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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-84487
SCICLONE PHARMACEUTICALS, INC.
COMMON STOCK
1,370,145 Shares Issued and Outstanding
and
1,553,324 Shares Subject to Warrants
This prospectus relates to the offer and sale of our common stock by
the selling shareholders, as follows:
o 1,370,145 shares issued to investors in our July 2, 1999 financing;
o up to 1,370,145 shares issuable upon exercise of warrants, with an
exercise price of $1.33 per share, issued to the investors in the
financing; and
o up to 183,179 shares issuable upon exercise of warrants, with an
exercise price of $1.66 per share, issued to the placement agents in
connection with the financing.
Our common stock is quoted on The Nasdaq National Market under the
symbol "SCLN." On July 23, 1999, the last sale price of the common stock as
reported on The Nasdaq National Market was $1.90.
Our principal executive offices are located at 901 Mariner's 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.
The date of this prospectus is August 12, 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 ........................................................15
LEGAL MATTERS ...............................................................17
EXPERTS .....................................................................17
WHERE TO FIND MORE INFORMATION ..............................................18
DOCUMENTS INCORPORATED BY REFERENCE .........................................18
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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 DO NOT CONTINUE TO INCREASE OUR SALES, WE MAY NOT BECOME PROFITABLE WHICH
MAY PREVENT OR DELAY OUR LONG-TERM PRODUCT DEVELOPMENT AND COMMERCIALIZATION
EFFORTS
We began to generate revenues from thymosin alpha 1, which we sell
under the branded trademark ZADAXIN, in 1997. Future ZADAXIN revenues are
uncertain. Our other drug under development, CPX, is a drug that targets the
underlying cause of cystic fibrosis, a disease caused by genetic defects.
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. Furthermore, 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 become profitable
depends in large part on our ability to do the following:
o increase ZADAXIN sales in existing markets;
o launch ZADAXIN in newly-approved markets;
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.
If we do not become profitable, we may have to delay or curtail our
long-term product development and commercialization efforts.
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;
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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 regulate
pharmaceutical prices. This regulation may reduce prices for ZADAXIN
significantly below those that would prevail in a free market.
IF WE FAIL TO OBTAIN ADDITIONAL REGULATORY APPROVALS OR MARKET ACCEPTANCE FOR
ZADAXIN(R) OR IF WE FAIL TO OBTAIN REGULATORY APPROVAL FOR CPX, OUR POTENTIAL
FUTURE REVENUE WOULD BE LIMITED
Our principal drug development efforts currently focus on our two lead
drugs, ZADAXIN and CPX. We need favorable results from additional clinical
trials of ZADAXIN 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.
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.
CPX is currently undergoing clinical testing in the United States. 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 NEED TO OBTAIN ADDITIONAL FUNDS IN ORDER
TO SUPPORT OUR LONG-TERM PRODUCT DEVELOPMENT AND COMMERCIALIZATION PROGRAMS
Since inception, we have financed our operations primarily through
sales of stock. Due to our continuing operating losses, our independent auditors
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. However, we recently completed two
private placements of common stock and common stock warrants which resulted in
aggregate net proceeds of approximately $5.5 million, excluding the proceeds
which will be received if the warrants are exercised. However, if we do not
continue to increase our revenue and become profitable, we will need to obtain
additional financing to support our long-term product development and
commercialization programs.
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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 our equity line, described below; and
o our ability to establish development, sales, manufacturing and
marketing arrangements.
The unavailability or timing of any necessary financing could prevent or delay
our long-term product development and commercialization programs. Other than the
equity line, we have no commitments or arrangements for additional funding and
we may not be able to obtain financing if and when needed.
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
We recently completed two equity financings in which we issued an
aggregate of 3,886,079 shares of common stock and warrants to purchase an
aggregate of 4,415,191 shares of common stock. Any common stock issued upon
exercise of the warrants would reduce the percentage ownership of our
then-current shareholders and decrease any earnings per share. Public resale of
the common stock issued in the private placements and issuable upon exercise of
the warrants and the possibility of such resales may depress the market price of
our common stock.
In addition, 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. Draws under the equity line are subject to certain conditions, including:
o registration of the investor's resale of the shares;
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.
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. We will also issue to the purchaser additional warrants to
purchase up to 300,000 shares of common stock. 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.
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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 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 23, 1999, the closing bid price of our common stock was
$1.90 and as of July 23, 1999, the market value of our public float was
approximately $46,000,000. As of July 24, 1999, we had net tangible assets of
approximately $7,700,000.
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 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 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
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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 in a timely or cost-effective manner, 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
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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 be 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 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 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.
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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 the first six months
of 1999, ZADAXIN generated approximately $3.6 million in sales, equivalent to
the $3.6 million in annual sales generated by ZADAXIN in 1998, 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 additional corporate partnering arrangements 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. Schering-Plough K.K. is conducting a 300-patient phase 3
study of ZADAXIN for treatment of hepatitis B. In phase 3, large-scale,
multi-center comparative trials are conducted in patients afflicted with the
target disease to provide sufficient data for the statistical proof of efficacy
and safety required by regulatory agencies to apply for marketing approval of a
drug. 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 phase 2 program for treatment of hepatitis C. Phase 2
trials are conducted with groups of patients afflicted with the target disease
to make a preliminary determination of efficacy and optimal dosages and to
provide additional evidence of safety.
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, commonly known as NIH, 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 genetic 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 preclinical data
demonstrating that CPX repairs the two key protein-associated 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 phase 1 development of CPX
as a treatment for cystic fibrosis. Typically, phase 1 trials are
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conducted in a small number of healthy volunteers, or in rare cases patients, to
determine the toxicity, pharmacological effects, metabolism and dose range
requirements for the drug. We completed our phase 1 clinical study of CPX in
cystic fibrosis patients in April 1998. In October 1998, we were awarded a
$200,000 Orphan Drug Grant by the FDA for phase 2 development of CPX as a
treatment for cystic fibrosis. We began the phase 2 clinical study of CPX in
cystic fibrosis patients in the U.S. in September 1998 and in April 1999 Cystic
Fibrosis Foundation awarded us a $517,000 research grant for phase 2 development
of CPX. 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
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 additional 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.
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, Japan and Italy.
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<PAGE> 12
USE OF PROCEEDS
If the warrants are exercised by the selling shareholders, we will
receive proceeds in the form of the exercise price. The warrants issued to the
investors for up to 1,370,145 shares have an aggregate exercise price of
$1,822,292, or $1.33 per share. The warrants issued to the placement agents for
up to 183,179 shares have an aggregate exercise price of $304,077, or $1.66 per
share. If we receive any proceeds from the exercise of the warrants, 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 2,923,469 shares offered by this prospectus consist of shares
issued or issuable to institutional and individual accredited investors in
connection with a privately placed equity financing on July 2, 1999, as follows:
o 1,370,145 shares of common stock issued to the investors;
o up to 1,370,145 shares of commons stock issuable upon exercise of
warrants, with an exercise price of $1.33, issued to the investors;
and
o up to 183,179 shares of common stock issuable upon exercise of
warrants, with an exercise price of $1.66, issued to the placement
agents.
The warrants are exercisable until July 1, 2004. The table below sets forth each
selling shareholder, the number of shares of common stock which it owns or has
the right to acquire as of July 2, 1999, the number of shares of common stock
subject to sale under this prospectus and the number of shares of common stock
it would own assuming the sale of all shares of common stock covered by this
prospectus. The shares offered by the investors consist of an equal number of:
o shares issued in the financing and outstanding; and
o shares subject to warrants issued in the financing.
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 each person named in the table has sole voting and investment power with
respect to all of the shares of our common stock listed as beneficially owned by
it.
<TABLE>
<CAPTION>
Shares Beneficially Shares Offered Shares Beneficially
Owned Prior to the by this Owned After
Selling Shareholders Offering Prospectus the Offering
-------------------- ------------------- -------------- -------------------
<S> <C> <C> <C>
Investors:
John D. Baxter, M.D 578,742 136,986 411,756
Sam Bolton 63,246 34,246 29,000
Stuart Cohen 74,492 68,492 6,000
Alex Colman 336,986 136,986 200,000
Gaymark Associates 273,972 273,972 --
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
Elliott J. Goldstein, M.D 305,400 32,000 273,400
Halifax Fund, L.P. 2,233,581 1,369,862 863,719
Michael Kooper 263,516 136,986 126,530
Alexis Korybut 34,246 34,246 --
Mcared Inc. Pension Plan 205,478 205,478 --
Robert G. Ortagus 78,492 68,492 10,000
Donald R. Sellers 1,036,582 20,546 1,016,036
The Bruce B. Allen Separate Ppty. Tr. #1 dtd. 12-16-87 28,776 28,776 --
Tracy K. Singh 38,246 34,246 4,000
The Martin and Deborah Stringfellow Trust dtd 7/3/91 154,986 136,986 18,000
Yolanda A. Willis 22,000 22,000 --
Placement Agents:
Moors & Cabot, Inc. 38,028 38,028 --
John Dakin 15,000 15,000 --
Samuel Skinner 15,000 15,000 --
Jim McCamant 8,028 8,028 --
Sterling Financial Investment Group, Inc. 8,561 8,561 --
Carlo Corzine 14,562 8,562 6,000
H.C. Wainwright & Co., Inc. 3,750 3,750 --
Matthew Balk 34,500 15,000 19,500
Scott Weisman 6,250 6,250 --
Reedland Capital Partners 58,500 58,500 --
James Burness 8,000 6,500 1,500
</TABLE>
The shares beneficially owned by John D. Baxter, M.D. include 46,250
shares issuable upon exercise of options exercisable within 60 days of July 2,
1999. Mr. Baxter is a director of SciClone.
Gaymark Associates is a limited partnership of which Windy Gates
Corporation is the general partner. Walter Scheuer is the President and Chief
Executive Officer, and Wayne Reisner is the Senior Vice President of, Windy
Gates. Messrs. Scheuer and Reisner may be deemed to have investment and voting
control over shares held by Gaymark Associates.
The number of shares shown as beneficially owned by Halifax Fund, L.P.
represents:
o 801,219 shares issued upon conversion of Series C Preferred Stock
purchased by Halifax in April 1998 and still owned by Halifax as of
July 2, 1999, based upon information provided to us by Halifax;
o 62,500 shares issuable upon exercise of a warrant issued to Halifax
in connection with the sale of the Series C Preferred Stock; and
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<PAGE> 14
o 684,931 shares issued to Halifax, and 684,931 shares issuable upon
exercise of warrants issued to Halifax, in connection with our July
2, 1999 private placement.
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.
Benedict Silverman is the sole beneficiary of the Mcared, Inc. Pension
Plan and may be deemed to have investment and voting control over the shares
held by the Mcared, Inc. Pension Plan.
The shares beneficially owned by Donald R. Sellers include 976,503
shares issuable upon exercise of options exercisable within 60 days of July 2,
1999. Mr. Sellers is the President and Chief Executive Officer of SciClone.
Moors & Cabot, Inc. is a corporation of which Michael Braun is the
Senior Vice President. Mr. Braun may be deemed to have investment and voting
control over the shares held by Moors & Cabot, Inc.
Sterling Financial Investment Group, Inc. is a corporation of which
Charles P. Garcia is the Chief Executive Officer. Mr. Garcia may be deemed to
have investment and voting control over the shares held by Sterling Financial
Investment Group, Inc.
H.C. Wainwright & Co., Inc. is a corporation of which Steve Barrett is
the Chief Executive Officer. Mr. Barrett may be deemed to have investment and
voting control over the shares held by H.C. Wainwright & Co., Inc.
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> 15
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.
Under our agreement with the selling shareholders, we agreed to file a
registration statement covering the 1,370,145 shares issued in our July 2, 1999
financing and the 1,553,324 shares issuable upon exercise of warrants issued in
connection with the financing within 30 days following the closing of the
financing and to keep a registration statement covering these shares effective
for up to two years following the closing.
15
<PAGE> 16
We will pay all expenses related to the registration of the shares
covered by this prospectus, including:
o filing, registration and qualification fees;
o printers' fees;
o accounting fees; and
o the fees and disbursements of our outside counsel.
We will not pay underwriters' or brokers' discounts and commissions or
the fees or disbursements of counsel for any selling shareholder.
The selling shareholders are not restricted as to the price or prices
at which they may resell the shares. Any resales may have an adverse effect on
the market price of the common stock. In addition, it is possible that a
significant number of shares could be sold at the same time, which also may have
an adverse effect on the market price of the common stock.
We have agreed to indemnify the selling shareholders against certain
civil liabilities, including liabilities under the Securities Act.
16
<PAGE> 17
LEGAL MATTERS
The legality of the shares offered by this prospectus is being passed
upon by Gray Cary Ware & Freidenrich LLP, Palo Alto, 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> 18
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 Internet 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, 1999 (File No. 0-19825);
o Current Report on Form 8-K, filed on August 4, 1999 (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 Mariner's Island Boulevard, Suite
205, San Mateo, California 94404. Our telephone number is (650) 358-3456.
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<PAGE> 19
================================================================================
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 OF
THIS PROSPECTUS. DELIVERY OF THIS PROSPECTUS AFTER THE DATE
INDICATED BELOW DOES NOT MEAN THAT THE INFORMATION IS STILL CORRECT.
SCICLONE PHARMACEUTICALS, INC.
COMMON STOCK
1,370,145 SHARES ISSUED AND OUTSTANDING
AND
1,553,324 SHARES SUBJECT TO WARRANTS
------------------
PROSPECTUS
------------------
August 12, 1999
================================================================================
