FORM 10-Q
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, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ----- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________________to ______________________
Commission file number: 0-19825
SCICLONE PHARMACEUTICALS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-3116852
---------- ----------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
901 Mariners Island Blvd., Suite 315, San Mateo, California 94404
- - ----------------------------------------------------------- -----
(Address of principal executive offices) (Zip code)
(415) 358-3456
(Registrant's telephone number, including area code)
Not Applicable
--------------
(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 30, 1996, 17,436,561 shares of the registrant's Common
Stock, no par value, were issued and outstanding.
<PAGE>
SCICLONE PHARMACEUTICALS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
March 31, December 31,
1996 1995
============== =============
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,892,265 $ 3,986,307
Short-term investments 12,344,208 15,467,685
Accounts receivable 120,833 108,410
Inventory 2,532,746 2,360,479
Prepaid expenses and other current assets 2,268,999 1,955,930
------------- -------------
Total current assets 21,159,051 23,878,811
Property and equipment, net 318,348 313,703
Long-term investments 28,951,453 27,935,835
Notes receivable from officers 1,761,955 1,964,065
Other assets 58,386 58,381
------------- -------------
Total assets $ 52,249,193 $ 54,150,795
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 394,302 $ 472,477
Accrued compensation and benefits 874,072 1,086,904
Accrued clinical trial expense 1,668,696 2,054,741
Accrued professional fees 1,121,500 765,000
Other accrued expenses 320,184 216,411
------------- -------------
Total current liabilities 4,378,754 4,595,533
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares
authorized ; no shares issued and outstanding -- --
Common stock, no par value; 75,000,000 shares
authorized; 17,386,590 and 16,807,257 shares
issued and outstanding 108,267,851 105,915,548
Net unrealized gain on available-for-sale securities 76,612 450,086
Accumulated deficit (60,344,021) (56,605,519)
Deferred compensation (130,003) (204,853)
------------- -------------
Total shareholders' equity 47,870,439 49,555,262
------------- -------------
Total liabilities and shareholders' equity $ 52,249,193 $ 54,150,795
============= =============
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
3
<PAGE>
SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended
March 31,
1996 1995
============= =============
Product sales $ 126,308 $ --
Cost of product sales 199,800 --
------------ ------------
Gross profit (73,492) --
Operating expenses:
Research and development 2,534,601 2,319,184
Marketing 1,070,817 1,146,389
General and administrative 775,698 789,964
------------ ------------
Total operating expenses 4,381,116 4,255,537
------------ ------------
Loss from operations (4,454,608) (4,255,537)
Interest and investment income, net 716,106 686,147
------------ ------------
Net loss $ (3,738,502) $ (3,569,390)
============ ============
Net loss per share $ (0.22) $ (0.21)
============ ============
Weighted average shares used in
computing per share amounts 17,051,546 17,086,780
============ ============
See notes to consolidated financial statements
4
<PAGE>
<TABLE>
SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Three months ended
March 31,
1996 1995
============= ============
<S> <C> <C>
Operating activities:
Net loss $ (3,738,502) $ (3,569,390)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 116,111 127,818
Changes in operating assets and liabilities:
Prepaid expenses and other assets (110,964) (593,189)
Accounts receivable (12,423) --
Inventory (172,267) --
Accounts payable and other accrued expenses 25,598 (45,952)
Accrued clinical trial expense (386,045) 19,051
Accrued professional fees 356,500 305,750
Accrued compensation and benefits (212,832) (660,821)
------------ ------------
Net cash used in operating activities (4,134,824) (4,416,733)
------------ ------------
Investing activities:
Purchase of property and equipment (45,906) (41,107)
Sale of marketable securities, net 1,734,385 6,231,072
------------ ------------
Net cash provided by investing activities 1,688,479 6,189,965
------------ ------------
Financing activities:
Proceeds from issuance of common stock, net 2,352,303 --
------------ ------------
Net cash provided by financing activities 2,352,303 --
------------ ------------
Net (decrease) increase in cash and cash equivalents (94,042) 1,773,232
Cash and cash equivalents, beginning of period 3,986,307 8,292,888
------------ ------------
Cash and cash equivalents, end of period $ 3,892,265 $ 10,066,120
============ ============
Supplemental disclosures of noncash financing activities:
Net unrealized (loss) gain on available-for-sale securities $ (373,474) $ 804,096
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
5
<PAGE>
SCICLONE PHARMACEUTICALS, INC.
Notes to Consolidated Financial Statements
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,
1995. 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 period presented. The
interim results are not necessarily indicative of results for the full
year.
2. Net loss per share has been computed using the weighted average number
of common shares outstanding during each period presented. Common
equivalent shares for outstanding options and warrants were not
included in the weighted average shares outstanding because the effect
would be antidilutive.
<TABLE>
3. The following is a summary of available-for-sale securities at March
31, 1996:
Available-for-Sale Securities
--------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. government &
agency obligations $26,619,426 $ 20,771 $(231,886) $26,408,311
Corporate obligations 14,059,333 28,777 (99,908) 13,988,202
Corporate equity securities 540,290 358,858 -- 899,148
----------- -------- --------- -----------
$41,219,049 $408,406 $(331,794) $41,295,661
=========== ======== ========= ===========
</TABLE>
The amortized cost and estimated fair value of debt and marketable
securities at March 31, 1996 by contractual maturity are shown below.
Estimated
Amortized Fair
Cost Value
---- -----
Due in one year or less $11,513,451 $11,445,060
Due after one year through three years 12,280,755 12,205,216
Due after three years 16,884,553 16,746,237
---------- ----------
40,678,759 40,396,513
Corporate equity securities 540,290 899,148
---------- ----------
$41,219,049 $41,295,661
=========== ===========
4. The following is a summary of inventories at March 31, 1996:
Raw materials $2,478,113
Finished goods 54,633
----------
$2,532,746
==========
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Except for historical information contained herein, the following
material is a forward-looking statement that is subject to certain risks and
uncertainties. These risks and uncertainties include the Company's reliance on a
single product, ZADAXIN(R) thymosin alpha 1, for its revenues, the absence of
regulatory approval for ZADAXIN in significant markets, uncertainties regarding
ZADAXIN's efficacy and outcome of ongoing clinical trials, risks associated with
the manufacture and supply of ZADAXIN and relationships with collaborative
partners, and competition from competing therapies, as well as other risks and
uncertainties described herein and in the Company's Annual Report on Form 10-K
and its other reports filed with the Securities Exchange Commission.
The Company is an international biopharmaceutical company involved in
the acquisition, development and commercialization of pharmaceuticals worldwide.
The Company's focus is on therapeutics for diseases that are chronic and
life-threatening, including hepatitis B and C, cancer and immune system
disorders. To date, the Company's principal focus has been the development and
commercialization of ZADAXIN.
From commencement of operations through March 31, 1996, the Company
incurred a cumulative net loss of approximately $60.3 million. The Company
expects its operating expenses to increase over the next several years as it
expands its research and development, clinical testing and marketing
capabilities. The Company's ability to achieve a profitable level of operations
currently is dependent in large part on obtaining additional favorable clinical
data on ZADAXIN (particularly from the Phase III trial in Taiwan), securing
regulatory approvals in additional countries, acquiring rights to additional
drugs, entering into and extending agreements for product development and
commercialization, where appropriate, and expanding from development to
marketing. There can be no assurance that the Company will ever achieve a
profitable level of operations.
The Company's operating results may fluctuate from period to period as
a result of, among other things, the timing and costs associated with clinical
trials and the regulatory approval process, and the acquisition of additional
product rights. The Company participates in a highly dynamic industry, which
often results in significant volatility of the Company's common stock price. Any
setbacks in clinical trials, in the regulatory approval process or in
relationships with collaborative partners, and any shortfalls in revenue or
earnings from levels expected by securities analysts, among other developments,
could have an immediate and significant adverse effect on the trading price of
the Company's common stock in any given period.
Results of Operations
Product sales reached approximately $126,000 for the three month period
ended March 31, 1996. There were no product sales for the corresponding period
in 1995. The Company commenced shipment of ZADAXIN in the second quarter of 1995
and has been recording product sales under a named patient registration program.
The Company has filed for approval to market ZADAXIN in several countries and
anticipates additional filings in other countries. As a result, the Company
expects product sales to increase during 1996 and beyond if additional ZADAXIN
marketing approvals are obtained. Although the Company remains optimistic
regarding the prospects of ZADAXIN, there can be no assurance that the Company
will ever achieve significant levels of product sales.
7
<PAGE>
Cost of product sales was approximately $200,000 for the three month
period ended March 31, 1996. There was no cost of product sales for the
corresponding period in 1995. Cost of product sales relates to the Company's
commencement of ZADAXIN sales in the second quarter of 1995 and the fixed costs
associated with acquiring and warehousing product inventory. The Company expects
cost of product sales to vary from quarter to quarter, depending upon the level
of product sales and the absorption of fixed product-related costs.
Research and development expenses increased to approximately $2,535,000
for the three month period ended March 31, 1996 from approximately $2,319,000
for the corresponding period in 1995. This increase is primarily attributable to
increased payroll costs. The Company is currently reviewing its U.S. and
European ZADAXIN clinical trial strategy and the results of this review will
have a significant effect on the Company's research and development expenses.
In general, the Company expects this research and development expenses to
increase over the next several years and to vary quarter to quarter as the
Company initiates additional clinical trials and testing acquires product
rights, initiates additional trials, and expands regulatory activities.
Marketing expenses were approximately $1,071,000 for the three month
period ended March 31, 1996 as compared to $1,146,000 for the corresponding
period in the prior year. This decrease is primarily attributable to decreased
payroll costs related to an executive officer who left the Company in 1995
offset by increased professional services and travel expenses. The Company
expects marketing expenses to increase significantly in the next several years
as it expands its commercialization and marketing efforts and pursues other
strategic relationships.
General and administrative expenses were approximately $776,000 for the
three month period ended March 31, 1996 as compared to approximately $790,000
for the corresponding period in the prior year. This decrease is primarily
attributable to decreased expenses for professional services, primarily legal
services associated with a 1994 securities class action lawsuit. In the near
term, the Company expects general and administrative expenses to increase as the
Company augments its general and administrative activities to support increased
expenditures on clinical trials and testing, and regulatory,
pre-commercialization and marketing activities.
Net interest and investment income was approximately $716,000 for the
three month period ended March 31, 1996 as compared to approximately $686,000 in
the same period in 1994. This increase primarily resulted from overall increased
interest rates and gains from the sale of certain short-term investments.
8
<PAGE>
Liquidity and Capital Resources
At March 31, 1996, the Company had approximately $45,188,000 in cash,
cash equivalents and highly liquid short and long-term investments.
Net cash used by the Company in operating activities amounted to
approximately $4,135,000 for the three month period ended March 31, 1996. Net
cash used in operating activities in the 1996 period is greater than the
Company's net loss for such period primarily due to cash used for inventory
purchases, the prepayment of certain future period expenses and decreases in
amounts owed to third parties for goods and services related to clinical trial
expenses and compensation and benefits. These uses were offset by increases in
amounts owed for accrued professional fees and noncash charges associated with
depreciation and amortization. Net cash used in operations amounted to
approximately $4,417,000 for the three month period ended March 31, 1995. Net
cash used in operating activities in the 1995 period is greater than the
Company's net loss for such period primarily due to cash used for the prepayment
of certain future period expenses and decreases in amounts owed to employees for
compensation and benefits. These uses of cash were offset by increases in
amounts owed for accrued professional fees and noncash charges associated with
depreciation and amortization.
Net cash provided by investing activities for the three month period
ended March 31, 1996 related to the net sale of approximately $1,735,000 of
marketable securities offset by the purchase of $46,000 in equipment and
furniture. Net cash provided by investing activities for the comparable 1995
period primarily resulted from the net sale of $6,231,000 of marketable
securities offset by the purchase of $41,000 of equipment and furniture.
Net cash provided by financing activities for the three month period
ending March 31, 1996 primarily consisted of approximately $2,352,000 in
proceeds received fro the issuance of common stock under the Company's stock
option plan. There were no financing activities for the three month period
ending March 31, 1995.
Management believes its existing capital resources and interest on
funds available are adequate to maintain its current and planned operations for
at least through 1997. However, the Company's capital requirements may change
depending upon numerous factors, including the availability of complementary
products, technologies and businesses, the results of clinical trials and
testing, the timing of regulatory approvals, developments in relationships with
collaborative partners and the status of competitive products. If the Company
cannot eventually generate sufficient funds from operations, it will need to
raise additional financing. There can be no assurance that such financing will
be available on acceptable terms, or at all.
9
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
10.1 Compensation agreement dated January 19, 1996, between the
Registrant and Philip H. Vander Werf*
10.2 Employment agreement, dated February 1, 1996, between the
Registrant and Donald R. Sellers*
10.3 Sublease, dated January 1, 1996, between the Registrant
and Cord Blood Registry, Inc., concerning property located at
901 Mariners Island Boulevard, San Mateo, California
27 Financial Data Schedule
(b) Reports on Form 8-K
None
* Management Compensatory plan or arrangement
10
<PAGE>
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 14, 1996 Donald R. Sellers
-------------------------------
Donald R. Sellers
Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1996 Mark A. Culhane
-------------------------------
Mark A. Culhane
Vice President, Finance and Administration
and Chief Financial Officer
(Principal Financial & Accounting Officer)
11
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- - ------- -----------
10.1 Compensation Agreement dated January 19, 1996 between the
Registrant and Philip H. Vander Werf*
10.2 Employment Agreement dated February 1, 1996 between the
Registrant and Donald R. Sellers
10.3 Sublease dated January 1, 1996, between the Registrant and Cord
Blood Registry, Inc., concerning property located at 901
Mariner's Island Boulevard, San Mateo, California
27 Financial Data Schedule**
- - -----------------
* Management Compensatory plan or arrangement.
** This exhibit shall not be deemed filed for purposes of Section 11 of
the Securities Act, Section 18 of the Exchange Act, and Section 323 of
the Trust Indenture Act, or otherwise be subject to the liabilities of
such sections.
COMPENSATION AGREEMENT
SciClone Pharmaceuticals ("SciClone") and Philip H. Vander Werf ("Vander Werf")
hereby agree as follows:
1. SciClone will make payments in the amount of Thirty Two Thousand Five
Hundred Dollars ($32,500) per month, less applicable withholding as
required by law, for the period beginning January 1, 1996 and ending
December 31, 1996. Such payments will be made by direct deposit on or
before the fifteenth day and the last day of each month.
2. On January 19, 1996, SciClone will make a one time payment in the
amount of Twenty Thousand Seven Hundred Dollars ($20,700) as full and
complete payment of accrued and unused personal time off, including,
but not limited, to vacation and sick leave.
3. SciClone will forgive outstanding loans previously made to Vander Werf
totalling Three Hundred Eighty Thousand Dollars ($380,000). In
addition, SciClone will make payments in the amount of Twenty Nine
Thousand Dollars ($29,000) per month, less applicable withholding as
required by law, for the period beginning January 1, 1996 and ending
December 31, 1996 as full and complete payment of the income and
payroll tax effects related to the forgiveness of the loans. Such
payments will be made by direct deposit on or before the fifteenth day
and the last day of each month. Vander Werf shall in no event be
entitled to additional amounts hereunder regardless of the actual
income and payroll taxes incurred by him.
4. As of January 19, 1996, Vander Werf shall have the option, under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), to
continue medical and dental coverage at the same level of coverage as
of January 19, 1996. SciClone shall pay for Vander Werf's purchase of
the medical and dental coverage available to him upon his election to
receive such continued health benefits under COBRA until December 31,
1996 or until Vander Werf becomes employed by another employer that
offers medical and dental coverage, whichever is first. Vander Werf is
obligated to inform SciClone within five days of becoming eligible for
such coverage by another employer.
5. As of January 19, 1996, Vander Werf's options exercisable for Two
Hundred Fifty Seven Thousand Three Hundred Thirty Four (257,334) shares
of SciClone Common Stock shall be fully vested. The exercise period for
such stock options shall terminate on January 18, 1997. At any time on
or before January 18, 1997, Vander Werf may exercise his options at the
following prices: One Hundred Ninety Four Thousand Three Hundred Thirty
Four shares (194,334) at an exercise price of Three Dollars ($3.00) per
share; Twenty Four Thousand shares (24,000) at an exercise price of
Five Dollars and Fifty Cents ($5.50) per share; and Thirty Nine
Thousand shares (39,000) at an exercise price of Twelve Dollars Fifty
Cents ($12.50) per share. Vander Werf understands and acknowledges that
the timing of his option exercise may effect the tax treatment of such
exercise.
SCICLONE PHARMACEUTICALS
By:
--------------------------- -------------------------------------
Thomas E. Moore Philip H. Vander Werf
Chairman & CEO
Dated: Dated:
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into February 1,
1996 between SciClone Pharmaceuticals, Inc. a California corporation, (the
"Company"), and Donald R. Sellers, an individual ("Employee").
In consideration of the promises and the terms and conditions set forth
in this Agreement, the parties agree as follows:
1. Position. During the term of this Agreement, the Company will employ
Employee, and Employee will serve the Company as its President and will have
such other responsibilities, authority and titles as may from time to time be
assigned to Employee by the Board of Directors of the Company.
2. Duties. Employee will have the duties and responsibilities generally
associated with the positions held by Employee and as the Board of Directors of
the Company may from time to time determine. Employee will comply with and be
bound by Company's operating policies, procedures, and practices from time to
time in effect during Employee's employment. Employee hereby represents and
warrants that he is free to enter into and fully perform this Agreement and the
agreements referred to herein without breach of any agreement or contract to
which he is a party or by which he is bound.
3. Compensation and Benefits.
3.1 Base Salary. The Company agrees to pay Employee a base salary of
$400,000. The base salary shall be payable as earned in accordance with
Company's customary payroll practice. If this Agreement is renewed pursuant to
Section 4, Employee's base salary for future years shall be negotiated by the
Company and Employee.
3.2 Cash Bonus. The Company agrees to pay Employee a bonus of $200,000
upon the full achievement of specified goals agreed upon by Employee and the
Company. The bonus shall be payable in accordance with the Company's customary
bonus payment practices unless otherwise agreed by the Company and Employee. If
this Agreement is renewed pursuant to Section 5, Employee's future bonus targets
and goals shall be negotiated by the Company and Employee.
3.3 Cost-of-Living Assistance Payments. The Company (or a subsidiary of
the Company) agrees to continue the cost-of-living assistance payments Employee
received as Managing Director, Pacific Rim Operations of the Company at their
current level through July 31, 1996.
3.4 Car Allowance. Employee will receive a car allowance of $850 per
month.
3.5 Additional Benefits. Employee will be eligible to participate in
the Company's employee benefit plans of general application, including without
limitation those plans covering pension and profit sharing, stock purchases,
stock options, and those plans covering life, health,
<PAGE>
and dental insurance in accordance with the rules established for individual
participation in any such plan and applicable law. Employee will receive such
other benefits, including vacation, holidays and sick leave, as the Company
generally provides to its employees holding similar executive positions as that
of Employee.
3.6 Expenses. The Company will reimburse Employee for all reasonable
and necessary expenses incurred by Employee in connection with the Company's
business, provided that such expenses are in accordance with the Company's
applicable policy and are properly documented and accounted for in accordance
with the requirements of the Internal Revenue Service.
4. Term and Termination.
4.1 Term. This Agreement shall terminate 12 months from the date first
entered into above (the "Anniversary Date") unless renewed by the Company and
Employee.
4.2 Events of Termination. The Agreement may terminated upon the
occurrence of any one of the following events:
(a) The Company's determination made in good faith that it is
terminating Employee for "cause" (as defined herein) ("Termination for Cause").
(b) The Company's determination that it is terminating
Employee without "cause" (as defined herein), which determination may be made by
the Company at any time at the Company's sole discretion, for any reason or for
no reason ("Termination Without Cause").
(c) The effective date of a written notice sent to the Company
from Employee stating that Employee is electing to terminate his employment with
the Company ("Voluntary Termination").
4.3 "Cause" Defined. For purposes of this Agreement, "cause" for
Employee's termination will exist at any time after the happening of one or more
of the following events:
(a) Employee's willful misconduct or gross negligence in
performance of his duties hereunder, inducing Employee's refusal to comply in
any material respect with the legal directives of the Company's Board of
Directors so long as such directives are not inconsistent with the Employee's
position and duties, and such refusal to comply is not remedied within ten (10)
working days after written notice from Company, which written notice shall state
that failure to remedy such conduct may result in Termination for Cause.
(b) Dishonest or fraudulent conduct, a deliberate attempt to
do an injury to the Company, or conduct that materially discredits the Company
or is materially detrimental to the reputation of the Company.
(c) Employee's incurable material breach of any element of the
Company's Proprietary Information and Inventions Agreement, including without
limitation, Employee's theft or other misappropriation of the Company's
proprietary information.
-2-
<PAGE>
4.4 "Disability" Defined. For purposes or this Agreement, "disability"
will mean that the Board of Directors has determined, based on competent medical
evidence, that the Employee has become incapable, mentally or physically, of
substantially performing his services and discharging his duties hereunder for a
period in excess of six (6) months.
5. Effect of Termination.
5.1 Termination for Cause or Voluntary Termination. In the event of any
termination of this Agreement pursuant to Sections 4.2(a) or 4.2(c), the Company
shall pay Employee the compensation and benefits otherwise payable to Employee
under Section 3 through the date of termination. Employee's rights under the
Company's benefit plans of general application shall be determined under the
provisions of those plans.
5.2 Termination Without Cause. In the event of any termination of this
Agreement pursuant to Section 4.2(b), or as a result of a material diminution of
Employee's duties and responsibilities by the Company, or as a result of
Employee's death or disability (as defined herein),
(a) the Company shall pay Employee the compensation and
benefits otherwise payable to Employee under Section 3 through the date of
termination, except that health-related benefits shall continue for one year
beyond the effective date of termination.
(b) within seven (7) days of termination, Company shall pay
Employee a severance payment equal to the sum of one year of the Employees
then-current base salary, car allowance and the bonus Employee could have earned
had he continued employment with the Company through the end of the calendar
year in which termination occurs,
(c) the Company shall cause all of the Employee's outstanding
stock options to become immediately vested and the exercise period of such
options will be extended for a period of one year, provided, however, that such
extension shall not exceed the original term of such options, and
(d) Employee's rights under the Company's benefit plans of
general application shall be determined under the provisions of those plans.
6. Miscellaneous.
6.1 Severability. If any provision of this Agreement shall be found by
any arbitrator or court of competent jurisdiction to be invalid or
unenforceable, then the parties hereby waive such provision to the extent that
it is found to be invalid or unenforceable and to the extent that to do so would
not deprive one of the parties of the substantial benefit of its bargain. Such
provision shall, to the extent allowable by law and the preceding sentence, be
modified by such arbitrator or court so that it becomes enforceable consistent
with the intent of this Agreement and, as modified, shall be enforced as any
other provision hereof, all the other provisions continuing in full force and
effect.
-3-
<PAGE>
6.2 No Waiver. The failure by either party at any time to require
performance or compliance by the other of any of its obligations or agreements
shall in no way affect the right to require such performance or compliance at
any time thereafter. The waiver by either party of a breach of any provision
hereof shall not be taken or held to be a waiver of any preceding or succeeding
breach of such provision or as a waiver of the provision itself. No waiver of
any kind shall be effective or binding, unless it is in writing and is signed by
the party against whom such waiver is sought to be enforced.
6.3 Assignment. This Agreement and all rights hereunder are personal to
Employee and may not be transferred or assigned by Employee at any time. The
Company may assign its rights, together with its obligations hereunder, to any
parent, subsidiary, affiliate or successor, or in connection with any sale,
transfer or other disposition of all or substantially all of its business and
assets, provided, however, that any such assignee assumes the Company's
obligations hereunder.
6.4 Withholding. All sums payable to Employee hereunder shall be
reduced by all federal, state, local and other withholding and similar taxes and
payments required by applicable law.
6.5 Amendment. This Agreement may be amended, modified, superseded,
canceled, renewed or extended only by an agreement in writing executed by both
parties hereto.
6.6 Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and hand delivered, sent by telecopier,
sent by certified first class mail, postage pre-paid, or sent by nationally
recognized express courier service. Such notices and other communications shall
be effective upon receipt if hand delivered or sent by telecopier, five (5) days
after mailing if sent by mail, and one (1) day after dispatch if sent by express
courier, to the following addresses, or such other addresses as any party, shall
notify the other parties:
If to the Company: SciClone Pharmaceuticals, Inc.
901 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chairman of the Board of Directors
Telecopier: (415) 358-3469
If to Employee: Donald R. Sellers
c/o SciClone Pharmaceuticals, Inc.
901 Mariners Island Boulevard
San Mateo, CA 94404
Telecopier: (415) 358-3469
6.7 Binding Nature. This Agreement shall be binding upon, and inure to
the benefit of, the successors and personal representatives of the respective
parties hereto.
6.8 Headings. The headings contained in this Agreement are for
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this
-4-
<PAGE>
Agreement, the singular includes the plural, the plural included the singular,
the masculine gender includes both male and female referents, and the word "or"
is used in the inclusive sense.
6.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which,
taken together, constitute one and the same agreement.
6.10 Governing Law. This Agreement and the rights and obligations of
the parties hereto shall be construed in accordance with the laws of the State
of California, without giving effect to the principles of conflict of laws.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement as of the date first above written.
SCICLONE PHARMACEUTICALS, INC. EMPLOYEE
By: ____________________________ ______________________________
Donald R. Sellers
Name:___________________________
Title:__________________________
-5-
SUBLEASE AGREEMENT
This sublease agreement ("Agreement") for 901 Mariner's Island Blvd.,
Suite 275, San Mateo, CA 94404 (the "Office Space"), dated and effective as of
January 1, 1996, is by and between SciClone Pharmaceuticals, Inc. ("SCLN") and
Cord Blood Registry, Inc. ("CBR").
WHEREAS, SCLN wishes to sublease the Office Space to CBR; and
WHEREAS, CBR wishes to sublease the Office Space from SCLN.
NOW, THEREFORE, BE IT RESOLVED, that CBR and SCLN agree as follows:
1. Rent. CBR shall pay directly to SCLN on a month-to-month basis, rent
for the Office Space at the rate stated in the attached Appendix A.
2. Termination. Upon 120 days written notice to the other, either CBR
or SCLN may terminate this Agreement.
In the event SCLN terminates this Agreement, CBR shall vacate
the Office Space within 120 days from its receipt of SCLN's termination notice.
If this Agreement is not otherwise terminated then it shall
terminate on April 30, 1998.
3. Improvements. CBR will have the right to improve the Office Space,
upon its receipt of SCLN's and Spieker Properties' ("Spieker") prior written
approval, including opening wall space and the installation of telephone and
data equipment lines and jacks, as necessary and appropriate. Such improvements
and/or modifications to the Office Space, shall become SCLN's property upon
termination of this Agreement.
4. Use. CBR will maintain the Office Space as per SCLN's agreement with
Spieker, as stated in the original lease agreement, dated September 10, 1991
("Original Lease"), as amended.
5. Expenses. CBR will pay, on a pass-through basis, incremental
operating expenses charged to SCLN by Spieker, as stated in Appendix A attached
hereto.
<PAGE>
6. Notices. Any notice or other communication required or permitted to
be given to either party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile or five (5) days after mailing by registered or certified
mail, postage paid, to the other party at the following address:
In the case of SciClone Pharmaceuticals:
SciClone Pharmaceuticals, Inc.
901 Mariners Island Boulevard, #315
San Mateo, California 94404
Telephone: 415/358-3456
FAX: 415/358-3469
Attention: Mark A. Culhane, CFO
In the case of Cord Blood Registry:
Cord Blood Registry, Inc.
901 Mariners Island Boulevard, #275
San Mateo, California 94404
Telephone: 415/______________________
FAX: 415/_________________________
Attention: President
To the extent not otherwise modified herein, all other terms and
conditions of the Original Lease, as amended, shall apply to this Agreement, as
agreed to this 3rd day of January, 1996.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
SCICLONE PHARMACEUTICALS, INC. CORD BLOOD REGISTRY, INC.
______________________________________ _______________________________________
Signature Signature
______________________________________ _______________________________________
Printed Name Printed Name
______________________________________ _______________________________________
Title Title
______________________________________ _______________________________________
Date Date
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<NAME> SCICLONE PHARMACEUTICALS, INC.
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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