I recommend reading Ross Klosterman's exhaustive and well-researched account of La Jolla. He does a good job tracing the history of the company, including the gnarly provenance of its lead compound, the galectin inhibitor GCS-100. He also delves into the complicated ownership structure of La Jolla, which includes big stakes controlled by a trio of San Diego hedge funds and the Baker Brothers.
Klosterman views the involvement of "smart" healthcare hedge funds as a positive and one reason why he decided to invest in La Jolla. I look at the situation much differently. What I see are hedge funds who gained control of a struggling, essentially insolvent, La Jolla at incredibly favorable prices, threw some lipstick on the pig and are now trying to sell the company to retail investors like it was a piece of fine art. Don't fall for it.
After Klosterman's article was published, La Jolla pushed through a 1-for-50 reverse stock split, but the company also authorized 12 billion (yes, billion) shares of common stock and 8 million preferred shares, which may be used for dilutive financings in the future. Scary.
La Jolla also just moved to the Nasdaq from the bulletin boards, so expect to see a lot more investor "marketing." Next week, La Jolla executives are in New York soliciting meetings with investors via an investor relations/research firm with close ties to the San Diego hedge funds.
