SCICLONE PHARMACEUTICALS INC, S-3, 1997-10-27

SCICLONE PHARMACEUTICALS INC
S-3, 1997-10-27
PHARMACEUTICAL PREPARATIONS

Previous: TRAVELERS SERIES TRUST, 485APOS, 1997-10-27

Next: FIDELITY UNION STREET TRUST II, 497J, 1997-10-27

As Filed With the Securities and Exchange Commission on October 27, 1997
Registration No. 333-_____

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------------

FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

----------------------

SCICLONE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

California 94-3116852
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

----------------------

901 Mariners Island Boulevard
San Mateo, California 94404
(650) 358-3456
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

----------------------

Donald R. Sellers
President and Chief Executive Officer
SciClone Pharmaceuticals, Inc.
901 Mariners Island Boulevard
San Mateo, California 94404
(650) 358-3456
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

----------------------

Copies to:
J. HOWARD CLOWES, ESQ. JAMES R. TANENBAUM, ESQ.
DIANNE B. SALESIN, ESQ. Stroock & Stroock & Lavan LLP
JOHN M. FOGG, ESQ. 180 Maiden Lane
Gray Cary Ware & Freidenrich New York, New York 10038
A Professional Corporation
400 Hamilton Avenue
Palo Alto, California 94301

----------------------

Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<TABLE>

CALCULATION OF REGISTRATION FEE
<CAPTION>
========================== ======================= ======================= ======================= =======================
Title of Each Class of Proposed Maximum Proposed Maximum Amount of
Securities to be Amount to be Offering Price Per Aggregate Offering Registration Fee
Registered Registered Share(1) Price(1)
-------------------------- ----------------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Common Stock, no par 1,500,000 Shares $6.19 $9,285,000 $2,814
value
========================== ======================= ======================= ======================= =======================
<FN>

(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) based upon the average high and low sale prices reported on
the Nasdaq National Market on October 22, 1997.
</FN>
</TABLE>

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.

================================================================================

<PAGE>

[GRAPHIC OMITTED]

SUBJECT TO COMPLETION, DATED OCTOBER 27, 1997

PROSPECTUS ____________, 1997
- --------------------------------------------------------------------------------

1,500,000 Shares

SCICLONE PHARMACEUTICALS, INC.

Common Stock

SciClone Pharmaceuticals, Inc. ("SciClone" or the "Company") is offering
1,500,000 shares (the "Shares") of its Common Stock, no par value (the "Common
Stock"). The Common Stock is traded on the Nasdaq National Market under the
symbol "SCLN." On October 23, 1997, the last sale price of the Common Stock, as
reported on the Nasdaq National Market, was $5.94 per share.

See "Risk Factors" beginning on page 7 for a discussion of certain factors
that should be considered by prospective purchasers of the Shares offered
hereby.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

================================================================================
Proceeds to
Price to Public Placement Agent Fees(1) Company(2)(3)
- --------------------------------------------------------------------------------
Per Share......... $ $ $
- --------------------------------------------------------------------------------
Total............. $ $ $
================================================================================

(1) The Shares are being offered by the Company principally to selected
institutional investors. EVEREN Securities, Inc. (the "Placement Agent")
has been retained to act, on a best efforts basis, as placement agent for
the Company in connection with the arrangement of this transaction. The
Company has agreed (i) to pay the Placement Agent a fee in connection with
the arrangement of this financing, (ii) to reimburse the Placement Agent
for certain out-of-pocket expenses, and (iii) to indemnify the Placement
Agent against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See "Plan of
Distribution."

(2) The termination date of this offering of Shares is _____________________,
1997 (the "Termination Date"). Prior to the closing of this best efforts
offering, all investor funds will promptly be placed in escrow with
______________________, as escrow agent (the "Escrow Agent"), in an escrow
account established for the benefit of the investors. Upon receipt of
notice from the Escrow Agent that investors have affirmed purchase of the
Shares and deposited the requisite funds in the escrow account, the Company
will deposit with The Depository Trust Company the Shares to be credited to
the accounts of the investors and will collect the investor funds from the
Escrow Agent. In the event that investor funds are not received in an
amount sufficient to satisfy the requirements of this offering on or before
the Termination Date, all funds deposited in the escrow account will be
promptly returned to the investors. See "Plan of Distribution."

(3) Before deducting expenses payable by the Company estimated at $225,000.

EVEREN Securities, Inc.
<PAGE>

FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY OR BY THE PLACEMENT AGENT THAT WOULD
PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED,
OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS
COMES ARE REQUIRED BY THE COMPANY AND THE PLACEMENT AGENT TO INFORM THEMSELVES
ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE SHARES AND THE
DISTRIBUTION OF THIS PROSPECTUS.

IN THIS PROSPECTUS REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS, AND THE TERMS "UNITED STATES" AND "U.S." MEAN THE UNITED STATES OF
AMERICA, ITS STATES, ITS TERRITORIES, ITS POSSESSIONS AND ALL AREAS SUBJECT TO
ITS JURISDICTION.

THE SHARES MAY NOT BE OFFERED OR SOLD IN THE UNITED KINGDOM OTHER THAN TO
PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING
OR DISPOSING OR INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR
BUSINESS OR OTHERWISE IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO THE
PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF THE PUBLIC OFFERS OF
SECURITIES REGULATION 1995.

THIS PROSPECTUS IS FOR DISTRIBUTION IN THE UNITED KINGDOM ONLY TO PERSONS
WHO ARE OF A KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986
(INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1996. IT MAY NOT BE COPIED OR
DISTRIBUTED OR OTHERWISE MADE AVAILABLE BY ANY RECIPIENT IN THE UNITED KINGDOM
WITHOUT THE EXPRESS CONSENT OF EVEREN SECURITIES, INC.

The names ZADAXIN, SCICLONE and the SCICLONE logo are registered trademarks
of the Company in the U.S. These trademarks have also been registered in
numerous foreign countries and applications to register these trademarks have
been filed in certain other foreign countries. All other trademarks appearing in
this Prospectus are the property of their respective owners.

2
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the following Regional Offices of the Commission: Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material may be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a web site that contains reports,
proxy and information statements, and other information regarding registrants
that file electronically with the Commission. The Commission web site address is
(http//www.sec.gov). The Company's Common Stock is traded on the Nasdaq National
Market. Reports and other information concerning the Company can also be
inspected at the offices of the Nasdaq Stock Market at 1735 K Street N.W.,
Washington D.C. 20006-1500.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act, of which this Prospectus constitutes a part, with
respect to the Shares offered hereby. The Registration Statement, including
exhibits and schedules thereto, may be obtained from the Commission's principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20459, upon
payment of the fees prescribed by the Commission. Statements contained in this
Prospectus as to the contents of any document referred to are not necessarily
complete and in each instance reference is made to the copy of the appropriate
document filed as an exhibit to, or incorporated by reference into, the
Registration Statement, each statement being qualified in all respects by such
reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, which have been filed by the Company with the
Commission, are hereby incorporated by reference into this Prospectus:

(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.

(b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997.

(d) The Company's Current Report on Form 8-K filed on October 14, 1997.

(e) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A dated January 31, 1992.

(f) The description of the Company's Preferred Stock Purchase Rights
attached to each share of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A dated October 14, 1997.

All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to
the termination of the offering hereunder shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any or all
of the documents incorporated herein by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to SciClone
Pharmaceuticals, Inc. at 901 Mariners Island Boulevard, San Mateo, California
94404 (telephone number (650) 358-3456), Attention: Secretary.

3
<PAGE>

- --------------------------------------------------------------------------------

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus or incorporated herein by reference. The material
herein contains certain forward-looking statements, including; (i) statements
regarding the application of ZADAXIN thymosin alpha 1 in disease areas beyond
chronic hepatitis B; (ii) the use of CPX as a potential chronic therapy for
cystic fibrosis; (iii) the potential for regulatory approvals of ZADAXIN and the
launching of ZADAXIN in additional markets; (iv) the Company's expectations
regarding increases in revenues from ZADAXIN and increases in marketing and
research and development expense levels; and (v) the Company's intent to
commence preclinical development of certain compounds. These statements are
subject to certain risks and uncertainties. These risks and uncertainties
include: (i) reliance by the Company on a single product, ZADAXIN, for its
revenues; (ii) the absence of regulatory approval for ZADAXIN in significant
markets; (iii) the expensive, time consuming and uncertain regulatory approval
process; (iv) risks associated with the manufacture and supply of ZADAXIN; (v)
competition from competing therapies; and (vi) uncertainties regarding the
outcome of the Company's efforts to commercialize additional products, as well
as other risks and uncertainties described herein and in the Company's reports
filed with the Commission.

The Company

The Company is an emerging pharmaceutical company that acquires, develops,
and commercializes specialist-oriented (e.g., hepatologists, oncologists and
pulmonologists), proprietary drugs for treating chronic and life-threatening
diseases for which there are no adequate treatment modalities, including chronic
hepatitis B, chronic hepatitis C, cancer, immune system disorders and cystic
fibrosis. The Company currently has two products in clinical development,
ZADAXIN thymosin alpha 1 and CPX, as well as several preclinical candidates.

ZADAXIN, a synthetic immunomodulator (i.e., immune system regulator), is
the Company's lead product. In the United States and Europe, the Company is
developing ZADAXIN in combination with interferon for the treatment of chronic
hepatitis C. The Company is currently exploring collaborative arrangements for
the development of ZADAXIN in these territories. In Japan, the Company has
licensed exclusive rights to ZADAXIN to Schering-Plough K.K. ("SPKK"), the
Japanese subsidiary of Schering-Plough Corporation, the world's leading marketer
of viral hepatitis therapies. SPKK has completed phase 1 and phase 2 clinical
studies of ZADAXIN for the treatment of chronic hepatitis B. SPKK is expected to
commence a pivotal phase 3 study of ZADAXIN in chronic hepatitis B and a phase 2
study of ZADAXIN in chronic hepatitis C in the fourth quarter of 1997. ZADAXIN
is currently approved and being marketed for chronic hepatitis B in China, the
Philippines and Singapore. Furthermore, the Company has filed for approval to
market ZADAXIN for this indication in 14 additional countries in Asia, Latin
America and the Middle East. SciClone licensed thymosin alpha 1 from Alpha 1
Biomedicals ("Alpha 1") and has worldwide marketing, development and
manufacturing rights with the exception of Japan, Italy, Spain and Portugal,
where rights have been sublicensed. Chronic hepatitis B is the second most
common chronic infectious disease worldwide. The World Health Organization
estimates that approximately 350 million individuals worldwide, or 5% of the
world's population, are carriers of the virus, the majority of whom are located
in Asia.

CPX, the Company's second product in clinical development, is an orally
administered synthetic compound discovered by the United States National
Institutes of Health ("NIH") as a potential treatment for cystic fibrosis
("CF"). CF is caused by a mutation in the cystic fibrosis transmembrane
conductance regulator ("CFTR") gene. CPX is an orally administered compound that
targets the biochemical abnormality at the root cause of CF, the malfunctioning
CFTR protein. In vitro studies from the NIH have shown that CPX binds to the
CFTR and permits the CFTR to enhance the performance of its chloride secretion
function. The Company obtained orphan drug status for CPX from the United States
Food and Drug Administration ("FDA") in April 1997 and was awarded a phase 1
Orphan Drug Grant from the FDA in October 1997. The Company is currently
conducting a multicenter phase 1 clinical study in the U.S. involving patients
with CF. SciClone's phase 1 program for CPX is the first to attempt to measure
both sweat chloride and nasal epithelial transmembrane potential difference
("NEPD") in a multicenter trial. The Cystic Fibrosis Foundation supported
SciClone in its Investigational New Drug ("IND")

- --------------------------------------------------------------------------------

4
<PAGE>

- --------------------------------------------------------------------------------

filing with the FDA to gain approval to begin the testing of CPX directly in CF
patients rather than the normal process of testing first in healthy, normal
volunteers.

The Company has additional compounds under license. During the first
quarter of 1998, the Company plans to commence preclinical development of one of
these compounds. Targeted indications for this compound include epilepsy, to be
studied at the NIH, and multiple drug resistance in cancer, to be studied at the
U.S. National Cancer Institute. The Company also plans to evaluate activity of
certain of its other preclinical candidates in 1998.

Internationally, SciClone has entered into over 25 exclusive distribution
arrangements to register and market ZADAXIN. The Company intends to out-license
its products where a collaborative arrangement will materially enhance the
prospects for a drug's commercial success, such as the Company's license with
SPKK for exclusive rights to develop and market ZADAXIN in Japan. The Company is
currently seeking a collaborative arrangement in the U.S. and Europe for the
phase 3 development of ZADAXIN in chronic hepatitis C. The Company intends to
source ZADAXIN, CPX and any future products through contract manufacturing and
supply agreements. The Company has entered into supply agreements in the U.S.
and Europe for the supply of bulk and finished product thymosin alpha 1. The
Company currently contracts with a major U.S. pharmaceutical company for the
supply of bulk CPX and another U.S. pharmaceutical manufacturer for the
finishing of CPX.

The Company was incorporated in California in 1990. Its principal
executive offices are located at 901 Mariners Island Boulevard, San Mateo,
California 94404, and its telephone number is (650) 358-3456. The Company's
international operating subsidiary, SciClone Pharmaceuticals International Ltd.
("SciClone International"), is incorporated in the Cayman Islands and
headquartered in Hong Kong. The Company also has office locations in Singapore,
Taiwan and Japan.

- --------------------------------------------------------------------------------

5
<PAGE>
- --------------------------------------------------------------------------------

The Offering

Common Stock offered hereby.................... 1,500,000 shares

Common Stock outstanding after this offering... 18,523,164 shares(1) (4)

Use of Proceeds................................ For the continued development of
ZADAXIN and CPX. See "Use of
Proceeds."

Nasdaq National Market Symbol.................. SCLN
<TABLE>

Summary Consolidated Financial Data
(In thousands, except per share data)
<CAPTION>

Year Ended December 31, Six Months Ended June 30,
-------------------------- -------------------------
1994 1995 1996 1996 1997
-------------------------- -------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Product sales ...................... -- $ 273 $ 703 $ 248 $ 1,294
Cost of product sales .............. -- 737 740 403 525
-------- -------- -------- -------- --------
Gross profit ....................... -- (464) (37) (155) 769
Operating expenses:
Research and development ........ $ 9,282 10,387 9,904 5,077 4,086
Special research and development
charges(2) .................... 3,470 -- -- -- --
Marketing ....................... 4,375 4,323 4,240 2,101 1,979
General and administrative ...... 3,811 2,904 3,183 1,564 1,765
-------- -------- -------- -------- --------
Total operating expenses .. 20,938 17,614 17,327 8,742 7,830
-------- -------- -------- -------- --------
Interest and investment income, net 3,057 3,303 2,618 1,428 846
-------- -------- -------- -------- --------
Net loss ........................... $(17,881) $(14,775) $(14,746) $ (7,469) $ (6,215)
======== ======== ======== ======== ========
Net loss per share ................. $ (1.02) $ (0.88) $ (0.85) $ (0.43) $ (0.36)
======== ======== ======== ======== ========

Weighted average shares used in
computing per share amounts ..... 17,508 16,882 17,421 17,243 17,355
======== ======== ======== ======== ========
</TABLE>

June 30, 1997
-------------------------
Actual As Adjusted(2)
-------------------------
(Unaudited)
Consolidated Balance Sheet Data:
Cash, cash equivalents and investments......... $24,477 32,536
Working capital................................ 7,744 15,802
Total assets................................... 32,431 40,489(4)
Accumulated deficit............................ (77,566) (77,566)
Total shareholders' equity..................... 28,068 36,126(4)

- ----------------------------
(1) Based upon 17,023,164 shares outstanding as of June 30, 1997. Excludes
options and warrants outstanding as of June 30, 1997 to purchase 3,237,296
shares of Common Stock at a weighted average exercise price of $6.16 share.

(2) Special research and development charges in fiscal 1994 represent
in-process technology charges related to the acquisition of the U.S. and
European rights to thymosin alpha 1 from Alpha 1.

(3) Adjusted to reflect the sale by the Company of 1,500,000 Shares offered
hereby at an assumed price of $5.94 per share, the last sale price of the
Common Stock as reported by the Nasdaq National Market on October 23, 1997,
after deduction of commissions and estimated offering expenses. See "Use of
Proceeds" and "Capitalization."

(4) Pursuant to an agreement between the Company and a principal shareholder of
the Company, such shareholder pledged 1,882,500 shares of Common Stock (the
"Pledged Shares") as security for a $5,944,000 loan from the Company (the
"Shareholder Loan"). Immediately prior to the consummation of any offering,
the Company may elect to cancel, through a non-cash exchange, a number of
the Pledged Shares in partial or complete satisfaction of the Shareholder
Loan , including accrued interest. The number of the Pledged Shares to be
so canceled would be determined by reference to the price of the Shares to
be sold in such offering less permitted discounts. If the Company elects to
exercise such option, immediately prior to this offering, in full
satisfaction of the Shareholder Loan and accrued interest then, assuming a
price of $5.94 per share less permitted discounts, the Company would cancel
1,306,471 of the Pledged Shares, and Common Stock issued and outstanding
after this offering, total assets and total shareholders' equity would be
17,216,693, $34,438,000 and $30,075,000, respectively. See "Recent
Developments."

- --------------------------------------------------------------------------------

6
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should consider the following risk factors in evaluating the Company
and its business before purchasing any of the Shares offered hereby. The
material herein contains certain forward-looking statements, including: (i)
statements regarding the application of ZADAXIN in disease areas beyond chronic
hepatitis B; (ii) the use of CPX as a therapeutic treatment for cystic fibrosis;
(iii) the potential for regulatory approvals of ZADAXIN and the launching of
ZADAXIN in additional markets; (iv) the Company's expectations regarding
increases in revenues from ZADAXIN and increases in marketing and research and
development expense levels; and (v) the Company's intent to commence preclinical
development of certain compounds. These statements are subject to certain risks
and uncertainties. These risks and uncertainties include: (i) reliance on a
single product, ZADAXIN, for its revenues; (ii) the absence of regulatory
approval for ZADAXIN in significant markets; (iii) the expensive, time consuming
and uncertain regulatory approval process; (iv) risks associated with the
manufacture and supply of ZADAXIN; (v) competition from competing therapies; and
(vi) uncertainties regarding the outcome of the Company's efforts to
commercialize additional products, as well as other risks and uncertainties
described herein and in the Company's reports filed with the Commission.

Dependence on ZADAXIN and CPX. The Company's principal development efforts
are currently focused primarily on ZADAXIN. Clinical trials of thymosin alpha 1
sponsored by the Company and/or other parties are currently in progress or
planned and favorable results from such trials will be necessary to gain
regulatory approval in significant markets. Sales of ZADAXIN commenced in 1997
but are not significant at this time. While ZADAXIN has been approved for
commercial sale for treatment of chronic hepatitis B in China, the Philippines
and Singapore, no assurance can be given that ZADAXIN approvals will be obtained
in additional countries or for the treatment of additional indications, such as
chronic hepatitis C, in a timely fashion or at all. The Company's launch of
ZADAXIN in China, the Philippines and Singapore is the first commercial
introduction of ZADAXIN by the Company, and no assurance can be given that
commercialization of ZADAXIN will prove successful. Future sales of the product
will depend on market acceptance and successful distribution. In particular,
while China is the largest potential market for ZADAXIN, the low average income
and poorly developed distribution infrastructure present ongoing challenges to
successful development of the market. Because the Company currently relies on
ZADAXIN as its sole source of revenue, the failure to demonstrate the drug's
efficacy in future clinical trials, to obtain additional marketing approvals or
to successfully commercialize the drug would have a material adverse effect on
the Company.

The Company may experience delays and encounter difficulties in clinical
trials of CPX. In addition, there can be no assurance that any clinical trials,
including those currently underway, will provide statistically significant
evidence of the efficacy of CPX in treating any of the target diseases. A
failure to demonstrate the efficacy of CPX in ongoing clinical trials, to obtain
additional approvals or to successfully commercialize such product would have a
material adverse effect on the Company.

No Significant Revenues; Continuing Operating Losses. The Company has never
generated significant revenues from the commercialization of its products, and
there is substantial uncertainty regarding the timing and amount of any future
revenues. The Company cannot predict when or if marketing approvals for CPX will
be obtained or additional marketing approvals for ZADAXIN will be obtained. Even
if such approvals are obtained, there can be no assurance that ZADAXIN and CPX
will be successfully commercialized. The Company has experienced significant
operating losses since its inception and, as of June 30, 1997, had an
accumulated deficit of approximately $78 million. The Company expects its
operating expenses to increase over the next several years as it expands its
development, clinical testing and marketing capabilities. The Company's ability
to achieve a profitable level of operations is dependent in large part on
successful expansion of the Asian market for ZADAXIN, obtaining additional
regulatory approvals for its ZADAXIN product and/or future products, entering
into agreements for product development and commercialization, where
appropriate, and continuing to expand from development into successful
marketing. There can be no assurance that the Company will ever achieve a
profitable level of operations.

7
<PAGE>

Future Capital Needs; Uncertainty of Additional Financing. The Company
anticipates that the net proceeds from this offering, together with the
Company's available cash and expected interest income thereon will be adequate
to satisfy its capital requirements until mid-1999. However, the Company will
need additional financing to support its long-term product development programs.
The Company's future capital requirements will depend on many factors, including
progress with preclinical testing and clinical trials, the time and cost
involved in obtaining regulatory approvals, patent costs, competing
technological and market developments, changes in existing collaborative
relationships, the Company's ability to establish development, sales,
manufacturing and marketing arrangements. No assurance can be given that
adequate financing will be available to the Company on a timely basis or at all.

Dependence on Third Parties. The Company's strategy contemplates that it
will enter into various arrangements with other entities. To date, the Company
has acquired rights to ZADAXIN and certain other drugs but is only actively
pursuing development of ZADAXIN and CPX. Failure to license or otherwise acquire
rights to additional drugs would result in a shortage of products for
development. In addition, the Company has licensed exclusive rights to the
development and commercialization of ZADAXIN in Japan to SPKK. SPKK has a
substantial commitment to alpha interferon, which is an approved therapy for
chronic hepatitis B and chronic hepatitis C in Japan. There can be no assurance
that either of these arrangements will prove successful or that the Company will
be able to negotiate additional arrangements in the future. The amount and
timing of resources that collaborators devote to their activities with the
Company will not be within the control of the Company and may be affected by
financial difficulties or other factors affecting these third parties. There can
be no assurance that such parties will perform their obligations as expected.
Moreover, the Company's ability to obtain regulatory approval in one country may
be delayed or adversely affected by the timing of regulatory activities and
approvals in one or more other countries, particularly if the Company does not
participate in the regulatory approval process in such other countries. See
"Business -- Manufacturing" and "-- Marketing and Sales."

Foreign Sales and Operations. The Company's financial condition in the
near term will be highly dependent on sales in foreign jurisdictions, where
sales and operations are subject to inherent risks, including difficulties and
delays in obtaining pricing approvals and reimbursement, unexpected changes in
regulatory requirements, tariffs and other barriers, political instability,
difficulties in staffing and managing foreign operations, longer payment cycles,
greater difficulty in accounts receivable collection, currency fluctuations and
potential adverse tax consequences. Certain foreign countries regulate pricing
of pharmaceuticals and such regulation may result in prices significantly below
those that would prevail in a free market. The majority of the Company's current
sales are to customers in China where the Company's accounts receivable
collections are typically 180 days or greater.

Patents and Proprietary Rights. Certain composition of matter patents for
thymosin alpha 1 expire in October 1997, and the Company may in the future have
only limited composition of matter patents for thymosin alpha 1 or other
products. However, the Company owns or has exclusive licenses for use and
process patents or patent applications in the U.S. and other jurisdictions for
thymosin alpha 1 and CPX and will seek to protect such products from competition
through such patent protection and through other means. See "Business -- Patents
and Proprietary Rights." The Company's success is significantly dependent on its
ability to obtain patent protection for its products and technologies and to
preserve its trade secrets and operate without infringing on the proprietary
rights of third parties. No assurance can be given that the Company's pending
patent applications will result in the issuance of patents or that any patents
will provide competitive advantages or will not be invalidated or circumvented
by its competitors. Moreover, no assurance can be given that patents are not
issued to, or patent applications have not been filed by, other companies which
would have an adverse effect on the Company's ability to use, manufacture or
market its products or maintain its competitive position with respect to its
products. Numerous patents and patent applications relating to thymosin alpha 1
are held under exclusive license and the breach by the Company of the terms of
such license could result in the loss of the Company's rights to such patents
and patent applications. Other companies obtaining patents claiming products or
processes useful to the Company may bring infringement actions against the
Company and such litigation is typically costly and time-consuming. As a result,
the Company may be required to obtain licenses from others or not be able to
use, manufacture or market its products. Such licenses may not be available on
commercially reasonable terms, if at all.

8
<PAGE>

The patent positions of biotechnology firms generally are highly uncertain
and involve complex legal and factual questions. No consistent policy has
emerged regarding the validity and scope of claims in biotechnology patents, and
courts have issued varying interpretations in the recent past, and legal
standards concerning validity, scope and interpretations of claims in
biotechnology patents may continue to evolve. Even issued patents may later be
modified or revoked by the U.S. Patent and Trademark Office, the European Patent
Office or the courts in proceedings instituted by third parties. Moreover, the
issuance of a patent in one country does not assure the issuance of a patent
with similar claims in another country and claim interpretation and infringement
laws vary among countries, so the extent of any patent protection is uncertain
and may vary in different countries.

Pharmaceuticals are not patentable in certain countries in SciClone's
ZADAXIN territory, or have only recently become patentable, and enforcement of
intellectual property rights in many countries in such territory has been
limited or non-existent. Future enforcement of patents and proprietary rights in
many countries in SciClone's ZADAXIN territory can be expected to be problematic
or unpredictable. There can be no assurance that any patents issued or licensed
to the Company will provide it with competitive advantages or will not be
challenged by others. No assurance can be given that holders of patents licensed
to the Company will file, prosecute, extend or maintain their patents in
countries where the Company has rights. Furthermore, there can be no assurance
that others will not independently develop similar products or will not design
around patents issued or licensed to the Company.

Government Regulation and Product Approvals. The research, preclinical
development, clinical trials, manufacturing, marketing and sales of
pharmaceuticals, including ZADAXIN and CPX, are subject to extensive regulation
by governmental authorities. Products developed by the Company cannot be
marketed commercially in any jurisdiction in which they have not been approved.
The process of obtaining regulatory approvals is lengthy and requires the
expenditure of substantial resources. In some countries where the Company
contemplates marketing ZADAXIN, the regulatory approval process for drugs not
previously approved in countries that have established clinical trial review
procedures is uncertain and this uncertainty may result in delays in granting
regulatory approvals. In addition, in certain countries such as Japan, the
process for obtaining regulatory approval is time consuming and costly because
all clinical trials and most preclinical studies must be conducted there. The
Company is currently sponsoring clinical trials and pursuing regulatory
approvals of ZADAXIN in a number of countries and of CPX in the U.S., but there
can be no assurance that the Company will be able to complete such trials, that
such trials, if completed, will fulfill regulatory approval criteria or that the
Company will ultimately obtain approvals in such countries. Adverse results in
such program could result in the placement of restrictions on the use of ZADAXIN
and CPX or revocation of the approval. The marketing approval for ZADAXIN in
Singapore requires a patient surveillance program to continue study of the
drug's safety and efficacy. Adverse results in such program could result in the
placement of restrictions on the use of ZADAXIN or revocation of the approval in
Singapore. Failure to comply with the applicable regulatory requirements can,
among other things, result in fines, suspensions of regulatory approvals,
product recalls or seizures, operating restrictions, injunctions and criminal
prosecutions. Further, additional government regulation may be established or
imposed which could prevent or delay regulatory approval of ZADAXIN, CPX or any
future products of the Company.

Manufacturing. The Company has entered into contract manufacturing and
supply agreements to source ZADAXIN and CPX. The Company has experienced delays
of supply of thymosin alpha l bulk drug in the past and could do so again in the
future. To be successful, the Company's products must be manufactured in
commercial quantities in compliance with regulatory requirements and at an
acceptable cost. While the Company believes it has and will be able in the
future to establish manufacturing relationships with experienced suppliers
capable of meeting the Company's needs, there can be no assurance that the
Company will establish long term manufacturing relationships with suppliers or
that these suppliers will prove satisfactory. The Company currently has a
sufficient supply of finished thymosin alpha l for the near term and is
currently negotiating a new vialing and packaging supply agreement. No
assurances can be given that such new agreement will be reached. Production
interruptions, if they occur, could significantly delay clinical development of
potential products, reduce third party or clinical researcher interest and
support of proposed clinical trials. Such interruptions could also delay
commercialization of the Company's products and impair their competitive
position, which would have a material adverse effect on the business and
financial condition of the Company. See "Business -- Manufacturing."

9
<PAGE>

Marketing and Sales. The Company has established distribution arrangements
with local pharmaceutical distribution companies in over 25 countries, in Asia,
Latin America and the Middle East. However, no assurance can be given that any
such distribution arrangements will remain in place or prove successful. See
"Business --Marketing and Sales."

Technological Change and Competition. Rapid technological development may
result in the Company's products becoming obsolete before they are marketed or
before the Company recovers a significant portion of the related development and
commercialization expenses. Competition in the pharmaceutical field is intense
and the Company expects that competition will increase. The Company's
competitors include major pharmaceutical companies, biotechnology firms and
universities and other research institutions, both in the U.S. and abroad, that
are actively engaged in research and development of products in the therapeutic
areas being pursued by the Company. Many of these companies and institutions
have substantially greater financial, technical, manufacturing, marketing and
human resource capabilities than the Company and extensive experience in
undertaking clinical testing and obtaining regulatory approvals necessary to
market drugs. Principal competitive factors in the pharmaceutical field include
efficacy, safety, and therapeutic regimen. Where comparable products are
marketed by other companies price is also a competitive factor.

Uncertainty of Third Party Reimbursement; Resources of Patient
Populations. The Company's ability to successfully commercialize its products
may depend in part on the extent to which reimbursement for the cost of such
products will be available from government health administration authorities,
private health insurers and other organizations. Significant uncertainty exists
as to the reimbursement status of new therapeutic products and there can be no
assurance that third party reimbursement will be available for therapeutic
products the Company might develop. In many of the foreign countries in which
the Company intends to operate, reimbursement of ZADAXIN under government or
private health insurance programs will not be available. In the U.S., health
care reform is an area of increasing national attention and a priority of many
governmental officials. Certain reform proposals, if adopted, could impose
limitations on the prices the Company will be able to charge in the U.S. for its
products or the amount of reimbursement for the Company's products from
governmental agencies or third party payors. In many countries where the Company
has marketing rights for ZADAXIN, government resources and per capita income
levels may be so low that the Company's products will be prohibitively expensive
for a large percentage of the population. In such countries, there can be no
assurance that the Company will be successful in marketing its products on
economically favorable terms, if at all.

Dependence on Qualified Personnel and Key Individuals. Because of the
specialized scientific nature of the Company's business, the Company is highly
dependent upon its ability to continue to attract and retain qualified
management, scientific and technical personnel. There is intense competition for
qualified personnel in the areas of the Company's activities, and there can be
no assurance that the Company will be able to continue to attract and retain the
qualified personnel necessary for the development of its business. In addition,
many key responsibilities within the Company have been assigned to a relatively
small number of individuals. Loss of the services of any of these individuals
unless they were promptly replaced could be significantly detrimental to the
Company's development. The Company does not maintain key person life insurance
on the lives of any of its key personnel.

Product Liability; Absence of Insurance. The Company's business will
expose it to potential product liability risks which are inherent in the
testing, manufacturing, marketing and sale of pharmaceutical products, and there
can be no assurance that product liability claims will not be asserted against
the Company. Product liability insurance for the pharmaceutical industry
generally is expensive to the extent that it is available at all. The Company
has product liability insurance coverage for clinical trials and commercial
sales. However, there can be no assurance that a product liability claim would
not adversely affect the business or financial condition of the Company.

Possible Volatility of Stock Price. The market price of the Common Stock
has in the past and may in the future fluctuate over a wide range. In addition,
the stock market has from time to time experienced significant price and volume
fluctuations that may be unrelated to the operating performance of particular
companies. The market prices of the common stock of many publicly traded
biotechnology companies have in the past been, and can in the

10
<PAGE>

future be, highly volatile. Progress in clinical trials by the Company, its
partners, or its competitors, announcements of technological innovations or new
products, developments or disputes concerning patents or proprietary rights or
collaborative agreements, availability of supply, publicity regarding actual or
potential medical results relating to products under development by the Company
or its competitors, regulatory developments in both the U.S. and foreign
countries, public concern as to the safety of the biotechnology products and
economic and other external factors, period-to-period fluctuations in the
Company's financial results, as well as any shortfalls in revenue or earnings
from levels expected by securities analysts, among other factors, have in the
past and may have in the future a significant impact on the market price of the
Common Stock.

Control by Existing Shareholder. As of September 30, 1997, a principal
shareholder of the Company beneficially owned approximately 19.2% of the
outstanding shares of Common Stock. This shareholder may have significant
influence over all matters requiring approval by the shareholders of the
Company, and will have the ability to elect a member of the Board of Directors.
Further, any significant sale of shares by such shareholder could adversely
affect the market price of the Common Stock. However, the Company has the option
to cancel up to that number of Pledged Shares necessary to completely satisfy
the outstanding balance, as of the date of this Prospectus, of the Shareholder
Loan, including accrued interest, made by the Company to such shareholder in a
non-cash exchange. If the Company elects to exercise this option in full
immediately prior to the closing of this offering, 1,306,471 Pledged Shares
(based on an assumed price of $5.94 less permitted discounts) would be
canceled, thereby reducing such shareholder's beneficial ownership to 11.5%, as
adjusted to reflect the sale of the Shares in this offering. See "Recent
Developments."

Dilution. Purchasers of the Common Stock offered hereby will incur
immediate and substantial net tangible book value dilution of $3.99 per share,
and, to the extent outstanding options and warrants to purchase the Company's
Common Stock are exercised, there will be further dilution. See "Dilution."

Blank Check Preferred Stock. The Company's Board of Directors has the
authority to issue Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, without any
further vote or action by the Company's shareholders. The rights of the holders
of the Common Stock will be subject to, and may be adversely affected by, the
rights of the holders of any Preferred Stock that may be issued in the future.
The issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company. The Company has no current plans
to issue shares of Preferred Stock.

11
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Shares offered hereby
are estimated to be approximately $8.1 million assuming the sale of 1,500,000
Shares at an assumed price of $5.94 per share, the last sale price of the Common
Stock as reported by the Nasdaq National Market on October 23, 1997, and after
deducting the Placement Agent's fee and estimated expenses of the offering. The
Company currently intends to use the net proceeds from the offering for the
continued development of ZADAXIN and CPX. Pending such uses, the net proceeds
will be invested in short-term, interest bearing investment grade securities.

Based on its current operating plan, the Company anticipates that the net
proceeds of this offering, together with the Company's available cash and
expected interest income thereon, should be sufficient to finance the Company's
current research and development and other working capital requirements until
mid-1999. This estimate is based on certain assumptions which could be
negatively impacted by the matters discussed in "Risk Factors."

12
<PAGE>

DILUTION

The Company's net tangible book value at June 30, 1997 was approximately
$28,067,754 or $1.65 per share. Net tangible book value per share represents the
amount of the Company's shareholders' equity, less intangible assets, divided by
17,023,164, the number of shares of Common Stock outstanding as of June 30,
1997.
<TABLE>

After giving effect to the sale of the Shares in this offering at an
assumed price of $5.94 per share, the last sale price of the Common Stock as
reported by the Nasdaq National Market on October 23, 1997, and after deducting
commissions and estimated offering expenses payable by the Company, the net
tangible book value of the Company as of June 30, 1997 would have been
$36,126,264, or $1.95 per share. This represents an immediate increase in net
tangible book value of $0.30 per share to existing shareholders and an immediate
dilution in net tangible book value of $3.99 per share to purchasers of Common
Stock in this offering, as illustrated in the following table:
<CAPTION>

<S> <C> <C>
Assumed price per share.................................................... $5.94
Net tangible book value per shares as of June 30, 1997................ $1.65
Increase per share attributable to new investors...................... .30
-------
Net tangible book value per share after this offering...................... 1.95
-----------
Dilution per share to new investors........................................ $ 3.99
===========
</TABLE>
<TABLE>

Utilizing the foregoing assumptions, the following table summarizes the
total consideration paid to the Company and the average price per share paid by
the existing shareholders and by purchasers of the Shares in this offering:
<CAPTION>

Shares Purchased Total Consideration Average Price
---------------- ------------------- -------------
Number Percentage Amount Percentage Per Share
------ ---------- ------ ---------- ---------

<S> <C> <C> <C> <C> <C>
Existing shareholders . . . 17,023,164 92% $105,771,124 92% $6.21
New investors . . . . . . . 1,500,000 9% 8,910,000 8% $5.94
---------- ----- ------------ ----
Total . . . . . . 18,523,164 100% $114,681,124 100%
========== ===== ============ ====
</TABLE>

The foregoing table excludes options and warrants outstanding as of June
30, 1997 to purchase 3,237,296 shares of Common Stock at a weighted average
exercise price of $6.16 per share. In the event such options and warrants are
exercised, investors may experience further dilution.

Pursuant to an agreement between the Company and a principal shareholder
of the Company, such shareholder pledged 1,882,500 shares of Common Stock as
security for the Shareholder Loan. Immediately prior to the conmsummation of any
offering, the Company may elect to cancel, through a non-cash exchange, a number
of the Pledged Shares in partial or complete satisfaction of the Shareholder
Loan, including accrued interest. The number of the Pledged Shares to be so
canceled would be determined by reference to the price of the Shares to be sold
in such offering less permitted discounts. If the Company elects to exercise
such option, immediately prior to this offering, in full satisfaction of the
Shareholder Loan and accrued interest then, assuming a price of $5.94 per share
less permitted discounts, the Company would cancel 1,306,471 of the Pledged
Shares, and the dilution per share to new investors would be $4.19. See "Recent
Developments."

13
<PAGE>

CAPITALIZATION
<TABLE>

The following table sets forth the consolidated capitalization of the
Company (i) as of June 30, 1997, and (ii) as adjusted to reflect the sale of
1,500,000 Shares offered hereby, and the receipt of the estimated net proceeds
therefrom, at an assumed price of $5.94, the last sale price of the Common Stock
as reported by the Nasdaq National Market on October 23, 1997. See "Use of
Proceeds." This table should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto and other financial
information incorporated herein by reference.
<CAPTION>
June 30, 1997
------------------------
Actual As Adjusted
------ -----------
(Unaudited)
(In thousands)
<S> <C> <C>
Shareholders' equity:
Preferred stock, no par value: 10,000,000 shares authorized, no shares
issued and outstanding, actual and as adjusted ...................... -- --
Common stock, no par value: 75,000,000 shares authorized; 17,023,164
issued and outstanding, actual, and 18,523,164 issued and outstanding,
as adjusted(1)(2) .................................................... $ 105,771 $ 113,829(2)
Net unrealized loss on available-for-sale securities ..................... (137) (137)
Accumulated deficit ...................................................... (77,566) (77,566)
--------- ---------
Total shareholders' equity .................................................. 28,068 36,126
--------- ---------
Total capitalization ..................................................... $ 28,068 $ 36,126
========= ---------
<FN>

(1) Excludes options and warrants outstanding as of June 30, 1997 to purchase
3,237,296 shares of Common Stock at a weighted average exercise price of
$6.16 share.

(2) Pursuant to an agreement between the Company and a principal shareholder of
the Company, such shareholder pledged 1,882,500 shares of Common Stock as
security for the Shareholder Loan. Immediately prior to the consumation of
any offering, the Company may elect to cancel, through a non-cash exchange,
a number of the Pledged Shares in partial or complete satisfaction of the
Shareholder Loan, including accrued interest. The number of the Pledged
Shares to be so canceled would be determined by reference to the price of
the Shares to be sold in such offering less permitted discounts. If the
Company elects to exercise such option, immediately prior to this offering,
in full satisfaction of the Shareholder Loan and accrued interest then,
assuming a price of $5.94 per share less permitted discounts, the Company
would cancel 1,306,471 of the Pledged Shares, and Common Stock issued and
outstanding, as adjusted, and Common Stock, as adjusted, would be
17,216,693 and $107,779,000, respectively. See "Recent Developments."
</FN>
</TABLE>

14
<PAGE>

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the Nasdaq National Market under the symbol
"SCLN." The following table sets forth the high and low sale prices per share of
the Common Stock for the periods indicated, as reported by the Nasdaq National
Market. The quotations shown represent inter-dealer prices without adjustment
for retail markups, markdowns, or commissions, and may not necessarily reflect
actual transactions.

High Low
---- ---
1997
4th quarter (through October 23, 1997).... $ 6 15/16 $ 5 1/4
3rd quarter............................... 6 1/8 3 1/2
2nd quarter............................... 7 9/32 4 1/2
1st quarter............................... 9 3/8 5 3/4

1996
4th quarter............................... 13 7 3/4
3rd quarter............................... 14 3/4 6 7/8
2nd quarter............................... 15 1/8 11 1/4
1st quarter............................... 16 1/8 4 3/4

1995
4th quarter............................... 8 7/8 3 3/4
3rd quarter............................... 9 3/4 5 3/4
2nd quarter............................... 7 3/4 4 3/8
1st quarter............................... 8 5/8 5 1/2

On October 23, 1997, the last sale price of the Common Stock, as reported
on the Nasdaq National Market, was $5.94 per share. As of September 30, 1997,
there were approximately 253 holders of record and more than 5,000 beneficial
holders of the Company's Common Stock.

The Company has not paid any dividends on its Common Stock and currently
intends to retain any future earnings for use in its business.

15
<PAGE>

BUSINESS

Overview

ZADAXIN, a synthetic immunomodulator (i.e., immune system regulator), is
the Company's lead product. In the United States and Europe, the Company is
developing ZADAXIN in combination with interferon for the treatment of chronic
hepatitis C. The Company is currently exploring collaborative arrangements for
the development of ZADAXIN in these territories. In Japan, the Company has
licensed exclusive rights to ZADAXIN to SPKK. SPKK has completed phase 1 and
phase 2 clinical studies of ZADAXIN for the treatment of chronic hepatitis B.
SPKK is expected to commence a pivotal phase 3 study of ZADAXIN in chronic
hepatitis B and a phase 2 study of ZADAXIN in chronic hepatitis C in the fourth
quarter of 1997. ZADAXIN is currently approved and being marketed for chronic
hepatitis B in China, the Philippines and Singapore. Furthermore, the Company
has filed for approval to market ZADAXIN for this indication in 14 additional
countries in Asia, Latin America and the Middle East. SciClone licensed thymosin
alpha 1 from Alpha 1 and has worldwide marketing, development and manufacturing
rights with the exception of Japan, Italy, Spain and Portugal, where rights have
been sublicensed. Chronic hepatitis B is the second most common chronic
infectious disease worldwide. The World Health Organization estimates that
approximately 350 million individuals worldwide, or 5% of the world's
population, are carriers of the virus, the majority of whom are located in Asia.

CPX, the Company's second product in clinical development, is an orally
administered synthetic compound discovered by the NIH as a potential treatment
for CF. CF is caused by a mutation in the CFTR gene. CPX is an orally
administered compound that targets the biochemical abnormality at the root cause
of CF, the malfunctioning CFTR protein. In vitro studies from the NIH have shown
that CPX binds to the CFTR and permits the CFTR to enhance the performance of
its chloride secretion function. The Company obtained orphan drug status for CPX
from the FDA in April 1997 and was awarded a phase 1 Orphan Drug Grant from the
FDA in October 1997. The Company is currently conducting a multicenter phase 1
clinical study in the U.S. involving patients with CF. SciClone's phase 1
program for CPX is the first to attempt to measure both sweat chloride and NEPD
in a multicenter trial. The Cystic Fibrosis Foundation supported SciClone in its
IND filing with the FDA to gain approval to begin the testing of CPX directly in
CF patients rather than the normal process of testing first in healthy, normal
volunteers.

16
<PAGE>

Strategy

SciClone's corporate objective is to become a leader in the acquisition,
development and commercialization of specialist-oriented proprietary drugs for
the treatment of chronic and life threatening diseases. The Company's strategy
to achieve this objective is as follows:

Expand Product Pipeline. The Company focuses its resources on the
development and commercialization of drugs; not drug discovery. SciClone
evaluates new compounds for acquisition or in-license from various sources,
including government agencies, universities, pharmaceutical companies and
biotechnology companies. The Company seeks development stage compounds that are
specialist-oriented, novel and patented. Management believes that this will
enable the Company to lower its expected time-to-market and risk profile
relative to competitors engaged in both drug discovery and development.

Optimize Resources. The Company does not own or maintain any manufacturing
facilities for finished products or raw materials. Instead, SciClone, using its
own manufacturing and quality assurance staff, out-sources these functions to
third parties that are capable of supplying current Good Manufacturing Practices
("cGMP") bulk product and finished goods as needed. Management believes that
this strategy will lower the Company's capital requirements and enable the
Company to concentrate its resources on drug development.

Capitalize on Commercial Capabilities. SciClone is equipped to manage
clinical development, regulatory submissions and pharmaceutical marketing in the
U.S., Europe and other international markets. The Company plans to continue to
use these capabilities aggressively to commercialize new and existing products
in markets around the world. Management believes that this strategy will enable
the Company to penetrate markets in an accelerated and profitable manner.

Enhance Product Portfolio Patent Position. SciClone plans to broaden the
protection of its intellectual property and trade secrets by actively developing
and expanding the patent filings for method of use and composition of matter
patents. Management believes that this strategy will enable the Company to
further protect the increased use of its product portfolio.

17
<PAGE>

Product Development Activities
<TABLE>

The following table summarizes the Company's current significant product
development activities:
<CAPTION>

- ------------------------- ----------------------- ----------------------- ------------------- ----------------------------
Product Location Indication Status Estimated Number of
Carriers/Patients(1)
- ------------------------- ----------------------- ----------------------- ------------------- ----------------------------
<S> <C> <C> <C> <C>
ZADAXIN China, Philippines, Chronic Hepatitis B Currently Marketed 130 million carriers
thymosin alpha 1 Singapore
----------------------- ----------------------- ------------------- ----------------------------
Argentina, Brunei, Chronic Hepatitis B Registrations 75 million carriers
Cyprus, Egypt, Hong Filed(2)
Kong, India,
Indonesia, Kuwait,
Lebanon, Malaysia,
Mexico, Nepal,
Pakistan, Turkey
----------------------- ----------------------- ------------------- ----------------------------
Taiwan Chronic Hepatitis B Completed phase 3 3.5 million carriers
----------------------- ----------------------- ------------------- ----------------------------
U.S./Europe Chronic Hepatitis C phase 3(3) 8.0 million carriers
----------------------- ----------------------- ------------------- ----------------------------
Japan(4) Chronic Hepatitis B Completed phase 2 2.6 million carriers
----------------------- ----------------------- ------------------- ----------------------------
Japan(4) Chronic Hepatitis C Completed phase 1 1.0 million carriers
- ------------------------- ----------------------- ----------------------- ------------------- ----------------------------
CPX U.S./Europe Cystic Fibrosis phase 1 55,000 patients
- ------------------------- ----------------------- ----------------------- ------------------- ----------------------------

<FN>
(1) Source: World Health Organization, Cystic Fibrosis Foundation and National
Organization of Rare Disorders, Inc.

(2) The Company is in the process of filing applications in the following
countries: Brazil, Chile, Colombia, Israel, New Zealand, Oman, South Korea,
Taiwan, Thailand, United Arab Emirates and Venezuela.

(3) A successful, non-pivotal U.S. phase 3 study has been completed. Subsequent
meetings have been held with the FDA, the United Kingdom Medicines Control
Agency, the Netherlands Medicines Evaluation Board and the Denmark Danish
Medicines Agency. From these meetings, a protocol for phase 3 pivotal
trials has been proposed and refined in a workshop with leading
international hepatologists.

(4) Clinical trial conducted by SPKK.
</FN>
</TABLE>

ZADAXIN thymosin alpha 1

ZADAXIN thymosin alpha 1 is a naturally occurring 28 amino acid peptide
that is produced for therapeutic use through chemical synthesis. Its simplified
or common chemical name is thymosin alpha 1. The generic name in the U.S. for
thymosin alpha 1 is thymalfasin. The Company believes that thymosin alpha 1 has
significant immunomodulatory properties. Data demonstrates that the drug has
raised lymphocyte (white blood cell) counts and enhanced multiple immune
response parameters in a substantial number of patients. The drug appears to act
on cells of the immune system that have been stimulated by infection or other
agents. Additionally, the drug does not appear to produce the side effects
associated with other immunomodulatory molecules, such as interferon,
particularly fever, headache, chills, fatigue, nausea and inflammation. To date,
over 1,500 patients have received thymosin alpha 1 with no significant drug
related side effects. Based on more than 70 clinical trials conducted to date,
the Company believes that thymosin alpha 1, either alone or in combination with
other therapies, may have application across a broad spectrum of diseases,
including chronic hepatitis B, chronic hepatitis C, cancer and other immune
system diseases.

Pursuant to the license agreement with Alpha 1, the Company obtained
worldwide marketing, development and manufacturing rights to thymosin alpha 1,
with the exception of Italy, Spain and Portugal. In April 1997, SciClone entered
into an arrangement with Alpha 1 to administer the sublicense activities of the
Alpha 1 license

18
<PAGE>

for Italy, Spain and Portugal. Under the Alpha 1 agreement, the Company also
acquired control of Alpha 1's patent portfolio for thymosin alpha 1.

Chronic hepatitis B

Chronic hepatitis B is the second most common chronic infectious disease
worldwide. It is transmitted through blood transfusions, contaminated needles,
sexual contact and perinatally. In addition, a large number of people are
infected by unknown means. The World Health Organization estimates that
approximately 350 million individuals worldwide or 5% of the world's population
are carriers of the virus. Among carriers of the chronic hepatitis B virus, many
have asymptomatic or minimal disease with no clinically evident symptoms.
Carriers of the chronic hepatitis B virus have a 200-fold increased chance of
developing primary liver cancer, the single largest cause of cancer mortality
globally, and a significant number develop cirrhosis of the liver.

Meta Analysis

Meta analysis is the statistical pooling of data derived from two or more
clinical trials. By using data from two or more studies, the play of random
chance is reduced and precision of estimates will increase as sample size
increases. A valuable use of meta analysis is to assess the efficacy of a drug
in the treatment of a particular disease across many studies. The Company
commissioned a meta analysis of chronic hepatitis B randomized and controlled
trials of ZADAXIN. The meta analysis was performed by MetaWorks, Inc. and
included two U.S. trials and a Taiwan trial. A statistically significant benefit
(p=0.04) was demonstrated in the meta analysis with a ZADAXIN overall response
rate of 36% compared to 19% for the control group. The results also showed no
indications of drug toxicity and no significant drug related side effects in the
trials.

The Company believes ZADAXIN is an effective new therapy for the treatment
of chronic hepatitis B with a superior side effect profile and efficacy equal to
or better than interferon, the primary existing therapy for chronic hepatitis B.
ZADAXIN has shown in clinical studies to be statistically significant in
efficacy with twice weekly administration for six months. ZADAXIN has shown
proven long term durable efficacy at five years of patient follow up. ZADAXIN
has shown virtually no drug related side effects in over 1,500 patients.

Interferon is an immunomodulatory protein that is produced commercially
using recombinant DNA technology and other techniques. Interferon is approved
for treatment of chronic hepatitis B in the United States and Europe, as well as
in Hong Kong, Taiwan, China, Japan and other countries. Other agents under
development, but not yet registered for the treatment of chronic hepatitis B,
include nucleoside analogs such as lamivudine, famciclovir and others. Unlike
thymosin alpha 1, data reported in the October 1997 supplement to Hepatology
reflect that nucleoside analogs are associated with rebound viral hepatitis and
viral mutation.

Set forth below is more detailed information regarding the status of
development of ZADAXIN as a therapy for chronic hepatitis B in certain key
markets.

China. In January 1997, the Company launched ZADAXIN for the treatment of
chronic hepatitis B in The People's Republic of China. This product launch
marked the first introduction of ZADAXIN by the Company anywhere in the world.
The Ministry of Public Health (MOPH) approval was based on a regulatory package
assembled from U.S. and European data in addition to a locally required
controlled clinical trial to evaluate the efficacy of ZADAXIN for patients
suffering from chronic hepatitis B. Sales and distribution in The People's
Republic of China are managed by SciClone International based in Hong Kong.
SciClone International has focused its initial sales efforts on the southern
province of Guangjou, the capitol city of Beijing and Shanghai. More than four
local distribution teams are used to steadily increase sales in China and to
place ZADAXIN on the formularies of city and provincial hospitals.

Japan. In Japan, the world's largest hepatitis market, the Company has
licensed exclusive thymosin alpha 1 rights to SPKK. SPKK has completed a phase 1
single and multiple dose safety and pharmacokinetics trial. SPKK has
successfully completed a dose ranging phase 2 safety and efficacy trial
involving approximately 60

19
<PAGE>

patients. SPKK will continue the development of thymosin alpha 1 as a
monotherapy for chronic hepatitis B, and study the compound in combination with
its INTRON(R) A (alpha interferon 2b) for the treatment of chronic hepatitis C.
Clinical studies for these two indications are planned to commence during the
fourth quarter of 1997 and certain costs will be shared by the Company and SPKK.
In October 1996, the Company expanded and amended its license agreement with
SPKK. The Company agreed to transfer exclusive Japanese rights for thymosin
alpha 1 to SPKK and SPKK agreed to pay the Company certain fees upon achievement
of milestones and committed to invest additional funds to develop and
commercialize ZADAXIN in Japan. Upon approval in Japan, SPKK is obligated to
purchase thymosin alpha 1 from the Company. The Company agreed to provide
certain funding for development expenses.

Taiwan. The Company is completing the Plant Master File required by
Taiwanese law. This file will complement existing regulatory documents and allow
the Company to file for registration in Taiwan. The Company sponsored a phase 3
chronic hepatitis B trial of ZADAXIN in Taiwan. The audited results of this
trial showed 37% of patients responded to ZADAXIN, compared to 25% for patients
taking a placebo. The Company believes this trial produced the best results of
any randomized and controlled chronic hepatitis B trial in Taiwan. The Company
knows of no randomized and controlled chronic hepatitis B clinical trial
conducted in Taiwan, including SciClone's trial, using medically accepted end
points of both hepatitis B virus DNA and hepatitis B e-antigen negativity that
has produced statistically significant results, including clinical trials of
alpha interferon, the leading chronic hepatitis B therapy approved in Taiwan.
The results also showed no indications of drug toxicity and no significant drug
related side effects in the trial.

Chronic Hepatitis C

The Centers for Disease Control estimate that 3.9 million Americans were
infected with the chronic hepatitis C virus, and the American Liver Foundation
estimates that an additional 170,000 new cases are reported each year. The
prevalence of chronic hepatitis C in Europe is approximately 4 million.
Interferon is the only current effective therapy approved for chronic hepatitis
C. The prevalence of chronic hepatitis C is not yet fully known, but an article
in the Annals of Internal Medicine indicates that in Japan alone there are more
than l million cases of chronic hepatitis C. Chronic hepatitis C can be
transmitted by blood transfusions and contaminated needles. The mode of
transmission in many cases is unknown. Approximately 10% to 20% of chronic
hepatitis C carriers may develop cirrhosis, and up to 40% of these individuals
may develop liver cancer.

Phase 3 Chronic Hepatitis C Combination Trial (United States). In 1996, a
randomized, placebo-controlled, multicenter study in chronic hepatitis C was
completed. The trial compared thymosin alpha 1 and alpha interferon 2b
combination treatment to alpha interferon 2b alone or a placebo. The primary end
point of the trial was normalization of alanine transaminase (ALT), a
measurement of liver inflammation, and secondary end points were improvement in
liver histology, the condition of the liver, and reduction in hepatitis C serum
viral RNA (HCV RNA) viral titer levels, the amount of virus in the blood. The
thymosin alpha 1 and alpha interferon 2b combination treatment had a
statistically significant (p=0.022) improvement over alpha interferon 2b alone.

A complete response was defined as a normal ALT level present on the last
two study visits while a partial response was defined as a 50% decrease in ALT.
Based on 103 patients who completed the six-month treatment period, the
combination group showed a statistically significant greater partial and/or
complete response (41.9%) as compared to alpha interferon 2b alone (16.6%), and
to placebo (2.7%). Ten patients who did not respond to alpha interferon alone
were subsequently treated for six months with the combination regimen. Four of
the 10 (40%) showed normalization of ALT levels after the six-month retreatment
period. The histologic data showed that only combination therapy demonstrated
statistically significant higher efficacy than placebo at reducing histologic
activity. Patients treated with combination therapy were the only group to
achieve significant reduction in HCV RNA viral titer levels in contrast with
patients treated with single-agent alpha interferon 2b or placebo who failed to
show a significant reduction in viral titer levels.

Thymosin alpha 1 Combination Therapy with Alpha Interferon in Chronic
Hepatitis C Phase 2 Combination Trial (Italy). A 15 patient, 12 month chronic
hepatitis C open-label study was completed in Italy

20
<PAGE>

using a combination of thymosin alpha 1 and lymphoblastoid interferon. Sustained
response to the combination therapy after 12 months of therapy and six months of
observation was 40% (6/15) with loss of serum HCV RNA. This is dramatically
higher than historical sustained response levels to monotherapy interferons.

Patients were treated with the combination for one year and followed for
an additional six months after conclusion of treatment. Of the 15 patients
entered into the study, four had previously failed standard alpha interferon
therapy. Thirteen of the 15 patients were of genotype 1b, the genotype least
responsive to interferon therapy. At the end of treatment, 11 (73%) patients,
including two previous alpha interferon failures, were negative for serum HCV
RNA measured by polymerase chain reaction (PCR). Of the 13 genotype lb patients,
nine (69%) responded to therapy and five of these 13 patients (39%) were still
negative for serum HCV RNA six months after treatment ended. The overall
sustained response after 18 months was 40% (6/15) with loss of serum HCV RNA.
Five of these six HCV RNA negative patients also had normalization of ALT
levels. Histological improvement was observed in the post-treatment liver biopsy
specimens of 12 patients for whom paired samples were available.

Set forth below is more detailed information regarding the status of
development of ZADAXIN as a therapy for chronic hepatitis C in selected
countries.

Japan. In Japan, the world's largest hepatitis market, SciClone has
licensed exclusive thymosin alpha 1 rights to SPKK. For the indication of
chronic hepatitis C, SPKK has submitted and gained approval for an IND to
conduct a phase 2 clinical study using thymosin alpha 1 as a monotherapy. The
Company expects SPKK to commence the phase 2 study in the fourth quarter of
1997. SPKK is also working on satisfying the necessary government requirements
to conduct a phase 2 combination study with alpha interferon 2b and thymosin
alpha 1.

U.S./Europe. In the United States and Europe, the Company is developing
ZADAXIN in combination with interferon for the treatment of chronic hepatitis C.
After meeting with U.S. and European regulatory authorities, the Company has
prepared a protocol outline for the required pivotal phase 3 chronic hepatitis C
studies, which has been refined with several leading international
hepatologists. The Company is currently exploring collaborative arrangements for
the development of ZADAXIN in these territories.

CPX

Cystic Fibrosis. CF is the most common fatal genetic disorder in the U.S.
today. CF affects approximately 30,000 children and young adults in the U.S. and
approximately 25,000 in Europe. In the U.S., CF occurs in approximately one of
every 3,300 live births and approximately 1,000 new cases are diagnosed each
year, usually by the age of three. The median age of survival for a person with
CF is 31 years. CF is caused by a mutation in the CFTR gene. This basic genetic
defect in CF cells results in the faulty transport of chloride and sodium (salt)
within epithelial cells (which line organs such as the lungs and pancreas) to
the cells' outer surfaces. This faulty transport causes the body to produce an
abnormally thick, sticky mucus which clogs the lungs and leads to fatal
infections. This thick, sticky mucus also obstructs the pancreas, preventing
enzymes from reaching the intestines to digest food. Most CF patients die from
lung disease. One in 29 Americans, more than 10 million people, is an unknowing,
symptomless carrier of the defective gene. A child must inherit a defective copy
of the CF gene, one from each parent, to have CF. Each time two carriers
conceive a child, there is a 25% chance that the child will have CF; a 50%
chance that the child will be a carrier; and a 25% chance that the child will be
a non-carrier.

CF has a variety of symptoms. The most common are: very salty-tasting
skin; persistent coughing, wheezing or pneumonia; excessive appetite but poor
weight gain; and bulky, foul-smelling stools. Currently, approved treatments for
CF only address the symptoms of CF and not the underlying biochemical
abnormality at the root cause of the disease that results in the faulty
transport of chloride and sodium within epithelial cells to their outer
surfaces. The treatment of CF depends upon the stage of the disease and which
organs are involved. One means of treatment, postural drainage (also called
chest physical therapy), requires vigorous percussion (by using cupped hands) on
the back and chest to dislodge the thick, sticky mucus from the lungs.
Antibiotics are also used to treat lung infections and are administered
intravenously, orally, and/or in medicated vapors which are inhaled to open up
clogged airways. In addition, mucolytic (mucus-thinning) drugs are also used to
thin the viscosity of the mucus. When CF

21
<PAGE>

affects the digestive system, the body does not absorb enough nutrients.
Therefore, people with CF may need to eat an enriched diet and take both
replacement vitamins and enzymes. The annual average cost of care of a CF
patient has been estimated by the Cystic Fibrosis Foundation to be approximately
$50,000 per patient.

CPX. CPX is an orally available xanthine derivative that is produced for
therapeutic use through chemical synthesis. CPX targets the biochemical
abnormality at the root cause of CF, the malfunctioning CFTR protein that
results in the buildup of thick, sticky mucus. CPX use in CF was discovered by
Harvey Pollard, M.D., Ph.D., and Kenneth Jacobson, Ph.D., of the National
Institute of Diabetes and Digestive and Kidney Disorders (NIDDK) of the NIH.
Previous NIH preclinical data indicated that CPX interacts directly with the
malfunctioning CFTR protein to enhance the performance of its chloride secretion
function. Thus, the Company believes CPX could prevent the buildup of thick,
sticky mucus and become a unique therapy correcting the protein defect, the
malfunctioning CFTR, in all organs affected by CF.

Consistent with the Company's strategy, SciClone licensed CPX from the NIH
in April 1996. In January 1997, the Company's IND was approved by the FDA to
begin clinical studies of CPX in the U.S. directly in CF patients rather than
normal, healthy volunteers. The Cystic Fibrosis Foundation supported SciClone in
its IND filing with the FDA to gain approval to begin testing of CPX directly in
patients. In April 1997, the Company obtained orphan drug status for CPX from
the FDA. In May 1997, the Company initiated a multicenter phase 1 trial of CPX
directly in CF patients. In October 1997, the FDA awarded SciClone a $100,000
Orphan Drug Grant for phase 1 development of CPX as a treatment for CF.

Phase 1 CPX trial in CF Patients (United States). The Company is currently
conducting its phase 1 clinical study of CPX at five CF centers in the U.S. The
five participating CF centers are: Stanford CF Center, Lucille Packard
Children's Hospital in Palo Alto, California; University of Washington and
Children's Hospital CF Center in Seattle, Washington; University of Iowa
Hospitals and Clinics CF Center in Iowa City, Iowa; The LeRoy Matthews CF
Center, Rainbow Babies and Children's Hospital in Cleveland, Ohio; and The Emory
University CF Center, Egleston Children's Hospital in Atlanta, Georgia. The
study is evaluating the safety and pharmacokinetic profile of CPX, that is its
ability to be orally absorbed, determining the best dose to use and determining
how often it should be taken. In addition, the study is the first ever to
attempt to measure both sweat chloride and NEPD in a multicenter trial. Sweat
chloride and NEPD are surrogate markers of efficacy and are abnormal in CF
patients. The phase 1 trial may provide an early indication of CPX effectiveness
if it demonstrates improvement of sweat chloride and NEPD tests.

Marketing and Sales

In general, the Company plans to market and sell its products in the U.S.
through its own marketing and sales organization. Outside of the U.S., the
Company currently plans to market and sell its products through collaborative or
distribution arrangements, which may include co-marketing and sales agreements.

In the U.S., CPX is still in clinical development. Currently, the Company
plans to market and sell CPX in the U.S. through its own marketing and sales
organization. In Europe, the Company is evaluating its plans for marketing and
selling CPX.

In the U.S. and Europe, thymosin alpha 1 is still in clinical development.
In Europe, SciClone is currently exploring various collaborative arrangements
with major pharmaceutical companies for the development of thymosin alpha 1 in
combination with interferon for the treatment of chronic hepatitis C. Such
collaborative arrangements may include marketing and sales cooperation. In the
U.S., the Company may consider collaborative arrangements for ZADAXIN.

SciClone's non-U.S./non-European thymosin alpha 1 marketing and sales
strategy, apart from Japan, is to establish its own proprietary regional sales
and marketing capabilities to commercialize thymosin alpha 1. Consistent with
this strategy, SciClone focuses on educating the medical opinion leaders in each
country and targeting the leading specialists and teaching hospitals, tactics
consistent with the successful introduction of

22
<PAGE>

specialist-oriented medicines. SciClone manages the intellectual processes of
marketing, medical education and the running of clinical trial and clinical
experience programs. Distributors assist SciClone with local regulatory
submissions to the ministries of health as well as import, inventory, physically
distribute and invoice ZADAXIN. SciClone International is based in Hong Kong and
has international offices in Singapore, Taiwan and Japan. SciClone International
also manages a distribution center in Hong Kong which is the source for all
ZADAXIN exported to the non-U.S. markets. SciClone has established distribution
arrangements with local pharmaceutical distribution companies in over 25
countries outside of the U.S., Europe and Japan. In its three approved Asian
ZADAXIN markets (China, Philippines and Singapore), SciClone has established a
marketing program, including the positioning and pricing of the drug. Local
sales are managed by dedicated distributor employees nominated and supported by
SciClone. In Japan, as previously discussed, SciClone has licensed SPKK to
develop and market thymosin alpha 1.

Manufacturing

The Company has entered into contract manufacturing and supply agreements
to source ZADAXIN and CPX. SciClone has a European cGMP third party source for
bulk thymosin alpha 1 peptide for the European, Asian (except Japan), Middle
Eastern and Latin American markets. This bulk peptide is turned into finished
sterile injectable form by a separate European cGMP manufacturer. This finished
product is shipped to Hong Kong for labeling and redistribution worldwide. For
the U.S. and Japanese markets, an alternative U.S. located cGMP bulk
manufacturer and a separate cGMP finishing plant are utilized. CPX is
manufactured for SciClone in the U.S. by a major U.S. pharmaceutical company and
turned into finished form by a separate U.S. pharmaceutical manufacturer. The
Company directly monitors production runs of its products and manages its own
Quality Assurance programs. The Company is constantly managing the manufacturing
processes and participating in production and quality testing upgrades. SciClone
has established an inventory sufficient to fulfill its expected requirements in
the near term.

Patents and Proprietary Rights

The Company is the exclusive licensee of composition of matter, process
and use patents and pending applications related to thymosin alpha 1, in the
U.S. and abroad.

The Company is the exclusive licensee (with limited exceptions) of a
number of foreign patents directed to the thymosin alpha 1 composition of matter
which is owned by Hoffman-La Roche AG and the Board of Regents of the University
of Texas System. The majority of these foreign composition of matter patents are
due to expire in October 1997, although the Company is the exclusive licensee of
a number of composition of matter patents and applications directed to analogs
and derivatives of thymosin alpha 1. The Company is also the exclusive licensee
and is directing prosecution of use and process patents related to the method of
making and therapeutic uses of thymosin alpha 1. Consistent with its strategy,
the Company also has filed its own use patents for thymosin alpha 1.

Process patents owned by Alpha 1 and exclusively licensed to SciClone are
directed to methods of making thymosin alpha 1 and have issued in the U.S., a
majority of European countries, Hong Kong and Taiwan.

SciClone also has exclusively licensed patents and pending applications
covering numerous uses of thymosin alpha 1, including treatment of chronic
hepatitis C which has issued in a majority of European countries, Taiwan,
Australia and South Africa. Patents under which SciClone is exclusively licensed
have additionally issued in the U.S. and Australia covering the use of thymosin
alpha 1 to treat small cell and non-small cell lung cancer; in the U.S., South
Africa and Taiwan covering the use of thymosin alpha 1 to treat autoimmune
hepatitis; in Japan covering the treatment of chronic hepatitis B using thymosin
alpha 1; in the U.S., Taiwan and South Africa covering the use of thymosin alpha
1 to treat septic shock; and in the U.S., Australia, Taiwan and South Africa
covering the treatment of infertility in mammalian males using thymosin alpha 1.
Patents which SciClone owns have issued in the United States, Taiwan and South
Africa covering the use of thymosin alpha 1 to treat chronic hepatitis B
carriers with minimal disease. Numerous corresponding additional patent
applications in other countries are pending for each of the above named
indications.

23
<PAGE>

The Company is the exclusive licensee of an issued U.S. patent covering
the use of CPX to treat CF, as well as other pending domestic and foreign patent
applications covering CPX analogs and their use in treating CF.

In addition to patent protection, the Company intends to use other means
to protect its proprietary rights. A type of marketing exclusivity period may be
available under regulatory provisions in certain countries including the United
States, European Union countries, Japan and Taiwan, which benefits the holder of
the first marketing approval for new chemical entities or their equivalents for
a given indication. Orphan drug protection will be sought where available
granting additional market exclusivity. The Company is the holder of an orphan
drug product designation for thymosin alpha 1 for chronic hepatitis B in the
United States. Recognition and protection of trademarks for thymosin alpha 1 is
being accomplished through a worldwide filing of trademark applications for
ZADAXIN and other trademarks which appear on the commercial packaging of the
product and are used in promotional literature. Copyrights for the commercial
packaging may provide SciClone with means to take advantage of procedures
available in certain countries to exclude counterfeit products or genuine but
unauthorized products from entering a particular country by parallel
importation. The Company has also implemented anti-counterfeiting measures on
commercial packaging and plans to register the packaging with customs
departments in countries where such procedures exist.

The Company is pursuing similar types of protection for CPX, where
applicable. The Company is the holder of an orphan drug product designation for
CPX to treat CF in the U.S.

The Company also relies upon trade secrets, which it seeks to protect, in
part, by confidentiality agreements with employees, consultants, suppliers and
licenses. There can be no assurance that these agreements will not be breached,
that SciClone would have adequate remedies for any breach or that SciClone's
trade secrets will not otherwise become known or independently developed by
competitors.

RECENT DEVELOPMENTS

On July 23, 1997, Thomas E. Moore, then Chairman of the Board and one of
the founders of the Company, pledged 1,882,500 shares of Common Stock as
security for the Shareholder Loan. Interest on the principal amount of the
Shareholder Loan accrues at a rate of 7% per annum and the Shareholder Loan is
repayable in July 1999. While the Shareholder Loan remains outstanding,
immediately prior to the closing of any offering of the Company's securities,
the Company may elect to cancel, through a non-cash exchange, a number of the
Pledged Shares in partial or complete satisfaction of the Shareholder Loan,
including accrued interest. The number of the Pledged Shares to be so canceled
would be determined by reference to the price of the shares of Common Stock to
be sold in the then-pending offering less permitted discounts. To date, the
Company has not cancelled any of the Pledged Shares. If, immediately prior to
the closing of this offering, the Company elects to exercise such option in full
satisfaction of the Shareholder Loan and accrued interest, then assuming a price
of $5.94 per share, the last sale price of the Common Stock as reported by the
Nasdaq National Market on October 23, 1997, less permitted discounts, the
Company would cancel 1,306,471 of the Pledged Shares. Effective July 24, 1997
Mr. Moore resigned from the Board of Directors to pursue other interests. See
"Management."

24
<PAGE>
MANAGEMENT

On July 2, 1997, the Company appointed Rolf H. Henel to its Board of
Directors and on July 25, 1997 the Company appointed Jere E. Goyan, Ph.D., a
director of the Company, as Chairman of the Board. Thomas E. Moore, Chairman of
the Board of Directors and a director of the Company, resigned effective July
24, 1997.

Alfred R. Rudolph, M.D. joined the Company in April 1997 as Chief
Technical Officer and was promoted to Chief Operating Officer in August 1997.
David A. Karlin, M.D. joined the Company in June 1995 as Vice President and
Medical Director. David Horwitz, M.D., Ph.D., Executive Vice President of
Medical, Regulatory and Scientific Affairs, resigned as an officer of the
Company effective August 29, 1997.
<TABLE>

The following table sets forth certain information with respect to each of
the executive officers and directors of the Company:
<CAPTION>

Name Age Position
------------------------------------ --------- ----------------------------------------

<S> <C> <C>
Donald R. Sellers................... 53 President, Chief Executive Officer and
Director

Alfred R. Rudolph, M.D.............. 50 Chief Operating Officer
David A. Karlin, M.D................ 54 Vice President and Medical Director
Mark A. Culhane..................... 37 Vice President, Finance and
Administration and Chief Financial
Officer, Secretary

Jere E. Goyan, Ph.D................. 66 Chairman of the Board of Directors

John D. Baxter, M.D................. 56 Director

Edwin C. Cadman, M.D................ 51 Director

Rolf H. Henel....................... 60 Director
</TABLE>

Donald R. Sellers has served as the Company's Chief Executive Officer
since April 1996 and as President and Director since January 1996. From May 1993
to present, he has also served as Managing Director, SciClone Pharmaceuticals
International Ltd., the international arm of the Company. From 1990 to 1993, Mr.
Sellers was Corporate Vice President of Getz Bros., a U.S.-based international
trading company, as well as President of one of their Japanese operations. From
1983 to 1990, Mr. Sellers was employed by Sterling Drug International, initially
as Vice President of Marketing and Operations in Asia and beginning in 1985 as
President of their Latin American Andina Group. Mr. Sellers began his
pharmaceutical career in 1973 with Pfizer as Country Manager, Vietnam and Hong
Kong, and he later worked with the Revlon Healthcare Group as Director of
Worldwide Exports and Pacific Area Director.

Alfred R. Rudolph, M.D. joined the Company in April 1997 as Chief
Technical Officer and was promoted to Chief Operating Officer in August 1997.
From January 1995 to September 1995, Dr. Rudolph was President and Chief
Operating Officer of Neptune Pharmaceuticals, Inc., a marine-based natural
product screening company. Dr. Rudolph was Senior Vice President of T Cell
Sciences, Inc., a biotechnology company, from December 1991 to September 1994
and was Vice President, Medical Affairs from March 1990 to December 1991.

David A. Karlin, M.D. has been a Medical Director since June 1995 and a
Vice President since July 1996 and was appointed an executive officer in May
1997. From December 1992 to June 1995 Dr. Karlin was a Clinical Team Leader at
Syntex USA, Inc. ("Syntex"), a pharmaceutical company, after serving as Senior
Clinical Research Physician at Syntex from May 1990 to December 1992.

25
<PAGE>

Mark A. Culhane has been the Company's Vice President, Finance and
Administration and Chief Financial Officer since May 1994 and its Secretary
since November 1993. From June 1992 to May 1994, Mr. Culhane served in other
financial positions with the Company. From July 1982 to June 1992, Mr. Culhane
was employed by Price Waterhouse, an international public accounting firm, where
his last position was Senior Manager.

Jere E. Goyan, Ph.D. has been a director of the Company since January 1992
and has been Chairman of the Board since July 1997. Since July 1993, Dr. Goyan
has been President and Chief Operating Officer and director of Alteon, Inc., a
biotechnology company where he served as Senior Vice President for Research and
Development from January 1993 through July 1993 and as Acting Chief Executive
Officer from July 1993 through May 1994. Dr. Goyan was Dean of the School of
Pharmacy and Professor of Pharmacy and Pharmaceutical Chemistry at the
University of California, San Francisco from 1967 through 1992, and was a
Professor there from 1965 through 1992. From 1979 to 1981, Dr. Goyan was the
Commissioner of the United States Food and Drug Administration. Dr. Goyan also
currently serves as a director of Emisphere Technologies, Inc. and Atrix
Laboratories, both biotechnology companies, and Boehringer Ingelheim
Pharmaceuticals Corporation and Penwest Pharmaceuticals, both pharmaceutical
companies.

John D. Baxter, M.D. joined the Company as a director and Chairman of its
Scientific Advisory Board in June 1991. Dr. Baxter has been associated with the
University of California, San Francisco since 1970. He has been Professor of
Medicine since 1979, Chief of the Endocrinology Section, Parnassus Campus since
1980 and Director of the Metabolic Research Unit since 1981. Dr. Baxter was a
founder and served as a director of Scios Nova Inc., a biotechnology company,
from its inception in 1982 to 1991.

Edwin C. Cadman, M.D. has been a director and member of the Company's
Scientific Advisory Board since November 1991. Since January 1994, Dr. Cadman
has been Senior Vice President of Medical Affairs and Chief of Staff at Yale New
Haven Hospital, where he was Chief of the Medical Service from 1987 through
December 1993. Since 1987, Dr. Cadman has also been Professor of Medicine at
Yale University, where he was Chairman of the Department of Medicine from 1987
through December 1993. Prior to these positions, he was Director of the Cancer
Research Institute at the University of California, San Francisco. Dr. Cadman
also currently serves as a director of CytoTherapeutics, Inc., a biotechnology
company.

Rolf H. Henel joined the Company as a director in July 1997. Mr. Henel has
been a partner at Naimark & Associates, Inc., a health care consulting firm,
since September 1993. Mr. Henel has been Executive Director of Performance
Effectiveness Corporation, Inc., a pharmaceutical consulting and education
company, since April 1993. From 1978 to 1993, Mr. Henel was with Cyanamid, a
chemical company, most recently as President of Cyanamid International Lederele
Division. Mr. Henel is also a director of Penwest Pharmaceuticals.

Directors serve one year terms or until their successors are elected and
qualified. Executive officers serve at the discretion of the Board of Directors.

There are no family relationships among any of the directors or executive
officers of the Company.

26
<PAGE>

PLAN OF DISTRIBUTION

The Shares are being offered for sale by the Company on a best efforts
basis principally to selected institutional investors. EVEREN Securities, Inc.
(the "Placement Agent") has been retained, pursuant to a placement agency
agreement, to act as the exclusive agent for the Company in connection with the
arrangement of such offers and sales on a best efforts basis.

The Placement Agent is not obligated to and does not intend to itself take
(or purchase) any of the Shares. It is anticipated that the Placement Agent will
obtain indications of interest from potential investors for the amount of the
offering and that effectiveness of the Registration Statement will not be
requested and no investor funds will be accepted until indications of interest
have been received for all of the Shares. Confirmations and definitive
prospectuses will be distributed to all investors at the time of pricing,
informing investors of the closing date, which will be scheduled for three
business days after pricing. No investor funds will be accepted prior to
effectiveness of the Registration Statement. After the Registration Statement is
declared effective and prior to the closing date, all investor funds will be
placed promptly, and in any event no later than noon Pacific Standard Time of
the next business day following receipt, in escrow with the Escrow Agent in an
escrow account established for the benefit of the investors. The Escrow Agent
will invest such funds in accordance with Rule 15c2-4 promulgated under the
Exchange Act. Prior to the closing date, the Escrow Agent will advise the
Company whether the investors have deposited the requisite funds in the escrow
account at the Escrow Agent. If the requisite funds have been deposited, the
Company will deposit with The Depository Trust Company the Shares to be credited
to the respective accounts of the investors. Investor funds, together with
interest thereon, if any, will be collected by the Company through the
facilities of the Escrow Agent on the scheduled closing date. The offering will
not continue after the closing date. In the event that investor funds are not
received, all funds deposited in the escrow account will promptly be returned in
the full amount necessary to satisfy the requirements of the offering.

The Company has agreed (i) to pay the Placement Agent ___% of the proceeds
of the offering as the selling commission, (ii) to indemnify the Placement Agent
against certain liabilities, including liabilities under the Securities Act, and
(iii) to reimburse the Placement Agent up to $__________ for certain of its
out-of-pocket expenses in connection with the offering.

The Placement Agent has provided, and may provide in the future,
investment banking and/or other advisory services to the Company for which it
received customary compensation.

LEGAL MATTERS

The validity of the Shares offered hereby will be passed upon for the
Company by Gray Cary Ware & Freidenrich, A Professional Corporation, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the Placement Agent by Stroock & Stroock & Lavan LLP, New York,
New York.

EXPERTS

The consolidated financial statements of SciClone Pharmaceuticals, Inc. at
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, incorporated by reference into this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.

27
<PAGE>

======================================================= ====================================================

<S> <C>
No dealer, salesperson or other person has been
authorized to give any information or to make any
representations other than those contained in this
Prospectus, and, if given or made, such information or
representation must not be relied upon as having been 1,500,000 Shares
authorized by the Company, the Placement Agent or any
other person. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any SciClone Pharmaceuticals, Inc.
security other than the Shares of Common Stock offered
hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any of the securities
offered hereby to any person in any jurisdiction in
which it is unlawful to make such offer or
solicitation to such person. Neither the delivery of
this Prospectus nor any sale made hereunder shall
under any circumstances create an implication that the
information contained herein is correct as of any date
subsequent to the date hereof.

---------------------------------

TABLE OF CONTENTS Common Stock
Page
---- ---------------------------------
Available Information........................... 3
Incorporation of Certain Documents by
Reference....................................... 3 PROSPECTUS
Prospectus Summary.............................. 4
Risk Factors.................................... 7
Use of Proceeds................................. 12
Dilution........................................ 13
Capitalization.................................. 14
Price Range of Common Stock..................... 15
Business........................................ 16 EVEREN Securities, Inc.
Recent Developments............................. 24
Management...................................... 25
Plan of Distribution............................ 27
Legal Matters................................... 27
Experts......................................... 27

_____________, 1997

======================================================= ====================================================
</TABLE>

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
Placement Agent's fee. All amounts shown are estimates except the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.

Item Amount
- ---- ------
Securities and Exchange Commission registration fee......... $ 2,814
NASD filing fee............................................. 1,429
Nasdaq National Market listing fee.......................... 17,500
Blue sky qualification fees and expenses.................... 3,000
Accounting fees and expenses................................ 20,000
Legal fees and expenses..................................... 160,000
Printing and engraving expenses............................. 10,000
Transfer agent and registrar fees........................... 2,000
Miscellaneous expenses...................................... 8,257
--------------
Total.............................................. $ 225,000
==============

Item 15. Indemnification of Directors and Officers

The Company's Restated Articles of Incorporation, as amended, provide that
the liability of the directors for monetary damages shall be eliminated to the
fullest extent permissible under California law. Pursuant to California law, the
Company's directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty of care to the Company and its shareholders. However,
this provision in the Restated Articles of Incorporation does not eliminate the
duty of care, and in appropriate circumstances equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available under
California law. In addition, each director will continue to be subject to
liability (i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law, (ii) for acts or omissions that a
director believes to be contrary to the best interests of the Company or its
shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show a reckless disregard for
the director's duty to the Company or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of
performing a director's duties, of a risk of serious injury to the Company or
its shareholders, (v) for acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
Company or its shareholders, (vi) for any transaction that constitutes an
illegal distribution or dividend under California law, and (vii) for any
transaction involving an unlawful conflict of interest between the director and
the Company under California law. The provision also does not affect a
director's responsibilities under any other law, such as the federal securities
laws or state or federal environmental laws.

In addition, the Company's Restated Articles of Incorporation, as amended,
provide that the Company is authorized to provide indemnification of agents (as
defined under California law) for breach of duty to the Company and its
shareholders through bylaw provisions, agreements with the agents, vote of
shareholders or disinterested directors or otherwise, in excess of the
indemnification otherwise permitted by California law, subject to the limits on
such excess indemnification set forth in California law.

The Company's Bylaws provide that the Company will indemnify its directors
and officers to the maximum extent and in the manner permitted by California law
and may indemnify its employees and other agents to the maximum extent and in
the manner permitted by California law. Such indemnification is intended to
provide the

II-1
<PAGE>

full flexibility available under California law and may, under certain
circumstances, include indemnification for negligence, gross negligence and
certain types of recklessness. Under California law and the Company's Bylaws,
the Company will be permitted to indemnify its directors, officers, employees
and other agents, within the limits established by law and public policy,
pursuant to an express contract, bylaw provision, shareholder vote or otherwise,
any or all of which could provide indemnification rights broader than those
expressly available under California law. The Company has entered into
agreements with its directors and certain of its officers, including all of its
executive officers, that require the Company to indemnify such persons against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
an officer of the Company or any of its affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Company and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.

The form of Placement Agent Agreement filed as Exhibit 1.1 hereto sets
forth certain provisions with respect to the indemnification of certain
controlling persons, directors and officers against certain losses and
liabilities, including certain liabilities under the Securities Act.

Item 16. Exhibits

See Exhibit Index.

Item 17. Undertakings

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant, pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned Registrant undertakes that:

(1) For purposes of determining any liability under the Securities act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 4340A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) of (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-2
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Mateo, State of California, on the 24th day of
October, 1997.

SCICLONE PHARMACEUTICALS, INC.

By: /s/ DONALD R. SELLERS
-------------------------------------
Donald R. Sellers
President and Chief Executive Officer
(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Donald R. Sellers and Mark A. Culhane, or
either of them, as his attorney-in-fact, each with full power of substitution
for him in any and all capacities, to sign any and all amendments to this
registration statement, including, but not limited to, post-effective amendments
and any and all new registration statements filed pursuant to Rule 462 under the
Securities Act of 1933 in connection with or related to the offering
contemplated by this registration statement, as amended, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each said attorney-in-fact or his substitute or substitutes may do or cause to
be done by virtue hereof.
<TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<CAPTION>

Signature Title Date
- --------- ----- ----

<S> <C> <C>
/s/ DONALD R. SELLERS President, Chief Executive Officer, October 24, 1997
- ------------------------------------ and Director (Principal Executive Officer)
Donald R. Sellers

/s/ MARK A CULHANE Vice President, Finance and October 24, 1997
- ------------------------------------ Administration, Chief Financial Officer
Mark A. Culhane and Secretary
(Principal Financial and Accounting Officer)

/s/ JERE E. GOYAN Chairman of the Board and Director October 24, 1997
- ------------------------------------
Jere E. Goyan, Ph.D

/s/ JOHN D. BAXTER Director October 24, 1997
- ------------------------------------
John D. Baxter, M.D.

/s/ EDWIN C. CADMAN Director October 24, 1997
- ------------------------------------
Edwin C. Cadman, M.D.

/s/ ROLF H. HENEL Director October 24, 1997
- ------------------------------------
Rolf H. Henel
</TABLE>

<PAGE>
EXHIBIT INDEX

Exhibit Number
Description of Document

1.1* Form of Placement Agency Agreement between EVEREN Securities,
Inc. and the Company.

4.1 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).

5.1 Opinion of Gray Cary Ware & Freidenrich.

10.1 Purchase and Sale, Pledge and Security Agreement; Release dated
as of July 23, 1997 by Thomas Moore, in favor of SciClone
Pharmaceuticals, Inc.

10.2* Form of Escrow Agreement among the Company, the Placement Agent
and the Escrow Agent (included in Exhibit 1.1)

23.1 Consent of Ernst & Young LLP.

23.2 Consent of Gray Cary Ware & Freidenrich (included in Exhibit
5.1).

24.1 Power of Attorney (see page II-3).

- -----------------------
* To be filed by amendment.

II-4

EXHIBIT 5.1

GRAY CARY WARE & FREIDENRICH
A Professional Corporation

ATTORNEYS AT LAW
400 HAMILTON AVENUE
PALO ALTO, CA 94301-1825
TEL: (415) 328-6561
FAX: (415) 327-3699

http://www.gcwf.com OUR FILE NO:
1010646-900000

October 24, 1997

Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: SciClone Pharmaceuticals, Inc.
Registration Statement on Form S-3

Ladies and Gentlemen:

As legal counsel for SciClone Pharmaceuticals, Inc., a California
corporation (the "Company"), we are rendering this opinion in connection with
the registration under the Securities Act of 1933, as amended, of up to
1,500,000 shares of the Company's Common Stock, without par value (the
"Shares").

We have examined all instruments, documents and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.

We are admitted to practice only in the State of California and we
express no opinion concerning any law other than the law of the State of
California and the federal law of the United States.

Based on such examination, we are of the opinion that the Shares are
duly authorized shares of the Company's Common Stock and, when issued against
payment of the purchase price therefor, will be validly issued, fully paid and
non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement referred to above and the use of our name wherever it
appears in said Registration Statement.

Respectfully submitted,

/s/ Gray Cary Ware & Freidenrich

GRAY CARY WARE & FREIDENRICH
A Professional Corporation

SAN DIEGO _ SAN DIEGO/GOLDEN TRIANGLE _ PALO ALTO _ LA JOLLA _ SAN JOSE _
IMPERIAL VALLEYMEXICO CITY _ TIJUANA

DRAFT

PURCHASE AND SALE,

PLEDGE AND SECURITY AGREEMENT; RELEASE

THIS PURCHASE AND SALE PLEDGE AND SECURITY AGREEMENT (this "Agreement")
is made as of July 23, 1997, by Thomas Moore, an individual ("Pledgor"), in
favor of SciClone Pharmaceuticals, Inc., a California corporation ("Pledgee").

RECITALS

WHEREAS, Pledgor has borrowed from Pledgee, and Pledgee has loaned to
Pledgor, the principal sum of Two Million Eight Hundred Thousand Dollars
($2,800,000) pursuant to that certain $2,800,000 Promissory Note dated as of
July 10, 1997, made by Pledgor in favor of Pledgee (the "Unsecured Note");

WHEREAS, various disputes have arisen between the parties which the
parties wish to resolve and to terminate any prior agreements relating to the
subject matter hereof;

WHEREAS, Pledgor has agreed to borrow from Pledgee, and Pledgee has
agreed to loan to Pledgor, up to an additional Three Million One Hundred
Forty-Four Thousand Dollars ($3,144,000) (the "Additional Loan Amount"), to be
aggregated with the existing indebtedness (including accrued and unpaid
interest) under the Unsecured Note (which shall be superseded and canceled upon
the execution hereof) and evidenced by that certain $5,944,000 Secured
Promissory Note dated of even date herewith and made by Pledgor in favor of
Pledgee (the "Secured Note");

WHEREAS, Pledgee, as a condition to issuing the Secured Note, is
requiring Pledgor to pledge, as security for Pledgor's obligations under the
Secured Note, One Million Eight Hundred Eighty-Two Thousand Five Hundred
(1,882,500) shares of common stock of Pledgee (the "Pledged Shares");

WHEREAS, Pledgor is willing to so pledge the Pledged Shares, and
Pledgee is willing to issue the Secured Note, all according to the terms and
subject to the conditions of this Agreement and the Secured Note.

WHEREAS, the parties intend by execution hereof to resolve a variety of
issues and claims including, in addition to securing the Secured Note, providing
for the purchase and sale of stock on reasonable terms, and the consideration
provided herein has been highly negotiated by the parties to ensure that
appropriate benefit is accorded for the stock purchase and mutual release
covenants.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Pledgor and
Pledgee hereby agree as follows:

1. Pledge of Collateral; Payment of Loan Amounts.

(a) Pledgor hereby pledges, assigns and delivers to Pledgee and grants
to Pledgee a security interest in the Pledged Shares, together with any stock
rights, rights to subscribe, dividends paid in cash or other property in
connection with the complete or partial liquidation of Pledgee, stock dividends,
dividends paid in stock, new securities or other property except cash dividends
other than liquidating dividends to which the Pledgor is or may hereafter become
entitled to receive on account of Pledgor's ownership of such shares (the
"Pledged Collateral") as security for the prompt performance of all Pledgor's
obligations under the Secured Note.

(b) Pledgee hereby agrees as follows:

i. Upon the execution and delivery of this Agreement by
Pledgee and Pledgor, the execution and delivery by Pledgor of the Secured Note
and the execution and delivery by the Pledgor and, where applicable, the
Pledgee, of the letters of instruction attached hereto as Annex A, it will
cancel and deliver to the Pledgor the Unsecured Promissory Note;

ii. Upon receipt of letters of confirmation from Smith Barney
and Goldman Sachs of receipt of letters of instruction sent to them by the
Pledgor instructing them to deliver certain of the Shares held by them for the
account of Pledgor to Pledgee upon receipt of funds from Pledgee, Pledgee will
pay up to Five Hundred Sixty-Five Thousand Dollars ($565,000) of the Additional
Loan Amount to Smith Barney and will pay up to Two Hundred Ninety Thousand
Dollars ($290,000) of the Additional Loan Amount shall be paid to Goldman Sachs,
as necessary to pay the total outstanding loan balance in margin accounts
maintained at Smith Barney and Goldman Sachs on behalf of the Pledgor;

iii. Upon receipt from Pledgor or his agents of stock
certificates evidencing the Pledged Shares (other than those Pledged Shares held
by Smith Barney and Goldman Sachs), and five (5) executed but undated stock
assignments separate from certificate substantially in the form attached hereto
as Exhibit 1, the Pledgee will pay the remainder of the Additional Loan Payment
as follows:

a) One Hundred Sixty Thousand Dollars ($160,000) representing
satisfaction of outstanding indebtedness owed to the Pledgor by the Pledgee
shall be retained by the Pledgee;

b) The remainder of the Additional Loan Payment shall be paid to the
Pledgor

(c) In the event that Pledgor receives any of the property described in
paragraph (a) of this Section 1 on account of Pledgor's ownership of the Pledged
Collateral after the date hereof, Pledgor will immediately deliver such property
to Pledgee in the manner set forth in paragraph (b) of this Section 1.

2. Representations, Warranties and Covenants. Pledgor represents and warrants
to, and covenants with, Pledgee during the term hereof that:

(a) The Pledged Collateral is owned by Pledgor free and clear of any
security interests, liens, encumbrances, options or other restrictions other
than those set forth in this Agreement and the Secured Note;

(b) Pledgor has full power and authority to create a lien on the
Pledged Collateral in favor of Pledgee and no disability or contractual
obligation exists that would prohibit Pledgor from pledging the Pledged
Collateral pursuant to this Agreement, and Pledgor will not assign, create or
permit to exist any other claim to, lien or encumbrance upon, or security
interest in any of the Pledged Collateral;

(c) Pledgor shall, immediately upon Pledgee's request, execute and
deliver such further instruments and documents, and take all such other actions,
as Pledgee deems reasonably necessary or desirable to further evidence and
perfect this pledge and grant of security; and

(d) The Pledged Collateral is not the subject of any present or
threatened suit, action, arbitration, administrative or other proceeding, and
Pledgor knows of no reasonable grounds for the institution of any such
proceedings.

All the above representations and warranties shall survive the date of
this Agreement.

3. Conditions to Obligations of Pledgee. The obligation of the Pledgee to
consummate the transactions contemplated herein is subject to the
fulfillment of the following condition: the Board of Directors of the
Pledgee shall have approved the consummation of the Transactions.

4. Covenants of Pledgor. Pledgor hereby covenants and agrees that he will not
enter into any additional margin, hedging or similar transaction including
shares of Common Stock of the Pledgee for a period of ninety (90) days from
the date hereof, other than the pledging of securities, if required, as
additional collateral for principal outstanding on the date hereof owed to
Wells Fargo Bank.

5. Covenants of Pledgee. Pledgee hereby covenants and agrees that it will
review written records submitted by the Pledgor of expenses incurred by the
Pledgor on behalf of the Pledgee and that it will do so in an expeditious
fashion and will repay all reasonable and bona fide expenses as the Pledgor
can reasonably documents based upon such records as the Pledgor submits.

6. Right of Repurchase; Full or Partial Cancellation of Secured Note Upon
Repurchase.

(a) At any time [six months] after the date of this Agreement,
immediately prior to the consummation of any offering by Pledgee of shares of
its Common Stock (whether in a registered public offering or in a private
placement) (an "Offering"), the Pledgee shall have the right to repurchase up to
that number of Pledged Shares (but in no event more than (a) the number of
Pledged Shares or (b) than a number of Pledged Shares equal to one-half the
number of shares to be sold in such Offering) as determined by a fraction, the
numerator of which shall be equal to the amount of principal and accrued and
unpaid interest due under the Secured Note as of the date of repurchase, and the
denominator of which (the "Share Repurchase Price") shall be calculated pursuant
to the following formula:

S = Z - .5D - .15Z

Where:

S = the Share Repurchase Price;

Z = the price per share at which Common Stock of the Pledgee is
sold in the Offering;

D = the greater of (i) zero, or (ii) Z - $12.

(b) Upon Pledgee's exercise of its right of repurchase under subsection
(a) hereof, and without any further action on the part of the parties hereto,
there shall be a cancellation of all or a portion of the amount of principal and
accrued and unpaid interest due under the Secured Note, in an amount equal to
the number of shares of Pledged Stock repurchased pursuant to subsection (a)
hereof (the "Repurchased Shares") multiplied by the Share Repurchase Price. Such
amounts shall be applied first to accrued and unpaid interest under the Secured
Note and then to principal. Further, Pledgee shall be entitled to cancel a
number of shares equal to the pro rata portion of the expenses associated with
the Offering allocable to the Repurchased Shares divided by the Share Repurchase
Price. If in any circumstance there are proceeds remaining after application as
provided above, such proceeds shall be returned to Pledgor.

(d) If Pledgor repays the Secured Note in whole or in part, then upon
each such repayment, Pledgee is authorized to deliver to itself for cancellation
that number of Pledged Shares, determined as follows:

P = principal paid x .025

where

P = the number of Pledged Shares to be cancelled by Pledgee

Upon any such repayment Pledgee shall release to Pledgor a number of Pledged
Shares (the "Released Shares"), determined as follows:

Released Shares = Principal Paid x 1,882,500 - P
5,994,000
Where: P is determined as above

Principal Paid = the amount of the principal on the Note repayed in
such payment.

7. Release.

(a) In exchange for the benefits provided hereunder, Pledgor and
Pledgee hereby release each other and their respective members, directors,
officers, employees, agents, attorneys, legal successors and assigns of and from
any and all claims, actions and causes of action, whether now known or unknown,
which either now has, or at any other time had, or shall or may have against the
other based upon or arising out of any matter, cause, fact, thing, act or
omission whatsoever occurring or existing at any time to and including the date
hereof, including, but not limited to, breach of contract, tort claims of any
type or wrongful termination (the "Released Matters") with the exception of the
following claims: those arising under this Agreement or referred to herein,
including Section 5 hereof, and those relating to repayment of outstanding
debts.

(b) It is the intention of the parties in executing this Agreement, and
in giving and receiving the consideration called for by this Agreement, that
this Agreement shall be effective as a full and final accord and satisfaction
and mutual general release of and from all of the Released Matters.

(c) In furtherance of the intentions set forth herein, each of the
parties hereto acknowledges that it is familiar with Section 1542 of the Civil
Code of the State of California, which provides as follows:

"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor."

(d) Each of the parties hereto waives and relinquishes any right or
benefit which it has or may have under Section 1542 of the Civil Code of the
State of California or any similar provision of the statutory or nonstatutory
law of any other jurisdiction, to the full extent that it may lawfully waive all
such rights and benefits pertaining to the subject matter of this Agreement. In
connection with such waiver and relinquishment, each of the parties hereto
acknowledges that it is aware that it or its attorneys or accountants may
hereafter discover claims or facts in addition to or different from those which
it now knows or believes to exist with respect to the subject matter of this
Agreement or the other parties hereto, but that it is its intention hereby
fully, finally and forever to settle and release all of the Released Matters
which now exist, may exist or heretofore have existed between them, except as
otherwise expressly provided. In furtherance of this intention, the releases
herein given shall be and remain in effect as full and complete mutual general
releases notwithstanding the discovery or existence of any such additional or
different claims or facts.

8. No Disparagement. Each party agrees not to make public disparaging remarks
regarding the other.

9. Authorization of Pledgee Action. Pledgor irrevocably authorizes and
empowers Pledgee, at any time and from time to time, without notice and at
Pledgor's expense, either in its own name or in Pledgor's name, to:

(a) collect by legal proceedings or otherwise all dividends (except
cash dividends other than liquidating dividends), interest, principal payments
and other sums now or hereafter payable upon or on account of the Pledged
Collateral;

(b) demand, collect, and receive payment of any and all monies or
proceeds represented by, or due with respect to, the Pledged Collateral;

(c) enter into any extension, reorganization, deposit, merger, or
consolidation agreement, or any agreement in any way relating to or affecting
the Pledged Collateral, and in connection therewith Pledgee may deposit or
surrender control of such Pledged Collateral thereunder, accept other property
in exchange for such Pledged Collateral and do and perform such acts and things
as it may deem proper, and any money or property received in exchange for such
Pledged Collateral shall be applied to the indebtedness under the Secured Note
or thereafter held by it Pledgee to the provisions hereof;

(d) insure, possess and preserve the Pledged Collateral;

(e) cause the Pledged Collateral to be transferred to its name or to
the name of its nominee;

(f) exercise as to such Pledged Collateral all the rights, powers, and
remedies of an owner, except that so long as the indebtedness due under the
Secured Note is not in default Pledgor shall retain all voting rights as to the
Pledged Collateral.

(g) deal in all respects with the Pledged Collateral as the holder
thereof, and Pledgor irrevocably constitutes and appoints Pledgee as its
attorney to do any and all things Pledgee deems necessary or desirable to effect
this Agreement and the Secured Note and the enforcement of Pledgee's rights and
remedies hereunder and thereunder.

10. Expenses. The prevailing party in any legal action hereunder shall be
entitled to a payment equal to its costs and expenses, including reasonable
attorneys' fees, incurred or paid in such an action or in exercising any
right, power or remedy conferred by this agreement, or in the enforcement
thereof.

11. Default. At the option of Pledgee and without necessity of demand or
notice, all or any part of the indebtedness due under the Secured Note
shall immediately become due and payable irrespective of any agreed
maturity, upon the happening of any of the following events:

(a) failure to keep or perform any of the terms or provisions of this
Agreement not cured within ten (10) days of written notice of such failure ;

(b) default in the payment of principal or interest under the Secured
Note when due if not cured within ten (10) days of notice of such default;

(d) the insolvency, commission of an act of bankruptcy, general
assignment for the benefit of creditors, filing of any petition in bankruptcy or
for relief under the provisions of Title 11, United States Code, Bankruptcy, of,
by or against Pledgor.

12. Foreclosure. In the event Pledgee forecloses hereunder, Pledgee shall be
entitled to the economic benefits of Section 6 if and to the extent the
fair market value of stock at the time is above $3.16.

13. Proceeds of Foreclosure. The proceeds of the sale of any of the Pledged
Collateral and all sums received or collected by Pledgee from or on account
of the Pledged Collateral shall first be applied by Pledgee to the payment
of expenses incurred or paid by Pledgee in connection with any sale,
transfer or delivery of the Pledged Collateral and to the payment of any
other costs, charges, attorneys' fees or expenses mentioned herein, and
then to the payment of the indebtedness under the Secured Note or any part
hereof. Thereafter, Pledgee shall pay any remaining balance to the Pledgor.

14. No Presentment, No Demands, etc. Pledgee shall be under no duty or
obligation whatsoever to make or give any presentations, demands for
performance, notices of non-performance, protests, notices of protest or
notices of dishonor in connection with the Secured Note or any other
obligations or evidences of indebtedness held by Pledgee as collateral, or
in connection with the Secured Note or any other any other obligations or
evidences of indebtedness which constitute in whole or in part the
indebtedness secured hereunder. The foregoing notwithstanding, the Pledgee
shall provide Pledgor with reasonable notice prior to commencing an
Offering as defined in Section 6(a).

15. Rights and Remedies Not Exclusive. The rights, powers and remedies given to
Pledgee by this Agreement shall be in addition to all rights, powers and
remedies given to Pledgee by virtue of any statute or rule of law. Pledgee
may exercise its Pledgee's lien or right of set off with respect to the
indebtedness due under the Secured Note in the same manner as if the
indebtedness due under the Secured Note were unsecured. Any forbearance or
failure or delay by Pledgee in exercising any right, power or remedy
hereunder shall not be deemed to be a waiver of such right, power or
remedy, and any single or partial exercise of any right, power or remedy
hereunder shall not preclude the further exercise thereof; and every right,
power and remedy of Pledgee shall continue in full force and effect until
such right, power or remedy is specifically waived by an instrument in
writing executed by Pledgee.

16. Notice. All notices, demands, requests and other written communications
hereunder shall be given to Pledgee and/or Pledgor by regular United States
mail, postage prepaid and addressed as follows:

If to Pledgee: SciClone Pharmaceuticals, Inc.
901 Mariners Island Boulevard
San Mateo, California 94404
Telephone: (415) 358-3456
Attn: Mark A. Culhane

If to
Pledgor: Thomas E. Moore
26201 Dori Lane
Los Altos Hills, California 94022
Telephone: (415) 949-3519

Any notice given in the manner aforesaid shall be deemed to have been served,
and shall be effective for all purposes hereof, on the earlier of the third day
following the day on which it is posted or the date of its receipt by the party
to be notified and to prove the service of any such notice it shall be
sufficient to prove that the same was properly address and posted as aforesaid
or actually received by any party to whom such notice was delivered in person.
Pledgor and Pledgee shall each have the right to change its address for the
purpose of this Agreement by giving at least three (3) days' written notice of
any such change to the other party hereto.

17. Governing Law. This Agreement shall be governed by the laws of the State of
California, without giving effect to conflicts of law principles.

18. Waiver of Jury Trial. PLEDGOR AND PLEDGEE EACH HEREBY WAIVE ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, SUIT OR
PROCEEDINGS (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (B)
IN ANY WAY CONNECTED WITH OR RELATED TO OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, THE
REIMBURSEMENT AGREEMENT, OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED
HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. PLEDGOR AND PLEDGEE HEREBY AGREE
AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, SUIT OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL, WITHOUT A JURY, AND THAT
EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

19. Miscellaneous.

(a) This Agreement may not be amended or modified except by a written
instrument signed by Pledgee and Pledgor.

(b) This Agreement constitutes the entire agreement between Pledgee and
Pledgor with respect to the subject matter hereof and supersede all prior
agreements, understandings, offers and negotiations, oral or written, including,
but not limited to, the Unsecured Note, that certain Agreement dated as of July
10, 1997 by and between the Seller and the Company, that certain Letter
Agreement regarding Registration Rights Agreement dated as of July 10, 1997 by
and between the Seller and the Company, all of which shall be terminated and be
of no further force and effect upon the satisfaction of the obligations of the
parties set forth in Section 1 of this Agreement.

(c) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one and the same document.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.

"PLEDGOR"

/s/ Thomas Moore
------------------------------
Thomas Moore

"PLEDGEE"

SCICLONE PHARMACEUTICALS, INC.

/s/ Mark A. Culhane
------------------------------
Mark A. Culhane
Chief Financial Officer

* The parties agree to review the tems above to ensure they are consistent and
accurate and to promptly agree in good faith upon any changes necessary for
accuracy or consistency.

EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of SciClone
Pharmaceuticals, Inc. for the registration of 1,500,000 shares of its common
stock and to the incorporation by reference therein of our report dated January
23, 1997, with respect to the consolidated financial statements of SciClone
Pharmaceuticals, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1996, filed with the Securities and Exchange Commission.

October 24, 1997
Palo Alto, California