You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and the related notes and other financial information included
elsewhere in this Quarterly Report on Form 10-Q and our audited financial
statements and the related notes and other financial information included in our
Annual Report on Form 10-K for the year ended December 31, 2021 filed with the
U.S. Securities and Exchange Commission (the "SEC") on March 9, 2022 (the "Form
10-K").

Forward-looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of the federal securities laws, and such statements may involve
substantial risks and uncertainties. All statements, other than statements of
historical facts included in this Quarterly Report on Form 10-Q, including
statements concerning our plans, objectives, goals, strategies, future events,
future revenues or performance, future expenses, financing needs, plans or
intentions relating to acquisitions, business trends and other information
referred to under this section titled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking statements.
Forward-looking statements generally relate to future events or our future
financial or operating performance. In some cases, you can identify
forward-looking statements by terms such as "may," "might," "will," "objective,"
"intend," "should," "could," "can," "would," "expect," "believe," "design,"
"estimate," "predict," "potential," "plan," "anticipate," "target," "forecast"
or the negative of these terms and similar expressions intended to identify
forward-looking statements. Forward-looking statements are not historical facts
and reflect our current views with respect to future events. Forward-looking
statements are also based on assumptions and are subject to risks and
uncertainties. Given these uncertainties, you should not place undue reliance on
these forward-looking statements.

There are a number of risks, uncertainties and other important factors that
could cause our actual results to differ materially from the forward-looking
statements contained in this Quarterly Report on Form 10-Q. Such risks,
uncertainties and other factors are described under "Risk Factors" in Part I,
Item 1A of our Form 10-K and Part II, Item 1A of this Quarterly Report on Form
10-Q. We caution you that these risks, uncertainties and other factors may not
contain all of the risks, uncertainties and other factors that are important to
you. In addition, we cannot assure you that we will realize the results,
benefits or developments that we expect or anticipate or, even if substantially
realized, that they will affect us or our business in the way expected. All
forward-looking statements in this Quarterly Report on Form 10-Q apply only as
of the date made and are expressly qualified in their entirety by the cautionary
statements included in this Quarterly Report on Form 10-Q. We undertake no
obligation to publicly update or revise any forward-looking statements to
reflect subsequent events or circumstances.

Business Overview

La Jolla Pharmaceutical Company is dedicated to the commercialization of
innovative therapies that improve outcomes in patients suffering from
life-threatening diseases. GIAPREZA® (angiotensin II) injection is approved by
the U.S. Food and Drug Administration ("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.

On July 10, 2022, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Innoviva, Inc., a Delaware corporation (the "Parent")
and Innoviva Acquisition Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of the Parent (the "Purchaser"). The Merger Agreement provides for
the acquisition of the Company by the Parent through a cash tender offer (the
"Offer") by the Purchaser for all of the Company's outstanding shares of common
stock, for $6.23 per share of common stock (the "Offer Price"). Purchaser
commenced the Offer on July 25, 2022 and the Offer will expire one minute after
11:59 p.m. New York City Time, on August 19, 2022, unless the Offer is extended
or terminated. Following the completion of the Offer, the satisfaction or waiver
of certain conditions set forth in the Merger Agreement and in accordance with
the General Corporation Law of the State of Delaware, the Purchaser will merge
with and into the Company, with the Company surviving as a wholly owned
subsidiary of the Parent.

                                       18
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                               Product Portfolio
   [[Image Removed]]
(1) For U.S. and
European approval
(2) U.S.: GIAPREZA is a
vasoconstrictor to
increase blood pressure
in adults with septic or
other distributive shock
European Union: GIAPREZA
is indicated for the
treatment of refractory
hypotension in adults
with septic or other
distributive shock who
remain hypotensive
despite adequate volume
restitution and
application of
catecholamines and other
available vasopressor
therapies
(3) U.S.: XERAVA is a
tetracycline class
antibacterial indicated
for the treatment of
cIAIs in patients 18
years of age and older
European Union: XERAVA
is indicated for the
treatment of cIAI in
adults


GIAPREZA® (angiotensin II)

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. GIAPREZA is approved by the European Commission ("EC") for the treatment
of refractory hypotension in adults with septic or other distributive shock who
remain hypotensive despite adequate volume restitution and application of
catecholamines and other available vasopressor therapies. GIAPREZA mimics the
body's endogenous angiotensin II peptide, which is central to the
renin-angiotensin-aldosterone system ("RAAS"), which in turn regulates blood
pressure. GIAPREZA is marketed in the U.S. by La Jolla Pharmaceutical Company on
behalf of La Jolla Pharma, LLC, its wholly owned subsidiary, and is marketed in
Europe by PAION Deutschland GmbH on behalf of La Jolla Pharma, LLC.

XERAVA® (eravacycline)



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. XERAVA is approved by
the EC for the treatment of cIAI in adults. XERAVA is marketed in the U.S. by
Tetraphase Pharmaceuticals, Inc., a wholly owned subsidiary of La Jolla, and is
marketed in Europe by PAION Deutschland GmbH on behalf of Tetraphase. Everest,
the Company's licensee for mainland China, Taiwan, Hong Kong, Macau, South
Korea, Singapore, the Malaysian Federation, the Kingdom of Thailand, the
Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the
Philippines, submitted an NDA in China, which was accepted by the China National
Medical Products Administration ("NMPA") in March 2021. XERAVA was approved in
Singapore by the Health Science Authority in April 2020.

Product Candidates



In connection with the acquisition of Tetraphase, we acquired the following
product candidates that are in early stage clinical or preclinical development:
(i) TP-6076, an IV formulation of a fully synthetic fluorocycline derivative for
the treatment of certain multidrug-resistant gram-negative bacteria; (ii)
TP-271, an IV and oral formulation of a fully synthetic fluorocycline for the
treatment of respiratory disease caused by bacterial biothreat and
antibiotic-resistant public health pathogens, as well as bacterial pathogens
associated with community-acquired bacterial pneumonia; and (iii) TP-2846, an IV
formulation of a tetracycline for the treatment of acute myeloid leukemia. At
this time, there are no active studies nor anticipated future studies for any of
these product candidates. We intend to seek out-license opportunities for these
product candidates; however, we are unable to predict the likelihood of
successfully out-licensing any of these product candidates.

                                       19
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Results of Operations



The following table summarizes our results of operations for each of the periods
below (in thousands):
                                           Three Months Ended                      Six Months Ended
                                                June 30,                               June 30,
                                     2022         2021        Change        2022         2021        Change
Net product sales                  $ 10,511     $ 11,059     $   (548 )   $ 20,920     $ 19,696     $   1,224
License and other revenue                32        5,000       (4,968 )         48       30,500       (30,452 )
Cost of product sales                 1,691        2,156         (465 )      3,856        4,887        (1,031 )
Cost of license and other
revenue                                   6            -            6           11        3,600        (3,589 )
Selling, general and
administrative expense                9,762        8,996          766       20,035       17,751         2,284
Research and development expense        154        1,114         (960 )        181        2,672        (2,491 )
Other income (expense), net           3,545          (60 )      3,605        5,593       (3,117 )       8,710
Provision for income taxes               17            -           17           18           18             -
Net income                         $  2,458     $  3,733     $ (1,275 )   $  2,460     $ 18,151     $ (15,691 )


Net Product Sales

Net product sales consist of revenue recognized from sales of GIAPREZA and
XERAVA to hospitals and other healthcare organizations in the U.S., generally
through a network of specialty distributors. These specialty distributors are
considered our customers for accounting purposes.

For the three and six months ended June 30, 2022, La Jolla's net product sales
were $10.5 million and $20.9 million, respectively, compared to $11.1 million
and $19.7 million, respectively, for the same periods in 2021. For the three and
six months ended June 30, 2022, GIAPREZA U.S. net product sales were $7.3
million and $15.0 million, respectively, compared to $8.6 million and $15.4
million, respectively, for the same periods in 2021. For the three and six
months ended June 30, 2022, XERAVA U.S. net product sales were $3.2 million and
$5.9 million, respectively, compared to $2.5 million and $4.3 million,
respectively, for the same periods in 2021. The decrease in GIAPREZA U.S. net
product sales is primarily due to a decrease in the number of vials sold to our
customers. The increase in XERAVA U.S. net product sales is primarily due to an
increase in the number of vials sold to our customers.

License and Other Revenue



License and other revenue consists of revenue from out-license agreements with
counterparties to develop and/or commercialize our products in territories
outside of the U.S. in exchange for: (i) nonrefundable, upfront license fees;
(ii) development, regulatory or commercial milestone payments; and/or (iii)
sales-based royalties. License and other revenue also consists of revenue from
commercial supply agreements with our out-licensees to supply a minimum quantity
of our products in territories outside the U.S. in exchange for: (i)
nonrefundable, upfront fees; and/or (ii) the reimbursement of manufacturing
costs, plus a margin in certain cases.

For the three and six months ended June 30, 2022, La Jolla's license and other
revenue was $32,000 and $48,000, respectively, compared to $5.0 million and
$30.5 million, respectively, for the same periods in 2021. For the three and six
months ended June 30, 2022, La Jolla's license and other revenue consists of
royalties from out-license agreements. The three months ended June 30, 2021,
consists of $5.0 million for the transfer of certain XERAVA-related
manufacturing know-how to Everest in connection with the Everest commercial
supply agreement (the "Technology Transfer"). The six months ended June 30,
2021, consists of: (i) a $22.5 million upfront payment in connection with the
PAION license; (ii) a $3.0 million milestone payment received in connection with
the Company's agreements with PAION AG and Everest Medicines Limited covering
ex-U.S. rights to GIAPREZA and XERAVA; and (iii) $5.0 million for the Technology
Transfer.

Cost of Product Sales

Cost of product sales consists primarily of expense associated with: (i)
manufacturing; (ii) royalties payable to George Washington University, Harvard
University and Paratek Pharmaceuticals, Inc.; (iii) shipping and distribution;
and (iv) the inventory fair value step-up adjustment recorded in connection with
the acquisition of Tetraphase.

La Jolla's cost of product sales were $1.7 million and $3.9 million for the
three and six months ended June 30, 2022, respectively, compared to $2.2 million
and $4.9 million, respectively, for the same periods in 2021. For the three and
six months ended June 30, 2021, cost of product sales includes zero and $0.9
million, respectively, of the

                                       20
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inventory fair value step-up adjustment recorded in connection with the acquisition of Tetraphase. No such adjustment was included in costs of product sales for the three and six months ended June 30, 2022.

Cost of License and Other Revenue



Cost of license and other revenue consists of amounts due under in-license
agreements and commercial supply agreements in connection with license and other
revenue from commercially approved product. Cost of license and other revenue
recognized in connection with product that is not commercially approved is
recorded as research and development expense.

For the three and six months ended June 30, 2022, La Jolla's cost of license and
other revenue was $6,000 and $11,000, respectively, compared to zero and $3.6
million, respectively, for the same periods in 2021. This decrease is due to a
decrease in amounts due under the George Washington University and Harvard
University license agreements of $2.7 million and $0.9 million, respectively, in
connection with the upfront cash payment received pursuant to the PAION AG
out-license agreement.

Selling, General and Administrative Expense



Selling, general and administrative expense consists of non-personnel and
personnel expenses. Non-personnel-related expense includes expense related to:
(i) professional fees for legal, patent, consulting, accounting and audit
services; (ii) sales and marketing costs such as speaker programs, advertising
and promotion, travel and marketing data; and (iii) facilities and information
technology. Personnel-related expense includes expense related to salaries,
benefits and share-based compensation for personnel engaged in sales, finance
and administrative functions. We expect our selling, general and administrative
expense to increase in the third quarter of 2022 due to transaction costs
related to the Merger Agreement.

The following table summarizes these expenses for each of the periods below (in
thousands):
                                          Three Months Ended                    Six Months Ended
                                               June 30,                             June 30,
                                    2022        2021        Change        2022         2021       Change

Non-personnel expense:
Professional fees                  $ 1,618     $ 1,266     $    352     $  3,203     $  2,794     $   409
Sales and marketing                  1,313       1,315           (2 )      2,670        2,510         159
Amortization of Intangibles            388         388            -          776          776           -
Facility                                62         105          (43 )        129          119          10
Other                                  438         423           15        1,098          826         272
Total non-personnel expense          3,819       3,496          322        7,875        7,025         850
Personnel expense:
Salaries, bonuses and benefits       4,609       4,523           86        9,581        8,909         673
Share-based compensation expense     1,334         977          357        2,579        1,817         762
Total personnel expense              5,943       5,500          443       12,160       10,726       1,434
Total selling, general and
administrative expense             $ 9,762     $ 8,996     $    765     $

20,035 $ 17,751 $ 2,284




During the three and six months ended June 30, 2022, total selling, general and
administrative non-personnel expense increased compared to the same periods in
2021 primarily as a result of: (i) an increase in transaction costs in
connection with the Merger Agreement; (ii) an increase in speaker programs,
advertising and other promotional activities to support growing net product
sales for both GIAPREZA and XERAVA; and (iii) an increase in non-personnel
allocations to general and administrative activities.

During the three months ended June 30, 2022, total selling, general and
administrative personnel expense increased compared to the same period in 2021
primarily due to an increase in share-based compensation expense resulting from
an increase in the volume and grant date fair value of stock options granted to
employees in connection with their annual performance.

During the six months ended June 30, 2022, total selling, general and
administrative personnel expense increased compared to the same period in 2021
primarily as a result of: (i) an increase in the average per cost of employee;
(ii) an increase in personnel allocations to general and administrative
activities; and (iii) an increase in

                                       21
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share-based compensation expense resulting from an increase in the volume and
grant date fair value of stock options granted to employees in connection with
their annual performance.

Research and Development Expense



Research and development expense consists of non-personnel and personnel
expenses. Non-personnel-related expense includes expense related to: (i)
manufacturing development; (ii) amounts due under in-license agreements for drug
product that is not commercially approved; and (iii) conducting post-marketing
pediatric studies. Personnel-related expense includes expense related to
salaries, benefits and share-based compensation for personnel engaged in
research and development functions. We do not expect our research and
development expense to be significant going forward.

During the three and six months ended June 30, 2022, total research and
development expense was $0.2 million and $0.2 million, respectively, compared to
$1.1 million and $2.7 million, respectively, for the same period in 2021. These
decreases are primarily due to: (i) a decrease in amounts due under in-license
agreements for drug product that was not commercially approved; (ii) decreases
in manufacturing development and post-marketing pediatric study expenses; and
(iii) a decrease in total research and development personnel expense, including
share-based compensation expense, due to a decrease in personnel allocations to
research and development activities.

Other Income (Expense), Net



Other income (expense), net consists primarily of the following: (i) income from
distributions received in connection with the Company's non-core asset,
consisting of a non-voting minority interest in a private company (the "Minority
Interest"); (ii) interest expense accrued for our deferred royalty obligation;
(iii) a gain on the forgiveness of Paycheck Protection Program loan ("PPP
Loan"); (iv) unrealized losses on changes in fair value of short term
investments; and (vi) gains and/or losses resulting from changes in the fair
value of contingent value rights ("CVRs").

During the three months ended June 30, 2022, other income (expense), net was $3.5 million, compared to $(0.1) million for the same period in 2021. This increase is primarily due to a $3.9 million increase in the receipt of distributions in connection with the Company's Minority Interest.



During the six months ended June 30, 2022, other income (expense), net was $5.6
million, compared to $(3.1) million for the same period in 2021. This increase
is primarily due to: (i) a $5.5 million increase in the receipt of distributions
in connection with the Company's Minority Interest; (ii) a $2.3 million increase
due to a gain on the forgiveness of the PPP Loan by the U.S. Small Business
Administration; and (iii) a $0.3 million decrease in interest expense accrued
for our deferred royalty obligation.

Liquidity and Capital Resources



As of June 30, 2022 and December 31, 2021, we had cash, cash equivalents and
short-term investments of $48.7 million and $46.7 million, respectively. The
increase in cash, cash equivalents and short-term investments is primarily due
to net cash provided by operating activities, offset by purchases of the
Company's common stock under its stock repurchase plan. For the six months ended
June 30, 2022, La Jolla's net cash provided by operating activities was $9.2
million compared to $24.3 million for the same period in 2021. The 2021 period
included a $16.8 million net upfront payment and a $3.0 million milestone
payment received in connection with the Company's agreements with PAION AG and
Everest Medicines Limited covering ex-U.S. rights to GIAPREZA and XERAVA.

We believe that our existing cash, cash equivalents and short-term investments
will be sufficient to fund operations for at least one year from the date this
Quarterly Report on Form 10-Q is filed with the SEC. The Company expects to fund
future operations with existing cash or cash generated from operations.

The amount and timing of additional future funding needs, if any, will depend on
many factors, including the success of our commercialization efforts for
GIAPREZA and XERAVA and our ability to control expenses. If the pending
transaction with Innoviva, Inc. does not close, and if necessary, we intend to
raise additional capital through equity or debt financings. We can provide no
assurance that additional financing will be available to us on favorable terms,
or at all.

                                       22
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Contractual Obligations

HealthCare Royalty Partners Royalty Agreement



In May 2018, we closed a $125.0 million royalty financing agreement (the
"Royalty Agreement") with HealthCare Royalty Partners ("HCR"). Under the terms
of the Royalty Agreement, we received $125.0 million in exchange for tiered
royalty payments on worldwide net sales of GIAPREZA. HCR is entitled to receive
quarterly royalties on worldwide net sales of GIAPREZA beginning April 1, 2018.
Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty
rate, with step-downs based on the achievement of annual net product sales
thresholds. Through December 31, 2021, the maximum royalty rate was 10%.
Starting January 1, 2022, the maximum royalty rate increased by 4%, and,
starting January 1, 2024, the maximum royalty rate may increase by an
additional 4% if an agreed-upon, cumulative net product sales threshold has not
been met. The Royalty Agreement is subject to maximum aggregate royalty payments
to HCR of $225.0 million. The Royalty Agreement expires upon the first to occur
of January 1, 2031 or when the maximum aggregate royalty payments have been
made. The Royalty Agreement was entered into by our wholly owned subsidiary, La
Jolla Pharma, LLC, and HCR has no recourse under the Royalty Agreement against
La Jolla Pharmaceutical Company or any assets other than GIAPREZA. See - Recent
Developments.

In-license Agreements

George Washington University



In December 2014, the Company entered into a patent license agreement with
George Washington University ("GW"), which was subsequently amended and restated
(the "GW License") and assigned to La Jolla Pharma, LLC. Pursuant to the GW
License, GW exclusively licensed to the Company certain intellectual property
rights relating to GIAPREZA, including the exclusive rights to certain issued
patents and patent applications covering GIAPREZA. Under the GW License, La
Jolla Pharma, LLC is obligated to use commercially reasonable efforts to
develop, commercialize, market and sell GIAPREZA. The Company has paid
a one-time license initiation fee, annual maintenance fees, an amendment fee,
additional payments following the achievement of certain development and
regulatory milestones and royalties. The Company is obligated to pay a 6%
royalty on net sales of GIAPREZA and 15% on payments received from sublicensees.
The obligation to pay royalties under this agreement extends through the
last-to-expire patent covering GIAPREZA.

Harvard University



In August 2006, the Company entered into a license agreement with Harvard
University ("Harvard"), which was subsequently amended and restated (the
"Harvard License"). Pursuant to the Harvard License, Harvard exclusively
licensed to the Company certain intellectual property rights relating to
tetracycline-based products, including XERAVA, including the exclusive rights to
certain issued patents and patent applications covering such products. Under the
Harvard License, the Company is obligated to use commercially reasonable efforts
to develop, commercialize, market and sell tetracycline-based products,
including XERAVA. For each product covered by the Harvard License, the Company
is obligated to make certain payments for the following: (i) up to approximately
$15.1 million upon the achievement of certain clinical development and
regulatory milestones; (ii) a 5% royalty on direct U.S. net sales of XERAVA;
(iii) a single-digit tiered royalty on direct ex-U.S. net sales of XERAVA,
starting at a minimum royalty rate of 4.5%, with step-ups to a maximum royalty
of 7.5% based on the achievement of annual net product sales thresholds; and
(iv) 20% on payments received from sublicensees. The obligation to pay royalties
under this agreement extends through the last-to-expire patent covering
tetracycline-based products, including XERAVA.

Paratek Pharmaceuticals, Inc.



In March 2019, the Company entered into a license agreement with Paratek
Pharmaceuticals, Inc. ("Paratek"), which was subsequently amended and restated
(the "Paratek License"). Pursuant to the Paratek License, Paratek
non-exclusively licensed to the Company certain intellectual property rights
relating to XERAVA, including non-exclusive rights to certain issued patents and
patent applications covering XERAVA. The Company is obligated to pay Paratek a
2.25% royalty based on direct U.S. net sales of XERAVA. 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 and shall continue until there are no
longer any valid claims of the Paratek patents, which will expire in October
2023.

Out-license Agreements

PAION AG

In January 2021, La Jolla Pharmaceutical Company and certain of its wholly owned
subsidiaries, including La Jolla Pharma, LLC and Tetraphase Pharmaceuticals,
Inc., entered into an exclusive license agreement (the "PAION

                                       23
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License") with PAION AG and its wholly owned subsidiary (collectively, "PAION").
Pursuant to the PAION License, La Jolla granted PAION an exclusive license to
commercialize GIAPREZA and XERAVA in the European Economic Area, the United
Kingdom and Switzerland (collectively, the "PAION Territory"). La Jolla has
received an upfront cash payment of $22.5 million, less a 15% refundable
withholding tax, and is entitled to receive potential commercial milestone
payments of up to $109.5 million and double-digit tiered royalty payments. In
addition, royalties payable under the PAION License will be subject to reduction
on account of generic competition and after patent expiration in a jurisdiction.
La Jolla recognized the upfront cash payment of $22.5 million as license and
other revenue for the six months ended June 30, 2021. As of June 30, 2022 and
December 31, 2021, the 15% refundable withholding tax of $2.3 million and $3.4
million, respectively, was recorded as an other current asset. On July 7, 2022,
the Company received the remaining refundable withholding tax. Pursuant to the
PAION License, PAION will be solely responsible for the future development and
commercialization of GIAPREZA and XERAVA in the PAION Territory. PAION is
required to use commercially reasonable efforts to commercialize GIAPREZA and
XERAVA in the PAION Territory. The Company has not received any payments from
PAION related to either royalties or commercial milestones.

In July 2021, the Company entered into a commercial supply agreement with PAION
whereby the Company will supply PAION a minimum quantity of GIAPREZA and XERAVA
through July 13, 2024. The supply agreement will automatically renew until the
earlier of July 13, 2027, or until a new supply agreement is executed. During
the initial 3-year term of the supply agreement, the Company will be reimbursed
for direct and certain indirect manufacturing costs at cost.

Everest Medicines Limited



In February 2018, the Company entered into a license agreement with Everest,
which was subsequently amended and restated (the "Everest License"). Pursuant to
the Everest License, the Company granted Everest 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, Singapore, the Malaysian
Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist
Republic of Vietnam and the Republic of the Philippines (collectively, the
"Everest Territory"). The Company is eligible to receive an additional $8.0
million regulatory milestone payment and up to an aggregate of $20.0 million in
sales milestone payments. The Company is also entitled to receive tiered
royalties from Everest at percentages in the low double digits on sales, if any,
in the Everest Territory of products containing eravacycline. Royalties are
payable with respect to each jurisdiction in the Everest Territory until the
latest to occur of: (i) the last-to-expire of specified patent rights in such
jurisdiction in the Everest Territory; (ii) expiration of marketing or
regulatory exclusivity in such jurisdiction in the Everest Territory; or (iii)
10 years after the first commercial sale of a product in such jurisdiction in
the Everest Territory. In March 2021, the Company received a $3.0 million
milestone payment associated with the submission of an NDA with the China NMPA
for XERAVA for the treatment of cIAI in patients in China. XERAVA was approved
in Singapore by the Health Science Authority in April 2020.

In May 2021, the Company entered into a commercial supply agreement with Everest
whereby the Company will supply Everest a minimum quantity of XERAVA through
December 31, 2023 and will transfer to Everest certain XERAVA-related
manufacturing know-how. Pursuant to the supply agreement: (i) the Company has
received $6.8 million of upfront payments comprised of: (1) a $4.0 million
upfront technology transfer payment; and (2) a $2.8 million partial prepayment
for XERAVA that is expected to be delivered to Everest; (ii) the Company has
received an additional $1.0 million technology transfer payment in January,
2022; and (iii) the Company will be reimbursed for direct and certain indirect
manufacturing costs at 110% of costs through December 31, 2023. The Company
recognized the $5.0 million of technology transfer-related payments as license
and other revenue during the three and six months ended June 30, 2021 as Everest
obtained control of the XERAVA-related manufacturing know-how prior to June 30,
2021. The Company recognized the $2.8 million partial prepayment for XERAVA that
is expected to be delivered to Everest as deferred revenue as of June 30, 2022,
and December 31, 2021, as the performance obligation to deliver XERAVA had not
yet been satisfied.

Recent Developments

On August 5, 2022, the Company received a notice letter from HCR in which HCR
alleges the occurrence, or imminent occurrence, of La Jolla Pharma, LLC not
meeting certain obligations under the Royalty Agreement and related agreements,
including the obligation to use commercially reasonable and diligent efforts to
commercialize GIAPREZA and the obligation to not undertake a Change of Control,
that would result in HCR's right to terminate the Royalty Agreement. As defined
in the Royalty Agreement, a Change of Control means any event or series of
events that results in either: (i) the Company no longer directly or indirectly
owning 100% of La Jolla Pharma, LLC; or (ii) La Jolla Pharma, LLC no longer
directly owning 100% of worldwide net sales of GIAPREZA, except for the granting
of ex-U.S. product licenses, neither of which are impacted by the transactions
contemplated by the Merger

                                       24
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Agreement with Innoviva. If La Jolla Pharma, LLC is ultimately determined to not
have met these obligations, HCR would have the right to terminate the Royalty
Agreement and demand payment from La Jolla Pharma, LLC of either $125.0 million
or $225.0 million (depending on which obligation La Jolla Pharma, LLC is held to
not have met), minus aggregate royalties already paid to HCR. The Company
believes that each of the claims made in the notice letter are wholly without
merit and frivolous, disputes them and would vigorously defend against such
claims if they were asserted in a legal proceeding. Neither the notice letter
nor the meritless and frivolous claims made therein are expected to impede the
anticipated closing of the transactions contemplated by the Merger Agreement and
the Company expects to complete the transactions as planned.

Critical Accounting Estimates



We believe the estimates, assumptions and judgments involved in the accounting
policies described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 7 of our Form 10-K for the year
ended December 31, 2021 are most critical to understanding and evaluating our
reported financial results. During the six months ended June 30, 2022, there
have been no material changes to the critical accounting policies and estimates
as described in Item 7 of our Form 10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.


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