<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SciClone Pharmaceutical
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[SciClone LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 27, 1999
Dear Fellow Shareholder:
The 1999 Annual Meeting of Shareholders (the "Annual Meeting") of SciClone
Pharmaceuticals, Inc., a California corporation (the "Company"), will be held at
The Westin, San Francisco Airport, 1 Old Bayshore Highway, Millbrae, California
94030 on Thursday, May 27, 1999, at 10:00 a.m., local time. At the Annual
Meeting, shareholders will act on the following matters:
(1) Election of five (5) directors each for a term of one year;
(2) Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 1999; and
(3) Any other matter that may properly come before the Annual Meeting and
any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part of
this Notice.
Shareholders of record as of the close of business on April 9, 1999 are
entitled to notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, sign, date and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit attendance to
shareholders. Admission to the meeting will be on a first-come, first-served
basis. Registration will begin at 9:00 a.m., and seating will be available at
approximately 10:00 a.m. "Street name" holders will need to bring a copy of a
brokerage statement reflecting stock ownership as of the record date.
By Order of the Board of Directors,
[/s/ SHAWN K. SINGH]
SHAWN K. SINGH, J.D.
Secretary
San Mateo, California
April 28, 1999
<PAGE> 3
[SciClone LOGO]
901 MARINERS ISLAND BOULEVARD
SAN MATEO, CALIFORNIA 94404
------------------------
PROXY STATEMENT
------------------------
SOLICITATION AND VOTING OF PROXIES
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of SciClone Pharmaceuticals, Inc., a
California corporation (the "Company"), of proxies in the enclosed form for use
in voting at the Company's 1999 Annual Meeting of Shareholders (the "Annual
Meeting") to be held at The Westin, San Francisco Airport, 1 Old Bayshore
Highway, Millbrae, California 94030 on Thursday, May 27, 1999, at 10:00 a.m.,
local time, and any adjournment or postponement thereof.
This Proxy Statement, the enclosed proxy card and the Company's 1998 Annual
Report to Shareholders are first being sent or given to shareholders on or about
April 28, 1999.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Shawn K. Singh) a written notice of revocation or a duly executed proxy bearing
a later date, or by attending the Annual Meeting and voting in person.
RECORD DATE
The close of business on April 9, 1999 was fixed as the record date (the
"Record Date") for determining the holders of shares of Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had 20,067,028 shares of Common Stock
outstanding.
VOTING AND SOLICITATION
Each outstanding share of Common Stock on the Record Date is entitled to
one vote on all matters to be acted upon at the Annual Meeting and is entitled
to cumulate votes for the election of directors, subject to the conditions
described below.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
The Inspector of Elections will also determine whether or not a quorum is
present. Except with respect to the election of directors and except in certain
other specific circumstances, the affirmative vote of a majority of shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of the
required quorum) is required under California law for approval of proposals
presented to shareholders. In general, California law also provides that a
quorum consists of a majority of the shares entitled to vote, represented either
in person or by proxy. The Inspector of Elections will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as not voting for purposes of determining the approval
of any matter submitted to the shareholders for a vote. If a broker indicates on
the enclosed proxy or its substitute that it does not have discretionary
authority as to certain shares to vote on a particular matter ("broker
non-votes"), those shares will be treated as present and entitled to vote for
purposes of determining the presence of a quorum but will not be considered as
voting with respect to that matter.
<PAGE> 4
While there is no definitive specific statutory or case law authority in
California concerning the proper treatment of abstentions and broker non-votes,
the Company believes that the tabulation procedures to be followed by the
Inspector of Elections are consistent with the general statutory requirements in
California concerning voting of shares and determination of a quorum.
The shares represented by the proxies received, properly marked, signed,
dated and not revoked will be voted at the Annual Meeting. Where such proxies
specify a choice with respect to any matter to be acted upon, the shares will be
voted in accordance with the specifications made. Any proxy in the enclosed form
which is returned but is not marked will be voted FOR the election of directors
and FOR ratification of the appointment of the designated independent auditors
and as the proxy holders deem advisable on other matters that may come before
the meeting, as the case may be with respect to the item not marked.
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy solicitation materials for the Annual Meeting and reimbursements
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation materials regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and employees,
none of whom will receive additional compensation for assisting with the
solicitation.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, the shareholders will elect five (5) directors to
serve until the 2000 Annual Meeting of Shareholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the proxies
may be voted for the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy, or for the balance of the nominees named without nomination of a
substitute, or the Board may be reduced in accordance with the Bylaws of the
Company. The Board has no reason to believe that any of the persons named below
will be unable or unwilling to serve as a nominee or as a director if elected.
In voting for directors, each shareholder is entitled to cast that number
of votes equal to the number of directors to be elected multiplied by the number
of shares of Common Stock held by such shareholder. Such votes may be cast for
one candidate or distributed in any manner among the nominees for directors.
However, the right to cumulate votes in favor of one or more candidates may not
be exercised unless the candidate or candidates have been nominated prior to the
voting, and a shareholder has given notice at the Annual Meeting, prior to the
voting, of the shareholder's intention to cumulate such shareholder's votes. If
any one shareholder gives such notice, all shareholders may cumulate their votes
for candidates in nomination. The persons authorized to vote shares represented
by executed proxies in the enclosed form (if authority to vote for the election
of directors is not withheld) will have full discretion and authority to vote
cumulatively and to allocate votes among any or all of the nominees as they may
determine or, if authority to vote for a specified candidate or candidates has
been withheld, among those candidates for whom authority to vote has not been
withheld.
Assuming a quorum is present, the five (5) nominees receiving the highest
number of affirmative votes of shares entitled to be voted for them will be
elected as directors of the Company for the ensuing year. Unless marked
otherwise, proxies received will be voted FOR the election of each of the five
(5) nominees named below. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner in accordance with cumulative voting as will ensure the
election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders.
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<PAGE> 5
The names of the nominees, their ages as of April 1, 1999, and certain
other information about them are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
Jere E. Goyan, Ph.D..... 68 President, Goyan & Hart Associates 1992
Donald R. Sellers....... 54 President, Chief Executive Officer and 1996
Director, SciClone Pharmaceuticals, Inc.;
Managing Director, SciClone Pharmaceuticals
International Ltd.
John D. Baxter, M.D..... 58 Professor of Medicine, the University of 1991
California, San Francisco
Edwin C. Cadman, M.D.... 53 Professor of Medicine, Yale University; 1991
Senior Vice President of Medical Affairs
and Chief of Staff, Yale New Haven Hospital
Rolf H. Henel........... 61 Partner, Naimark & Associates, Inc. 1997
</TABLE>
Jere E. Goyan, Ph.D. has been Chairman of the Board of Directors of the
Company since July 1997 and has been a director of the Company since January
1992. Currently, Dr. Goyan is President of Goyan and Hart Associates, a private
consulting firm. From May 1993 until December 1998, Dr. Goyan was President,
Chief Operating Officer, and a director of Alteon, Inc., a biotechnology
company. He also served as Acting Chief Executive Officer of Alteon from July
1993 until May 1994 and as Senior Vice President for Research and Development
from January 1993 to May 1993. Dr. Goyan was the Commissioner of the United
States Food and Drug Administration from October 1979 to January 1981. He was
Dean of the School of Pharmacy at the University of California, San Francisco
and Professor of Pharmacy and Pharmaceutical Chemistry from 1967 through 1992.
He joined the faculty of UCSF in 1963 as an associate professor after serving on
the faculty of the University of Michigan, College of Pharmacy from 1956 to
1963. Dr. Goyan also currently serves as a director of Atrix Laboratories,
Emisphere Technologies, Inc., PenWest Pharmaceuticals and of Boehringer
Ingelheim Pharmaceuticals Corporation. Dr. Goyan also serves as a consultant to
various companies and corporations.
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 later 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. Mr. Sellers spent five years in Military Intelligence
serving with Special Forces and as a Counter-Intelligence Special Agent. He has
an AB degree from Lafayette College and a Masters of International Management
degree with honors from the American Graduate School of International
Management.
John D. Baxter, M.D. has been a director of the Company and the Chairman of
its Scientific Advisory Board since June 1991. Dr. Baxter has been associated
with the University of California, San Francisco ("UCSF") since 1970. He has
been Professor of Medicine since 1979, Chief of the Endocrinology Section,
Parnassus Campus from 1980 to 1997 and Director of UCSF's Metabolic Research
Unit since 1981. Dr. Baxter was a founder and served as a director of California
Biotechnology, Inc. (now Scios Nova, Inc.), and of Kao Bio A.B., both
biotechnology companies.
Edwin C. Cadman, M.D. has been a director of the Company and a member of
its 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 UCSF.
3
<PAGE> 6
Rolf H. Henel joined the Company as a director in June 1997. Mr. Henel has
been a partner in Naimark & Associates, Inc., a healthcare consulting firm,
since September 1994. 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 American
Cyanamid Company, most recently as President of the Cyanamid International
Lederele Division. Mr. Henel is also a director of Penwest Pharmaceuticals, a
pharmaceutical company, based in Patterson, New York.
Directors serve one-year terms or until their successors are elected and
qualified. There are no family relationships among any of the directors or
executive officers of the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1998, the Board met six times and no director attended fewer than
75% of the aggregate number of meetings of the Board and meetings of the
committees of the Board on which he serves. The Board has the following three
committees: an Audit Committee, a Compensation Committee and a Nominating
Committee.
During 1998, the Audit Committee, which consisted of Dr. Cadman and Mr.
Henel, each a non-employee director, held two meetings. The Audit Committee
recommends the engagement of the Company's independent public accountants to
audit the financial statements of the Company, and monitors the effectiveness of
the audit effort, the Company's financial and accounting organization and its
system of internal accounting controls.
During 1998, the Compensation Committee, which consisted of Drs. Cadman and
Goyan, held one meeting. The Compensation Committee establishes and administers
the Company's policies regarding annual officer salaries and cash incentives and
long-term equity incentives. The Compensation Committee also administers the
Company's equity compensation plans.
During 1998, the Nominating Committee, which consisted of Dr. Goyan and Mr.
Sellers, held no formal meetings. The Nominating Committee considers and
recommends action to the Board regarding nominations to the Board of Directors
of the Company. Shareholders may submit, with the nominees' permission, names of
prospective Board nominees which will be considered by the Nominating Committee
in light of the nominees' qualifications. Shareholder submissions to be
considered for the Company's 2000 Annual Meeting of Shareholders must be
received by Shawn K. Singh, SciClone Pharmaceuticals, Inc., 901 Mariner's Island
Boulevard, San Mateo, California 94404, no later than December 30, 1999.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive any compensation
for their services as directors. Two directors who are not employees of the
Company receive an annual retainer of $30,000, payable at the rate of $7,500 per
quarter, plus payment of out-of-pocket expenses relating to their service as
Board members. The two other directors who are not employees of the Company
receive an annual retainer of $35,000, payable at the rate of $8,750 per
quarter, plus payment of out-of-pocket expenses relating to their service as
Board members.
The Company has entered into a consulting agreement with Dr. Baxter
pursuant to which Dr. Baxter serves as Chairman of the Company's Scientific
Advisory Board and performs consulting services as requested by the Company. The
Company also has retained Dr. Cadman to perform consulting services. In 1998,
Dr. Baxter received $35,535 for such consulting services. Dr. Cadman did not
perform consulting services for the Company during 1998. From time to time, Dr.
Goyan performs consulting services for the Company. The Company compensates Dr.
Goyan for these services at his then-effective rate for consulting services. Dr.
Goyan received $10,000 in consulting fees from the Company in 1998.
If directors Baxter, Cadman, Goyan and Henel are reelected to the Board at
the Annual Meeting, each will automatically receive an option to purchase 10,000
shares of the Company's Common Stock under the Company's 1995 Nonemployee
Director Stock Option Plan. Each such option shall vest and become exercisable
at the rate of one-twelfth of the shares subject to the option at the end of
each one-month period from the date of the Annual Meeting. In addition, in 1998,
directors Baxter, Cadman, Goyan and Henel were
4
<PAGE> 7
each granted an option to purchase 10,000 shares of the Company's Common Stock
under the Company's 1991 Stock Plan.
RECOMMENDATION OF THE BOARD
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Ernst & Young LLP has served as the Company's independent auditors since
1991 and has been appointed by the Board to continue as the Company's
independent auditors for the year ending December 31, 1999. In the event that
ratification of this selection of auditors is not approved by a majority of the
shares of Common Stock voting at the Annual Meeting in person or by proxy,
management will review its future selection of auditors.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting. This representative will have an opportunity to make a statement
and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1999.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of shares of the Company's Common Stock as of March 26, 1999 by (i)
all those known by the Company to be beneficial owners of more than 5% of its
Common Stock, (ii) the Chief Executive Officer of the Company and the three
other most highly-compensated executive officers of the Company as of December
31, 1998 whose total salary and bonus for the fiscal year ended December 31,
1998 exceeded $100,000 for services in all capacities to the Company
(collectively, the "Named Executive Officers"), (iii) each director of the
Company and (iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
NAME NUMBER PERCENT
---- --------- -------
<S> <C> <C>
Halifax Fund, L.P.(2)....................................... 1,545,499 7.70
Donald R. Sellers(3)........................................ 653,115 3.25
John D. Baxter, M.D.(4)..................................... 437,798 2.18
Shawn K. Singh, J.D.(5)..................................... 103,295 *
Alfred R. Rudolph, M.D.(6).................................. 99,828 *
David A. Karlin, M.D.(7).................................... 80,240 *
Jere E. Goyan, Ph.D.(8)..................................... 74,292 *
Edwin C. Cadman, M.D.(9).................................... 73,772 *
Rolf H. Henel(10)........................................... 25,626 *
All directors and executive officers as a group (8
persons)(11).............................................. 2,588,951 12.9
</TABLE>
- ---------------
* Less than 1%.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G filed with the SEC. Unless
otherwise indicated in the footnotes to this table and
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<PAGE> 8
subject to community property laws where applicable, the Company believes
that each of the shareholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially
owned. Applicable percentages are based on 20,067,028 shares outstanding on
March 31, 1999.
(2) As reported by Halifax Fund, L.P., to the Company on March 22, 1999.
(3) Includes 617,855 shares issuable pursuant to options exercisable within 60
days of March 31, 1999.
(4) Includes 395,506 shares held by John D. Baxter and Ethelene D. Baxter as
Trustees, FBO The Baxter Family Revocable Trust UDT 11/8/95 and 42,292
shares issuable pursuant to options exercisable within 60 days of March 31,
1999.
(5) Includes 89,314 shares issuable pursuant to options exercisable within 60
days of March 31, 1999.
(6) Includes 58,021 shares issuable pursuant to options exercisable within 60
days of March 31, 1999.
(7) Includes 67,813 shares issuable pursuant to options exercisable within 60
days of March 31, 1999.
(8) Includes 72,292 shares issuable pursuant to options exercisable within 60
days of March 31, 1999.
(9) Includes 72,772 shares issuable pursuant to options exercisable within 60
days of March 31, 1999.
(10) Includes 20,626 shares issuable pursuant to options exercisable within 60
days of March 31, 1999.
(11) Includes 1,040,985 shares issuable pursuant to options exercisable within
60 days of March 31, 1999.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Named Executive Officers for each of the past three fiscal years, where
applicable.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($)(2) ($) OPTIONS(#) ($)
- --------------------------- ---- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Sellers........... 1998 400,000 75,000 54,204(3) 105,000 5,291(4)
President and Chief 1997 400,000 50,000 50,537(3) 70,000 5,191(4)
Executive Officer 1996 400,000 150,000 * 400,000 8,524(4)
Alfred R. Rudolph,
M.D.(5)................... 1998 192,000 55,000 30,000(6) 85,000 3,296(7)
Chief Operating Officer 1997 128,192 * 105,393(6) 105,000 2,376(7)
1996 -- -- -- -- --
Shawn K. Singh, J.D. ....... 1998 189,996 48,000 * 85,000 2,429(8)
Senior Vice President, 1997 157,500 45,000 * 28,000 2,241(8)
Corporate Development 1996 141,500 40,781 * 27,000 2,130(8)
and Secretary
David A. Karlin, M.D.(9).... 1998 187,200 37,800 * 75,000 4,025(10)
Vice President and 1997 180,000 45,000 * 36,000 3,196(10)
Medical Director 1996 -- -- -- -- --
</TABLE>
- ---------------
* No disclosure required under Securities and Exchange Commission rules.
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Reflects bonuses paid in the year indicated for performance in the prior
year (e.g., bonuses paid in 1998 were for performance in 1997).
(3) Consists of $44,004 in cost-of-living assistance payments and $10,200 in
car allowance payments in 1998 and 40,337 in cost-of-living assistance
payments and $10,200 in car allowance payments in 1997.
6
<PAGE> 9
(4) Consists of disability and life insurance premiums ($3,291 in 1998, 3,291
in 1997 and $6,624 in 1996) and $2,000, $1,900 and $1,900 in matching
contributions under the Company's 401(k) plan in 1998, 1997 and 1996.
(5) Dr. Rudolph joined the Company in April 1997.
(6) Consists of cost-of-living assistance payments ($30,000 in 1998, and
$10,000 in 1997) and $95,393 in moving expenses in 1997.
(7) Consists of matching contributions under the Company's 401(k) plan ($2,000
in 1998 and $1,080 in 1997) and life insurance premiums ($1,296 in 1998 and
$1,296 in 1997).
(8) Consists of matching contributions under the Company's 401(k) plan ($2,000
in 1998 $1,890 in 1997, $1,698 in 1996) and life insurance premiums ($429
in 1998, $351 in 1997 and $432 in 1996).
(9) Dr. Karlin became an executive officer of the Company in May 1997 and has
been employed by the Company since January 1995.
(10) Consists of matching contributions under the Company's 401(k) plan ($2,000
in 1998 and $1,900 in 1997) and life insurance premiums ($2,025 in 1998 and
$1,296 in 1997).
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in 1998. In addition, as
required by Securities and Exchange Commission rules, the table sets forth the
hypothetical gains that would exist for the options based on assumed rates of
annual compound stock price appreciation during the option term.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED
----------------------------------------------------- VALUE AT
PERCENT OF ASSUMED ANNUAL
NUMBER OF TOTAL EXERCISE RATES OF STOCK
SECURITIES OPTIONS OR BASE PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION -------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------------- ------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Sellers................ 30,000 4.5% 2.47 2/24/08 46,601 118,096
75,000 11.2 2.38 8/18/08 112,258 284,483
Alfred R. Rudolph, M.D........... 20,000 3.0 2.47 2/24/08 31,067 78,731
65,000 9.7 2.38 8/18/08 97,290 246,552
Shawn K. Singh, J.D.............. 25,000 3.7 2.47 2/24/08 38,834 98,414
60,000 8.9 2.38 8/18/08 89,806 227,586
David A. Karlin, M.D............. 12,000 1.8 2.47 2/24/08 18,640 47,239
63,000 9.4 2.38 8/18/08 94,296 238,966
</TABLE>
- ---------------
(1) Such options vest with respect to 25% of the shares one year from date of
grant; thereafter, the remaining shares vest ratably on a monthly basis over
three years. The options become fully exercisable without regard to vesting
in the event the Company is not the surviving corporation in any merger or
consolidation. The options have a ten-year term, but are subject to earlier
termination in connection with termination of employment. Under the
Company's 1991 Stock Plan, 1992 Stock Plan and 1995 Equity Incentive Plans,
the Board retains the discretion to modify the terms, including the price(s)
of outstanding options. For additional information regarding options, see
"Compensation Committee Report on Executive Compensation."
(2) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their terms, assuming the specified compounded rates of
appreciation of the market price per share from the date of grant to the end
of the option term. Actual gains, if any, on stock option exercise are
dependent upon a number of factors, including the future performance of the
Common Stock and the timing of option exercises, as well as the optionees
continued employment through the vesting period. There can be no assurance
that the amounts reflected in this table will be achieved.
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<PAGE> 10
The following table sets forth certain information with respect to stock
options held by the Named Executive Officers as of December 31, 1998, and the
value of "in-the-money" stock options, which represents the positive spread
between the exercise price of a stock option and the market price of the shares
subject to such option on December 31, 1998. No stock options were exercised by
any of the Named Executive Officers in 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT
YEAR END (#) FISCAL YEAR END($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE(1)
---- ----------------- ------------------
<S> <C> <C>
Donald R. Sellers................................... 584,552/166,448 $0.00/$0.00
Alfred R. Rudolph, M.D.............................. 40,834/149,166 $0.00/$0.00
Shawn K. Singh, J.D................................. 74,940/111,665 $0.00/$0.00
David A. Karlin, M.D................................ 54,897/108,103 $0.00/$0.00
</TABLE>
- ---------------
(1) Based on the $1.063 per share closing price of the Company's Common Stock as
reported by the Nasdaq National Market on December 31, 1998, less the
exercise prices.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the following report and the Stock Performance Graph which
follows shall not be deemed to be incorporated by reference into any such
filings.
The Compensation Committee of the Board is composed of Drs. Cadman and
Goyan, both of whom are nonemployee directors. The Compensation Committee is
responsible for establishing and administering the Company's policies regarding
compensation and stock ownership programs. The Committee annually evaluates the
performance, and determines compensation and long-term equity incentives, of the
Chief Executive Officer ("CEO"), and reviews and approves the CEO's compensation
recommendations for other officers of the Company.
Compensation Policy
The overall objectives of the Company's compensation policy are as follows:
to (i) attract and retain executives of outstanding ability and potential; (ii)
motivate these individuals to achieve corporate goals to enhance long-term
shareholder value; (iii) link executive compensation and shareholder interests;
and (iv) provide a compensation package that recognizes individual contributions
as well as overall corporate results and is competitive with biopharmaceutical
companies with which the Company competes for talent.
In the biopharmaceutical industry, traditional measures of corporate
performance, such as earnings per share and sales growth, may not apply in
reviewing the performance of executive officers. At the Company's current stage
of development, in evaluating and determining the compensation of the Company's
CEO and other executive officers, the Compensation Committee looks to other
performance criteria, such as progress of the Company's clinical and regulatory
programs and commercialization and development activities, as well as the
Company's success in securing capital resources that are necessary for the
Company to complete clinical, regulatory and commercialization programs and
achieve product revenues. As a result, in many instances these qualitative
factors involve a subjective assessment of corporate performance by the
Compensation Committee. The Compensation Committee does not base its
considerations on any single performance factor nor does it specifically assign
relative weights to factors, but rather it considers a mix of factors and
evaluates the CEO's and each individual executive officer's performance against
that mix.
8
<PAGE> 11
Compensation for individual executive officers is targeted to be comparable
to compensation packages paid to executives of other biopharmaceutical companies
of comparable or larger size with which the Company competes for talent. The
Compensation Committee reviews from time to time independent survey data
regarding compensation and benefits in the biopharmaceutical industry as well as
compensation and benefits in a comparative group of publicly-held
biopharmaceutical companies that represent a number of the Company's most direct
competitors for executive talent. The companies selected for comparison are
biopharmaceutical firms with market capitalizations comparable to or larger than
the Company's, several of which companies are included in the Nasdaq
Pharmaceutical/Biotechnology Index used in the Stock Performance Graph contained
herein. The Compensation Committee believes that inclusion of companies with
larger market capitalizations is necessary because the talent pool from which
the Company recruits is composed largely of executives employed by such
companies.
The key elements of the Company's executive compensation program consist of
base salary, annual cash incentives and long-term equity incentives.
Base Salary
Base salaries for executive officers are initially determined by evaluating
the responsibilities of the position held and the base salaries paid by
biopharmaceutical companies generally and companies in the comparative group
described above. The Compensation Committee initially sets base salaries in the
mid to upper range of base salaries at other companies in such comparative
group. In certain cases, minimum base salaries are established by employment
agreements between the Company and its executive officers. Using this general
guideline, the Compensation Committee then considers other factors such as the
individual's contribution to achievement of corporate goals, the attainment of
specific individual objectives and the assumption of new responsibilities. From
year to year, the relative weight of the individual factors may differ from
officer to officer, and can be expected to change over time in response to the
Company's development and the evolution of the biopharmaceutical industry.
Annual Cash Incentives
The Company's annual cash incentives account for a significant percentage
of each executive officer's potential compensation. The Compensation Committee
establishes annual cash incentive targets for executive officers based upon cash
incentive programs of biopharmaceutical companies generally and companies in the
comparative group described above. The Compensation Committee generally sets
such targets in the mid range of cash incentives paid by other companies in such
comparative group. The actual cash incentive award earned depends upon the
attainment of corporate performance goals established for the year by the
Compensation Committee as well as the attainment of individual performance
objectives. Corporate performance goals for 1998 included the following: to (i)
achieve certain ZADAXIN(R) sales milestones; (ii) complete the Company's
acquisition of global rights to ZADAXIN; (iii) initiate a Phase 3 trial of
ZADAXIN for the treatment of hepatitis B and start a Phase 2 trial of ZADAXIN
for the treatment of hepatitis C in Japan; (iv) establish corporate partnering
arrangements for development of ZADAXIN plus interferon for the treatment of
hepatitis C in the United States and Europe; and (v) complete Phase 1 and start
Phase 2 trials of CPX for the treatment of cystic fibrosis. At year end, the
Compensation Committee reviewed the original plans and goals. The Compensation
Committee determined that, due to the significant efforts and accomplishments of
the Company's executive officers, many of the original goals had been achieved;
however, certain goals deemed significant by the Compensation Committee were not
achieved. As a result, and due to the Company's cash position at year end, for
performance in 1998, the executive officers received less than their targeted
annual cash incentive and received cash incentives ranging from 7.5% to
approximately 11% of base salary.
The Company's long-term equity incentives currently consist of the
Company's 1991 and 1992 Stock Plans and the Company's 1995 Equity Incentive Plan
(collectively, the "Plans"), pursuant to which the Company grants options and
other rights to purchase shares of its Common Stock. The objective of each of
the Plans is to advance the long-term interests of the Company and its
shareholders and to complement incentives tied to annual performance. Stock
options granted under the Plans generally vest over a four-year
9
<PAGE> 12
period, providing incentive to create value for the Company's shareholders over
the long term since the full benefit of the compensation package cannot be
realized unless the employee remains with the Company and stock price
appreciation occurs over a number of years. The Compensation Committee has
typically granted options to employees upon commencement of employment and has
occasionally granted additional options following a significant change in job
responsibility, scope or title or a particularly noteworthy corporate or
individual achievement. During 1998, certain executive officers and employees
were granted stock options based on their individual contribution to achievement
of corporate performance goals.
CEO Compensation
In 1998, Mr. Sellers received a base salary of $400,000, an annual cash
incentive payment of $75,000 for performance in 1997 and an annual cash
incentive payment of $30,000 for performance in 1998. In determining Mr.
Sellers' base salary, the Compensation Committee considered Mr. Seller's current
compensation, his expected role with the Company and data with respect to
compensation levels at other biopharmaceutical companies. With respect to Mr.
Sellers' cash incentive payment for performance in 1998, the Committee noted
that although Mr. Sellers' individual performance objectives were met, certain
significant 1998 corporate performance objectives for the Company were not
achieved in full. The stock option grants to Mr. Sellers in 1998, as in past
years, were made with a view to the stock he already held and his achievement of
certain objectives.
Special Deduction Limit
The Compensation Committee has considered the impact of Section 162(m) of
the Code adopted under the Omnibus Budget Reconciliation Act of 1993, which
disallows a deduction for any publicly-held corporation for individual
compensation exceeding $1.0 million in any taxable year for the CEO and four
other most highly compensated executive officers, unless such compensation meets
the requirements for the "performance-based" exception to the general rule.
Since the cash compensation paid by the Company to each of its executive
officers is expected to be well below $1.0 million, and the Committee believes
that options granted under the 1995 Equity Incentive Plan prior to the Company's
Annual Meeting in 1996 will meet the requirements for performance-based
compensation under Section 162(m), the Compensation Committee believes that this
section will not affect the tax deductions available to the Company with respect
to such options. However, because a transition rule which permits the
Compensation Committee to qualify as a committee which may award
performance-based compensation expired upon the Company's Annual Meeting in 1996
and the Compensation Committee may not so qualify, the Company can provide no
assurance that options granted under the 1995 Equity Incentive Plan after that
date will meet the requirements for performance-based compensation.
The foregoing report has been provided by Drs. Cadman and Goyan.
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares the annual percentage change in (i) the
cumulative total shareholder return on the Company's Common Stock since December
31, 1993, with (ii) the cumulative total return on (a) The Nasdaq Stock Market
(U.S. and Foreign Companies) and (b) the Nasdaq Pharmaceutical/ Biotechnology
Index. The comparison assumes (i) an investment of $100 on December 31, 1993 in
each of the foregoing indices and (ii) reinvestment of dividends, if any. The
stock price performance shown on the graph below is not necessarily indicative
of future stock price performance.
<TABLE>
<CAPTION>
SCICLONE COMMON NASDAQ STOCK MKT. NASDAQ PHARM COM.
STOCK US & FRGN SIC 283
--------------- ----------------- -----------------
<S> <C> <C> <C>
12/31/93 100.00 100.00 100.00
12/30/94 39.13 112.28 67.08
12/29/95 29.71 157.69 122.72
12/31/96 46.37 193.10 123.08
12/31/97 19.93 236.26 127.09
12/31/98 6.15 326.03 163.20
</TABLE>
<TABLE>
<CAPTION>
COMPUTED INDEX
------------------------------
NASDAQ NASDAQ
SCICLONE STOCK PHARM.
PERFORMANCE COMMON MKT. COM.
PERIOD STOCK US & FRGN SIC 283
----------- -------- --------- -------
<S> <C> <C> <C>
12/31/93.......................................... 100.00 100.00 100.00
12/30/94.......................................... 39.13 112.28 67.08
12/29/95.......................................... 29.71 157.69 122.72
12/31/96.......................................... 46.37 193.10 123.08
12/31/97.......................................... 19.93 236.26 127.09
12/31/98.......................................... 6.15 326.03 163.20
</TABLE>
11
<PAGE> 14
TRANSACTIONS WITH MANAGEMENT
In July 1995, the Company extended a loan to Thomas E. Moore, the former
Chairman of the Board and one of the founders of the Company, in the principal
amount of $95,000 which bears interest at the rate of 7.375% per annum. In
December 1995, the Company extended an additional loan to Mr. Moore in the
principal amount of $600,000 which bears interest at the rate of 7.50% per
annum. The loans were due and payable in December 1997 after which they became
subject to 3.5% additional accelerated interest per year. The loans are secured
by a second deed of trust on residential property owned by Mr. Moore. At
December 31, 1998, these loans had not been repaid and an aggregate of
approximately $890,000 in principal and accrued interest was outstanding under
the loans. In January 1999, the Company foreclosed on the loans, is in
possession of the underlying property and is actively seeking to sell the
property. No entry reflecting this transaction has been recorded in the
Company's financial statements.
On July 23, 1997, the Company loaned to Mr. Moore $5,944,000 in exchange
for a promise to repay the loan on demand and the pledge of 1,882,500 shares of
SciClone Common Stock owned by Mr. Moore as collateral for such loan. The loan
bears interest at 7% per annum.
During 1998 it was determined that the value of the collateral underlying
the loan made to Mr. Moore was more than temporarily impaired and that a
writedown of the book value of the note would be required. Upon further
investigation relative to the collectibility of the demand note, it was
determined that the entire $5.944 million, plus accumulated interest of
approximately $689,000, was in substantial doubt. As a result of this
determination the Company elected to write off the entire remaining book value
in a non-cash charge to earnings in the fourth quarter of 1998 and cancel the
1,882,500 shares held as collateral. Under a new agreement, Mr. Moore received
credit against his total indebtedness of approximately $6.633 million. This
credit is calculated as the value of Mr. Moore's 1,882,500 shares of SciClone
Common Stock cancelled by the Company based on the greater of two stock prices.
The first stock price is calculated as the average 5-day closing stock price at
March 5, 1999, the date of this agreement. The second stock price is calculated
as the average 5-day closing stock price at September 30, 1999. After
calculating and applying the appropriate credit, the balance of the remaining
debt, if any, will be paid in five installments according to a schedule
beginning on October 1, 1999 of $20,000 and increasing by a factor of four each
six month anniversary thereafter with final payment due no later than October 1,
2001. In the event that the higher 5-day average stock price exceeds the amount
of the indebtedness such excess will be remitted to Mr. Moore in cash or stock,
at the Company's sole discretion. If in stock, the number of shares will not
exceed 1,882,500 shares.
The Company entered into an employment agreement with Mr. Sellers in
February 1996 for a term of one year, subject to renewal by the Company and Mr.
Sellers. Under the agreement, Mr. Sellers receives an annual base salary of
$400,000 and is eligible for an annual cash incentive up to $200,000 and other
benefits that are generally provided to the Company's executives. In the event
Mr. Sellers' employment relationship with the Company is terminated by the
Company without cause or as a result of a material diminution of Mr. Seller's
duties and responsibilities by the Company or as a result of Mr. Seller's death
or disability, the Company is required to (1) pay Mr. Sellers a severance
payment equal to his then current annual salary and car allowance for twelve
months and any cash incentives as if Mr. Sellers has continued his employment
through the end of the calendar year, (2) continue Mr. Seller's health-related
benefits for twelve months, (3) accelerate the vesting of all of Mr. Sellers'
outstanding stock options so they become fully vested, and (4) extend the
exercise period for such options for one year, but within the original term of
the option. The agreement was renewed in November 1998 for a one-year term
expiring in November 1999.
In August 1996, the Company extended a loan to Mr. Sellers in the principal
amount of $1,000,000 which was used to finance the purchase of his primary
residence. The loan is secured by a first deed of trust on the property, bears
interest at 8.0% per annum and is payable in July 2000, subject to renewal if
Mr. Sellers remains employed by the Company. In March 1998, Mr. Sellers paid the
Company $754,000 and reduced the Company loan to $236,500, including accrued
interest. As of December 31, 1998, approximately $234,500 of principal was
outstanding. In April 1999, Mr. Sellers paid the entire outstanding balance on
this loan.
The Company entered into an employment agreement with Dr. Rudolph in April
1997. Under the agreement, Dr. Rudolph receives a monthly base salary of $15,000
and is eligible for an annual cash incentive
12
<PAGE> 15
and other benefits that are generally provided to the Company's executives. The
annual cash incentive is targeted at 40%, and can range from 0% to 150%, of Dr.
Rudolph's annual base salary depending upon performance in relation to
predetermined management objectives. In the event the Company terminates Dr.
Rudolph's employment without cause, the Company is required to pay Dr. Rudolph a
severance payment in accordance with the Company's normal payroll policies equal
to one month, up to a maximum of six months, of his then current annual salary
for every two months he is employed by the Company. Pursuant to the agreement,
the Company also granted Dr. Rudolph options to purchase 70,000 shares of the
Company's Common Stock, reimbursed Dr. Rudolph for certain moving costs and
agreed to defray $30,000 per year of his housing expenses from September 1997 to
September 2000, provided Dr. Rudolph is employed by the Company during such
three-year period.
SHAREHOLDER PROPOSALS
Pursuant to new amendments to Rule 14a-4(c) of the Securities Exchange Act
of 1934, as amended, the Company's proxy for its 2000 Annual Meeting of
Shareholders may confer discretionary authority to vote on any proposal
submitted by a shareholder if written notice of such proposal is not received by
Shawn K. Singh, SciClone Pharmaceuticals, Inc., 901 Mariners Island Boulevard,
San Mateo, California 94404, on or before March 14, 2000.
Proposals of shareholders intended to be presented at the Company's 2000
Annual Meeting of Shareholders must be received by Shawn K. Singh, SciClone
Pharmaceuticals, Inc., 901 Mariners Island Boulevard, San Mateo, California
94404, no later than December 30, 1999, and must satisfy the conditions
established by the Securities and Exchange Commission for shareholder proposals
to be included in the Company's proxy statement for that meeting.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, proxies in the enclosed form will be voted in respect thereof as
the proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
[/s/ SHAWN K. SINGH]
SHAWN K. SINGH, J.D.
Secretary
April 28, 1999 San Mateo, California
13
<PAGE> 16
SCICLONE PHARMACEUTICALS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 27, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SCICLONE
PHARMACEUTICALS, INC.
The undersigned hereby appoints Donald R. Sellers and Shawn K. Singh, and
each of them, proxies for the undersigned, with full power of substitution, to
vote at the Annual Meeting of Shareholders of the Company to be held at The
Westin, San Francisco Airport, 1 Old Bayshore Highway, Millbrae, California
94030, on Thursday, May 27, 1999, at 10:00 a.m., or at any adjournment
thereof,upon the proposals set forth on the reverse side and described in the
accompanying Proxy Statement and upon such other matters as may properly come
before the meeting or any adjournment thereof. The undersigned hereby
acknowledges receipt of the Company's 1998 Annual Report to Shareholders
accompanying this Proxy.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
PROPOSAL. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES NEED BE CHECKED.
WHERE NO VOTING INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
(Continued and to be signed on the other side)
<PAGE> 17
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
Please mark
your votes in
black or blue ink X
as indicated in
this example.
PROPOSAL 1. Election of Directors
FOR all nominees listed
(except as marked to X
the contrary)
WITHHOLD AUTHORITY
to vote for all nominees X
listed below
NOMINEES: Jere E. Goyan, Ph.D., Donald R. Sellers, John D. Baxter, M.D.,
Edwin C. Cadman, M.D., Rolf H. Henel
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list above.)
PROPOSAL 2. Approval of Auditors
FOR AGAINST ABSTAIN
/X/ /X/ /X/
RECEIPT IS HEREBY ACKNOWLEDGED OF THE SCICLONE
PHARMACEUTICALS NOTICE OF MEETING AND PROXY STATEMENT
IMPORTANT: Please sign exactly as your name(s) appears on this Proxy. Where
shares of stock are held jointly, both or all holders should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
your full title as such. If the holder is a corporation or partnership,
execute in full corporate or partnership name by an authorized person. Please
date the Proxy.
Signature _______________________ Date: ________________________
Signature _______________________ Date: ________________________
o FOLD AND DETACH HERE o
