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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1999
REGISTRATION NO. 333-____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SCICLONE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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CALIFORNIA 94-3116852
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
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)
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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 the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
Title of Each Class of PROPOSED MAXIMUM MAXIMUM
Securities to be AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
Registered REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
common stock (no par value) 801,219 shares(1) $1.375 (2) $1,101,676 $325(3)
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(1) Represents additional shares of common stock issued upon conversion of
issued shares of Series C Preferred Stock as described in the
prospectus.
(2) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 and based on the
average of the high and low sales prices of the common stock as reported
on the Nasdaq National Market on June 17, 1999.
(3) The prospectus which is a part of this registration statement also
covers 720,980 shares of common stock issuable upon conversion of issued
shares of Series C Preferred Stock and 150,000 shares of common stock
issuable upon exercise of warrants issued in connection with the sale of
the Series C Preferred Stock. Such shares were originally registered on
Registration Statement No. 333-52471 relating to an aggregate of
2,816,667 shares for which SciClone paid an aggregate filing fee of
$2,808.
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.
PURSUANT TO RULE 429, THE PROSPECTUS WHICH IS A PART OF THIS REGISTRATION
STATEMENT RELATES TO AND UPDATES THE REGISTRANT'S EARLIER REGISTRATION STATEMENT
ON FORM S-3 (NO. 333-52471). THAT REGISTRATION STATEMENT RELATED TO AN AGGREGATE
OF 2,816,667 SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF ISSUED SHARES OF
SERIES C PREFERRED STOCK AND UPON EXERCISE OF WARRANTS ISSUED IN CONNECTION WITH
THE SALE OF THE SERIES C PREFERRED STOCK.
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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 SEC 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 JUNE 24, 1999
1,672,199 SHARES
SCICLONE PHARMACEUTICALS, INC.
COMMON STOCK
This prospectus relates to the offer and sale of up to 1,672,199 shares
of our common stock by the selling shareholders listed under the caption
"Selling Shareholders" on page 11. The number of shares the selling shareholders
may sell under this prospectus includes common stock:
- they currently hold, and
- issuable to them upon exercise of warrants issued in connection
with the sale of the Series C Preferred Stock.
We will not receive any proceeds from sales by the selling shareholders, but may
receive proceeds from exercise of the warrants. Our agreement with the selling
shareholders is described in more detail on page 10.
Our common stock is quoted on The Nasdaq National Market under the
symbol "SCLN." On June 11, 1999, the last sale price of the common stock as
reported on The Nasdaq National Market was $1.438.
Our principal executive offices are located at 901 Mariners Island
Boulevard, Suite 205, San Mateo, California 94404, and our telephone number is
(650) 358-3456.
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AN INVESTMENT IN SCICLONE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
PLEASE CAREFULLY CONSIDER THE INFORMATION UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES , OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is ____________, 1999.
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TABLE OF CONTENTS
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Page
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RISK FACTORS............................................................ 3
ABOUT SCICLONE ......................................................... 9
USE OF PROCEEDS......................................................... 11
SELLING SHAREHOLDERS.................................................... 11
PLAN OF DISTRIBUTION.................................................... 13
LEGAL MATTERS .......................................................... 14
EXPERTS................................................................. 14
WHERE TO FIND MORE INFORMATION.......................................... 15
DOCUMENTS INCORPORATED BY REFERENCE..................................... 15
</TABLE>
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RISK FACTORS
You should carefully consider the following risk factors, together with
the other information contained or incorporated by reference in this prospectus,
in evaluating whether to purchase shares of our common stock.
This prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1934 and Section 21E of the Securities
Exchange Act and we have attempted to identify these statements with an asterisk
("*"). Actual results could differ materially from those projected in these
forward-looking statements due to a variety of factors, including those set
forth below.
IF WE FAIL TO OBTAIN ADDITIONAL REGULATORY APPROVALS OR MARKET
ACCEPTANCE FOR ZADAXIN(R) OR OBTAin REGULATORY APPROVAL FOR CPX, OUR POTENTIAL
FUTURE REVENUE WOULD BE ADVERSELY AFFECTED. Our principal drug development
efforts currently focus on our two lead drugs, thymosin alpha 1, which the
Company sells under the branded trademark ZADAXIN, and CPX. Thymosin alpha 1 is
a drug that boosts the body's immune system. Clinical trials of ZADAXIN are in
progress and we need favorable results from these trials to get regulatory
approval in major pharmaceutical markets. ZADAXIN has been approved for
commercial sale in 14 countries, principally as a treatment for hepatitis B and
hepatitis C, diseases caused by viruses that affect the liver. However, we may
not be able to obtain approvals for ZADAXIN in other countries or for the
treatment of additional medical conditions, such as cancer. CPX is a drug that
targets the underlying cause of cystic fibrosis, a disease caused by genetic
defects. CPX is currently undergoing clinical testing in the United States.
Our launch of ZADAXIN in the People's Republic of China, the Philippines
and Singapore was our first commercial introduction of ZADAXIN, and may not be
successful. Moreover, our future launches of ZADAXIN in additional countries may
not be successful. Future sales of ZADAXIN will depend on market acceptance and
successful distribution.
In particular, although the People's Republic of China has the highest
prevalence of hepatitis B in the world, its low average income and poorly
developed distribution infrastructure may make it difficult to successfully
commercialize ZADAXIN in the Chinese market. Because we currently rely on
ZADAXIN as our sole source of revenue, our failure to demonstrate its efficacy
in future clinical trials, obtain additional marketing approvals or successfully
commercialize ZADAXIN would adversely affect our revenue and operating results.
We may experience delays and difficulties in clinical trials of CPX. In
addition, clinical trials may not prove that CPX is an effective treatment for
cystic fibrosis. Our failure to demonstrate the safety and efficacy of CPX as a
treatment for cystic fibrosis in a clinical trial, obtain regulatory approval of
CPX as a treatment for cystic fibrosis or successfully commercialize CPX could
adversely affect our potential future revenue and operating results.
IF WE DO NOT BECOME PROFITABLE, WE MAY NOT BE ABLE TO SUSTAIN OUR
OPERATIONS. We began to generate revenues from ZADAXIN in 1997. Future ZADAXIN
revenues are uncertain. Marketing approvals for CPX and additional marketing
approvals for ZADAXIN are uncertain. We have experienced significant operating
losses since our inception and have a substantial accumulated deficit. We expect
our operating expenses to increase over the next several years if we expand our
development, clinical testing and marketing capabilities.* Our ability to expand
our operations or become profitable depends in large part on our ability to do
the following:
- obtain additional financing in the near term to support our
operations and long-term product development and
commercialization efforts;
- increase ZADAXIN sales in existing markets;
- launch ZADAXIN in newly-approved markets;
- obtain additional regulatory approvals for ZADAXIN and/or future
products;
- obtain regulatory approvals for CPX;
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- enter into a corporate partnering arrangement for development in
the U.S. and Europe of a combination therapy for hepatitis C
including ZADAXIN plus interferon; and
- enter into other agreements for product development and
commercialization.
In addition, we have recently undertaken a program to reduce our cash
expenses in an effort to maximize our cash resources and minimize the
anticipated expenditures needed to operate profitably. This program includes a
domestic restructuring program which reduced our domestic staff. We intend to
continue to review and implement our expense reduction efforts, depending on the
timing and amount of any additional financing we receive and changes in our
capital requirements for product development and commercialization.* If we do
not become profitable, we may not be able to sustain our operations and our
stock price may decrease.
WE NEED TO OBTAIN ADDITIONAL FUNDS IN THE NEAR FUTURE IN ORDER TO HAVE
ENOUGH CAPITAL RESOURCES TO SUPPORT OUR PRODUCT DEVELOPMENT AND
COMMERCIALIZATION PROGRAMS. Since inception, we have financed our operations
primarily through sales of stock. However, we will need to obtain additional
financing to support our product development and commercialization programs
beyond August 1999. Without additional financing, management believes we have
enough capital resources to maintain our current and planned operations only
through August 1999. As a result, our independent auditors have issued an
opinion on our financial statements for the period ended December 31, 1998 that
includes a paragraph emphasizing the uncertainty surrounding our ability to
continue as a going concern. If we are unsuccessful in obtaining additional
funds, we would be required to curtail or cease our operations.
We have entered into a Structured Equity Line Flexible Financing(SM)
Agreement which allows us, subject to certain limitations, to sell to the
purchaser under the equity line up to $4 million of common stock during each
"investment period" during the two-year term of the equity line. An "investment
period" under the equity line is approximately three months. If we sell stock
under the equity line, the purchaser's price will be 97% of the lowest reported
sale price during the four days immediately prior to each purchase date selected
by the purchaser during the investment period. In order to use the equity line,
our common stock must trade at more than $1.00 per share, unless we reach a
different agreement with the purchaser under the equity line.
We are evaluating financing alternatives, including a private placement
of common stock and common stock warrants, use of our equity line and debt
financing to increase our capital resources. However, our need for capital will
depend on many factors, including:
- the level of ZADAXIN sales;
- preclinical and clinical development expenses and opportunities;
- the timing and cost of regulatory approvals;
- patent costs;
- our ability to use the equity line; and
- our ability to establish development, sales, manufacturing and
marketing arrangements.
Other than the equity line, we have no commitments or arrangements for
additional funding and we may not be able to obtain the financing we need. Draws
under the equity line are subject to certain conditions, including:
- registration of the investor's resale of the shares;
- a minimum trading price per share;
- volume limitations;
- limitations on the number of shares that can be issued without
shareholder approval; and
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- limitations on the number of shares of our common stock the
investor may hold at any time.
The unavailability or timing of financing could prevent or delay our product
development and commercialization programs and would require us to curtail or
cease our operations.
IF WE DO NOT CONTINUE TO COMPLY WITH CERTAIN NASDAQ LISTING
REQUIREMENTS, OUR COMMON STOCK MAY BE DELISTED WHICH WOULD MAKE IT MORE
DIFFICULT TO SELL OUR COMMON STOCK. Our common stock is listed on the Nasdaq
National Market. To remain listed on the Nasdaq, a company must meet certain
criteria, including:
- a minimum bid price of $1.00 per share;
- $4,000,000 in net tangible assets; and
- $5,000,000 market value of the public float, excluding shares
held directly or indirectly by any of our officers or directors
and by anyone holding beneficially more than 10% of our
outstanding shares.
As of June 11, 1999, the closing bid price of our common stock was
$1.438 and on April 30, 1999, the market value of our public float was
approximately $29,250,000. As of March 31, 1999, we had net tangible assets of
$6,688,000.
If we fail to meet Nasdaq's listing criteria our common stock may be
delisted. Our common stock would thereafter be traded in the non-Nasdaq,
over-the-counter market. If our common stock were delisted, it may be more
difficult to dispose of, or get an accurate market value of, our common stock.
This could severely limit our common shareholders' ability to sell our common
stock in the secondary market.
POSSIBILITY OF DILUTION TO OUR CURRENT SHAREHOLDERS AND DECREASE IN THE
MARKET PRICE OF OUR COMMON STOCK. If we sell common stock under the equity line,
the percentage ownership of our then-current shareholders will be reduced. In
connection with the equity line, we also issued to the purchaser a warrant to
purchase 200,000 shares of our common stock at an exercise price of $5.53 per
share. We will also issue to the purchaser additional warrants to purchase up to
300,000 shares of common stock at an exercise price of 150% of the weighted
average purchase price of the common stock issued under the equity line during
the year for which an additional warrant is issued. If we do not issue any
common stock under the equity line, the exercise price will be 150% of the
closing sale price of the common stock on the day before the end of the two-year
term of the equity line. The purchaser's resale of common stock acquired under
the equity line could depress the market price of the common stock. Moreover,
because the shares that may be issued under the equity line, along with the
shares issuable upon exercise of the warrant and additional warrants, can be
immediately resold by the purchaser, the possibility of these sales could
adversely affect the market price of the common stock.
Similarly, if we raise additional funds through the issuance of common
stock or securities convertible into or exercisable for common stock, the
percentage ownership of our then-current shareholders will be reduced.
IF WE DO NOT OBTAIN ADDITIONAL PRODUCT RIGHTS FROM THIRD PARTIES OR IF
OUR LICENSEES DO NOT PERFORM THEIR OBLIGATIONS, OUR POTENTIAL FUTURE REVENUE
WOULD BE LIMITED. Our strategy includes entering into various corporate
partnering arrangements. To date, we have acquired rights to ZADAXIN, CPX and
certain other drugs but we are only actively pursuing clinical development of
ZADAXIN and CPX. If we do not license or otherwise acquire rights to additional
drugs we may have a shortage of drugs to develop which would limit our potential
future revenue.
In addition, we have exclusively sublicensed our rights to develop and
market ZADAXIN in Japan to Schering-Plough K.K. However, Schering-Plough K.K.
already has a substantial commitment to alpha interferon, which is an approved
drug for hepatitis B and hepatitis C in Japan. Our relationship with
Schering-Plough K.K. may not be successful and we may not be able to negotiate
similar additional arrangements in the future. We generally do not have control
over the amount and timing of resources that our collaborators devote to their
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activities with us. If these parties do not perform their obligations as we
expect them to, the development and sale of our products could be limited or
delayed.
Our ability to obtain regulatory approval in one country may be delayed
or adversely affected by the timing of regulatory activities and approvals in
other countries, particularly if we do not participate in the regulatory
approval process in these other countries. Any delay or failure to achieve
regulatory approvals may limit our potential future revenue.
IF WE EXPERIENCE DIFFICULTIES IN OUR FOREIGN SALES AND OPERATIONS, OUR
FINANCIAL CONDITION WOULD SUFFER. Our financial condition in the near term is
highly dependent on ZADAXIN sales in foreign jurisdictions. The majority of our
current ZADAXIN sales are to customers in the People's Republic of China.
However, ZADAXIN sales in the People's Republic of China may be limited due to
its low average income and poorly developed infrastructure. In addition, our
sales and operations in Asia, Latin America and the Middle East are subject to
inherent risks, including:
- difficulties and delays in obtaining pricing approvals and
reimbursement;
- difficulties and delays in obtaining product health registration
and importation permits;
- unexpected changes in regulatory requirements;
- tariffs and other barriers;
- political instability;
- the difficulties of staffing and managing foreign operations;
- long payment cycles;
- difficulty in accounts receivable collection;
- currency fluctuations; and
- potential adverse tax consequences.
We currently do not have any sales in the United States with which to offset any
decrease in revenue from ZADAXIN sales in Asia, Latin America and the Middle
East. In addition, certain countries in these territories regulate
pharmaceutical prices. This regulation may reduce prices for ZADAXIN
significantly below those that would prevail in a free market.
IF WE FAIL TO PROTECT OUR PRODUCTS, TECHNOLOGIES AND TRADE SECRETS, OUR
ABILITY TO USE, MANUFACTURE OR MARKET AND SELL OUR PRODUCTS WOULD BE ADVERSELY
AFFECTED. The United States composition of matter patent and most of the
European composition of matter patents for thymosin alpha 1 have expired. Going
forward, we will have only limited composition of matter patents for thymosin
alpha 1 and this could adversely affect our proprietary rights. Our success
depends significantly on our ability to obtain patent protection for our
products and technologies, to preserve our trade secrets and to avoid infringing
on the proprietary rights of third parties. However, our pending patent
applications may not result in issued patents. Any patents that are issued may
not provide a competitive advantage to us or may be invalidated or circumvented
by our competitors. Others may independently develop similar products or designs
around patents issued or licensed to us. Patents issued to or patent
applications filed by other companies could have an adverse effect on our
ability to use, manufacture or market our products or maintain our competitive
position with respect to our products. Many of our patents and patent
applications relating to thymosin alpha 1 are held under exclusive licenses. If
we breach the terms of any of these licenses we could lose our rights to these
patents and patent applications. Holders of patents licensed to us may not file,
prosecute, extend or maintain their patents in countries where we have rights.
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Other companies obtaining patents on products or processes useful to us
may bring infringement actions against us. This type of litigation is typically
costly and time-consuming and could require us to obtain licenses from others,
or prevent us from using, manufacturing or marketing our products. These
licenses may not be available on commercially reasonable terms, if at all.
Pharmaceuticals are not patentable or have only recently become
patentable in certain countries in the territory in which we have exclusive
rights to ZADAXIN. Enforcement of intellectual property rights in many countries
in this territory has been limited or non-existent. Future enforcement of
patents and proprietary rights in many countries in this territory will likely
be problematic or unpredictable. Moreover, the issuance of a patent in one
country does not assure the issuance of a similar patent in another country.
Claim interpretation and infringement laws vary by nation, so the extent of any
patent protection is uncertain and may vary in different jurisdictions.
WE NEED TO OBTAIN REGULATORY APPROVALS FOR ZADAXIN AND CPX IN ORDER TO
DEVELOP, MARKET AND SELL THEM. The research, preclinical and clinical
development, manufacturing, marketing and sale of ZADAXIN, CPX and our other
drug candidates are subject to extensive regulation by governmental authorities.
ZADAXIN, CPX and any other products must be approved before they can be sold in
any jurisdiction. Obtaining regulatory approval is time-consuming and expensive.
In some countries where we are contemplating marketing and selling ZADAXIN, the
regulatory approval process for drugs that have not been previously approved in
countries with established clinical trial review procedures is uncertain, and
this may delay the grant of regulatory approvals for ZADAXIN.
We are currently sponsoring clinical trials and pursuing regulatory
approvals for ZADAXIN in a number of countries and we are currently sponsoring
clinical trials of CPX in the United States. However, we may not be able to
complete these trials, and even if completed, these trials may not fulfill the
relevant regulatory approval criteria. We ultimately may not be able to obtain
regulatory approvals in these countries. Adverse results in our development
programs also could result in restrictions on the use of ZADAXIN and, if
approved, CPX.
Our failure to comply with applicable United States or foreign
regulatory requirements could, among other things, result in warning letters,
fines, suspensions of regulatory approvals, product recalls or seizures,
operating restrictions, injunctions and criminal prosecutions. In addition,
government regulations may be established or imposed which prevent or delay
regulatory approval of ZADAXIN, CPX or our future products.
IF WE ARE NOT ABLE TO ESTABLISH AND MAINTAIN ADEQUATE MANUFACTURING AND
SUPPLY RELATIONSHIPS, THE DEVELOPMENT AND SALE OF OUR PRODUCTS COULD BE
IMPAIRED. We have entered into contract manufacturing and supply agreements for
ZADAXIN and CPX. To be successful, our products must be manufactured in
commercial quantities, in compliance with regulatory requirements and at an
acceptable cost. While we believe we have and will be able to establish and
maintain manufacturing relationships with experienced suppliers*, we may not be
able to establish long-term manufacturing relationships with these suppliers. We
currently have vialing and packaging supply agreements in effect and a
sufficient supply of finished ZADAXIN for the near term. We have recently
changed and upgraded our manufacturing source of finished ZADAXIN for our
international markets, excluding Japan. In certain countries, this change may
require additional regulatory approvals. If we do not obtain any required
regulatory approvals of this manufacturing change in a timely fashion, new
ZADAXIN marketing approvals may be delayed or sales may be interrupted until the
manufacturing change is approved.
Production interruptions, if any, could significantly delay clinical
development of potential products and reduce third party or clinical researcher
interest and support of proposed trials. These kinds of interruptions could also
impede commercialization of our products, including sales of ZADAXIN in approved
markets, and impair their competitive position, which would have a material
adverse effect on our business.
WE MAY LOSE MARKET SHARE OR OTHERWISE FAIL TO COMPETE IN THE INTENSELY
COMPETITIVE PHARMACEUTICAL INDUSTRY. Competition in the pharmaceutical industry
is intense and we expect that competition to increase. We believe that the
principal competitive factors in the pharmaceutical industry include the
efficacy, safety, price and therapeutic regimen associated with a given drug.
Our competitors include pharmaceutical companies, biotechnology firms,
universities and other research institutions, both in the United States and
abroad, that are actively engaged in research and development of chronic and
life-threatening diseases such as hepatitis B, hepatitis C, cancer, immune
system disorders and cystic fibrosis. Most of our competitors, particularly
large
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pharmaceutical companies, have substantially greater financial, technical,
regulatory, manufacturing, marketing and human resource capabilities than we do.
Most of them also have extensive experience in undertaking the clinical testing
and obtaining the regulatory approvals necessary to market drugs. In addition,
we currently rely on sales of ZADAXIN as a treatment for hepatitis B and
hepatitis C as our sole source of revenue. Several large pharmaceutical
companies have substantial commitments to alpha interferon, which is an approved
drug for treating hepatitis B and hepatitis C.
IF THIRD PARTY REIMBURSEMENT IS NOT AVAILABLE OR PATIENTS CANNOT
OTHERWISE PAY FOR ZADAXIN, WE MAY NOT BE ABLE TO SUCCESSFULLY MARKET ZADAXIN.
Our ability to successfully sell ZADAXIN depends in part on whether
pharmaceutical drug consumers will be reimbursed for the cost of ZADAXIN. This
reimbursement may come from government health administration authorities,
private health insurers and other organizations. Third-party reimbursement for
new therapeutic products is highly uncertain and may not available for our
future products. In many of the foreign countries in which we currently operate
or intend to operate, reimbursement for ZADAXIN under government or private
health insurance programs is currently not be available, particularly in
Cambodia, the People's Republic of China, Mexico, the Philippines, Peru, Myanmar
and Malaysia. In the United States, certain proposed health care reforms could
limit the amount of third-party reimbursement available for our products. In
many countries where we have marketing rights to ZADAXIN, government resources
and per capita income may be so low that our products will be prohibitively
expensive. In these countries, we may not be able to market our products on
economically favorable terms, if at all.
IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL OR IF OUR
PRESIDENT AND CHIEF EXECUTIVE OFFICER, CHIEF OPERATING OFFICER, CHIEF
ADMINISTRATIVE OFFICER OR OUR REGIONAL MANAGING DIRECTOR FOR GREATER CHINA LEFT,
OUR BUSINESS WOULD BE ADVERSELY AFFECTED. We are highly dependent upon our
ability to attract and retain qualified personnel because of the specialized,
scientific and international nature of our business. There is intense
competition for qualified management, scientific and technical personnel in the
pharmaceutical industry, and we may not be able to attract and retain the
qualified personnel we need to grow and develop our business globally. In
addition, many key responsibilities at SciClone are assigned to a relatively
small number of individuals, such as our President and Chief Executive Officer,
Chief Operating Officer, Chief Administrative Officer and our Regional Managing
Director for Greater China. If we are unable to attract and retain qualified
personnel as needed or promptly replace those employees who are critical to our
product development and commercialization, the development and commercialization
of our products would adversely be affected. We do not maintain "key person"
life insurance on any of our key personnel.
WE HAVE LIMITED PRODUCT LIABILITY INSURANCE AND OUR BUSINESS AND
FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED IF PRODUCT LIABILITY CLAIMS WERE
ASSERTED AGAINST US. Companies which test, manufacture, market and sell
pharmaceutical products commonly receive product liability claims. These claims
may be asserted against us. Product liability insurance for the pharmaceutical
industry generally is expensive, if it is available at all. We have product
liability insurance coverage for our clinical trials and commercial sales.
However, product liability claims in excess of our insurance coverage or that
resulted in the payment of large deductibles would adversely affect our
financial condition and demand for our products.
ISSUING PREFERRED STOCK COULD ADVERSELY AFFECT HOLDERS OF COMMON STOCK
OR PREVENT TAKEOVER ATTEMPTS. Our charter documents give our board of directors
the authority to issue additional series of preferred stock without a vote or
action by our shareholders. The board also has the authority to determine the
terms of preferred stock, including price, preferences and voting rights. The
rights of holders of our common stock may be adversely affected by the rights
granted to holders of preferred stock. For example, a series of preferred stock
may be granted the right to receive a liquidation preference -- a pre-set
distribution in the event SciClone is liquidated -- that would reduce the amount
available for distribution to holders of common stock. In addition, the issuance
of preferred stock could make it more difficult for a third party to acquire a
majority of our outstanding voting stock.
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ABOUT SCICLONE
GENERAL
SciClone acquires, develops and commercializes drugs for treating
chronic and life-threatening diseases such as hepatitis B, hepatitis C, cancer,
immune system disorders and cystic fibrosis. We have two drugs in clinical
testing, ZADAXIN and CPX, and we have other potential drugs in preclinical
development.
ZADAXIN. Our lead drug is ZADAXIN, which boosts the immune system. We
are pursuing development of ZADAXIN for treatment of hepatitis B, hepatitis C,
cancer and certain immune system disorders, as well as an enhancement to the
effectiveness of viral vaccines. ZADAXIN is approved for marketing in 14
countries: Argentina, Cambodia, Italy, Kuwait, Mexico, Malaysia, Myanmar,
Pakistan, the People's Republic of China, Peru, the Philippines, Singapore,
Venezuela and Vietnam. We have filed for approval to market ZADAXIN in 22
additional countries outside the U.S., Europe and Japan. In 1998, ZADAXIN
generated over $3.6 million in sales, primarily in the People's Republic of
China, the Philippines and Singapore for treatment of hepatitis B. We hold
worldwide development, manufacturing and marketing rights to ZADAXIN. In Japan,
we have sublicensed our rights to Schering-Plough, K.K., the Japanese subsidiary
of Schering-Plough Corporation, the leading marketer of viral hepatitis
therapies worldwide.
We are pursuing a corporate partnering arrangement for development in
the U.S. and Europe of a combination therapy for hepatitis C including ZADAXIN
plus interferon.* Hepatitis C affects over 170 million people worldwide,
including over 10 million people in the United States, Europe and Japan, which
are the world's largest pharmaceutical markets. Our clinical data show that the
combination of ZADAXIN plus interferon could be a significant therapeutic
advance in the fight against the hepatitis C epidemic. Interferon, the only
established therapy for hepatitis C, leads to a response in only 5% to 20% of
patients and causes unpleasant side effects. Rebetron(TM), a combination of
two drugs, interferon and ribavirin, was approved for treatment of hepatitis C
in the U.S. and certain other countries in 1998. This combination benefits
certain patients. However, ribavirin has its own potential side effects, and
increases the risk of side effects when combined with interferon. Importantly,
ZADAXIN combined with interferon has shown clinical promise for treatment of
hepatitis C without increasing the risk of additive side effects.
In Japan, the world's largest market for viral hepatitis therapies, we
have exclusively sublicensed our rights to develop and market ZADAXIN to
Schering-Plough K.K. In the second quarter of 1998, Schering-Plough K.K. began a
300-patient clinical study of ZADAXIN for treatment of hepatitis B. The drug
interferon, including Schering-Plough K.K.'s interferon, is the leading therapy
for hepatitis B in Japan. Schering-Plough K.K. is also developing ZADAXIN in a
clinical study for treatment of hepatitis C.
CPX. Our second drug in clinical testing is CPX. CPX is a protein-repair
therapy initially developed by the United States National Institutes of Health
as a potential treatment for cystic fibrosis, the most common fatal genetic
disease in the U.S. and Europe.
Cystic fibrosis is caused by mutations in the gene that encodes a
certain protein known as the cystic fibrosis transmembrane conductance
regulator, or CFTR protein. More than 70% of cystic fibrosis patients have a
certain type of mutation, referred to as the "delta F508" mutation. In October
1997, Dr. Harvey Pollard of the Uniformed Services University of the Health
Sciences and formerly of the NIH, presented breakthrough preclinical data
demonstrating that CPX repairs the two key protein defects causing cystic
fibrosis in patients with the delta F508 genetic mutation. CPX is the only drug
in clinical development with the potential to correct the two key
protein-associated defects in most cystic fibrosis patients. In 1997, we were
awarded a $100,000 Orphan Drug Grant by the FDA for the first clinical study of
CPX as a treatment for cystic fibrosis. We completed the first clinical study of
CPX in cystic fibrosis patients in April 1998. In October 1998, we were awarded
a prestigious $200,000 Orphan Drug Grant by the FDA for the second clinical
study of CPX as a treatment for cystic fibrosis. We began the second clinical
study of CPX in cystic fibrosis patients in the U.S. in September 1998. The
Cystic Fibrosis Foundation provided substantial financial support for early
research on CPX at the NIH. The Cystic Fibrosis Foundation also supported us in
our application for an Investigational New Drug exemption to gain approval from
the FDA to begin testing of CPX directly on cystic fibrosis patients rather than
the standard process of testing first in healthy
9
<PAGE> 11
volunteers. The Cystic Fibrosis Foundation continues to support us with protocol
review, patient recruitment and investigator and study center selection.
We have other drug candidates in early preclinical development. We plan
to continue to evaluate the pharmaceutical potential of our preclinical drug
candidates in 1999.
Internationally, we have 41 ZADAXIN distribution arrangements covering
46 countries outside the U.S., Europe and Japan. We intend to out-license our
products where a collaborative arrangement will materially enhance the prospects
for a drug's commercial success in licensed markets. Our license with
Schering-Plough K.K. for exclusive rights to develop and market ZADAXIN in
Japan, and our arrangements with our ZADAXIN distributors are examples of this
strategy. We are currently pursuing corporate partnering arrangements in the
U.S. and Europe for development of ZADAXIN, particularly the combination of
ZADAXIN plus interferon for the treatment of hepatitis C.* We intend to produce
ZADAXIN, CPX and any future products through contract manufacturing and supply
agreements. We have entered into separate supply agreements in the U.S. and
Europe for the supply of bulk and finished product thymosin alpha 1. We contract
with a major U.S. pharmaceutical company for the supply of bulk CPX and another
U.S. pharmaceutical manufacturer for finished product CPX.
SALE OF SERIES C PREFERRED STOCK
We sold the Series C Preferred Stock in an April 1998 private placement
to institutional investors. The Series C Preferred Stock was convertible into
shares of our common stock, calculated according to a formula based on the
average closing bid price of a share of our common stock during any three
consecutive days within the 22 trading days immediately prior to conversion. The
holders of the Series C Preferred Stock have converted approximately 98% of
their Series C Preferred Stock, and we have redeemed the remainder.
In connection with the sale of the Series C Preferred Stock, we also
issued warrants to purchase an aggregate of 150,000 shares of our common stock
to the institutional investors and the placement agent. The warrants are
exercisable at a price per share of $5.67 at any time until April 1, 2003, and
may be exercised for cash or on a cashless basis based on the net appreciated
value of the underlying shares.
We will pay all expenses related to the registration of the common stock
covered by this prospectus, including, without limitation:
- all registration and filing fees;
- printing expenses;
- transfer agents' and registrars' fees; and
- the reasonable fees and disbursements of our outside counsel and
independent accountants.
We will not pay transfer or other taxes and other expenses related to the
issuance of the common stock.
FORMATION AND OTHER INFORMATION
SciClone was incorporated in California in 1990. Our international
operating subsidiary, SciClone Pharmaceuticals International Ltd., is
incorporated in the Cayman Islands and headquartered in Hong Kong.
We also have office locations in Singapore, Taiwan and Japan.
10
<PAGE> 12
USE OF PROCEEDS
If the warrants are exercised by the selling shareholders, we may
receive proceeds in the form of the exercise price. If we receive any proceeds,
we expect to use them for working capital. We will not receive any proceeds from
the sale of the shares of common stock by the selling shareholders and all
proceeds will go to the selling shareholders to be used for their own purposes.
SELLING SHAREHOLDERS
The table below sets forth the following information:
- the name of each selling shareholder;
- the number of shares each selling shareholder beneficially owns;
- the number of shares the selling shareholder may resell under
this prospectus; and
- the number of shares each selling shareholder would own,
assuming that each selling shareholder sells all of the shares
it may sell under this prospectus.
Beneficial ownership is determined in accordance with rules promulgated
by the SEC, and the information is not necessarily indicative of beneficial
ownership for any other purpose. This table is based upon information supplied
to us by the selling shareholders. Except as otherwise indicated, we believe
that the persons named in the table have sole voting and investment power with
respect to all of the shares of our common stock listed as beneficially owned by
them, subject to community property laws where applicable.
The actual number of shares of common stock offered by this prospectus,
and included in the registration statement of which this prospectus is a part,
includes additional shares that may be issued or issuable:
- upon exercise of the warrants as a result of the floating
conversion rate provisions or other adjustment mechanisms in the
warrants; or
- by reason of any stock split, stock dividend or similar
transaction involving the common stock, in order to prevent
dilution, in accordance with Rule 416 under the Securities Act
of 1933.
Pursuant to the preferred stock investment agreement and the certificate
of determination, the Series C Preferred Stock was convertible only to the
extent that the number of shares of common stock issued upon conversion did not
exceed 19.99% of our outstanding common stock on the date the Series C Preferred
Stock was issued. Due to the market price of our common stock, the remaining
shares of Series C Preferred Stock converted by Halifax Fund L.P. would have
converted into a number of shares of common stock that would have exceeded the
aggregate 19.99% limit described above. When Halifax converted the remaining
shares of Series C Preferred Stock, we redeemed any such shares that would have
exceeded the 19.99% limit at 130% of the liquidation preference.
The shares shown as beneficially owned by Halifax Fund, L.P. represent
the sum of:
- the number of shares of common stock issued to Halifax Fund,
L.P. upon prior conversions of Series C Preferred Stock, less
the number of shares previously sold by Halifax based upon
information provided to us by Halifax on June 1, 1999; and
- the number of shares of common stock issuable to Halifax upon
exercise of a warrant issued in connection with the sale of the
Series C Preferred Stock.
The shares shown as beneficially owned by selling shareholders other
than Halifax Fund, L.P. represent shares issuable upon exercise of warrants
issued in connection with the sale of the Series C Preferred Stock.
11
<PAGE> 13
<TABLE>
<CAPTION>
Shares Shares Shares
Beneficially Offered by Beneficially
Owned Prior to this Owned After
Selling Shareholder the Offering Prospectus the Offering
------------------- ------------ ---------- ------------
<S> <C> <C> <C>
Halifax Fund, L.P. 1,584,699 1,584,699 --
Heracles Fund 25,000 25,000 --
Themis Partners L.P. 12,500 12,500 --
Reedland Capital Partners 45,000 45,000 --
James Burness 5,000 5,000 --
TOTAL: 1,672,199 1,672,199 --
</TABLE>
12
<PAGE> 14
PLAN OF DISTRIBUTION
The selling shareholders may sell their shares of common stock on the
Nasdaq National Market, or other exchange on which the common stock is trading,
in privately negotiated transactions or otherwise. The shares may be sold by the
selling shareholders by one or more of the following methods:
- block trades in which the broker or dealer will attempt to sell
the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of such
exchange;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- privately negotiated transactions;
- short sales; or
- a combination of any of the above methods.
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. If any broker-dealer
acts as agent for a purchaser of shares, the broker-dealer may receive
commissions or discounts from the purchaser. Commissions or discounts will be
negotiated at the time of the transaction and are not expected to exceed
customary amounts.
Broker-dealers may agree with the selling shareholders to sell a
specified number of shares at a stipulated price per share. To the extent the
broker-dealer is unable to sell the specified number, it may purchase as
principal any unsold shares at the price required to fulfill the broker-dealer's
commitment to the selling shareholder. Broker-dealers who acquire shares as
principal may then resell such shares from time to time in transactions, which
may involve block transactions as described above, in the over-the-counter
market or otherwise. Resales by broker-dealers may be 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. In connection with resales,
broker-dealers may pay to or receive from purchasers of the shares commissions
as described above. The selling shareholders may also sell their 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. If so, any
commissions received by such broker-dealers or agents and any profit on the
resale of 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 our
securities or instruments that derive their value from our securities, and may
sell and deliver the shares covered by this prospectus in connection with the
transactions or to settle securities loans. From time to time the selling
shareholders may pledge their shares pursuant to the margin provisions of its
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 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 related rules and regulations. The Exchange Act and related
rules and regulations may limit the timing of purchases and sales of any of the
shares by the selling
13
<PAGE> 15
shareholders or other person participating in the sale or distribution of the
shares which may affect the marketability of the shares.
We have agreed to indemnify the selling shareholders against liabilities
they may incur because of an untrue or allegedly untrue statement of a material
fact contained in this prospectus or the omission or alleged omission to state
in the prospectus a material fact required to be in the prospectus, or necessary
to make the statements in this prospectus not misleading. However, we are not
required to indemnify any selling shareholder for liabilities that we incur
based on our reliance on written information that the selling shareholder has
provided to us for use in this prospectus. Likewise, the selling shareholders
have agreed to indemnify us against liabilities that we incur as a result of any
material misstatement or omission made in this prospectus based on written
information that the selling stockholder has provided to us. The selling
shareholder's liability to us, however, is limited to the net proceeds it
receives from the sale of its shares under this prospectus.
We have agreed to use our best efforts to keep the registration
statement of which this prospectus is a part effective until the shares may be
or have been sold pursuant to Rule 144(k) of the Securities Act.
LEGAL MATTERS
The legality of the shares offered by this prospectus is being passed
upon by Gray Cary Ware & Freidenrich LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 1998, as set forth in their report, which contains
an explanatory paragraph describing conditions that raise substantial doubt
about our ability to continue as a going concern as described in Note 1 to the
consolidated financial statements, which is incorporated by reference in this
prospectus and elsewhere in the registration statement. Our financial statements
and schedule are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
14
<PAGE> 16
WHERE TO FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. These reports, proxy statements and other
information filed with the SEC may be inspected and copied at the SEC Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information about the operation of the SEC Public
Reference Room by calling 1-800-SEC-0330. You can also inspect this material
free of charge at a Web site maintained by the SEC at http://www.sec.gov.
Finally, you can also inspect reports and other information concerning SciClone
at the offices of the National Association of Securities Dealers, Inc., Market
Listing Section, 1735 K Street, N.W., Washington, D.C. 20006. SciClone common
stock is traded on The Nasdaq National Market under the symbol "SCLN."
SciClone's Web site is located at http://www.sciclone.com.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file
with them which means that we can disclose important information to you by
referring you to these documents. The information incorporated by reference is
an important part of this prospectus and information we later file with the SEC
will automatically update and supersede this information. The following
documents filed by us with the SEC are incorporated in this prospectus by
reference:
- Annual Report on Form 10-K for the year ended December 31, 1998,
filed on March 31, 1999 (File No. 0-19825);
- Current Report on Form 8-K, filed on April 26, 1999 (File No.
0-19825);
- Quarterly Report on Form 10-Q for the quarter ended March 31,
1999, filed on May 14, 1998 (File No. 0-19825); and
- The description of SciClone's Common Stock contained in
SciClone's Registration Statement on Form 8-A filed under the
Securities Exchange Act, including any amendment or report filed
for the purpose of updating that description (File No. 0-19825).
We also incorporate by reference all documents and reports filed by us
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus. We will provide free of charge to each
person, including any beneficial owner, to whom this prospectus is delivered,
upon written or oral request, a copy of any or all of the documents incorporated
by reference in this prospectus. Please direct such requests to Investor
Relations, SciClone Pharmaceuticals, Inc., 901 Mariners Island Boulevard, Suite
205, San Mateo, California 94404. Our telephone number is (650) 358-3456.
15
<PAGE> 17
================================================================================
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. THE
INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF THE DATE INDICATED BELOW.
DELIVERY OF THIS PROSPECTUS AFTER THE DATE INDICATED BELOW DOES NOT MEAN THAT
THE INFORMATION IS STILL CORRECT.
1,672,199 SHARES
SCICLONE PHARMACEUTICALS, INC.
COMMON STOCK
-----------
PROSPECTUS
-----------
____________, 1999
================================================================================
<PAGE> 18
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 $325
Nasdaq filing fee $17,500
Accounting fees and expenses $5,000
Legal fees and expenses $5,000
Miscellaneous expenses $2,175
Total......................................................... $ 30,000
=========
</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> 19
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
3.1* Certificate of Determination Regarding the Terms of the
Series C Preferred Stock filed with the California Secretary
of State on March 25, 1998.
4.1* Preferred Stock Investment Agreement by and between
Registrant, Halifax Fund, L.P., Heracles Fund and Themis
Partners L.P. dated as of March 27, 1998.
4.2 Amendment No. 1 to Preferred Stock Investment Agreement by
and between Registrant and Halifax Fund, L.P. dated as of
December 14, 1998.
4.3* Registration Rights Agreement by and between Registrant,
Halifax Fund, L.P., Heracles Fund and Themis Partners L.P.
dated as of April 2, 1998.
4.4* Form of Common Stock Purchase Warrant
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
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 Annual Report on Form 10-K
filed with the Commission on April 2, 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
II-2
<PAGE> 20
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
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. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to
and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are
not set forth in the prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
D. 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.
II-3
<PAGE> 21
E. 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-4
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of San Mateo, State of California on June 24, 1999.
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-3, 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 President, Chief Executive June 24, 1999
- --------------------------------- Officer and Director (Principal
Donald R. Sellers Executive Officer)
/s/ Jere E. Goyan Chairman of the Board and Director June 24, 1999
- --------------------------------
Jere E. Goyan, Ph.D.
/s/ Diane Lee Director, Corporate Finance and June 24, 1999
- -------------------------------- Administration (Principal
Diane Lee Financial and Accounting Officer)
/s/ John D. Baxter Director June 24, 1999
- --------------------------------
John D. Baxter
- --------------------------------- Director June __, 1999
Edwin C. Cadman, M.D.
/s/ Rolf H. Henel Director June 24, 1999
- --------------------------------
Rolf H. Henel
</TABLE>
II-5
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
3.1* Certificate of Determination Regarding the Terms of the
Series C Preferred Stock filed with the California Secretary
of State on March 25, 1998.
4.1* Preferred Stock Investment Agreement by and between
Registrant, Halifax Fund, L.P., Heracles Fund and Themis
Partners L.P. dated as of March 27, 1998.
4.2 Amendment No. 1 to Preferred Stock Investment Agreement by
and between Registrant and Halifax Fund dated as of December
14, 1998.
4.3* Registration Rights Agreement by and between Registrant,
Halifax Fund, L.P., Heracles Fund and Themis Partners L.P.
dated as of April 2, 1998.
4.4* Form of Common Stock Purchase Warrant
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
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 Annual Report on Form 10-K
filed with the Commission on April 2, 1998.
<PAGE> 1
EXHIBIT 4.2
AMENDMENT NO. 1
to
PREFERRED STOCK INVESTMENT AGREEMENT
THIS AMENDMENT NO. 1 to PREFERRED STOCK INVESTMENT AGREEMENT
("Amendment") is dated as of December 14, 1998 between SciClone Pharmaceuticals,
Inc., a California corporation ("SciClone") and Halifax Fund, L.P. ("Halifax").
Capitalized terms not defined herein shall have the meanings assigned to them in
that certain Preferred Stock Investment Agreement (the "Agreement") dated as of
March 27, 1998 among SciClone, Halifax, Themis Partners L.P. ("Themis") and
Heracles Fund ("Heracles").
W I T N E S S E T H:
WHEREAS, SciClone, Halifax, Themis and Heracles entered into the
Agreement, pursuant to which SciClone issued and sold shares of its Series C
Convertible Preferred Stock ("Series C Shares") to Halifax, Themis and Heracles.
WHEREAS, prior to this Amendment, each of Themis and Heracles has
converted all of its Series C Shares to Common Stock of the Company and sold
such Common Stock pursuant to an effective registration statement; and
WHEREAS, SciClone and Halifax desire to amend the Agreement to increase
the limitation on a holder's right to convert Series C Shares.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
AGREEMENT
Section 1.1 Section 1.5 of the Agreement is hereby amended and restated
in its entirety as follows:
"Section 1.5 Limitation on Holder's Right to Convert. Notwithstanding
anything to the contrary contained herein, no Preferred Share may be converted
by a holder to the extent that, after giving effect to Common Shares to be
issued pursuant to a Conversion Notice, the total number of Common Shares deemed
beneficially owned by such holder (other than by virtue of the ownership of
Series C Preferred Stock or ownership of other securities that have limitations
on a holder's rights to convert or exercise similar to those limitations set
forth herein), together with all Common Shares deemed beneficially owned by the
holder's "affiliates" (as defined in Rule 144 of the
1
<PAGE> 2
Act) that would be aggregated for purposes of determining whether a group under
Section 13(d) of the Securities Exchange Act of 1934 exists, would exceed 9.9%
of the total issued and outstanding shares of the Corporation's Common Stock,
provided that each holder shall have the right to waive this restriction, in
whole or in part, upon 61 days prior notice to SciClone. The delivery of a
Conversion Notice by any holder shall be deemed a representation by such holder
that it is in compliance with this Section 1.5. A transferee of the Series C
Preferred Stock shall not be bound by this provision unless it expressly agrees
to be so bound. The term "deemed beneficially owned" as used in this Agreement
shall exclude shares that might otherwise be deemed beneficially owned by reason
of the convertibility of the Series C Preferred Stock."
Section 1.2 Except as amended hereby, the Agreement shall remain
unchanged and in full force and effect.
ARTICLE II
MISCELLANEOUS
Section 2.1 No Third Party Beneficiaries. This Amendment is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 2.2 Governing Law. This Amendment shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to such state's principles of conflict of laws.
Section 2.3 Execution. This Amendment may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
SCICLONE: INVESTOR:
SCICLONE PHARMACEUTICALS, INC. HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-fact
By: /s/ Donald R. Sellers By: PALLADIN CAPITAL
---------------------------- MANAGEMENT, L.L.C.,
Name: Donald R. Sellers General Partner
Title: President and Chief Executive Officer
By: /s/ Jeffrey E. Devers
-----------------------------
Name: Jeffrey E. Devers
Title: Duly Authorized Signatory
[SIGNATURE PAGE TO AMENDMENT NO. 1 to
PREFERRED STOCK PURCHASE AGREEMENT]
3
<PAGE> 1
[GRAY CARY WARE & FREIDENRICH LLP LETTERHEAD]
EXHIBIT 5.1
June 24, 1999
Securities and Exchange Commission
450 Fifth Street, N.W
Washington, D.C. 20549
RE: SCICLONE PHARMACEUTICALS, INC.
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
As legal counsel for SciClone Pharmaceuticals, Inc., a California corporation
(the "Company"), we are rendering this opinion in connection with the
preparation and filing of a registration statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended, of 801,219 shares of Common Stock (the "Shares"), issued by
the Company upon conversion of shares of the Company's Series C Preferred Stock.
We have examined such instruments, documents and records as we deemed relevant
and necessary for the basis of our opinion herein after 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 Shares being
registered pursuant to the Registration Statement are duly authorized, 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 Shares
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-3 and the related Prospectus of SciClone
Pharmaceuticals, Inc. for registration of 1,672,199 shares of its Common Stock
and to the incorporation by reference therein of our report dated March 17,
1999, 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, 1998 filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
Palo Alto, California
June 18, 1999
