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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-81481
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 12. The number of shares the selling shareholders
may sell under this prospectus includes common stock:
o they currently hold, and
o 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 July 12, 1999, the last sale price of the common stock as
reported on The Nasdaq National Market was $1.875.
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 July 15, 1999.
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TABLE OF CONTENTS
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Page
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RISK FACTORS..................................................................3
ABOUT SCICLONE...............................................................10
USE OF PROCEEDS..............................................................12
SELLING SHAREHOLDERS.........................................................12
PLAN OF DISTRIBUTION.........................................................14
LEGAL MATTERS................................................................15
EXPERTS......................................................................15
WHERE TO FIND MORE INFORMATION...............................................16
DOCUMENTS INCORPORATED BY REFERENCE..........................................16
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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 LIMITED
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:
o obtain additional financing in the near term to support our
operations and long-term product development and
commercialization efforts;
o increase ZADAXIN sales in existing markets;
o launch ZADAXIN in newly-approved markets;
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o obtain additional regulatory approvals for ZADAXIN and/or future
products;
o obtain regulatory approvals for CPX;
o 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
o 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 1999. Without
additional funding, management believes we have enough capital resources to
maintain our current and planned operations only through 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:
o the level of ZADAXIN sales;
o preclinical and clinical development expenses and opportunities;
o the timing and cost of regulatory approvals;
o patent costs;
o our ability to use the equity line; and
o 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:
o registration of the investor's resale of the shares;
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o a minimum trading price per share;
o volume limitations;
o limitations on the number of shares that can be issued without
shareholder approval; and
o 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:
o a minimum bid price of $1.00 per share;
o $4,000,000 in net tangible assets; and
o $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 July 12, 1999, the closing bid price of our common stock was
$1.875 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.
IF WE ISSUE ADDITIONAL COMMON STOCK OR SECURITIES CONVERTIBLE INTO COMMON STOCK,
THE PERCENTAGE OWNERSHIP OF OUR THEN-CURRENT SHAREHOLDERS WOULD BE REDUCED AND
THE MARKET PRICE OF OUR COMMON STOCK MAY DECREASE
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.
In addition, we recently completed a private placement of 1.37 million
shares of common stock and warrants to purchase 1.37 million shares of common
stock. Any common stock issued upon exercise of the warrants would reduce the
percentage ownership of our then-current shareholders. Furthermore, we are
required to register
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for resale the common stock issued in the private placement and issuable upon
exercise of the warrants, and the possibility of such resales may depress the
market price of our common stock.
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
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:
o difficulties and delays in obtaining pricing approvals and
reimbursement;
o difficulties and delays in obtaining product health registration
and importation permits;
o unexpected changes in regulatory requirements;
o tariffs and other barriers;
o political instability;
o the difficulties of staffing and managing foreign operations;
o long payment cycles;
o difficulty in accounts receivable collection;
o currency fluctuations; and
o 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
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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, WE MAY NOT
BE ABLE TO SUCCESSFULLY USE, MANUFACTURE OR MARKET AND SELL OUR PRODUCTS OR WE
MAY FAIL TO ADVANCE OR MAINTAIN OUR COMPETITIVE POSITION
The United States composition of matter patent, which covers the
chemical structure of thymosin alpha 1, and most of the European composition of
matter patents for thymosin alpha 1 have expired. Going forward, we will have
only limited patents covering the chemical structure of 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.
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.
IF WE FAIL TO OBTAIN REGULATORY APPROVALS FOR OUR PRODUCTS IN COUNTRIES IN WHICH
WE HAVE NOT BEEN APPROVED, WE CANNOT DEVELOP, MARKET AND SELL OUR PRODUCTS IN
THOSE COUNTRIES
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.
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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 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 SCICLONE, WE
MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR PRODUCTS
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
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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 ANY PRODUCT LIABILITY CLAIMS
ASSERTED AGAINST US COULD RESULT IN SIGNIFICANT EXPENSES AND DECREASED DEMAND
FOR OUR PRODUCTS
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 WITH RIGHTS SENIOR TO THOSE OF OUR COMMON STOCK COULD
ADVERSELY AFFECT HOLDERS OF COMMON STOCK OR HINDER TAKEOVER TRANSACTIONS THAT
OFFER COMMON SHAREHOLDERS AN OPTIMAL PRICE FOR THEIR SHARES
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. As a result, common shareholders could
be prevented from participating in transactions that would offer an optimal
price for their shares.
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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
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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:
o all registration and filing fees;
o printing expenses;
o transfer agents' and registrars' fees; and
o 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.
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<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:
o the name of each selling shareholder;
o the number of shares each selling shareholder beneficially owns;
o the number of shares the selling shareholder may resell under
this prospectus; and
o 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:
o upon exercise of the warrants as a result of the floating
conversion rate provisions or other adjustment mechanisms in the
warrants; or
o 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:
o 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
o 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.
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<PAGE> 13
<TABLE>
<CAPTION>
Shares Beneficially Shares Offered Shares Beneficially
Owned Prior to the by this Owned After
Selling Shareholder 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>
Halifax Fund, L.P. is a limited partnership for which The Palladin
Group, L.P. serves as its investment advisor. The Palladin Group, L.P. has
voting control and investment discretion over securities held by Halifax.
Jeffrey E. Devers is the President of the Palladin Group, L.P.
Heracles Fund Ltd. is a corporation for which Promethean Asset
Management LLC serves as its investment manager and consequently has voting
control and investment discretion over securities of SciClone held by Heracles
Fund. Promethean and James F. O'Brien, Jr., the President of Promethean Asset
Management LLC, disclaim beneficial ownership of the securities of SciClone held
by all other entities controlled by Promethean.
Themis Partners, L.P. is a limited partnership for which Promethean
Managers LLC is the general partner and consequently has voting control and
investment discretion over securities of SciClone held by Themis Partners, L.P.
Promethean and James F. O'Brien, Jr., the President of Promethean Asset
Management LLC, disclaim beneficial ownership of the securities of SciClone held
by all other entities controlled by Promethean.
Reedland Capital Partners is a corporation of which TYJO Corporation and
Thomas J. Griesel are the only shareholders. TYJO Corporation is a corporation
of which Robert K. Schacter and Kim Schacter are the only shareholders.
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<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:
o 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;
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of such
exchange;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o privately negotiated transactions;
o short sales; or
o 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
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<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.
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<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:
o Annual Report on Form 10-K for the year ended December 31, 1998,
filed on March 31, 1999 (File No. 0-19825);
o Current Report on Form 8-K, filed on April 26, 1999 (File No.
0-19825);
o Quarterly Report on Form 10-Q for the quarter ended March 31,
1999, filed on May 14, 1998 (File No. 0-19825); and
o 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.
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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
-------------------
July 15, 1999
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