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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-19825
SCICLONE PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 94-3116852
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
901 MARINERS ISLAND BOULEVARD,
SAN MATEO, CALIFORNIA 94404
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(650) 358-3456
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $72,992,432 as of March 27, 1998, based upon
the closing sale price of the Registrant's Common Stock on The Nasdaq National
Market on such date. Shares of Common Stock held by each executive officer and
director have been excluded from the calculation because such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of March 27, 1998, there were 17,348,108 shares of the Registrant's
Common Stock outstanding.
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The undersigned registrant hereby amends the following portions of its
Annual Report on Form 10-K for the year ended December 31, 1997, as set forth
on the pages attached hereto.
PART II
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Company is qualified by
reference to and should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this Annual Report on Form
10-K.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Product sales................... $ 2,223,052 $ 703,082 $ 273,353 $ -- $ --
Cost of product sales........... 989,792 740,494 737,460 -- --
------------ ------------ ------------ ------------ ------------
Gross margin.................... 1,233,260 (37,412) (464,107) -- --
Operating expenses:
Research and development...... 8,642,137 9,903,536 10,386,312 9,282,051 8,122,716
Special research and
development charges......... -- -- -- 3,470,000 --
Marketing..................... 4,144,499 4,240,208 4,323,327 4,375,447 1,771,985
General and administrative.... 3,662,441 3,182,972 2,903,991 3,810,696 2,895,513
------------ ------------ ------------ ------------ ------------
Total operating expenses........ 16,449,077 17,326,716 17,613,630 20,938,194 12,790,214
------------ ------------ ------------ ------------ ------------
Loss from operations............ (15,215,817) (17,364,128) (18,077,737) (20,938,194) (12,790,214)
Interest and investment income,
net........................... 1,218,812 2,618,381 3,302,307 3,056,869 1,111,183
------------ ------------ ------------ ------------ ------------
Net loss........................ $(13,997,005) $(14,745,747) $(14,775,430) $(17,881,325) $(11,679,131)
============ ============ ============ ============ ============
Basic net loss per share........ $ (0.85) $ (0.85) $ (0.88) $ (1.02) $ (0.89)
============ ============ ============ ============ ============
Weighted average shares used in
computing basic net loss per
share amounts................. 16,472,765 17,421,312 16,881,652 17,507,564 13,098,462
BALANCE SHEET DATA:
Cash, cash equivalents and
investments................... $ 12,900,465 $ 35,105,708 $ 47,389,827 $ 63,670,287 $ 45,284,254
Working capital................. 7,416,472 9,223,793 19,283,278 44,796,629 44,995,598
Total assets.................... 19,195,505 42,727,687 54,150,795 67,012,993 48,095,931
Total shareholders' equity...... 15,723,657 37,465,628 49,555,262 62,754,031 45,520,246
</TABLE>
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SCICLONE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIALS (CONTINUED)
NOTE 8 -- SHAREHOLDERS' EQUITY
Common Stock and Warrants
In January 1994, the Company sold 2,000,000 shares of common stock in an
underwritten public offering at $23.25 per share. The Company received
approximately $43,600,000 in net proceeds from the offering.
In conjunction with its initial public offering ("IPO"), the Company
granted its IPO investment banker warrants to purchase 300,000 shares of common
stock and 300,000 non-redeemable warrants. The warrants were exerciseable during
the four-year period ending March 16, 1997. The exercise price of the 300,000
shares of common stock was $6.00 per share and the non-redeemable warrants was
at $0.33 per warrant. The non-redeemable warrants were further exerciseable into
one common share at $15.55 per share. In March 1997, 164,995 warrants
exerciseable at $6.00 per share remained outstanding and were exercised by the
Company's IPO investment banker resulting in proceeds of approximately $990,000.
In exchange for exercising the outstanding warrants at $6.00 per share, the
Company lowered the exercise price of the non-redeemable warrants from $15.55
per share to $4.00 per share. In October 1997, 300,000 warrants were exercised
at $4.00 per share by the Company's IPO investment banker resulting in proceeds
of approximately $1,200,000.
In July 1997, the Company loaned to one of its former board members and
former executive officers $5.944 million secured by approximately 1.9 million
shares of the Company's common stock owned by this individual. The loan carries
interest at 7%. During the period this loan is outstanding and immediately prior
to the closing of any offering of the Company's common stock, the Company may
convert the loan in a non-cash exchange into this individual's SciClone common
stock by retiring his SciClone common stock at a fixed discount rate from the
offering price. To date, the Company has not retired any of this individual's
SciClone common stock. On December 31, 1997, the balance of the loan was $5.944
million and was classified as an offset to shareholders' equity.
Repurchase of Common Stock
In 1995 and 1994, the Company's Board of Directors authorized the
repurchase of up to 1.0 million and 1.5 million shares of the Company's common
stock, respectively. In the year ended December 31, 1997, 1996, and 1995, the
Company repurchased 684,500, 78,000, and 346,000 shares of its common stock for
an aggregate cost of $4,267,000, $659,000, and $1,925,000, respectively.
Stock Award Plans
In August 1991, the Board of Directors and shareholders of the Company
approved the 1991 Stock Plan (the "1991 Plan") and reserved 1,300,000 shares for
issuance thereunder. In May 1993, the Board of Directors and shareholders of the
Company approved a 2,150,000 share increase in the shares reserved under the
1991 Plan. The 1991 Plan permits the award of incentive or nonqualified stock
options and shares of common stock under restricted stock purchase agreements.
In January 1992, the Board of Directors and
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SCICLONE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIALS (CONTINUED)
shareholders of the Company approved the 1992 Stock Plan (the "1992 Plan") and
reserved 240,000 shares for issuance thereunder. The 1992 Plan permits the award
of incentive or nonqualified stock options which must be exercised in cash. In
June 1995, the Board of Directors and the shareholders of the Company approved
the 1995 Equity Incentive Plan (the "1995 Plan") and reserved 1,250,000 shares
for issuance thereunder. In May 1997, the Board of Directors and shareholders of
the Company approved an amendment to the 1995 Plan which increased by 750,000
the shares reserved for issuance thereunder. The 1995 Plan permits the award of
incentive or nonqualified stock options and shares of common stock under
restricted stock awards.
Under the 1991, 1992 and 1995 Plans, options are exercisable upon
conditions determined by the Board of Directors and expire ten years from the
date of grant. Options are generally granted at fair market value on the date of
grant and vest over time, generally four years.
In June 1995, the Board of Directors and the shareholders of the Company
approved the Nonemployee Director Stock Option Plan (the "Nonemployee Director
Plan") and reserved 250,000 shares for issuance thereunder. The Nonemployee
Director Plan automatically grants nonqualified stock options to nonemployee
directors upon their appointment or first election to the Company's Board of
Directors ("Initial Grant") and annually upon their reelection to the Board of
Directors at the Company's Annual Meeting of Shareholders ("Annual Grant"). The
options are granted at fair market value on the date of grant. Initial Grants
vest annually over a period of three years. Annual Grants vest monthly over a
period of one year.
In July 1996, the Board of Directors and shareholders of the Company
approved the 1996 Employee Stock Purchase Plan (the "ESPP") and reserved 500,000
shares for issuance thereunder. All full-time employees are eligible to
participate in the ESPP. Under the terms of the ESPP, employees can choose to
have up to 15% of their salary withheld to purchase the Company's common stock.
The purchase price of the stock is the lower of 85% of the fair market value as
of the first trading day of each quarterly participation period, or as of the
last trading day of each quarterly participation period. Under the ESPP, the
Company sold 20,432 and 5,675 shares to employees in 1997 and 1996,
respectively.
The following table summarizes the stock option activity under the 1991,
1992 and 1995 plans and the Nonemployee Director Plan:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES AVAILABLE SHARES UNDER EXERCISE PRICE OF
FOR GRANT OPTION SHARES UNDER PLAN
---------------- ------------ -----------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994.................. 801,212 2,225,337 $5.81
1995 Plan shares reserved................... 1,250,000 -- --
Nonemployee Director Plan shares reserved... 250,000 -- --
Options canceled............................ 63,963 (63,963) 5.93
Options granted............................. (436,500) 436,500 5.68
Options exercised........................... (66,477) 2.88
--------- ---------
BALANCE AT DECEMBER 31, 1995.................. 1,928,675 2,531,397 5.86
Options canceled............................ 107,357 (107,357) 7.97
Options granted............................. (901,850) 901,850 5.73
Options exercised........................... (799,625) 4.66
--------- ---------
BALANCE AT DECEMBER 31, 1996.................. 1,134,182 2,526,265 6.11
Additional 1995 Plan shares reserved........ 750,000 -- --
Options canceled............................ 232,595 (232,595) 7.03
Options granted............................. (775,300) 775,300 5.12
Options exercised........................... -- (10,236) 3.14
--------- ---------
BALANCE AT DECEMBER 31, 1997.................. 1,341,477 3,058,734 $5.80
========= =========
</TABLE>
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SCICLONE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIALS (CONTINUED)
NOTE 10 -- SUBSEQUENT EVENTS -- UNAUDITED
In March 1998, the Company received $754,000 from one of its executive
officers as a partial payment of a $1,000,000 loan. This payment reduced the
loan to $236,500 including accrued interest. (See "Note 1 -- Notes Receivable
from Officers.")
In April 1998, the Company sold 661,157 shares of Series C convertible
preferred stock at $6.05 per share and received approximately $4,000,000 from
the offering (before deducting expenses). The preferred stock is convertible
into common stock on a scheduled basis over the next five years at prices based
on the market price of the common stock during a pricing period preceding
conversion. In conjunction with the offering, the Company granted to the
investor warrants to purchase 100,000 shares of common stock. These warrants are
exercisable during the five year period ending March 2003 at an exercise price
of $5.67 per share. (See "Business -- Recent Developments.")
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SCICLONE PHARMACEUTICALS, INC.
/s/ DONALD R. SELLERS
By:
--------------------------------------
Donald R. Sellers,
Date: June 8, 1998 Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD R. SELLERS Chief Executive Officer, Director June 8, 1998
- --------------------------------------------- (Principal Executive Officer)
Donald R. Sellers
/s/ DIANE LEE* Director, Corporate Finance and June 8, 1998
- --------------------------------------------- Administration
Diane Lee (Principal Financial and
Accounting Officer)
/s/ JOHN D. BAXTER, M.D.* Director June 8, 1998
- ---------------------------------------------
(John D. Baxter, M.D.)
/s/ EDWIN C. CADMAN, M.D.* Director June 8, 1998
- ---------------------------------------------
(Edwin C. Cadman, M.D.)
/s/ JERE E. GOYAN, PH.D.* Director June 8, 1998
- ---------------------------------------------
(Jere E. Goyan, Ph.D.)
*By /s/ Donald R. Sellers
- ---------------------------------------------
Donald R. Sellers, Attorney-in-Fact
</TABLE>
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SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
SCICLONE PHARMACEUTICALS INC.
<TABLE>
<CAPTION>
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
----------- ------------ ---------- ---------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectable
accounts............................ $ 7,000 $43,000 $200,000(1) -- $250,000
Inventory Reserve..................... 174,888 -- 225,000(1) 74,888(2) 325,000
YEAR ENDED DECEMBER 31, 1996
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectable
accounts............................ -- 7,000 -- -- 7,000
Inventory Reserve..................... 114,753 60,135 -- -- 174,888
YEAR ENDED DECEMBER 31, 1995
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectable
accounts............................ -- -- -- -- --
Inventory Reserve..................... -- 14,753 100,000 -- 114,753
</TABLE>
- ---------------
(1) Transfer from General Reserve
(2) Adjustment to Reserve
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