, was exercisable immediately and was exercisable until all of the pre-funded warrants are exercised in full. Each common stock warrant had an exercise price of $2.87 per share, was exercisable immediately and will expire five years from the date of issuance.

Also in January 2020, the Company completed a registered direct offering to certain healthcare-focused institutional investors comprised of: (1) 2,380,105 shares of common stock and accompanying warrants to purchase up to an aggregate of 2,380,105 shares of common stock; and (2) pre-funded warrants to purchase up to an aggregate of 120,000 shares of common stock and accompanying warrants to purchase up to an aggregate of 120,000 shares of common stock. Each share of common stock and accompanying common stock warrant were sold together at a combined price of $3.00, and each pre-funded warrant and accompanying common stock warrant were sold together at a combined price of $2.999, for gross proceeds of approximately $7.5 million. Each pre-funded warrant had an exercise price of $0.001 per share, was exercisable immediately and was exercisable until all of the pre-funded warrants are exercised in full. Each common stock warrant had an exercise price of $2.87 per share, was exercisable immediately and will expire five years from the date of issuance.

The net proceeds to the Company from the registered direct offering and the concurrent private placement, after deducting the placement agent’s fees and other offering expenses payable by the Company, were approximately $15.9 million.

9. Debt

Paycheck Protection Program Loan

On April 22, 2020, the Company entered into a promissory note for $2.3 million under the Paycheck Protection Program (the “PPP Loan”). The interest rate on the PPP Loan is 1.0% per annum. The PPP Loan is unsecured and guaranteed by the U.S. Small Business Administration (the “SBA”). The principal amount of the PPP Loan may be forgiven under the Paycheck Protection Program, subject to certain requirements and to the extent that the PPP Loan proceeds are used to pay permitted expenses, including certain payroll, rent and utility payments. The Company intends to apply for forgiveness of the PPP Loan. The Company is obligated to make monthly payments of principal and interest with respect to any unforgiven portion of the PPP Loan beginning November 22, 2020, amortizing monthly through April 22, 2022. The obligation to repay the PPP Loan may be accelerated upon the occurrence of an event of default.

Solar Capital

In November 2018, the Company entered into a loan and security agreement (the “Loan Agreement”) with Solar Capital Ltd. (“Solar Capital”), as collateral agent and lender, and the other lenders named therein (together with Solar Capital, the “Lenders”). In August 2019, the Company entered into a payoff letter with the Lenders, pursuant to which the Company agreed to pay off and thereby terminate the Loan Agreement. Pursuant to the payoff letter, the Company paid a total of $30.7 million to the Lenders, representing the principal balance, accrued interest outstanding and a portion of the final fee

11

under the Loan Agreement in repayment of the Company’s outstanding obligations under the Loan Agreement. During the third quarter of 2019, the Company recorded a loss from debt extinguishment of $1.6 million as the difference between the net carrying amount of the indebtedness under the Loan Agreement and the amount paid.

In connection with the Loan Agreement and the funding of the initial loan facility, the Company issued to the Lenders warrants to purchase an aggregate of 20,718 shares of the Company’s common stock. The warrants terminate 10 years from the date of its original issuance. The warrants were equity classified with a fair value of $0.8 million at issuance and recorded to additional paid in capital.

The Company recorded interest expense related to the Loan Agreement of $1.9 million for the six months ended June 30, 2019.

10. Commitments and Contingencies

Operating Leases

The Company’s operating leases consist of 37,438 square feet of office and laboratory space in Watertown, Massachusetts (the “Watertown Lease”) and office equipment.

The Watertown Lease originally provided for an expiration on November 30, 2019. In November 2018, the Company entered into an Eighth Amendment to the Watertown Lease to extend the term of the lease through November 30, 2022.

In January 2020, the Company entered into a Ninth Amendment to the Watertown Lease to surrender a portion of its leased space, which reduced the leased premises by a total of 15,899 square feet from approximately 37,438 square feet to approximately 21,539 square feet. This amendment was accounted for as a lease modification in accordance with FASB’s ASC Topic 842, which required the Company to reassess and remeasure the lease liability based on the incremental borrowing rate determined as of the modification date. As a result, the Company recorded: (i) a $2.0 million reduction of the lease liability and corresponding right-of-use asset as of the effective date of the amendment; and (ii) a $0.1 million gain on lease modification in selling, general and administrative expense. Total aggregate remaining payments under the Watertown lease as of the modification date were $3.1 million, $2.7 million of which was remaining as of June 30, 2020.

The Company recorded lease liabilities and right-of-use lease assets for the Watertown Lease based on the present value of lease payments over the expected lease term, discounted using the Company’s estimated incremental borrowing rate. Rent expense under lease was $1.0 million and $1.5 million for the six months ended June 30, 2020 and 2019, respectively.

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Future minimum lease payments as of June 30, 2020 are as follows (in thousands):

	Amount
2020	$	561
2021		1,138
2022		1,027
Thereafter		—
Total future minimum lease payments	$	2,726
Less: discount		(264	)
Total lease liabilities	$	2,462

Legal Proceedings

From time to time, we may become subject to claims and litigation arising in the ordinary course of business. We are not a party to any material legal proceedings, nor are we aware of any material pending or threatened litigation.

11. 2019 Corporate Restructuring

In June 2019, the Company announced a restructuring of its organization, including a 20% reduction in headcount, designed to focus its cash resources on commercializing XERAVA (the “2019 Corporate Restructuring”). For the three months ended June 30, 2019, the Company recorded $2.4 million of total expense, which was comprised of: (1) $2.1 million for one-time cash termination benefits to the affected employees, including severance and health care benefits; (2) $0.4 million for non-cash asset impairment expense; and (3) a $0.1 million reversal of non-cash, share-based compensation expense related to forfeited, unvested equity awards. As of June 30, 2020, the Company had paid $2.0 million of the $2.1 million cash severance and health care benefits charges, and the remaining $0.1 million of the health care benefits were included in accrued expenses.

12. Subsequent Events

Acquisition by La Jolla Pharmaceutical Company

On June 24, 2020, La Jolla entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tetraphase, and TTP Merger Sub, Inc., a wholly owned subsidiary of La Jolla. On July 28, 2020, La Jolla completed its acquisition of Tetraphase for $43 million in upfront cash plus potential future cash payments of up to $16 million pursuant to contingent value rights (“CVRs”). The holders of the CVRs are entitled to receive potential future cash payments of up to $16 million in the aggregate upon the achievement of certain net sales of XERAVA in the U.S. as follows: (i) $2.5 million if 2021 XERAVA U.S. net sales are at least $20 million; (ii) $4.5 million if XERAVA U.S. net sales are at least $35 million during any calendar year ending on or prior to December 31, 2024; and (iii) $9 million if XERAVA U.S. net sales are at least $55 million during any calendar year ending on or prior to December 31, 2024. Following the acquisition, Tetraphase became a wholly owned subsidiary of La Jolla.

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EX-99.3

Exhibit 99.3

LA JOLLA PHARMACEUTICAL COMPANY

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On July 28, 2020, La Jolla Pharmaceutical Company (“La Jolla”) completed its acquisition of Tetraphase Pharmaceuticals, Inc. (“Tetraphase”), a biopharmaceutical company focused on commercializing its novel tetracycline, XERAVA^TM (eravacycline), to treat serious and life-threatening infections, for $43 million in upfront cash plus potential future cash payments of up to $16 million pursuant to contingent value rights (“CVRs”). The holders of the CVRs are entitled to receive potential future cash payments of up to $16 million in the aggregate upon the achievement of certain net sales of XERAVA in the U.S. as follows: (i) $2.5 million if 2021 XERAVA U.S. net sales are at least $20 million; (ii) $4.5 million if XERAVA U.S. net sales are at least $35 million during any calendar year ending on or prior to December 31, 2024; and (iii) $9 million if XERAVA U.S. net sales are at least $55 million during any calendar year ending on or prior to December 31, 2024. Following the acquisition, Tetraphase became a wholly owned subsidiary of La Jolla.

The following unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of La Jolla and Tetraphase, as adjusted to give effect to La Jolla’s acquisition of Tetraphase. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2020 and the twelve months ended December 31, 2019 give effect to the acquisition as if it had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of June 30, 2020 gives effect to the acquisition as if it had occurred on June 30, 2020.

The unaudited adjustments to the unaudited pro forma condensed combined financial statements, including the purchase price allocation, are preliminary and described in the accompanying notes, and should be read together with the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements should be read together with La Jolla’s historical consolidated financial statements, which are included in La Jolla’s latest annual report on Form 10-K and quarterly report on Form 10-Q filed with the U.S. Securities and Exchange Commission, and Tetraphase’s historical consolidated financial statements, which are included in Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K/A.

The unaudited pro forma condensed combined financial statements are not indicative of the financial position or results of operations that would have been realized had La Jolla and Tetraphase been a combined company during the specified periods, and do not reflect the realization of any expected cost savings or other synergies from the acquisition of Tetraphase. In addition, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the financial position or results of operations of La Jolla for any future periods, and the actual financial position and results of operations of La Jolla for any future periods may differ materially from the pro forma amounts reflected herein.

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LA JOLLA PHARMACEUTICAL COMPANY

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2020

(in thousands)

	Historical						Pro Forma Adjustments			Notes	La Jolla Pro Forma Combined
	La Jolla			Tetraphase
ASSETS
Current assets:
Cash and cash equivalents	$	68,353		$	15,389		$	(42,990	)	(A)	$	40,752
Short-term investments		3,062			—			—				3,062
Accounts receivable, net		1,843			877			—				2,720
Inventory, net		3,120			1,503			3,264		(B)		7,887
Prepaid expenses and other current assets		2,792			2,880			—				5,672
Total current assets		79,170			20,649			(39,726	)			60,093
Property and equipment, net		12,827			60			—				12,887
Right-of-use lease assets		14,792			2,376			—				17,168
Restricted cash		606			699			—				1,305
Intangible assets, net		—			4,062			11,578		(C)		15,640
Goodwill		—			—			14,196		(D)		14,196
Total assets	$	107,395		$	27,846		$	(13,952	)		$	121,289
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable		2,481			1,389			—				3,870
Accrued expenses		6,172			2,549			—				8,721
Accrued transaction costs		600			1,332			3,479		(E)		5,411
Accrued payroll and related expenses		5,741			1,266			—				7,007
Lease liabilities, current portion		2,890			958			—				3,848
Total current liabilities		17,884			7,494			3,479				28,857
Lease liabilities, less current portion		25,000			1,504			—				26,504
Deferred royalty obligation, net		124,406			—			—				124,406
Other noncurrent liabilities		15,317			2,286			2,610		(F)		20,213
Total liabilities		182,607			11,284			6,089				199,980
Shareholders’ deficit:
Common Stock		3			7			(7	)	(G)		3
Series C-12 Convertible Preferred Stock		3,906			—			—				3,906
Additional paid-in capital		982,393			644,234			(644,234	)	(G)		982,393
Accumulated deficit		(1,061,514	)		(627,679	)		624,200		(E)(G)		(1,064,993	)
Total shareholders’ equity (deficit)		(75,212	)		16,562			(20,041	)			(78,691	)
Total liabilities and shareholders’ equity (deficit)	$	107,395		$	27,846		$	(13,952	)		$	121,289

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LA JOLLA PHARMACEUTICAL COMPANY

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2020

(in thousands, except per share amounts)

	Historical						Pro Forma Adjustments			Notes	La Jolla Pro Forma Combined
	La Jolla			Tetraphase
Revenue
Net product sales	$	13,396		$	3,228		$	—			$	16,624
Total revenue		13,396			3,228			—				16,624
Operating expenses
Cost of product sales		1,524			1,834			(197	)	(C)		3,161
Research and development		17,964			3,352			—				21,316
Selling, general and administrative		16,829			21,727			782		(C)		32,010
								(7,328	)	(H)
Total operating expenses		36,317			26,913			(6,743	)			56,487
Loss from operations		(22,921	)		(23,685	)		6,743				(39,863	)
Other income (expense)
Other income—related party		4,085			—			—				4,085
Interest income		222			72			—				294
Interest expense		(4,876	)		—			—				(4,876	)
Other (expense) income, net		(693	)		61			—				(632	)
Total other income (expense), net		(1,262	)		133			—				(1,129	)
Net loss	$	(24,183	)	$	(23,552	)	$	6,743			$	(40,992	)
Net loss per share, basic and diluted	$	(0.89	)								$	(1.50	)
Weighted-average common shares outstanding, basic and diluted		27,282										27,282

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LA JOLLA PHARMACEUTICAL COMPANY

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2019

(in thousands, except per share amounts)

	Historical						Pro Forma Adjustments			Notes	La Jolla Pro Forma Combined
	La Jolla			Tetraphase
Revenue
Net product sales	$	23,054		$	3,575		$	—			$	26,629
License and collaboration revenue		—			2,000			—				2,000
Government revenue		—			1,801			—				1,801
Total revenue		23,054			7,376			—				30,430
Operating expenses
Cost of product sales		2,392			3,080			(393	)	(C)		5,079
Research and development		85,329			22,785			—				108,114
Selling, general and administrative		45,134			49,043			1,564		(C)		95,741
Total operating expenses		132,855			74,908			1,171				208,934
Loss from operations		(109,801	)		(67,532	)		(1,171	)			(178,504	)
Other income (expense)
Interest expense		(10,774	)		(2,580	)		—				(13,354	)
Interest income		2,128			1,262			—				3,390
Other income—related party		1,939			—			—				1,939
Loss on extinguishment of debt		—			(1,568	)		—				(1,568	)
Other income		—			333			—				333
Total other income (expense), net		(6,707	)		(2,553	)		—				(9,260	)
Net loss	$	(116,508	)	$	(70,085	)	$	(1,171	)		$	(187,764	)
Net loss per share, basic and diluted	$	(4.30	)								$	(6.88	)
Weighted-average common shares outstanding, basic and diluted		27,112										27,282

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Note 1. Basis of Presentation

The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are: (1) directly attributable to the acquisition; (2) factually supportable; and (3) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on results following the acquisition. The unaudited pro forma adjustments represent management’s current best estimates and may differ from those that will be used in future filings.

La Jolla has conformed the accounting policies of Tetraphase to its own accounting policies, and certain reclassifications have been made to Tetraphase’s historical consolidated financial statements to conform to La Jolla’s presentation.

Note 2. Preliminary Purchase Price Allocation

The acquisition of Tetraphase was accounted for as a business combination pursuant to the Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations. As the acquirer for accounting purposes, La Jolla has preliminarily estimated the fair value of consideration transferred (the “Purchase Price”), assets acquired and liabilities assumed, with the excess of the Purchase Price over the fair value of assets acquired and liabilities assumed recorded as goodwill. The Purchase Price is comprised of the upfront cash of $43 million and the preliminary estimated fair value of potential future cash payments pursuant to the CVRs.

The unaudited pro forma adjustments to record the fair value of Tetraphase’s assets acquired and liabilities assumed are preliminary estimates as if the acquisition date was June 30, 2020. The final allocation of the Purchase Price will be determined as of the acquisition date of July 28, 2020, and is dependent on multiple factors, including the final valuation of the CVRs, assets acquired and liabilities assumed. The preliminary purchase price allocation as if the acquisition date was June 30, 2020 is presented as follows (in thousands):

Cash	$	42,990
CVRs		2,610
Total Purchase Price	$	45,600
Cash and cash equivalents	$	15,389
Accounts receivable		877
Inventory		4,767
Prepaid expenses and other current assets		2,880
Property and equipment		60
Right-of-use lease assets		2,376
Restricted cash		699
Identifiable intangible assets		15,640
Goodwill		14,196
Accounts payable		(1,389	)
Accrued expenses		(3,881	)
Accrued payroll and related expenses		(1,266	)
Lease liabilities, current portion		(958	)
Lease liabilities, less current portion		(1,504	)
Other noncurrent liabilities		(2,286	)
Total Purchase Price	$	45,600

Management believes that the fair values recognized for the assets acquired and liabilities assumed are based on reasonable estimates and assumptions. The final valuation of the CVRs, assets acquired and liabilities assumed may be materially different than the estimated values assumed in the unaudited pro forma condensed combined financial statements.

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Note 3. Pro Forma Adjustments

The following adjustments have been reflected in the unaudited pro forma condensed combined financial statements:

(A) Represents La Jolla’s payment of $43 million in upfront cash for the acquisition of Tetraphase.

(B) Represents the adjustment to “step up” Tetraphase’s finished goods and work-in-process inventory to a preliminary estimated fair value of approximately $4.8 million, an increase of $3.3 million from the carrying value. After the acquisition, the step-up in inventory fair value of $3.3 million will increase cost of product sales over approximately 4 months as the inventory is sold. This increase in cost of product sales is not reflected in the unaudited pro forma condensed combined statements of operations because it does not have a continuing impact.

(C) Represents adjustments to: (1) remove the historical intangible assets and corresponding amortization expense; and (2) record the preliminary estimated fair value of acquired identifiable intangible assets and corresponding amortization. The following table summarizes the preliminary estimated fair values of Tetraphase’s identifiable intangible assets and their preliminary estimated useful lives, as well as the corresponding pro forma adjustments to amortization expense (in thousands):

	Preliminary Estimated Fair Value		Preliminary Estimated Useful Life in Years		Year Ended December 31, 2019 Amortization Expense			Six Months Ended June 30, 2020 Amortization Expense
Technology	$	14,000		10.0	$	1,400		$	700
Trade name		1,520		10.0		152			76
Customer relationships		120		10.0		12			6
Total	$	15,640			$	1,564		$	782
Tetraphase historical amortization expense recorded as cost of product sales						(393	)		(197	)
Pro forma adjustments to amortization expense					$	1,171		$	585

(D) Represents the preliminary estimated goodwill associated with the acquisition as shown in Note 2.

(E) Represents $3.5 million of non-recurring costs directly related to the acquisition of Tetraphase (“Transaction Costs”) that are not yet reflected in the historical financial statements of either La Jolla or Tetraphase as of June 30, 2020.

(F) Represents the preliminary estimated fair value of the future cash payments pursuant to CVRs.

(G) Represents the elimination of the historical equity of Tetraphase.

(H) Represents the removal of $7.3 million of Transaction Costs incurred by either La Jolla or Tetraphase during the six months ended June 30, 2020.

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XML

Document and Entity Information	Jul. 28, 2020
Cover [Abstract]
Amendment Flag	false
Entity Central Index Key	0000920465
Document Type	8-K/A
Document Period End Date	Jul. 28, 2020
Entity Registrant Name	LA JOLLA PHARMACEUTICAL COMPANY
Entity File Number	1-36282
Entity Incorporation, State or Country Code	CA
Entity Tax Identification Number	33-0361285
Entity Address, Address Line One	4550 Towne Centre Court
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92121
City Area Code	858
Local Phone Number	207-4264
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	LJPC
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false