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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-19825
SCICLONE PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3116852
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) Identification no.)
901 MARINER'S ISLAND BLVD., SUITE 205, SAN MATEO, CALIFORNIA 94404
------------------------------------------------------------ -----
(Address of principal executive offices) (Zip code)
(650) 358-3456
(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of April 25, 2000, 31,461,477 shares of the registrant's Common
Stock, no par value, were issued and outstanding.
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SCICLONE PHARMACEUTICALS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 4
Consolidated Statements of Operations for the
Three-month periods ended March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows for the
Three-months periods ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 26
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
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(unaudited) (Note 1)
Current assets:
Cash and cash equivalents $ 4,852,000 $ 1,828,000
Short-term investments 14,886,000 1,793,000
Accounts receivable, net 6,446,000 4,343,000
Inventory 443,000 1,081,000
Prepaid expenses and other current assets 527,000 685,000
Assets available-for sale 1,184,000 1,184,000
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Total current assets 28,338,000 10,914,000
Property and equipment, net 208,000 235,000
Other assets 1,866,000 1,975,000
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Total assets $ 30,412,000 $ 13,124,000
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,868,000 $ 825,000
Accrued compensation and benefits 346,000 730,000
Accrued clinical trials expense 336,000 258,000
Accrued professional fees 648,000 865,000
Other accrued expenses 7,000 203,000
Other current liabilities 939,000 942,000
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Total current liabilities 4,144,000 3,823,000
Shareholders' equity:
Common stock, no par value; 75,000,000 shares authorized;
30,703,677 and 25,258,395 shares issued and outstanding 142,156,000 124,328,000
Net unrealized gain on available-for-sale securities 16,000 2,000
Accumulated deficit (115,904,000) (115,029,000)
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Total shareholders' equity 26,268,000 9,301,000
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Total liabilities and shareholders' equity $ 30,412,000 $ 13,124,000
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See notes to consolidated financial statements
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SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended
March 31,
2000 1999
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Product revenue $ 3,499,000 $ 1,577,000
Contract revenue 200,000
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Total revenue 3,499,000 1,777,000
Cost of product sales 735,000 359,000
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Gross profit 2,764,000 1,418,000
Operating expenses:
Research and development 1,259,000 1,912,000
Marketing 1,916,000 1,272,000
General and administrative 643,000 909,000
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Total operating expenses 3,818,000 4,093,000
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Loss from operations (1,054,000) (2,675,000)
Interest and investment income, net 179,000 52,000
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Net loss $ (875,000) $ (2,623,000)
============ ============
Basic and diluted net loss per share $ (0.03) $ (0.13)
============ ============
Shares used in computing basic and
diluted net loss per share 28,476,234 20,029,333
============ ============
See notes to consolidated financial statements
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SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended
March 31,
2000 1999
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OPERATING ACTIVITIES:
Net loss $ (875,000) $ (2,623,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization
153,000 25,000
Changes in operating assets and liabilities:
Prepaid expenses and other assets 165,000 253,000
Accounts receivable (2,103,000) (443,000)
Inventory 638,000 164,000
Accounts payable and other accrued expenses 844,000 210,000
Accrued compensation and benefits (384,000) (71,000)
Accrued clinical trials expense 78,000 (293,000)
Accrued professional fees (217,000) 53,000
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Net cash used in operating activities (1,701,000) (2,725,000)
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INVESTING ACTIVITIES:
Purchase of property and equipment
(24,000) (3,000)
Sale (purchase) of marketable securities, net (13,079,000) 1,661,000
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Net cash (used in) provided by investing activities (13,103,000) 1,658,000
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FINANCING ACTIVITIES:
Proceeds from issuance of common stock and financing cost, net 17,828,000 (97,000)
Payment on notes receivable from officer -- 1,000
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Net cash provided by (used in) financing activities 17,828,000 (96,000)
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Net increase (decrease) in cash and cash equivalents 3,024,000 (1,163,000)
Cash and cash equivalents, beginning of period 1,828,000 3,490,000
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Cash and cash equivalents, end of period $ 4,852,000 $ 2,327,000
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See notes to consolidated financial statements
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SCICLONE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
consistent with those applied in, and should be read in conjunction
with, the audited financial statements for the year ended December 31,
1999. The interim financial information reflects all normal recurring
adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the interim periods presented. The
balance sheet data at December 31, 1999 is derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The interim results are
not necessarily indicative of results for subsequent interim periods or
for the full year.
2. In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which is required to be adopted for the year ending
December 31, 2001. Management does not anticipate that the adoption of
SFAS 133 will have a significant impact on results of operations or the
financial position of the Company.
3. In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). This summarizes certain areas of the staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company is currently evaluating
the impact of SAB 101 on its results of operations and financial
position.
4. For the three-month periods ended March 31, 2000 and 1999, total
comprehensive loss amounted to $(861,000) and $(2,618,000),
respectively.
5. The following is a summary of available-for sale securities at March 31,
2000:
Available-for-sale securities
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Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
Corporate obligations $14,870,000 $ -- $ (3,000) $14,867,000
Corporate equity securities -- 19,000 -- 19,000
----------- ----------- ----------- -----------
$14,870,000 $ 19,000 $ (3,000) $14,886,000
=========== =========== =========== ===========
As of March 31, 2000, the average portfolio duration was less than one
year.
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6. The following is a summary of inventories at March 31, 2000:
Raw materials $304,000
Finished goods 139,000
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$443,000
========
7. The following is a summary of other assets at March 31, 2000:
Intangible product rights - net $1,808,000
Other 58,000
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$1,866,000
==========
Product rights acquired are being amortized over six years beginning in
September 1998. The Company identifies and records impairment losses, as
circumstances dictate, on intangible product rights when events and
circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are
less than the carrying amounts of those assets.
8. In January 2000, the Company completed a $5,720,000 private placement to
Brown Simpson Asset Management, a strategic institutional investor.
Brown Simpson purchased 1,000,000 shares of the Company's common stock
at a price of $6.00 per share, a slight premium to market, and five-year
warrants to purchase 800,000 shares of the Company's common stock at an
exercise price of $7.00 per share. The shares issued upon exercise of
the warrants, if any, may not be sold prior to October 18, 2000 if the
market price is less than $10.00 per share.
9. In March 2000, the Company completed a $3,100,000 private placement to
Italy-based Sigma-Tau Group, one of the leading pharmaceutical companies
in Southern Europe. Sigma Tau purchased 198,072 shares of the Company's
common stock at $15.14 per share and five-year warrants to purchase an
aggregate of 400,000 shares of the Company's common stock, 200,000 of
which are exercisable at a price of $15.67 per share and 200,000 of
which are exercisable at a price of $31.33 per share. Sigma-Tau may not
sell any of the shares purchased in this private placement until March
2, 2001. In addition, Sigma-Tau was not granted any registration rights
covering resale of the shares or the shares issuable upon exercise of
the warrants.
10. During the quarter ended March 31, 2000, the Company received
approximately $8,973,000 in connection with exercises of outstanding
options to purchase 450,399 shares of common stock and outstanding
warrants to purchase 3,769,342 shares of common stock.
11. The Company does not have any minimum purchase requirements under its
contract manufacturing supply agreements for ZADAXIN(R) and CPX.
12. The Company recognizes revenue from product sales at the time of
shipment and recognizes contract/grant revenue when services have been
performed. Sales to distributors are recognized at time of shipment when
titles to the products are transferred to them. The distributors do not
have contractual right of return. In March 1999, the Company received a
non-refundable $200,000 FDA Orphan Drug Grant for phase 2
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development of CPX. As there were no future performance obligations with
respect to this FDA grant, the Company recognized the entire amount as
revenue in March 1999.
13. The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 and Emerging Issues Task
Force ("EITF") 96-18. Warrants issued in connection with equity and debt
arrangements are valued using the Black-Scholes option valuation model.
Warrants issued to placement agents and similar parties in connection
with equity financing are accounted as stock issuance cost with an equal
amount recorded as additional paid-in capital. Warrants issued to
purchasers of the Company's equities are not specifically accounted for
as their value is a sub-component of additional paid-in capital. The
fair value of warrants issued in connection with debt arrangements, if
material, is accounted for as a debt discount and amortized as
additional interest expense over the term of the related debt.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and related notes appearing elsewhere in this report. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. The actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, such as those set forth under "Risk Factors" and the risks discussed in
our other SEC filings, including our Annual Report on Form 10-K filed March 30,
2000 with the SEC.
OVERVIEW
SciClone Pharmaceuticals, Inc. is a global specialty biopharmaceutical
company that develops and commercializes novel medicines for treating a broad
range of the world's most serious diseases. We believe the significance,
prevalence and diversity of our disease targets, and the known limitations of
current treatment alternatives, have created a compelling need for improved
therapies, with novel medicines often enjoying premium pricing and rapid market
acceptance. Our current product development and commercial activities are
focused on this large, unmet market need. Specifically, we have focused our
current product development and commercial activities on the following diseases:
- hepatitis C, an infectious disease affecting 170 million people
worldwide;
- hepatitis B, an infectious disease affecting 350 million people
worldwide;
- the most common and deadliest form of liver cancer worldwide,
hepatocellular carcinoma;
- the deadliest form of skin cancer and one of the most rapidly
increasing types of cancer worldwide, malignant melanoma;
- HIV, the virus that causes AIDS;
- drug-resistant tuberculosis, an infectious disease reaching pandemic
proportions worldwide; and
- cystic fibrosis, the most common fatal genetic disease among
Caucasians.
The fundamentals of the markets for therapies that treat cancer,
infectious disease and cystic fibrosis that are particularly advantageous for us
include:
- high incidence and prevalence of these diseases;
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- inadequate treatment alternatives, characterized by limited efficacy
and high risks of toxic side effects;
- potential for "fast track" FDA review;
- highly concentrated populations of specialists, allowing a small
sales force to be effective; and
- favorable pricing and reimbursement environment.
Our flagship drug is ZADAXIN(R), an immunotherapy. ZADAXIN boosts the
body's immune system in the fight against multiple types of cancer and
infectious diseases. ZADAXIN is in, or is expected to enter, phase 2 and phase
3 development in the United States, Europe and Japan, the world's largest
pharmaceutical markets, targeting six diseases: hepatitis C, hepatitis B,
hepatocellular carcinoma, malignant melanoma, HIV and drug-resistant
tuberculosis. Approximately 3,000 patients have been treated with ZADAXIN in
over 70 clinical trials covering a broad range of life-threatening diseases in
which the immune system plays a key role in the patient's ability to fight
back.
Unlike most global specialty biopharmaceutical companies, we are
currently selling our lead drug ZADAXIN. ZADAXIN is currently approved for sale
in Italy and 19 emerging markets in Asia, Latin America and the Middle East,
principally for the treatment of hepatitis C and hepatitis B, and as a vaccine
adjuvant. Total ZADAXIN sales for 1999 were $9.1 million, a 151% increase over
1998 sales of $3.6 million, and for the three months ended March 31, 2000,
sales were $3.5 million, a 122% increase over sales of $1.6 million in the
three months ended March 31, 1999. We have filed 17 ZADAXIN marketing
applications and plan to file 8 additional applications in 2000.
Our second product in clinical development, CPX, is a novel
protein-repair therapy for cystic fibrosis, the most common fatal genetic
disease among Caucasians. Currently approved drugs treat only the symptoms of
cystic fibrosis, not the underlying cause of the disease. CPX, which we
in-licensed from the United States National Institutes of Health, is designed
to repair the underlying protein-associated defect that is responsible for
cystic fibrosis in most patients, not just the symptoms of the disease. CPX is
currently undergoing phase 2 development in the United States.
Additional preclinical drug candidates include SCV-07, the lead orally
active compound in our new class of immunotherapies, and DAX. We expect to
develop SCV-07 for drug-resistant tuberculosis, cancer and viral hepatitis. DAX
is targeted at cystic fibrosis.
From commencement of our operations in 1989 through March 31, 2000, we
had incurred a cumulative net loss of approximately $115.9 million. We expect
our operating expenses to increase over the next several years consistent with
our expansion of sales, research and development, and preclincial and clinical
testing. Our ability to expand our operations or achieve profitability is
dependent in part on successful expansion of the market for ZADAXIN in Asia,
Latin America and the Middle East, obtaining additional regulatory approvals
for ZADAXIN and/or future products in the United States, Europe and Japan,
entering into additional strategic
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arrangements for product development and commercialization, where appropriate,
obtaining additional financing to support our long-term product development and
commercialization efforts, and continuing to transition from a development
operation into a successful marketing and development operation.
Our operating results may fluctuate from period to period as a result
of, among other things, market acceptance of ZADAXIN, the timing and costs
associated with preclinical and clinical development of our products, the
regulatory approval process, and the acquisition of additional product rights.
RESULTS OF OPERATIONS
Total revenue was approximately $3,499,000 for the three-month period
ended March 31, 2000, as compared to approximately $1,777,000 for the
corresponding period in 1999. For the three-month period ended March 31, 2000,
all of our total revenue was derived from sales of ZADAXIN. For the three-month
period ended March 31, 2000, four distributors in China accounted for 86% of
our ZADAXIN sales. China, like Japan and other Asian countries, uses a tiered
method to import and distribute products. The distributors make the sales in
the country, but the product is imported for them by licensed importers. We
currently work with two importing agents who resell ZADAXIN to four
distributors within China. We have received ZADAXIN marketing approval in 20
countries but have not yet commercially launched ZADAXIN in all of these
countries. We have filed for approval to market ZADAXIN in 17 additional
countries and anticipate additional filings in 8 other countries this year. As
a result, if we are able to increase sales of ZADAXIN in existing markets, and
commence sales of ZADAXIN in new markets once we have secured the requisite
regulatory approvals, we expect our product revenue to continue to increase in
2000. However, because the level of ZADAXIN sales in newly approved markets and
increased sales in existing markets is dependent upon a number of factors,
including our long-term product development and commercialization efforts,
particularly those in the United States, Europe and Japan, approved pricing
levels, increased market penetration, additional marketing approvals and
successful launch activities, we cannot assure you that our product revenue
will increase in 2000.
Cost of product sales was approximately $735,000 for the three-month
period ended March 31, 2000, as compared to approximately $359,000 for the
corresponding period in 1999. The increase was attributable to increased
ZADAXIN sales. We expect cost of sales to vary from quarter to quarter,
dependent upon the level of ZADAXIN sales, the absorption of fixed
product-related costs, and any charges associated with excess or expiring
finished product.
Research and development expenses were approximately $1,259,000 for the
three-month period ended March 31, 2000, as compared to approximately
$1,912,000 for the corresponding period in 1999. The decrease was primarily
attributable to decreases in clinical trial expenses, consulting fees and
payroll expenses. In general, we expect product research and development
expenses to increase quarter to quarter as we pursue our strategy of initiating
additional clinical trials and testing, particularly in the United States,
acquiring product rights, and expanding regulatory activities.
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Marketing expenses were approximately $1,916,000 for the three-month
period ended March 31, 2000, as compared to approximately $1,272,000 for the
corresponding period in 1999. The increase relates to increased payroll and
travel expenses and expenses for advertising associated with the expansion in
our existing ZADAXIN markets. We expect our marketing expenses to increase as we
continue to expand our commercialization and marketing efforts and strategic
relationships.
General and administrative expenses were approximately $643,000 for the
three-month period ended March 31, 2000, as compared to approximately $909,000
for the corresponding period in 1999. The decrease was attributable to decreased
payroll and travel expenses and decreased legal and consulting expenses,
partially offset by increased amortization expense. In the near term, we expect
general and administrative expenses to increase quarter to quarter as we engage
in additional clinical trials and testing, particularly in the United States,
and regulatory, pre-commercialization and marketing activities.
Net interest and investment income was approximately $179,000 for the
three-month period ended March 31, 2000, as compared to approximately $52,000
for the corresponding period in 1999. The increase primarily resulted from
increased interest and investment income due to higher average invested cash
balances.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000 and 1999, we had approximately $19,738,000 and
$2,591,000, respectively, in cash, cash equivalents and marketable securities.
The marketable securities consist primarily of highly liquid short-term
investments.
Net cash used by us in operating activities amounted to approximately
$1,701,000 for the three-month period ended March 31, 2000. Net cash used in
operating activities in the 2000 period was greater than our net loss for such
period due to increases in accounts receivable and decreases in accrued
compensation and benefits and accrued professional fees. These uses of cash were
partially offset by non-cash charges associated with depreciation and
amortization, and decreases in prepayments of certain future expenses and
inventory, and increases in accounts payable and other accrued expenses. Net
cash used by us in operating activities amounted to approximately $2,725,000 for
the three-month period ended March 31, 1999. Net cash used in operating
activities in the 1999 period was greater than our net loss for such period due
to increases in accounts receivable and decreases in amounts owed to third
parties for clinical trials and to employees for compensation and benefits.
Net cash used in investing activities amounted to approximately
$13,103,000 for the three-month period ended March 31, 2000 and related to the
net purchase of approximately $13,079,000 of marketable securities and the
purchase of approximately $24,000 in equipment and furniture. Net cash provided
by investing activities amounted to approximately $1,658,000 for the three-month
period ended March 31, 1999 and related to the net sale of approximately
$1,661,000 of marketable securities offset by the purchase of approximately
$3,000 in equipment and furniture.
Net cash provided by financing activities for the three-month period
ended March 31, 2000 amounted to approximately $17,828,000, primarily consisting
of $14,695,000 in net
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proceeds received from the issuance of common stock and redeemable warrants to
institutional and accredited investors, and $3,133,000 in net proceeds from the
issuance of common stock under our employee stock purchase plan and issuance of
common stock to Sigma-Tau, our European ZADAXIN development and marketing
partner. Net cash used in financing activities for the three-month period ended
March 31, 1999 amounted to approximately $96,000, primarily consisting of
various costs related to our 1998 financing activities and partially offset by
net proceeds from issuance of common stock under our employee stock purchase
plan.
Our capital requirements may change depending upon numerous factors,
including the level of ZADAXIN sales, the availability of complementary
products, technologies and businesses, the initiation of preclinical and
clinical trials and testing, the timing of regulatory approvals, developments in
relationships with existing or future collaborative parties and the status of
competitive products. Assuming ZADAXIN sales continue to increase quarter to
quarter at growth rates similar to what we have achieved over the past nine
quarters, management believes our existing capital resources and interest on
funds available are adequate to maintain our current and planned operations. The
initiation and continuation of United States clinical development programs
could, however, require additional funding either from a collaborative source or
through equity or debt financing. The timing and sustainability of our operating
profitability and capital requirements may change depending upon numerous
factors, including the level of ZADAXIN sales, the timing and amount of
manufacturing costs related to ZADAXIN and CPX, the availability of
complementary products, technologies and businesses, the initiation and
continuation of preclinical and clinical trials and testing, particularly in the
United States, the timing of regulatory approvals, developments in relationships
with existing or future collaborative parties and the status of competitive
products. In the event we need to raise additional financing, the unavailability
or the timing of financing could prevent or delay our long-term product
development and commercialization programs. Without additional financing, or if
sales do not grow beyond management's expectations, or a combination thereof,
management believes our existing capital resources and interest on funds
available are adequate to maintain our current and planned operations for at
least the next twelve months.
RISK FACTORS
You should carefully consider the risks described below, together with
all of the other information included in this report on Form 10-Q, before making
an investment decision. The risks below are not the only ones we face. If any of
the following risks actually occurs, our business, financial condition or
operating results could be harmed. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF OPERATING LOSSES AND AN ACCUMULATED DEFICIT AND EXPECT TO
CONTINUE TO INCUR LOSSES IN THE NEAR TERM AND MAY NEVER ACHIEVE PROFITABILITY.
We have experienced significant operating losses since our inception and
as of March 31, 2000, we had an accumulated deficit of $115,904,000. We expect
our operating expenses to increase over the next several years as we plan to
dedicate substantially all of our resources to expanding our development,
testing and marketing capabilities.
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IF WE DO NOT INCREASE THE AMOUNT OF REVENUE WE DERIVE FROM SALES OF ZADAXIN AND
ACHIEVE OPERATING PROFITABILITY, WE WILL NEED TO OBTAIN ADDITIONAL CAPITAL TO
SUPPORT OUR LONG-TERM PRODUCT DEVELOPMENT AND COMMERCIALIZATION PROGRAMS.
Our strategy in the near term to achieve and sustain operating
profitability depends in large part on our ability to:
- increase ZADAXIN sales in existing markets;
- launch ZADAXIN in new markets;
- commence and continue clinical programs for, and obtain additional
regulatory approvals for, ZADAXIN, CPX, SCV-07, DAX and/or future
products, particularly in the United States, Europe and Japan;
- maintain our partnering arrangements for development and marketing
of ZADAXIN in Europe and Japan; and
- enter into other agreements for product development and
commercialization of our products in the United States.
If we do not increase the revenue we derive from the sales of ZADAXIN
and achieve operating profitability, we will need to obtain additional
financing to support our long-term product development and commercialization
programs. We may seek additional funds through public and private stock
offerings, arrangements with corporate partners, borrowings under lease lines
of credit or other sources. If we cannot raise the necessary funds, we will
have to reduce our capital expenditures, scale back our development of new
products, reduce our workforce and license to others products or technologies
that we otherwise would seek to commercialize ourselves.
The amount of capital we need will depend on many factors, including:
- the level of future ZADAXIN sales;
- the timing, location, scope and results of ongoing and planned
preclinical studies and clinical trials;
- the cost of manufacturing or obtaining preclinical and clinical
materials;
- the timing and cost involved in applying for and obtaining FDA and
international regulatory approvals;
- the costs involved in filing, prosecuting and enforcing patent
claims;
- competing technological and market developments;
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- whether any or all of our outstanding common stock warrants are
exercised and the timing and amount of these exercises;
- our ability to establish and maintain strategic arrangements for
development, sales, manufacturing and marketing of our products; and
- whether we elect to establish additional partnering arrangements for
development, sales, manufacturing, and marketing of our products.
Many of the foregoing factors are not within our control. If we need to
raise additional funds and such funds are not available on reasonable terms, we
may be required to delay or cancel our long-term product development and
commercialization programs. We have no commitments or arrangements for
additional funding and we may not be able to obtain financing if and when
needed. Any additional equity financing may be dilutive to shareholders, and
debt financing, if available, may include restrictive convenants.
WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP OR COMMERCIALIZE OUR PRODUCTS.
Many of our products are in the development stage and will require the
commitment of substantial resources, devoted to extensive research,
development, preclinical testing, clinical trials, manufacturing scale-up and
regulatory approval prior to being ready for sale. We have not yet sold any of
our products other than ZADAXIN. All of our other products will require further
development, clinical testing and regulatory approvals, and we can not assure
you that commercially viable products will result from these efforts. We face
significant technological risks of failure inherent in developing these
products. We may also abandon some or all of our proposed products before they
become commercially viable. If any of our products, even if developed and
approved, cannot be successfully commercialized in a timely manner, our
business will be harmed and the price of our stock may decline.
IF WE EXPERIENCE DIFFICULTIES IN OUR FOREIGN SALES AND OPERATIONS, OUR
FINANCIAL CONDITION WILL BE HARMED.
Our financial condition in the near term is highly dependent on the sale
of ZADAXIN in foreign jurisdictions. If we experience difficulties in our
foreign sales and operations, our business will suffer and our financial
condition will be harmed. The majority of our ZADAXIN sales are to customers in
China. However, ZADAXIN sales in China may be limited due to its low average
income and poorly developed infrastructure. In addition, our ZADAXIN sales and
operations in other parts of Asia, as well as in Latin America and the Middle
East, are subject to inherent risks, including:
- difficulties and delays in obtaining pricing approvals and
reimbursement;
- difficulties and delays in obtaining product health registration;
- difficulties and delays in obtaining importation permits;
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- unexpected changes in regulatory requirements;
- tariffs and other barriers;
- political instability;
- difficulties in staffing and managing foreign operations;
- long payment cycles;
- difficulties in accounts receivable collection;
- currency fluctuations; and
- potential adverse tax consequences.
We do not have any product sales in the United States with which to
offset any decrease in our revenue from ZADAXIN sales in Asia, Latin America
and the Middle East. In addition, some countries in these territories regulate
pharmaceutical prices. These regulations may reduce prices for ZADAXIN to
levels significantly below those that would prevail in a free market, which
will cause our revenues to fall and our business to suffer.
IF WE FAIL TO COMPLY WITH GOVERNMENTAL REGULATIONS, OUR BUSINESS WILL SUFFER.
All new drugs, including our products which have been developed or are
currently under development, are subject to extensive and rigorous regulation
by the FDA, and comparable agencies in state and local jurisdictions and in
foreign countries. These regulations govern, among other things, the
development, testing, manufacturing, labeling, storage, premarket approval,
advertising, promotion, sale and distribution of our products. Satisfaction of
these requirements typically takes several years and the time needed to satisfy
them vary substantially, based on the type, complexity and novelty of the
pharmaceutical product. The effect of government regulation may be to delay or
to prevent marketing of our existing or potential products for a considerable
period of time and to impose costly procedures upon our activities. If
regulatory approval of our products is granted, such approval may impose
limitations on the indicated uses for which our products may be marketed.
Further, even if regulatory approval is obtained for a product, later discovery
of previously unknown products may result in restrictions of the product,
including withdrawal of the product from the market.
IF WE FAIL TO OBTAIN REGULATORY APPROVALS IN THE UNITED STATES, EUROPE OR
JAPAN, OUR REVENUE MAY NOT GROW SIGNIFICANTLY AND OUR STOCK PRICE MAY DECLINE.
If we fail to obtain regulatory approvals for ZADAXIN in the United
States, Europe or Japan for the treatment of hepatitis C, our revenue may not
grow significantly and the price of our stock may fall. To secure these
approvals in the United States, Europe and Japan, we need favorable results
from additional clinical trials of ZADAXIN. We cannot assure you that
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these additional clinical trials will yield favorable results or that if they
do, we will obtain any regulatory approvals.
Our failure to obtain regulatory approvals for, and successfully
commercialize, CPX for the treatment of cystic fibrosis will harm our
operations. Our failure to demonstrate, in preclinical and clinical trials, the
safety and efficacy of CPX as a treatment for cystic fibrosis and to obtain
regulatory approval of CPX in the United States as a treatment for cystic
fibrosis will impair our operations. CPX is currently undergoing phase 2
testing in the United States. We cannot assure you that we will not experience
delays and difficulties in the preclinical and clinical development of CPX. In
addition, clinical trials may prove that CPX is not an effective treatment for
cystic fibrosis.
WE HAVE LIMITED SALES, MARKETING AND DISTRIBUTION CAPABILITIES, WHICH MAY
ADVERSELY AFFECT OUR ABILITY TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCTS.
We currently have limited sales, marketing and distribution
capabilities, and we anticipate that we will be relying on third parties to
sell, market and distribute our products in the foreseeable future. If our
arrangements with third parties are not successful, or if we are unable to
enter into third-party arrangements, we may need to substantially expand our
sales, marketing and distribution force. Our plans to expand may not succeed,
or we may lack the sufficient resources to expand in a timely manner. If we do
develop such capabilities, we will compete with other companies that have
experienced and well funded operations. If we fail to establish successful
sales and marketing capabilities or to enter into successful marketing
arrangements with third parties, or if our third party distributors fail to
perform their obligations, our business and operations will be materially and
adversely affected.
IF WE FAIL TO SUCCESSFULLY MARKET AND COMMERCIALIZE OUR PRODUCTS, OUR REVENUE
WILL NOT GROW.
Our future revenue growth depends on increased market acceptance and
commercialization of ZADAXIN in additional countries. If we fail to
successfully market ZADAXIN, or if we cannot commercialize this drug in
additional markets, our revenue and operating results will suffer. Our future
revenue will also depend in part on our ability to develop other commercially
viable and accepted products. Market acceptance of our products will depend on
many factors, including our ability to:
- convince prospective strategic partners and customers that our
products are an attractive alternative to other treatments and
therapies; and
- manufacture products in sufficient quantities with acceptable
quality and at an acceptable cost.
In many of our current markets for ZADAXIN, particularly China, low
average per capita income and poorly developed distribution infrastructure make
it difficult to successfully commercialize ZADAXIN.
IF WE ARE NOT ABLE TO ESTABLISH AND MAINTAIN ADEQUATE MANUFACTURING AND SUPPLY
RELATIONSHIPS, THE DEVELOPMENT AND SALE OF OUR PRODUCTS COULD BE IMPAIRED.
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To be successful, our products must be manufactured in commercial
quantities, in compliance with regulatory requirements and at an acceptable
cost. We may not be able to maintain the long-term manufacturing relationships
we currently have with our suppliers of ZADAXIN and CPX. Manufacturing
interruptions, if any, could significantly delay clinical development of
potential products and reduce third-party or clinical researcher interest and
support of proposed trials. These interruptions could also impede
commercialization of our products, including sales of ZADAXIN in approved
markets, and impair our competitive position. Any of these developments would
harm our business. We have recently changed and upgraded our manufacturing
source of ZADAXIN for our international markets, excluding Japan. In some
countries, this change may require additional regulatory approvals. If we do
not obtain the required regulatory approvals of this manufacturing change in a
timely fashion, new ZADAXIN marketing approvals may be delayed or sales may be
interrupted until the manufacturing change is approved. Either of these results
will hurt our business.
Manufacturing, supply and quality control problems may arise as we,
either alone or with subcontractors, attempt to scale-up manufacturing
procedures. We may not be able to scale-up in a timely manner or at a
commercially reasonable cost. Problems could lead to delays or pose a threat to
the ultimate commercialization of our products and harm us.
IF WE DO NOT OBTAIN RIGHTS TO ADDITIONAL PRODUCTS FROM THIRD PARTIES, OUR
REVENUE MAY DECLINE AND OUR FUTURE DEVELOPMENT EXPENSES MAY INCREASE.
We are only actively pursuing clinical development of ZADAXIN and CPX at
this time. If we do not license or otherwise acquire rights to additional drugs
or advance SCV-07 and DAX, the other products to which we have in-licensed
rights, from preclinical into clinical development, we may have a shortage of
drugs to develop and commercialize. Any shortage in the number of drugs that we
are able to develop and commercialize may cause our revenues to fall and
increase our future development expenses.
COMMERCIALIZATION OF SOME OF OUR PRODUCTS DEPENDS ON COLLABORATIONS WITH
OTHERS. IF OUR COLLABORATORS ARE NOT SUCCESSFUL, OR IF WE ARE UNABLE TO FIND
FUTURE COLLABORATORS, WE MAY NOT BE ABLE TO PROPERLY DEVELOP AND COMMERCIALIZE
OUR PRODUCTS.
We depend on our licensees to develop and promote our drugs, and if they
are not successful in their efforts or fail to do so, our business will suffer.
We have exclusively sublicensed our rights to develop and market ZADAXIN in
Europe to Sigma-Tau S.p.A. and in Japan to Schering-Plough K.K. However, we
generally do not have control over the amount and timing of resources that
Sigma-Tau and Schering Plough devote to their ZADAXIN development activities.
If they do not perform their obligations as we expect, our development expenses
would increase and the development and sale of our products could be limited or
delayed, which could cause our business to suffer and our stock price to
decline. In addition, these companies already have a substantial commitment to
alpha interferon, which is an approved drug for cancer, hepatitis B and
hepatitis C in Europe and Japan. Our relationships with these companies may not
be successful. Disputes may arise over ownership rights to intellectual
property, know-how or technologies developed with our collaborators, and we may
not be able to negotiate similar
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additional arrangements in the future in Europe and Japan or other major
markets to develop and commercialize ZADAXIN.
IF WE FAIL TO PROTECT OUR PRODUCTS, TECHNOLOGIES AND TRADE SECRETS, WE MAY NOT
BE ABLE TO SUCCESSFULLY USE, MANUFACTURE OR MARKET AND SELL OUR PRODUCTS OR WE
MAY FAIL TO ADVANCE OR MAINTAIN OUR COMPETITIVE POSITION.
Our success depends significantly on our ability to obtain and maintain
meaningful patent protection for our products and technologies, to preserve our
trade secrets and to avoid infringing on the proprietary rights of third
parties. Our pending patent applications may not result in the issuance of
patents in the future. Our patent applications may not have priority over
others' applications and, even if any patents are issued, they may not provide
a competitive advantage to us or may be invalidated or circumvented by our
competitors. Others may independently develop similar products or design around
patents issued or licensed to us. Patents issued to, or patent applications
filed by, other companies could harm our ability to use, manufacture or market
our products or maintain our competitive position with respect to our products.
Many of our patents relating to ZADAXIN have expired, and we have rights to
other patents and patent applications relating to ZADAXIN under exclusive
licenses. If we breach the terms of any of these licenses, we could lose our
rights to these patents and patent applications.
Our commercial success also depends in part on us neither infringing
valid, enforceable patents or proprietary rights of third parties, nor
breaching any licenses that may relate to our technologies and products. We are
aware of third-party patents that may relate to our technology. It is possible
that we may unintentionally infringe these patents or other patents or
proprietary rights of third parties. We may in the future receive notices
claiming infringement from third parties as well as invitations to take
licenses under third-party patents. Any legal action against us or our
collaborative partners claiming damages and seeking to enjoin commercial
activities relating to our products and processes affected by third-party
rights may require us or our collaborative partners to obtain licenses in order
to continue to manufacture or market the affected products and processes. Our
efforts to defend against such claims, even if unmeritorious, would require us
to devote resources and attention that could have been directed to our
operation and growth plans. In addition, these actions may subject us to
potential liability for damages. We or our collaborative partners may not
prevail in a patent action and any license required under a patent may not be
made available on commercially acceptable terms, or at all.
Pharmaceuticals are either not patentable or have only recently become
patentable in some of the countries outside of the United States, in which we
have exclusive rights to ZADAXIN. Past enforcement of intellectual property
rights in many of these countries has been limited or non-existent. Future
enforcement of patents and proprietary rights in many other countries will
likely be problematic or unpredictable. Moreover, the issuance of a patent in
one country does not assure the issuance of a similar patent in another
country. Claim interpretation and infringement laws vary by nation, so the
extent of any patent protection is uncertain and may vary in different
jurisdictions.
IF WE FAIL TO OBTAIN REGULATORY APPROVALS IN COUNTRIES IN WHICH OUR PRODUCTS
HAVE NOT BEEN APPROVED, OUR REVENUE GROWTH MAY BE HARMED.
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The research, preclinical and clinical development, manufacturing,
marketing and sale of ZADAXIN, CPX and our other drug candidates are subject to
extensive regulation by governmental authorities. ZADAXIN, CPX and any other
products must be approved by the FDA or its foreign counterparts before they
can be sold in any jurisdiction. Obtaining regulatory approval is
time-consuming and expensive. In some countries where we are contemplating
marketing and selling ZADAXIN, the regulatory approval process for drugs that
have not been previously approved in countries with established clinical trial
review procedures is uncertain, and this may delay the grant of regulatory
approvals for ZADAXIN. Our failure to obtain, develop, market and sell our
products in countries where we currently do not have such approvals may limit
the growth of our revenues.
We may not be able to commence or complete the clinical trials we have
sponsored or are planning relating to ZADAXIN and CPX in a timely or
cost-effective manner. Even if completed, these trials may not fulfill the
applicable regulatory approval criteria, in which case we will not be able to
obtain regulatory approvals in these countries. Failure to obtain additional
regulatory approvals will harm our operating results. In addition, adverse
results in our development programs also could result in restrictions on the
use of ZADAXIN and, if approved, CPX.
Our failure, or the failure by one or more of our partners, to comply
with applicable United States or foreign regulatory requirements could, among
other things, result in warning letters, fines, suspensions of regulatory
approvals, product recalls or seizures, operating restrictions, injunctions and
criminal prosecutions. In addition, government regulations may be established
or imposed which prevent or delay regulatory approval of ZADAXIN, CPX or our
future products.
Our ability to obtain regulatory approval in one country may be delayed
or adversely affected by the timing of regulatory activities and approvals in
other countries, particularly if we do not participate in the regulatory
approval process in these other countries. Any delay or failure to achieve
regulatory approvals may limit our potential future revenue.
IF WE MAKE ANY ACQUISITIONS, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER
REALIZE THE ANTICIPATED BENEFITS.
If appropriate opportunities become available, we may attempt to acquire
products, product candidates or businesses that we believe fit strategically
with our business. We currently have no commitments or agreements with respect
to material acquisitions. If we do undertake any transaction of this tort, the
process of integrating an acquired product, product candidate or business may
result in operating difficulties and expenditures and may absorb significant
management attention that would otherwise be available for our ongoing business
development plans. Moreover, we may never realize the anticipated benefits of
any acquisition. Future acquisitions could result in potentially dilutive
issuances of equity securities, the incurrence of debt, contingent liabilities
and/or amortization expenses related to goodwill and other intangible assets,
which could adversely affect our business, financial condition and results of
operations.
WE MAY LOSE MARKET SHARE OR OTHERWISE FAIL TO COMPETE EFFECTIVELY IN THE
INTENSELY COMPETITIVE BIOPHARMACEUTICAL INDUSTRY.
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Competition in the biopharmaceutical industry is intense and we expect
that competition to increase. Our success depends on our ability to compete. We
believe that the principal competitive factors in this industry include the
efficacy, safety, price, therapeutic regimen and manufacturing quality
assurance associated with a given drug. Our competitors include
bio-pharmaceutical companies, biotechnology firms, universities and other
research institutions, both in the United States and abroad, that are actively
engaged in research and development of chronic and life-threatening diseases
such as hepatitis C, hepatitis B, cancer, immune system disorders and cystic
fibrosis.
Most of our competitors, particularly large bio-pharmaceutical
companies, have substantially greater financial, technical, regulatory,
manufacturing, marketing and human resource capabilities than we do. Most of
them also have extensive experience in undertaking the clinical testing and
obtaining the regulatory approvals necessary to market drugs. We currently rely
on sales of ZADAXIN as a treatment for hepatitis C and hepatitis B as our
primary source of revenue. However, several large bio-pharmaceutical companies
have substantial commitments to alpha interferon, which is an approved drug for
treating hepatitis B and hepatitis C and the primary competitor to ZADAXIN. We
cannot assure you that we will compete successfully against our competitors or
that our competitors, or potential competitors, will not develop drugs or other
treatments for hepatitis C, hepatitis B, cystic fibrosis, cancer and other
diseases that will be superior to ours. Increased competitive pressure could
also lead to intensified price-based competition resulting in lower prices and
margins, which would hurt our operating results.
IF THIRD-PARTY REIMBURSEMENT IS NOT AVAILABLE OR PATIENTS CANNOT OTHERWISE PAY
FOR ZADAXIN, WE MAY NOT BE ABLE TO SUCCESSFULLY MARKET ZADAXIN.
If third-party reimbursement, either from government health
administration authorities, private health insurers and other organizations, is
not available or patients cannot otherwise pay for ZADAXIN, we may not be able
to successfully market ZADAXIN. Third-party reimbursement for new therapeutic
products such as ZADAXIN is highly uncertain and may not be available for our
future products. In most of the foreign countries in which we sell ZADAXIN or
intend to sell ZADAXIN, reimbursement for ZADAXIN under government or private
health insurance programs is not widely available. The failure to obtain
third-party reimbursement for our products will hurt our business. In the
United States, proposed health care reforms could limit the amount of
third-party reimbursement available for our products. In many countries where
we have marketing rights to ZADAXIN, government resources and per capita income
may be so low that our products will be prohibitively expensive. In these
countries, we may not be able to market our products on economically favorable
terms, if at all.
Efforts by governmental and third-party payors to contain or reduce
health care costs could cause us to reduce the prices at which we market our
drugs, which will reduce our gross margins and may harm our business. There are
efforts by governmental and third-party payors to contain or reduce the costs
of health care through various means. We expect that there will continue to be
a number of legislative proposals to implement government controls. The
announcement of proposals or reforms could cause us to reduce the prices at
which we market our drugs, which will reduce our gross margins and may harm our
business.
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IF WE LOSE KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL, HIGHLY
SKILLED PERSONNEL REQUIRED FOR THE EXPANSION OF OUR ACTIVITIES, OUR BUSINESS
WILL SUFFER.
We are highly dependent upon our ability to attract and retain qualified
personnel because of the specialized, scientific and international nature of
our business. There is intense competition for qualified management, scientific
and technical personnel in the pharmaceutical industry, and we may not be able
to attract and retain the qualified personnel we need to grow and develop our
business globally. In addition, numerous key responsibilities at SciClone are
assigned to a small number of individuals, including our president and chief
executive officer, chief operating officer, chief business officer and our
regional managing director for greater China. If we are unable to attract and
retain qualified personnel as needed or promptly replace those employees who
are critical to our product development and commercialization, the development
and commercialization of our products would adversely be affected. At this
time, we do not maintain "key person" life insurance on any of our key
personnel.
WE MAY BE SUBJECT TO PRODUCT LIABILITY LAWSUITS AND OUR INSURANCE MAY BE
INADEQUATE TO COVER DAMAGES.
Clinical trials or marketing of any of our current and potential
products may expose us to liability claims from the use of these products. We
currently carry product liability insurance. However, we cannot be certain that
we will be able to maintain insurance on acceptable terms for clinical and
commercial activities or that the insurance would be sufficient to cover any
potential product liability claim or recall. If we fail to have sufficient
coverage, our business, results of operation and cash flows could be adversely
affected.
IF WE ARE UNABLE TO COMPLY WITH ENVIRONMENTAL LAWS AND REGULATIONS, OUR
BUSINESS MAY BE HARMED.
We are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous
materials and waste products. We currently maintain a supply of hazardous
materials at our facilities. In the event of an accident, we could be liable
for any damages that result, and the liability could exceed our resources.
While we currently outsource our research and development programs involving
the controlled use of biohazardous materials, if in the future we conduct these
programs, we might be required to incur significant cost to comply with the
environmental laws and regulations.
THE PRICE OF OUR COMMON STOCK HAS EXPERIENCED SUBSTANTIAL VOLATILITY AND MAY
FLUCTUATE DUE TO FACTORS BEYOND OUR CONTROL.
There has been significant volatility in the market prices for publicly
traded shares of pharmaceutical and biotechnology companies, including ours.
The following factors may have an adverse impact on the market price of our
common stock:
- announcements of technical or product developments by us or our
competitors;
- market conditions for pharmaceutical and biotechnology stocks;
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- market conditions generally;
- governmental regulation;
- healthcare legislation;
- public announcements regarding advances in the treatment of the
disease states that we are targeting;
- public announcements from government officials relating to the
biotechnology or pharmaceutical industries;
- patent or proprietary rights developments;
- changes in third-party reimbursement policies for our products; and
- fluctuations in our operating results.
In 1999, the price of our common stock fluctuated from a low of $1.06 to
a high of $6.13. On May 1, 2000, our common stock closed at a price of $10.87.
The price of our common stock may not remain at or exceed current levels.
SUBSTANTIAL SALES OF OUR STOCK OR CONVERTIBLE SECURITIES MAY IMPACT THE MARKET
PRICE OF OUR COMMON STOCK.
As of May 1, 2000, stock options for 4,124,093 shares of common stock
were outstanding, of which options for 3,124,172 shares were currently
exercisable, and there were warrants exercisable for 2,052,623 shares of common
stock outstanding. Upon exercise and issuance, all of these shares of common
stock will be freely tradable.
Future sales of substantial amounts of our common stock could adversely
affect the market price of our common stock. Similarly, if we raise additional
funds through the issuance of common stock or securities convertible into or
exercisable for common stock, the percentage ownership of our shareholders will
be reduced and the price of our common stock may fall.
ISSUING PREFERRED STOCK WITH RIGHTS SENIOR TO THOSE OF OUR COMMON STOCK COULD
ADVERSELY AFFECT HOLDERS OF COMMON STOCK.
Our charter documents give our board of directors the authority to issue
additional series of preferred stock without a vote or action by our
shareholders. The board also has the authority to determine the terms of
preferred stock, including price, preferences and voting rights. The rights of
holders of our common stock may be adversely affected by the rights granted to
holders of preferred stock. For example, a series of preferred stock may be
granted the right to receive a liquidation preference -- a pre-set distribution
in the event SciClone is liquidated -- that would reduce the amount available
for distribution to holders of common stock. In addition, the issuance of
preferred stock could make it more difficult for a third party to acquire a
majority of
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our outstanding voting stock. As a result, common shareholders could be
prevented from participating in transactions that would offer an optimal price
for their shares.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The primary objective of our investment activities is to preserve
principal while at the same time maximizing yields without significantly
increasing risk. To achieve this objective, we invest in highly liquid and high
quality debt securities. Our investments in debt securities are subject to
interest rate risk. To minimize the exposure due to adverse shift in the
interest rates we invest in short term securities and maintain an average
maturity of less than 1 year. A hypothetical 60 basis point increase in
interest rates would result in an approximate $28,098 decrease (less than 0.6%)
in fair value of our available-for-sale securities.
The potential change noted above is based on sensitivity analyses
performed on our financial positions at March 31, 2000. Actual results may
differ materially.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Recent Sales of Unregistered Securities
In January 2000, we completed a $5,720,000 private placement to Brown
Simpson Asset Management, a strategic institutional investor. Brown Simpson
purchased 1,000,000 shares of our common stock at a price of $6.00 per share, a
slight premium to market, and five-year warrants to purchase 800,000 shares of
our common stock at an exercise price of $7.00 per share. The shares issued
upon exercise of the warrants, if any, may not be sold prior to October 18,
2000 if the market price is less than $10.00 per share.
In March 2000, we completed a $3,100,000 private placement to
Italy-based Sigma-Tau Group, one of the leading pharmaceutical companies in
Southern Europe. Sigma Tau purchased 198,072 shares of our common stock at
$15.14 per share and five-year warrants to purchase an aggregate of 400,000
shares of our common stock, 200,000 of which are exercisable at a price of
$15.67 per share and 200,000 of which are exercisable at a price of $31.33 per
share. Sigma-Tau may not sell any of the shares purchased in this private
placement until March 2, 2001. In addition, Sigma-Tau was not granted any
registration rights covering resale of the shares or the shares issuable upon
exercise of the warrants.
During the quarter ended March 31, 2000, we received approximately
$8,973,000 in connection with exercises of outstanding options to purchase
450,399 shares of common stock and outstanding warrants to purchase 3,769,342
shares of common stock.
(d)
None.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i).1 Restated Articles of Incorporation (incorporated by
reference from the Company's Registration Statement on
Form S-1 (No. 33-45446), declared effective by the
Commission on March 17, 1992).
3(i).2 Certificate of Amendment of Restated Articles of
Incorporation (incorporated by reference from the
Company's Registration Statement on Form S-8 (No.
33-66832) filed with the Commission on August 3, 1993).
3(i).3 Certificate of Determination (incorporated by reference
from the Company's Current Report on Form 8-K filed on
October 14, 1997).
3(ii).1 Bylaws (incorporated by reference from the Company's
Registration Statement on Form S-1 (No. 33-45446),
declared effective by the Commission on March 17, 1992).
3(ii).2 Certificate of Amendment of Bylaws (incorporated by
reference from the Company's Registration Statement on
Form S-8 (No. 33-66832) filed with the Commission on
August 3, 1993).
4.2 Rights Agreement, dated as of July 25, 1997, between
SciClone and ChaseMellon Shareholder Services, LLC.
(incorporated by reference to the Company's Current
Report on Form 8-K filed on October 14, 1997).
10.5 Common Stock Purchase Agreement between SciClone
Pharmaceuticals, Inc. and Sigma-Tau Finance S.A., dated
March 3, 2000.
10.6 Form of Sigma-Tau Finance S.A. Warrant to Purchase
Shares of Common Stock of SciClone Pharmaceuticals,
Inc., dated March 3, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SCICLONE PHARMACEUTICALS, INC.
(Registrant)
Date: May 15, 2000 Donald R. Sellers
-----------------------------------------
Donald R. Sellers
President, Chief Executive Officer and
Interim Chief Financial Officer
(Principal Executive Officer and
Principal Financial & Accounting Officer)
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Exhibit
Number Description
-------- -----------
3(i).1 Restated Articles of Incorporation (incorporated by
reference from the Company's Registration Statement on
Form S-1 (No. 33-45446), declared effective by the
Commission on March 17, 1992).
3(i).2 Certificate of Amendment of Restated Articles of
Incorporation (incorporated by reference from the
Company's Registration Statement on Form S-8 (No.
33-66832) filed with the Commission on August 3, 1993).
3(i).3 Certificate of Determination (incorporated by reference
from the Company's Current Report on Form 8-K filed on
October 14, 1997).
3(ii).1 Bylaws (incorporated by reference from the Company's
Registration Statement on Form S-1 (No. 33-45446),
declared effective by the Commission on March 17, 1992).
3(ii).2 Certificate of Amendment of Bylaws (incorporated by
reference from the Company's Registration Statement on
Form S-8 (No. 33-66832) filed with the Commission on
August 3, 1993).
4.2 Rights Agreement, dated as of July 25, 1997, between
SciClone and ChaseMellon Shareholder Services, LLC.
(incorporated by reference to the Company's Current
Report on Form 8-K filed on October 14, 1997).
10.4 Prospectus to January 18, 2000 private placement
(incorporated by reference to the Company's filing
pursuant to Ru1e 424(b)(3) (No. 333-30938) filed with
the Commission on April 25, 2000).
10.5 Common Stock Purchase Agreement between SciClone
Pharmaceuticals, Inc. and Sigma-Tau Finance S.A., dated
March 3, 2000.
10.6 Form of Sigma-Tau Finance S.A. Warrant to Purchase
Shares of Common Stock of SciClone Pharmaceuticals,
Inc., dated March 3, 2000
27 Financial Data Schedule