Business Overview
La Jolla Pharmaceutical Company (NASDAQ:LJPC) is a biopharmaceutical company dedicated to the commercialization of innovative therapies that improve outcomes in patients suffering from life-threatening diseases. The company's portfolio includes two FDA-approved products, GIAPREZA and XERAVA, which have demonstrated their value in addressing critical medical needs.GIAPREZA (angiotensin II) injection is approved by the FDA as a vasoconstrictor indicated to increase blood pressure in adults with septic or other distributive shock. XERAVA (eravacycline) for injection is approved by the FDA as a tetracycline class antibacterial indicated for the treatment of complicated intra-abdominal infections (cIAI) in patients 18 years of age and older. These products have been strategically positioned to address significant unmet medical needs, showcasing La Jolla's commitment to improving patient outcomes.
Financials
In the latest fiscal year, La Jolla Pharmaceutical Company reported annual net income of $19.66 million, annual revenue of $75.72 million, annual operating cash flow of $28.24 million, and annual free cash flow of $28.24 million. These impressive financial results demonstrate the company's ability to generate sustainable growth and profitability.Quarterly Highlights
During the most recent quarter, the company reported net product sales of $10.5 million, a slight decrease compared to the same period in the previous year. This decline was primarily due to a decrease in the number of GIAPREZA vials sold to customers. However, XERAVA net product sales increased to $3.2 million, up from $2.5 million in the same quarter last year, driven by an increase in the number of vials sold.License and other revenue for the quarter was $32,000, compared to $5.0 million in the same period last year. The decrease was primarily due to the recognition of a $5.0 million payment in the prior year related to the transfer of certain XERAVA-related manufacturing know-how to Everest Medicines Limited.
Gross margin remained strong at 82%, reflecting the company's efficient manufacturing and distribution processes. Selling, general, and administrative expenses increased to $9.8 million, up from $9.0 million in the same quarter last year, primarily due to higher transaction costs related to the pending merger with Innoviva, Inc. and increased marketing activities to support the growing sales of GIAPREZA and XERAVA.
Research and development expenses decreased to $0.2 million, down from $1.1 million in the same quarter last year, as the company focused on the commercialization of its approved products rather than early-stage development.
Liquidity
As of the end of the latest quarter, La Jolla Pharmaceutical Company had $48.7 million in cash, cash equivalents, and short-term investments, providing a strong liquidity position to support its ongoing operations and strategic initiatives. The company expects that its existing cash and cash equivalents will be sufficient to fund operations for at least one year from the date of the latest quarterly report.Pending Merger with Innoviva, Inc.
On July 10, 2022, La Jolla Pharmaceutical Company announced that it had entered into an agreement to be acquired by Innoviva, Inc. (NASDAQ:INVA) for $6.23 per share in cash. The transaction is expected to close in the third quarter of 2022, subject to the satisfaction of customary closing conditions, including the tender of a majority of La Jolla's outstanding shares.Risks and Challenges
While La Jolla Pharmaceutical Company has demonstrated its ability to successfully commercialize its products, the company faces several risks and challenges that investors should be aware of. These include potential competition from generic or biosimilar products, regulatory uncertainties, and the ability to maintain and expand its customer base. Additionally, the company's reliance on a limited number of large customers for a significant portion of its revenue could pose a risk if any of these customers were to reduce their orders or cease doing business with La Jolla.Outlook
La Jolla Pharmaceutical Company has not provided specific financial guidance for the current fiscal year. However, the company remains focused on driving the continued growth and adoption of GIAPREZA and XERAVA in their respective markets. The pending merger with Innoviva, Inc. is expected to provide additional resources and expertise to further strengthen the company's position in the pharmaceutical industry.Geographical Breakdown
La Jolla Pharmaceutical Company's products are primarily sold in the United States, where the company has established a strong distribution network and customer relationships. The company has also entered into licensing agreements to commercialize its products in select international markets, such as the European Union and certain Asian countries, through partnerships with companies like PAION AG and Everest Medicines Limited.Revenue Breakdown and Trends
The company's revenue is primarily derived from two sources: net product sales and license and other revenue. Net product sales, which accounted for the majority of the company's revenue, were $20.9 million in the latest fiscal year, up from $19.7 million in the prior year. This increase was driven by higher sales of XERAVA, which offset a slight decline in GIAPREZA sales.License and other revenue, which includes payments from the company's out-licensing agreements, was $32,000 in the latest fiscal year, down significantly from $30.5 million in the prior year. This decrease was primarily due to the recognition of a $22.5 million upfront payment and a $3.0 million milestone payment in the prior year related to the company's agreements with PAION AG and Everest Medicines Limited.
Financial Ratios and Metrics
La Jolla Pharmaceutical Company's financial ratios and metrics demonstrate its strong financial position and operational efficiency. The company's current ratio stands at 3.82, indicating a healthy ability to meet its short-term obligations. The quick ratio of 3.33 further reinforces the company's liquidity. Additionally, the company's gross profit margin of 82% and operating profit margin of 40% highlight its ability to generate robust profitability.