FOSTER CITY, CA -- (MARKET WIRE) -- 05/10/11 --
SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) today reported financial results for the first quarter of 2011.
Revenues for the quarter grew 21% to $21.7 million compared with the same
period last year. SciClone reported net income of $3.8 million, or $0.08
per share on a basic and diluted basis, compared with net income of $4.2
million, or $0.09 per share for the same period last year, on a basic and
diluted basis. The decrease in earnings per share in the first quarter of
2011 compared with the same period last year is mainly due to an increase
in general and administrative expenses related to the ongoing government
investigation. NovaMed Pharmaceuticals, Inc. ("NovaMed") sales and earnings
are not included in SciClone's first quarter financial results. SciClone
completed its acquisition of NovaMed on April 18, 2011.
"We made important progress early this year, most significantly, acquiring
NovaMed, a major step towards fulfilling our strategy of creating a
market-leading specialty pharmaceutical company in China," commented
Friedhelm Blobel, Ph.D., SciClone's President and Chief Executive Officer.
"This transaction allows SciClone to dramatically expand its presence in
the country, with additional important pharmaceutical products, new
therapeutic areas of focus, an expanded management team and a sales force
including over 680 professionals and importantly, additional revenues. We
anticipate that this, along with our ZADAXIN franchise, will facilitate a
significant increase in our revenues in the near-term and will strengthen
our rapidly growing pharmaceutical business in China. In addition, on the
development side, we have started a phase 2b trial of SCV-07 in oral
Research and development expenses for the first quarter of 2011 totaled
$3.1 million, compared with $2.7 million for the same period last year. The
increase was primarily related to clinical trial-related expenses including
the initiation of the Company's phase 2b clinical trial for the prevention
of oral mucositis in the first quarter of 2011.
Sales and marketing expenses for the first quarter of 2011 were $5.2
million, compared with $4.9 million for the same period last year. The
increase was primarily due to increased marketing activities, including
conferences and employee-related costs associated with the expanding sales
efforts for SciClone's lead product ZADAXIN.
General and administrative expenses for the first quarter of 2011 were $6.0
million, compared with $3.2 million for the same period last year. The
significant and unusually large increase in general and administrative
expenses was primarily a result of higher corporate and legal expenses
resulting from our internal investigation, the investigations of the
Securities and Exchange Commission (SEC), the Department of Justice (DoJ),
and civil litigation, as well as SciClone's business development efforts
for China, including expenses related to the acquisition of NovaMed.
Corporate and legal expenses in the first quarter of 2011 were $2.7
million, compared with $0.6 million for the same period last year.
Cash, cash equivalents and short and long-term investments totaled $71.3
million at March 31, 2011 compared with $56.5 million at December 31, 2010.
The increase in cash during the first quarter of 2011 is primarily a result
of SciClone's operating net income and the related cash collection from
customers in the 2011 period.
Financial Outlook for 2011
As announced following SciClone's acquisition of NovaMed, the Company
anticipates that NovaMed and SciClone's combined revenue for fiscal 2011 on
a pro forma basis will be between $140 and $145 million. SciClone's GAAP
revenue for fiscal 2011 will exclude NovaMed's 2011 revenue prior to the
closing of the acquisition in the second quarter. SciClone anticipates that
its 2011 GAAP revenue will be between $133 and $138 million. As a result of
the various charges relating to acquisitions, and in order to provide what
the Company believes is appropriate information on its operational results,
SciClone is providing guidance on earnings per share on a non GAAP basis
for 2011, and reporting GAAP as well as non GAAP EPS on a quarterly basis.
SciClone's non GAAP EPS will exclude charges and write offs related to the
acquisition, which may vary from quarter to quarter and which cannot be
predicted at this time. SciClone's earnings per share for 2011, excluding
charges and write offs related to the acquisition of NovaMed, are expected
to be between $0.52 and $0.57 per share. Cash, cash equivalents, and short
and long term investments are expected to be greater than $45 million at
the end of 2011, with $24.7 million having been paid to NovaMed
shareholders as part of the initial consideration in the second quarter of
Update on the FCPA Investigations
SciClone's Special Committee has substantially concluded its investigation
and reported its
findings and recommendations to the Board of Directors. As part of its
cooperation with the ongoing investigations of the SEC and the DOJ, the
has also reported findings to the SEC and DOJ.
The Special Committee found that:
-- The Company lacked appropriate internal controls to assure compliance
with laws, including the FCPA, with respect to sales and marketing
practices including payments for, or reimbursement of, third party gifts,
travel and entertainment expenses, and sponsorships of certain conferences
-- The Company failed to adequately implement existing controls and
policies including its policy that employees comply with all applicable
-- There was a lack of transparency between the Company's operations in
China and its operations in the U.S. such that U.S. management did not have
adequate and appropriate information about the Company's activities in
The Special Committee identified evidence of sales and marketing activities
that might constitute potential violations of the FCPA.
The Special Committee made recommendations to the Board of Directors
regarding remedial measures and the Board has directed the Company to take
a number of remedial measures, including the following:
-- Adopt a new, more detailed policy regarding compliance with the FCPA
and other laws specifically covering travel and entertainment, honoraria,
meals, gifts and other matters, with the policy to be approved by the
-- Expand the Company's training of employees regarding understanding and
compliance with laws, including the FCPA and other anti-bribery and
anti-corruption laws and regulations.
-- Retain a senior management level professional with FCPA compliance
experience who would be a member of the executive team and (i) report
directly to the Special Committee at least quarterly on the Company's
implementation of remedial measures and its compliance with the FCPA and
(ii) report independently to the Audit Committee or the Special Committee
on legal compliance.
In light of the findings of the Special Committee regarding the lack of
and failure to implement existing controls, the Board also determined that
Dr. Friedhelm Blobel would not be paid a cash bonus for service in 2010 and
that the amount payable under Dr. Blobel's long term cash incentive plan
for fiscal 2009 to 2011 would be reduced by $150,000, for an aggregate
reduction of approximately $334,000 in the cash compensation Dr. Blobel
would have been eligible to receive for performance in fiscal 2010. Dr.
Blobel's bonus for service in 2011 was also made contingent upon his
successful oversight of the implementation of appropriate remedial
Hans Schmid, the President of SciClone's subsidiary, SciClone
International, Ltd. resigned effective as of May 9, 2011.
In addition, the Board extended the service of the Special Committee for at
least one year so
that the Special Committee can monitor the Company's implementation of
remedial measures. The SEC's and DOJ's formal investigations are
continuing. These continuing investigations could result in administrative
orders against SciClone, the imposition of significant penalties and/or
fines against SciClone, and/or the imposition of civil or criminal
sanctions against SciClone, or certain of its officers, directors and/or
employees. SciClone cannot predict what the outcome of those investigations
will be, or the timing of any resolution.
"In addition to our financial and business goals, we have critical work to
do to accomplish
our remediation efforts and I want to assure our stockholders that I and
the rest of the
management team will work very diligently to achieve the necessary
Friedhelm Blobel, Ph.D., SciClone's President and Chief Executive Officer.
Upcoming Corporate Milestones in 2011
-- Implement the remedial measures adopted by the Board;
-- Achieve regulatory approval for Tramadol® in China;
-- File IDLs (Import Drug Licenses) for Thioctacid® (oral), Formoterol®,
Budesonide® and Loramyc® in China;
-- Obtain regulatory approval for DC Bead® in China;
-- Achieve GAAP revenues of $133 to $138 million and EPS of $0.52 to $0.57
on a non-GAAP basis for the full year 2011.
First Quarter 2011 Pipeline and Business Updates
In April, SciClone announced that it acquired NovaMed, a China-based
specialty pharmaceutical company, bringing additional, broad sales and
marketing, as well as regulatory and extensive business capabilities and
pharmaceutical assets in the regulatory approval stage to its growing and
profitable China focused specialty pharmaceutical business. Under terms of
the agreement, NovaMed shareholders are entitled to receive up-front
payments of approximately $24.7 million in cash, 8,298,110 shares of
SciClone common stock valued at approximately $37.1 million (based upon the
closing price of $4.47 on the NASDAQ stock market on April 18, 2011) and
the right to additional cash consideration of up to $43.0 million,
contingent upon the successful achievement of revenue and earnings targets
for the 2011 and 2012 fiscal years.
In January, SciClone announced the enrollment of the first patient in the
Company's phase 2b clinical trial of SCV-07 for the prevention of oral
mucositis (OM), a painful, debilitating and costly toxicity caused by
chemoradiotherapy regimens used to treat head and neck cancer. The study is
examining three doses of SCV-07, including two higher doses than those used
in the Company's phase 2a study, to assess the drug's impact on modifying
the course of OM in patients with head and neck cancer. In addition, the
trial is further evaluating SCV-07's safety and tolerability in this
patient population, as well as the role played by specific genetic profiles
in patient response to the treatment.
Financial Update Conference Call Information
SciClone is hosting a conference call today at 8:30 am ET to provide a
financial update. The call will be hosted by Friedhelm Blobel, Ph.D.,
President and CEO, Gary Titus, Senior Vice President and CFO, and Mark
Lotter, CEO of China Operations.
LIVE CALL: 866.831.6224 (U.S./Canada)
REPLAY: 888-286-8010 (U.S./Canada)
(Replay available from Tuesday, May 10, 2011, at 11:30am ET until 11:59 pm
ET on Tuesday, May 17, 2011)
The conference call will contain forward-looking statements. Interested
parties who wish to listen to the webcast should visit the Investor
Relations section of SciClone's website at www.sciclone.com. The
information provided on the teleconference is accurate only at the time of
the conference call, and SciClone will take no responsibility for providing
updated information except as required by law.
SciClone Pharmaceuticals is a revenue-generating, China-centric specialty
pharmaceutical company with a substantial business and a product portfolio
of novel therapies for cancer, infectious diseases and cardiovascular,
urology and central nervous system disorders, and respiratory conditions.
SciClone's ZADAXIN® (thymalfasin) is approved in over 30 countries for
the treatment of hepatitis B (HBV), as a vaccine adjuvant, for the
treatment of hepatitis C (HCV), and certain cancers. SciClone markets
nearly 20 products in China besides ZADAXIN, including Depakine®, the most
widely prescribed broad-spectrum anti-convulsant in China, Tritace, an ACE
inhibitor for the treatment of hypertension, Stilnox®, a fast-acting
hypnotic for the short-term treatment of insomnia (marketed as Ambien® in
the US), and Aggrastat®, a recently-launched intervention cardiology
product. On the development side, SciClone is evaluating SCV-07 in a phase
2b trial to modify the course of oral mucositis in patients with head and
neck cancer. SciClone is also pursuing the registration of several other
therapeutic products in China. SciClone is headquartered in Foster City,
California. For additional information, please visit www.sciclone.com.
This press release contains forward-looking statements regarding expected
financial results and expectations. Readers are urged to consider
statements that include the words "may," "will," "would," "could,"
"should," "might," "believes," "estimates," "projects," "potential,"
"expects," "plans," "anticipates," "intends," "continues," "forecast,"
"designed," "goal," "unaudited", "approximately" or the negative of those
words or other comparable words to be uncertain and forward-looking. These
statements are subject to risks and uncertainties that are difficult to
predict and actual outcomes may differ materially. These include risk and
uncertainties relating to: the course, cost and outcome of regulatory
matters, including pricing decisions by authorities in China; the on-going
regulatory investigations and SciClone's independent investigation; the
Company's ability to execute on its goals for the acquisition of NovaMed,
and for ZADAXIN sales to China and on its objectives for revenue in fiscal
2011; the challenges presented by integrating an acquired business into
existing operations; the variability in earnings on a GAAP basis that may
result from non-cash charges related to the acquisition; the dependence on
third party license or distribution agreements including the need to renew
such agreements; operating an international business; the clinical trial
process, including the regulatory approval and the process of initiating
trials at, and enrolling patients at, clinical sites; the Company's ability
to remediate its identified material weaknesses over financial control; and
changes in its practices and policies which could adversely affect its
ability to generate revenue. SciClone cannot predict the timing or outcome
of the ongoing SEC and DOJ investigations, of the various litigations that
have or may be filed relating to any of those matters, or of its efforts to
cooperate with those investigations, however the Company expects to incur
substantial expenses in connection with the investigations and its
remediation efforts, and the results of the investigations could include
fines and further measures that could adversely affect its business. Please
also refer to other risks and uncertainties described in SciClone's filings
with the SEC. All forward-looking statements are based on information
currently available to SciClone and SciClone assumes no obligation to
update any such forward-looking statements.
Ambien, Depakine and Stilnox are registered trademarks of Sanofi-Aventis.
Aggrastat is a registered trademark of Merck & Co., Inc.
DC Bead is a registered trademark of Biocompatibles UK Limited.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Ended
Product sales $ 21,662 $ 17,962
Cost of product sales 3,103 2,759
Gross margin 18,559 15,203
Research and development 3,109 2,675
Sales and marketing 5,228 4,948
General and administrative 5,958 3,197
Total operating expenses 14,295 10,820
Income from operations 4,264 4,383
Interest and investment income 20 25
Interest and investment expense (57) (19)
Other income (expense), net 15 2
Income before income tax 4,242 4,391
Provision for income tax 393 198
Net income $ 3,849 $ 4,193
Basic net income per share $ 0.08 $ 0.09
Diluted net income per share $ 0.08 $ 0.09
Weighted average shares used in computing:
Basic net income per share 48,020 47,255
Diluted net income per share 50,402 48,634
UNAUDITED SELECTED BALANCE SHEET DATA
March 31, December 31,
Balance Sheet Data:
Cash and cash equivalents $ 70,100 $ 53,017
Short-term investments 761 3,125
Accounts receivable 21,387 30,671
Inventories 7,654 7,078
Long-term investments 409 380
Total assets 103,169 97,807
Total current liabilities 13,105 12,129
Long-term borrowing on line of credit 2,500 2,500
Total Shareholders' equity 86,738 82,188
Chief Financial Officer
Source: SciClone Pharmaceuticals, Inc.
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