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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998
REGISTRATION NO. 333-____________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-2
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, SUITE 205
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, SUITE 205
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.
Gray Cary Ware & Freidenrich LLP
139 Townsend Street, Suite 400
San Francisco, California 94107
(415) 836-2500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time as described in the Prospectus after the effective date of this
Registration Statement.
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, check the following box. [X]
If the registrant elects to deliver its latest annual report to
security holders, or a complete and legal facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [X]
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(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>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
Title of Each Class of AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
Securities to be Registered REGISTERED PER SHARE PRICE
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<S> <C> <C> <C> <C>
Common Stock (no par value) 2,500,000 shares(1) $2.875 (2) $7,187,500 $2,120.31
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Common Stock (no par value) 500,000 shares (3) $2.875 (2) $1,437,500 $ 424.06
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TOTAL 3,000,000 shares $8,625,000 $2,544.37
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</TABLE>
(1) Represents shares of common stock issuable pursuant to the terms of the
Structured Equity Line Flexible Financing Agreement (the "Equity
Line"), dated as of June 30, 1998, between SciClone Pharmaceuticals,
Inc. (the "Company") and the selling shareholder.
(2) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(c) of the 1933 Act and based on the average of the
high and low sales prices of the Common Stock of SciClone
Pharmaceuticals, Inc. reported on the Nasdaq National Market on July
29, 1998.
(3) Represents shares of common stock issuable upon exercise of
warrants issued or issuable to the selling shareholder in connection
with the Equity Line.
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 SUCH SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED ___________, 1998
3,000,000 SHARES
SCICLONE PHARMACEUTICALS, INC.
COMMON STOCK
This Prospectus relates to a maximum of 3,000,000 shares (the "Shares")
of common stock, no par value (the "Common Stock"), of SciClone Pharmaceuticals,
Inc., a California corporation ("SciClone" or the "Company"), consisting of (i)
up to 2,500,000 shares issuable from time to time, under certain circumstances,
to Cheyenne LLC, a New York limited liability company (the "Selling
Shareholder"), pursuant to the terms of the Structured Equity Line Flexible
Financing(SM) Agreement (the "Equity Line"), dated as of June 30, 1998, between
the Company and the Selling Shareholder and (ii) up to 500,000 shares of Common
Stock issuable upon exercise of certain warrants issued or issuable to the
Selling Shareholder pursuant to the Equity Line. See "The Company - Equity
Line."
The shares of Common Stock being registered hereby constitute 2,500,000
of the shares issuable by the Company pursuant to the Equity Line. As more fully
set forth herein, the Company may issue a significantly fewer number of Shares
and, in any event, may not issue more than $4.0 million of Common Stock in any
three-month investment period. Further, the Company may register additional
shares on a separate registration statement at a future date if it determines
that it might sell additional shares under the Equity Line. See "The Company
Equity Line."
The Shares may be offered from time to time by the Selling Shareholder
after the date of this Prospectus. The Company will receive the proceeds
from the sale and issuance of the Shares, if any, to the Selling Shareholder
pursuant to the Equity Line and upon exercise of the warrants but will not
receive any proceeds from the sale of the Shares by the Selling Shareholder.
There can be no assurance, however, that any Shares will be issued under the
Equity Line or that any warrants will be exercised. See "Use of Proceeds." The
Company will pay all expenses in connection with the registration and sale of
the Shares, except that the Selling Shareholder will pay any commissions,
discounts or other fees payable to brokers and dealers in connection with any
such sale.
The Selling Shareholder has not advised the Company of any specific
plans for the distribution of the Shares other than as described herein, but it
is anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on The Nasdaq Stock Market
at the market price prevailing at the time of sale, although sales may also be
made in negotiated transactions with institutional investors or otherwise. There
can be no assurances that any of the Shares will be sold. See "Plan of
Distribution."
The Selling Shareholder may be deemed to be an "Underwriter" as defined
in the Securities Act of 1933 (the "Securities Act"). If any broker-dealers are
used to effect sales, any commissions paid to such broker-dealers and, if
broker-dealers purchase any of the Shares as principals, any profits received by
such broker-dealers on the resale of the Shares, may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Shareholder may be deemed to be underwriting
commissions.
The Common Stock currently is traded on The Nasdaq National Market
under the symbol "SCLN." On July 30, 1998, the last sale price of the Common
Stock, as reported by The Nasdaq National Market, was $3.00 per share.
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SEE "RISK FACTORS" BEGINNING ON PAGE 4
FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS
OF THE SHARES OFFERED HEREBY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------------------------
The date of this Prospectus is ____________, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements (if required) and other
information with the Commission. The reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Regional Offices of the Commission located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60611 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. 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 National Association of
Securities Dealers, Inc., Market Listing Section, 1735 K Street, N.W.,
Washington, D.C. 20006. Such reports and other information may also be inspected
without charge at a Web site maintained by the Commission. The address of the
site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company
pursuant to the Exchange Act are incorporated herein by reference:
1. Report on Form 8-K filed with the Commission on July 23, 1998;
2. Quarterly Report on Form 10-Q for the period ended March 31,
1998, filed with the Commission on May 14, 1998;
3. The definitive Proxy Statement for the Company's 1998 Annual
Meeting of Shareholders filed with the Commission on April 30,
1998;
4. Annual Report on Form 10-K for the year ended December 31,
1997, filed with the Commission on April 2, 1998;
5. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed under the
Exchange Act, including any amendment or report filed for the
purpose of updating such description.
Any statement contained in a document incorporated by reference or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement. The Company will provide without charge to each person
to whom this Registration Statement is delivered, upon written or oral request,
a copy of any or all of the foregoing documents incorporated by reference in
this Registration Statement (other than any exhibits thereto). Requests for such
documents should be directed to SciClone Pharmaceuticals, Inc. at 901 Mariners
Island Boulevard, Suite 205, San Mateo, California 94404 (telephone number (650)
358-3456), Attn.: Investor Relations.
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act and the Company has attempted to identify such statements with an asterisk
("*"). Actual results could differ materially from those projected in these
forward-looking statements as a result of a variety of factors, including those
set forth below and elsewhere in this Prospectus.
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RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree
of risk and the Common Stock should not be purchased by persons who cannot
afford the loss of their entire investment. Purchasers should carefully consider
the following risk factors in conjunction with the other information included
and incorporated by reference in this Prospectus before purchasing or otherwise
acquiring the Common Stock offered hereby.
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act and the Company has attempted to identify such statements with an asterisk
("*"). Actual results could differ materially from those projected in these
forward-looking statements as a result of a variety of factors, including those
set forth below and elsewhere in this Prospectus.
DEPENDENCE ON ZADAXIN(R) AND CPX. The Company's principal drug
development efforts are currently focused on ZADAXIN and CPX. Clinical trials
of ZADAXIN 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 major pharmaceutical markets. Sales of ZADAXIN
commenced in 1997 but are not material at this time. While ZADAXIN has been
approved for commercial sale for treatment of hepatitis B in the People's
Republic of China, Kuwait, Peru, 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 hepatitis C or cancer, in
a timely fashion or at all. The Company's launch of ZADAXIN in the People's
Republic of 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. The Company has not yet
launched ZADAXIN in Argentina, Italy, Kuwait or Peru and no assurance can be
given that future launch of ZADAXIN will prove successful in these countries or
in any additional countries. Future sales of ZADAXIN will depend on market
acceptance and successful distribution. In particular, although the People's
Republic of China has the highest hepatitis B prevalence rate in the world, the
low average income and poorly developed distribution infrastructure present
ongoing challenges to successful commercialization of ZADAXIN in that 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,
obtain additional marketing approvals or commercialize the drug successfully
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
trial will provide statistically significant evidence of the efficacy of CPX in
treating CF. A failure to demonstrate the safety and efficacy of CPX in a CF
clinical trial, obtain regulatory approval of CPX for CF or successfully
commercialize CPX would have a material adverse effect on the Company.
NO HISTORY OF SIGNIFICANT REVENUES; CONTINUING OPERATING LOSSES. The
Company has only recently generated revenues from the commercialization of its
lead product, ZADAXIN, and there is substantial uncertainty regarding the timing
and amount of any future revenues and whether such future revenues will be
material. 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 commercialized successfully. The Company has experienced significant
operating losses since its inception and has a substantial accumulated deficit.
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 market for ZADAXIN in
Asia, Latin America and the Middle East, obtaining additional regulatory
approvals for ZADAXIN and/or future products, entering into a corporate
partnering arrangement for phase 3 development of the combination of ZADAXIN
plus interferon for hepatitis C in the U.S. and Europe, entering into other
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.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING. Since
inception, the Company has financed its operations primarily through sales of
equity securities. The Company will need to obtain additional financing through
sales of equity securities to support its long-term product development and
commercialization
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programs. The Company believes its existing capital resources and interest on
funds available are adequate to maintain its current and planned operations at
least through June 1999.* The Company is considering corporate partnering and
other opportunities to increase its capital resources. However, the Company's
future capital requirements will depend on many factors, including the level of
ZADAXIN product sales, the availability of complementary products, technologies
and businesses, the initiation of preclinical and clinical trials and testing,
the timing and cost of regulatory approvals, patent costs, competing
technological and market developments, the nature of existing and future
collaborative relationships, and the Company's ability to establish development,
sales, manufacturing and marketing arrangements. The Company continues to pursue
corporate partnering and public and private financing alternatives. If
additional funds are raised by the Company through the issuance of equity
securities or securities convertible into or exercisable for equity securities,
the percentage ownership of the then current shareholders of the Company will be
reduced. The Company may issue a series of Preferred Stock with rights,
preferences and privileges senior to those of the Company's Common Stock. There
can be no assurance that such financing will be available on acceptable terms or
a timely basis, if at all. The unavailability or timing of financing could
prevent or delay the Company's long-term product development and
commercialization programs and may require curtailment of operations of the
Company.
DILUTION; SHARES ELIGIBLE FOR FUTURE SALE. Pursuant to the Equity Line,
the Company may issue to the Selling Shareholder up to $4.0 million of Common
Stock during each Investment Period (or $32 million in the aggregate) at a price
equal to 97% of the lowest reported sale price during the four days immediately
preceding the notice of purchase delivered by the Selling Shareholder to the
Company. Issuances, if any, of Common Stock pursuant to the Equity Line would
have a dilutive effect on existing holders of Common Stock. In connection with
the Equity Line, the Company also issued to the Selling Shareholder the Warrant
to purchase 200,000 shares of Common Stock at $5.53 per share and may issue the
Additional Warrants to purchase up to an additional 300,000 shares of Common
Stock at a price equal to 150% of the weighted average purchase price of the
Common Stock purchased during the year with respect to which the Additional
Warrant is issued. See "The Company - Equity Line." The resale by the Selling
Shareholder of the Common Stock that it acquires could depress the market price
of the Common Stock. Moreover, as all the shares to be issued pursuant to the
Equity Line as well as the shares issuable upon exercise of the Warrant and the
Additional Warrants, if any, will be available for immediate resale, the
prospects of such sales could further adversely affect the market price for the
Common Stock. The Company recently issued shares of Series C Preferred Stock
(the "Series C Shares") in a private placement with proceeds of $4,000,000
(before deducting offering expenses). Under certain conditions, each Series C
Share may convert into substantially more than one share of the Company's Common
Stock. If such events were to occur, the conversion of the Series C Shares would
have a dilutive effect on the common shareholders.
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, CPX and certain other drugs but is only
actively pursuing clinical 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 develop and market ZADAXIN in Japan to SPKK. SPKK has a substantial
commitment to alpha interferon, which is an approved therapy for hepatitis B and
hepatitis C in Japan. There can be no assurance that the relationship 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.
FOREIGN SALES AND OPERATIONS. The Company's financial condition in the
near term will be highly dependent on ZADAXIN 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
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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
the People's Republic of China where the Company's accounts receivable
collection terms are typically 180 days. Such collections are now being paid on
time, however, these payments may slow in the future.
PATENTS AND PROPRIETARY RIGHTS. The U.S. and most European composition
of matter patents for thymosin alpha 1 have expired. The Company will in the
future have only limited composition of matter patents for thymosin alpha 1 or
other products and this could adversely affect the Company's proprietary rights.
However, the Company owns or has exclusive licenses for use and/or process
patents or patent applications in the U.S., Europe, Japan and other
jurisdictions for thymosin alpha 1, and for CPX in the U.S. and will seek to
protect such products from competition through such patent protection and
through other means. 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.
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
and clinical development, manufacturing, marketing and sales of pharmaceuticals,
including ZADAXIN, CPX and the Company's other drug candidates, 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
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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 the Company's development
programs also 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 U.S. or foreign
regulatory requirements can, among other things, result in Warning Letters,
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 1 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 vialing
and packaging supply agreements in effect and has a sufficient supply of
finished thymosin alpha 1 for the near term. 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.
MARKETING AND SALES. The Company has established distribution
arrangements with local pharmaceutical distribution companies covering 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.
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, regulatory, 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, price 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 successfully to 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
markets and sells or intends to market and sell 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.
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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.
PREFERRED STOCK. The Company's Board of Directors has the authority to
issue additional series of 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.
In connection with the issuance of the Series C Shares, the Company
recognized a deemed dividend in the amount of $3,143,000 in the second quarter
ended June 30, 1998. This amount increased the net loss and net loss per share
applicable to common shareholders and was calculated as required by the SEC.
THE COMPANY
This Prospectus is accompanied by a copy of the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 and the Quarterly Report on
Form 10-Q for the most recent fiscal quarter after the year ended December 31,
1997.
GENERAL
SciClone Pharmaceuticals, Inc. ("SciClone" or the "Company") is a
global biopharmaceutical company that acquires, develops, and commercializes
specialist-oriented drugs for treating chronic and life-threatening diseases
such as hepatitis B, hepatitis C, cancer, immune system disorders and cystic
fibrosis. SciClone has two drugs in clinical development, ZADAXIN(R) thymosin
alpha 1 and CPX, and has other drug candidates in preclinical development.
ZADAXIN thymosin alpha 1, an immunomodulator (i.e., an immune system
regulator), is the Company's lead drug, targeting hepatitis B, hepatitis C,
cancer, viral vaccine enhancement and certain immune system disorders. ZADAXIN
is approved and marketed in the People's Republic of China, the Philippines and
Singapore for treatment of hepatitis B, one of the most common chronic
infectious diseases in the world. In the first quarter of 1998, ZADAXIN was
approved in Kuwait and Peru for treatment of hepatitis B, and in Argentina for
use as an influenza vaccine adjuvant. ZADAXIN is also approved in Italy for use
as an influenza vaccine adjuvant. ZADAXIN has now been approved in each of the
three primary regions SciClone has targeted for hepatitis B sales -- Asia,
Latin America and the Middle East. The Company has filed for approval to market
ZADAXIN in additional countries in Asia, Latin America and the Middle East.
SciClone has worldwide marketing, development and manufacturing rights to
ZADAXIN, except in Japan, where the Company's rights have been sublicensed.
8
<PAGE> 10
In the U.S. and Europe, the Company is planning phase 3 development of
the combination of ZADAXIN plus interferon for the treatment of hepatitis C, a
worldwide epidemic affecting over 170 million people including over ten million
people in the U.S., Europe and Japan, the world's largest pharmaceutical
markets. Clinical data demonstrate that the combination of ZADAXIN plus
interferon could be a significant therapeutic advance in the fight against
hepatitis C. Interferon, the only established first-line therapy to treat
hepatitis C, leads to a sustained response in only 5% to 20% of patients and
causes unpleasant side effects. The Company is pursuing a corporate partnering
arrangement for phase 3 development of the combination of ZADAXIN plus
interferon for hepatitis C in the U.S. and Europe.* In Italy, a ZADAXIN
marketing application for treatment of non small-cell lung cancer is pending.
The Company also is planning a U.S. phase 2 study of ZADAXIN plus TACE
(transarterial chemo-emobilization) in liver cancer.
In Japan, the world's leading market for viral hepatitis therapies, the
Company has licensed exclusive development and marketing rights to ZADAXIN to
Schering-Plough K.K. ("SPKK"), the Japanese subsidiary of Schering-Plough
Corporation (NYSE:SGP), a leading marketer of viral hepatitis therapies
worldwide. In the second quarter of 1998, SPKK started a 300-patient pivotal
phase 3 ZADAXIN hepatitis B trial in Japan. SPKK also is developing ZADAXIN in a
phase 2 hepatitis C study.
CPX is SciClone's second drug in clinical development. CPX is an orally
administered protein-repair therapy initially developed by the U.S. National
Institutes of Health ("NIH") as a potential treatment for cystic fibrosis
("CF"). SciClone acquired an exclusive license to CPX from the NIH. CF is caused
by mutations in the gene that encodes the cystic fibrosis transmembrane
conductance regulator ("CFTR") protein. More than 70% of CF patients have the
delta F508 mutation. In October 1997, Harvey Pollard, M.D., Ph.D, of the
Uniformed Services University of the Health Sciences and formerly of the NIH,
presented breakthrough new preclinical data demonstrating that CPX corrects
the two key molecular defects causing CF in patients with the F508
mutation - impaired chloride ion transport and abnormal CFTR trafficking.
These preclinical data indicate that CPX is the only drug in clinical
development with the potential to correct the two key molecular defects in most
CF patients. The Company has obtained orphan drug status for CPX from the
United States Food and Drug Administration ("FDA"). In 1997, the FDA awarded
the Company a $100,000 research grant for phase 1 development of CPX. The
Company completed phase 1 development of CPX in CF patients in April 1998 and
expects to begin phase 2 development in CF patients in the third quarter
of 1998.*
EQUITY LINE
The Company and the Selling Shareholder entered into the Structured
Equity Line Flexible Financing(SM) Agreement (the "Equity Line"), dated as of
June 30, 1998 and a related Registration Rights Agreement (the "Registration
Rights Agreement"), dated as of June 30, 1998 whereby the Company agreed to file
under the Securities Act a registration statement (the "Registration Statement")
covering resales from time to time, by the Selling Shareholder of shares of
Common Stock. This Prospectus is a part of the Registration Statement. Pursuant
to the terms of the Equity Line, subject to the satisfaction of certain
conditions, the Company may require the Selling Shareholder to purchase shares
of Common Stock over a period of 24 months from the effective date of the
Registration Statement, for an aggregate purchase price of up to $32 million.
The Company may terminate the Equity Line at any time without further obligation
to the Selling Shareholder and the Selling Shareholder may terminate the Equity
Line without further obligation to the Company if and only if any change in law
makes it impracticable or impossible for the Selling Stockholder to fulfill its
obligations under the Equity Line. Under the terms of the Equity Line, during
each three month period (each, an "Investment Period") following the effective
date of the Registration Statement, the Company at its sole option and
discretion, subject to the satisfaction of certain conditions, can require the
Selling Shareholder to purchase shares of Common Stock for an aggregate purchase
price of up to $4.0 million. Ten (10) days prior to the beginning of each
Investment Period, the Company is required to notify the Selling Shareholder of
the minimum purchase price per share to be paid for shares of Common Stock
required to be purchased by the Selling Shareholder, if any, during such
Investment Period, provided that the Company may reset such minimum price to a
value within fifteen percent (15%) of such minimum price up to three times
during any Investment Period. The purchase price per share to be paid by the
Selling Shareholder for the shares of Common Stock acquired under the Equity
Line will equal 97% of the lowest sales
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<PAGE> 11
price of the Common Stock during the four trading days immediately preceding the
notice of purchase by the Selling Shareholder.
The Selling Shareholder's obligation to purchase shares of Common Stock
under the Equity Line is subject to various conditions, including, among other
things: (i) effectiveness of the Registration Statement under the Securities
Act; (ii) the price of the Common Stock being equal to at least the price the
Company sets from time to time as the minimum purchase price; (iii) continued
trading of the Common Stock on the Nasdaq National Market; and (iv) the
percentage of the Common Stock beneficially owned by the Selling Shareholder and
its affiliates being not more than 4.9% of the Company's then outstanding Common
Stock. In addition, the Selling Shareholder is not required to purchase, in any
Investment Period, an amount in excess of 10% (in the first Investment Period,
with such percentage reduced by 1% in each succeeding Investment Period until
such percentage reaches 6% at which time it will be fixed at 6%) of the product
of (i) the daily average value of open market trading of the Common Stock and
(ii) the number of trading days in the Investment Period during either the
current or immediately preceding Investment Period.
In connection with the Equity Line, the Selling Shareholder received a
five-year warrant (the "Warrant") to purchase 200,000 shares of the Common Stock
at an exercise price equal to $5.53 per share (150% of the closing sale price of
the Common Stock at the time of issuance). In addition, the Company has agreed
to issue to the Selling Shareholder, at the end of each calendar year an
additional Warrant (each, an "Additional Warrant" and collectively, the
"Additional Warrants") to purchase Common Stock in an amount equal to 5,000
shares for each $500,000 of Common Stock purchased by the Selling Shareholder
during such year, with an exercise price equal to 150% of the weighted average
purchase price of the Common Stock purchased by the Selling Shareholder during
such year, provided that the number of shares issuable upon exercise of all the
Additional Warrants will not exceed 300,000. The Additional Warrants, if any,
have a term ending on the same date as the end of the five-year term of the
Warrant. The Company also agreed to reimburse the Selling Shareholder for its
legal fees and expenses incurred in connection with entering into the Equity
Line up to a maximum of $50,000, and for its costs and expenses incurred in
connection with the performance of its obligations under the Equity Line up to a
maximum of $25,000 initially and $5,000 quarterly thereafter.
Under the Equity Line and the related Registration Rights Agreement,
the Company agreed to file and maintain the effectiveness of (subject to certain
penalties for non-compliance which may be waived by the Selling Shareholder) a
registration statement under the Securities Act, of which this Prospectus is a
part, for the resale from time to time by the Selling Shareholder of the shares
of the Common Stock to be issued under the Equity Line and upon exercise of the
Warrant and the Additional Warrants.
SECOND QUARTER RESULTS
The Company reported revenue of $801,000 in the second quarter ended
June 30, 1998, compared to $554,000 in the first quarter ended March 31, 1998.
Net loss in the second quarter was $6,848,000 ($0.44 per share) made up of
$3,705,000 ($0.24 per share) in operational losses and a $3,143,000 ($0.20 per
share) one-time non-cash deemed dividend, as required by the Commission, in
connection with the issuance of Series C Preferred Stock during the quarter. The
comparable net loss in the first quarter of 1998 was $3,685,000 ($0.24 per
share).
OTHER INFORMATION
The Company was incorporated in California in 1990. Its principal
executive offices are located at 901 Mariners Island Boulevard, Suite 205, 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.
10
<PAGE> 12
USE OF PROCEEDS
The Company will receive proceeds from the original issuance of the
Shares, if any, to the Selling Shareholder under the Equity Line and may receive
proceeds from the exercise of the Warrant and Additional Warrants, if any, but
will not receive any of the proceeds from resales by the Selling Shareholder of
the Shares offered by this Prospectus. The Company could receive, before
expenses, up to $32 million under the Equity Line and up to $1,106,000 upon
exercise of the Warrant. In addition, the Selling Shareholder may receive
Additional Warrants to purchase up to 300,000 shares of Common Stock. The amount
of gross proceeds received will depend on the exercise price of the Additional
Warrants, which is specified in the Equity Line as 150% of the weighted average
purchase price of the Common Stock purchased during the year with respect to
which an Additional Warrant is issued. The actual amount of proceeds, if any,
from the Equity Line, the Warrant and the Additional Warrants, if any, will
depend upon the market price of the Common Stock, whether the Selling
Shareholder elects to exercise the Warrant and the Additional Warrants, if any,
and whether the Company elects to require the Selling Shareholder to purchase
Common Stock under the terms of the Equity Line. However, there can be no
assurance that the Company will issue any Shares or receive any proceeds from
the Equity Line and, under the terms of the Equity Line, it is possible that no
Shares will be issued. For a description of the terms of the Equity Line, the
Warrant and the Additional Warrants, see "The Company - Equity Line."
The Company expects that any net proceeds from issuances of Common
Stock pursuant to the Equity Line, or exercise of the Warrant and the Additional
Warrants, if any, will be used for general corporate purposes, including
research and development, marketing, sales, and clinical and regulatory
activities.
SELLING SHAREHOLDER
The Selling Shareholder, Cheyenne, LLC, has not had a material
relationship with the Company within the past three years, other than as a
result of entering into the Equity Line and related agreements. See "The Company
- - Equity Line." However, one of the Selling Shareholder's members, The Palladin
Group, L.P., is or was an investment advisor for several entities which
purchased an aggregate of $4.0 million of the Company's Series C preferred stock
on April 1, 1998. The Palladin Group, L.P. also may act as a broker on behalf of
the Selling Shareholder in connection with this offering.
As of the date hereof, the Selling Shareholder does not own any shares
of the Common Stock, other than the Shares which it has the right to acquire
upon exercise of the Warrant and is offering hereby up to 3,000,000 of the
shares of Common Stock it may acquire pursuant to the Equity Line and the
Warrant and the Additional Warrants, if any.
PLAN OF DISTRIBUTION
The Selling Shareholders may, from time to time, sell all or a portion
of the Shares on the NNM (or such other exchange on which the Common Stock may
from time to time be trading), in privately negotiated transactions or
otherwise, at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated
prices. The Shares may be sold by the Selling Shareholders by one or more of the
following methods, without limitation: (a) block trades in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction, (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this prospectus, (c) an exchange distribution in
accordance with the rules of such exchange, (d) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, (e) privately
negotiated transactions, (f) short sales and (g) a combination of any such
methods of sale. In effecting sales, brokers and dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the Selling Shareholders (or,
if any such broker-dealer acts as agent for the purchaser of such Shares, from
such purchaser) in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the Selling Shareholders to sell a
11
<PAGE> 13
specified number of such Shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a Selling
Shareholder, to purchase as principal any unsold Shares at the price required to
fulfill the broker-dealer commitment to the Selling Shareholders. Broker-dealers
who acquire Shares as principal may thereafter resell such Shares from time to
time in transactions (which may involve block transactions of the nature
described above) in the over-the-counter market or otherwise at prices and on
terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such Shares
commissions as described above. The Selling Shareholders may also sell the
Shares in accordance with Rule 144 under the Securities Act, rather than
pursuant to this Prospectus.
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders in sales of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
From time to time the Selling Shareholders may engage in short sales,
short sales against the box, puts and calls and other transactions in securities
of the Company or derivatives thereof, and may sell and deliver the Shares in
connection therewith or in settlement of securities loans. If the Selling
Shareholders engage in such transactions, the Conversion Price may be affected.
Pursuant to the Equity Line, the Selling Shareholders may not make any sales
with the intention of reducing the price of the Common Stock. From time to time
the Selling Shareholders may pledge their Shares pursuant to the margin
provisions of its customer agreements with its brokers. Upon a default by the
Selling Shareholders, the broker may offer and sell the pledged Shares from time
to time.
The Company is required to pay certain fees and expenses incident to
the registration of the Shares.
The Selling Shareholders and any other persons participating in the
sale or distribution of the Shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Shareholders or any other such person. The foregoing may affect the
marketability of the Shares.
The Company has agreed to indemnify in certain circumstances the
Selling Shareholders against certain liabilities, including liabilities under
the Securities Act. The Selling Shareholders have agreed to indemnify in certain
circumstances the Company against certain liabilities, including liabilities
under the Securities Act.
The Company has agreed to use its best efforts to keep the Registration
Statement, of which this Prospectus constitutes a part, effective until the
Shares may be or have been sold pursuant to Rule 144(k) of the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby have been passed upon for the Company by Gray Cary Ware &
Freidenrich LLP.
EXPERTS
The consolidated financial statements and schedule of the Company
appearing in its Annual Report (Form 10-K) for the year ended December 31, 1997
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon, included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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<PAGE> 14
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 3
Incorporation of Certain Documents By
Reference............................................................ 3
Risk Factors ............................................................ 4
The Company ............................................................. 8
Use of Proceeds ......................................................... 11
Selling Shareholder...................................................... 11
Plan of Distribution..................................................... 11
Legal Matters ........................................................... 12
Experts ................................................................. 12
</TABLE>
3,000,000 SHARES
SCICLONE PHARMACEUTICALS, INC.
COMMON STOCK
PROSPECTUS
____________, 1998
================================================================================
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection
with the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
<TABLE>
<CAPTION>
To be Paid
By The
Registrant
----------
<S> <C>
SEC Registration Fee .................................. $ 2,544
Nasdaq filing fee ..................................... $17,500
Accounting fees and expenses .......................... $ 7,000
Legal fees and expenses ............................... $15,000
Miscellaneous expenses ................................ $ 2,956
Total ........................................ $45,000
=======
</TABLE>
- -------------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 204 of the California Corporations Code (the
"CCC"), the Registrant's Articles of Incorporation provide that each person who
is or was or who had agreed to become a director or officer of the Registrant or
who had agreed at the request of the Registrant's Board of Directors or an
officer of the Registrant to serve as an employee or agent of the Registrant or
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall be indemnified by the Registrant
to the full extent permitted by the CCC or any other applicable laws. Such
Articles of Incorporation also provide that no amendment or repeal of such
Articles shall apply to or have any effect on the right to indemnification
permitted or authorized thereunder for or with respect to claims asserted before
or after such amendment or repeal arising from acts or omissions occurring in
whole or in part before the effective date of such amendment or repeal.
The Registrant's Bylaws provide that the Registrant shall indemnify to
the full extent authorized by law any person made or threatened to be made a
party to an action or a proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or intestate was or
is a director, officer or employee of the Registrant or any predecessor of the
Registrant or serves or served any other enterprise as a director, officer or
employee at the request of the Registrant or an predecessor of the Registrant.
The Registrant's Bylaws also provide that the Registrant may enter into one or
more agreements with any person which provides for indemnification greater or
different than that provided in such Articles of Incorporation.
The Registrant has entered into indemnification agreements with its
directors and certain of its officers.
The Registrant intends to purchase and maintain insurance on behalf of
any person who is a director or officer against any loss arising from any claim
asserted against him and incurred by him in any such capacity, subject to
certain exclusions.
See also the undertakings set out in response to Item 17 herein.
II-1
<PAGE> 16
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- --------------------------------------------------------------
<S> <C>
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
10.1* Structured Equity Line Flexible Financing(SM) Agreement by and
between the Company and Cheyenne LLC dated as of June 30,
1998.
10.2* Warrant to purchase up to 200,000 shares of Common Stock of
the Company issued to Cheyenne LLC dated as of June 30, 1998.
10.3* Registration Rights Agreement by and between the Company and
Cheyenne LLC dated as of June 30, 1998.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained in
Part II of the Registration Statement).
</TABLE>
* Incorporated by reference from the Company's Report on Form 8-K filed
with the Commission on July 23, 1998.
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the Registrant
II-2
<PAGE> 17
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. Insofar as indemnification for liabilities arising under the
Securities Act 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.
C. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes 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.
II-3
<PAGE> 18
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-2 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 July 31, 1998.
SCICLONE PHARMACEUTICALS, INC.
By: /s/ Donald R. Sellers
-------------------------------------
Donald R. Sellers
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Donald R. Sellers and Shawn K. Singh, and
each of them, as his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-2, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-facts and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald R. Sellers
- --------------------------------------
Donald R. Sellers President, Chief Executive Officer and July 31, 1998
Director (Principal Executive Officer)
/s/ Jere E. Goyan
- --------------------------------------
Jere E. Goyan, Ph.D. Chairman of the Board and Director July 31, 1998
/s/ Diane Lee
- --------------------------------------
Diane Lee Director, Corporate Finance and Administration July 31, 1998
(Principal Financial and Accounting Officer)
/s/ John D. Baxter
- --------------------------------------
John D. Baxter, M.D. Director July 31, 1998
/s/ Edwin C. Cadman
- --------------------------------------
Edwin C. Cadman, M.D. Director July 31, 1998
/s/ Rolf H. Henel
- --------------------------------------
Rolf H. Henel Director July 31, 1998
</TABLE>
II-4
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- --------------------------------------------------------------
<S> <C>
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
10.1* Structured Equity Line Flexible Financing(SM) Agreement by and
between the Company and Cheyenne LLC dated as of June 30,
1998.
10.2* Warrant to purchase up to 200,000 shares of Common Stock of
the Company issued to Cheyenne LLC dated as of June 30, 1998.
10.3* Registration Rights Agreement by and between the Company and
Cheyenne LLC dated as of June 30, 1998.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained in
Part II of the Registration Statement).
</TABLE>
* Incorporated by reference from the Company's Report on Form 8-K filed
with the Commission on July 23, 1998.
<PAGE> 1
EXHIBIT 5.1
[GRAY CARY WARE FREIDENRICH LLP LETTERHEAD]
July 31, 1998
Securities and Exchange Commission
450 Fifth Street, N.W
Washington, D.C. 20549
RE: SCICLONE PHARMACEUTICALS, INC.
REGISTRATION STATEMENT ON FORM S-2
Ladies and Gentlemen:
As legal counsel for SciClone Pharmaceuticals, Inc., a California corporation
(the "Company"), we are rendering this opinion in connection with the
preparation and filing of a registration statement on Form S-2 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended, of 3,000,000 shares of Common Stock, no par value (the
"Common Stock"), that may be issued by the Company pursuant to the Structured
Equity Line Flexible Financing(SM) Agreement (the "Equity Line") or upon
exercise of certain related warrants.
We have examined such instruments, documents and records as 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.
Based on such examination, we are of the opinion that the 3,000,000 shares of
Common Stock of the Company being registered pursuant to the Registration
Statement and that may be issued to the purchasers will be, upon issuance in
accordance with the terms of the Equity Line or the warrants, as applicable,
duly authorized shares, validly issued, fully paid, and nonassessable.
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.
This opinion is to be used only in connection with the issuance of the Common
Stock while the Registration Statement is in effect.
Respectfully submitted,
/s/ Gray Cary Ware Freidenrich LLP
GRAY CARY WARE & FREIDENRICH LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-2 and related Prospectus of SciClone
Pharmaceuticals, Inc. for the registration of 3,000,000 shares of its Common
Stock and to the incorporation by reference therein of our report dated January
16, 1998, except Note 10, as to which date is April 2, 1998, with respect to
the consolidated financial statements and schedule of SciClone Pharmaceuticals,
Inc. included in its Annual Report on Form 10-K for the year ended December 31,
1997 filed with the Securities and Exchange Commission.
Ernst & Young LLP
--------------------------
/s/Ernst & Young LLP
Palo Alto, California
July 30, 1998
