SciClone Reports Financial Results for the Third Quarter of 2010 and Provides Updated Guidance for the Full Year
FOSTER CITY, CA -- (MARKET WIRE) -- 11/08/10 --
SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) today reported financial results for the third quarter of 2010. As
reported on October 12, 2010, product revenues from sales of ZADAXIN® were
$22.8 million, an increase of 32.5% compared with revenues of $17.2 million
for the same period last year. For the nine months ended September 30,
2010, product revenues were $61.5 million, compared with $54.3 million for
the same period last year.
"We are pleased to announce further revenue growth this quarter driven by
our China-based specialty pharmaceutical business' increased sales of
ZADAXIN," commented Friedhelm Blobel, Ph.D., SciClone President and Chief
Executive Officer. "We are also delighted that our development activities
received support from four grants from the U.S. Department of Treasury's
Therapeutic Discovery Project Program, which amount to close to $1 million.
With these additional funds we continue to maintain an even stronger
balance sheet that will support our strategic goals of growing the company
through in-licensing and product acquisitions and advancing our
biotechnology portfolio."
Cost of product sales for the third quarter of 2010 remained flat at $3.1
million, compared with the same period last year. Gross margin was 86.2%
for the third quarter of 2010, compared with 82.0% for the same period last
year. The increase in gross margin for the three month period ended
September 30, 2010, compared to the corresponding period in 2009, was
primarily attributable to lower per vial production costs resulting from
increased production volume. For the nine months ended September 30, 2010,
cost of product sales were $9.4 million, compared with $9.2 million for the
same period last year. Gross margin was 84.6% for the nine months ended
September 30, 2010, compared with 83.1% for the same period last year.
SciClone expects that its cost of product sales and gross margins will
fluctuate from period to period depending upon the level of sales and price
of ZADAXIN, the absorption of product-related fixed costs, currency
exchange fluctuations, and any charges associated with excess or expiring
finished product inventory.
Additionally, SciClone expects government reimbursement levels in China for
listed drugs to be reviewed in the next 3 to 6 months, as part of the
health care reform, and that regulators may lower ZADAXIN's list price,
although the amount of the price change and timing cannot be predicted.
Research and development expenses for the third quarter of 2010 totaled
$2.6 million, compared with $4.1 million for the same period last year. The
decrease was primarily related to the timing and number of ongoing clinical
trials. SciClone's overall decreased expenditure reflects the timing of the
phase 2 clinical trials as well as SciClone's strategy of closely managing
its research and development costs. For the nine months ended September 30,
2010, research and development expenses were $7.7 million, compared with
$12.5 million for the same period last year.
The initiation, continuation, and completion of SciClone's current clinical
development programs had and is expected to continue to have a significant
effect on its research and development expenses. SciClone expects the
actual costs incurred in future periods to vary, depending in particular
upon timeline and design of further clinical trials and final decisions
regarding the timing and expense-sharing arrangements for these trials.
SciClone expects its research and development expenses to increase
significantly for the remainder of the year in preparation for its SCV-07
phase 2b trial in oral mucositis, which the Company plans to initiate in
late 2010 or early 2011.
SciClone is evaluating opportunities to acquire or in-license the marketing
rights to proprietary products primarily in China, which may result in
increased research and development expenses due to license fee payments or
other expenses related to in-licensing and development of new products in
the future.
Sales and marketing expenses for the third quarter of 2010 were $5.4
million, compared with $4.6 million for the same period last year. The
increase was primarily due to increased marketing activities and
employee-related costs associated with its sales efforts for SciClone's
lead product ZADAXIN in China. For the nine months ended September 30,
2010, sales and marketing expenses were $16.0 million compared with $13.5
million for the same period last year.
General and administrative expenses for the third quarter of 2010 were $3.8
million compared with $3.1 million for the same period last year. The
increase was primarily due to higher corporate and legal expenses related
to business development efforts for China and in connection with the United
States Securities and Exchange Commission (SEC) and United States
Department of Justice (DOJ) investigations announced in August 2010. For
the nine months ended September 30, 2010, general and administrative
expenses were $10.4 million, compared with $9.1 million for the same period
last year.
The Company expects its general and administrative expenses to increase for
the remainder of 2010 compared to 2009, related to its expanding operations
in China, responding to the United States Securities and Exchange
Commission (SEC) and United States Department of Justice (DOJ)
investigations and shareholder litigations that have been, or may be, filed
following its announcement of those investigations, and the conduct of an
independent investigation by a special committee of SciClone's Board of
Directors.
Net income for the third quarter of 2010 totaled $7.6 million, or $0.16 per
share on a basic and diluted basis, compared with net income of $2.1
million, or $0.04 per share, for the same period last year, on a basic and
diluted basis. For the nine months ended September 30, 2010, net income was
$17.3 million, or $0.36 per share on a basic and $0.35 per share on a
diluted basis, compared with net income of $9.5 million, or $0.20 on a
basic and diluted basis for the same period last year.
Cash, cash equivalents and investments totaled $53.4 million at September
30, 2010, compared with $31.8 million at December 31, 2009. Cash, cash
equivalents and investments were higher than anticipated at September 30,
2010 due in part to early cash collections related to the Chinese National
Holiday and fluctuations in SciClone's inventory balances. SciClone also
has available a $15 million debt financing facility with Silicon Valley
Bank, which it has not yet accessed.
Regulatory Investigations
On August 5, 2010, SciClone was contacted by the SEC and advised that the
SEC has initiated a formal, non-public investigation of SciClone, and the
SEC issued a subpoena to SciClone requesting a variety of documents and
other information. The subpoena requests documents relating to a range of
matters including, but not limited to, potential payments or transfers of
anything of value to regulators and government-owned entities in China,
bids or contracts with state or government-owned entities in China, any
joint venture partner, intermediary or local agent of the Company in China,
the Company's ethics and anti-corruption policies, training, and audits,
and certain company financial and other disclosures. On August 6, 2010, the
Company received a letter from the DOJ indicating that the DOJ was
investigating Foreign Corrupt Practices Act issues in the pharmaceutical
industry generally, and that the DOJ had information about the Company's
practices suggesting possible violations.
The Company intends to cooperate fully with the SEC and DOJ in the conduct
of their investigations. In response to these matters, SciClone's Board of
Directors has appointed a special committee of independent directors. Based
on an initial review the special committee has decided to undertake an
independent investigation as to matters reflected in and arising from the
SEC and DOJ investigations including, but not limited to, certain sales and
marketing matters in China, in order to evaluate whether any violation of
the FCPA or other laws occurred as to such matters.
Following the Company's announcement of these investigations, purported
class actions naming SciClone and certain of its officers as defendants
were filed and derivate litigations purportedly on behalf of the Company
were filed naming certain of its officers and directors as defendants.
In addition, the Board of Directors has received a demand from a purported
stockholder demanding that the Board of Directors take actions to remedy
breaches of fiduciary duties by the directors and certain officers relating
to alleged violations of the FCPA and securities laws.
SciClone cannot predict the outcome of these matters, but we anticipate
that we will incur substantial expenses in the course of the
investigations, and in connection with current or future litigation.
Financial Outlook
SciClone continues to anticipate 2010 revenues of between $82 and $85
million. SciClone is raising its earnings per share guidance and now
expects earnings per share for the year 2010 to be between $0.41 and $0.46.
Cash, cash equivalents and investments at December 31, 2010, are now
projected to be greater than $56 million.
Significant Corporate Milestones
-- Provide topline results in the phase 2 trial of SCV-07 in HCV by the
end of 2010;
-- File a CTA, (Clinical Trial Application), the initiation of the product
registration process, for ondansetron RapidFilm®, around the end of
2010;
-- Initiate phase 2b trial of SCV-07 in OM in late 2010 or early 2011;
-- Obtain regulatory approval for DC Bead® in China in 2011;
-- Achieve revenues of $82 to $85 million and EPS of $0.41 to $0.46 for
the full year 2010.
Third Quarter 2010 Pipeline and Business Updates
In September, SciClone announced that researchers have identified two
unique gene clusters that were associated with subjects who responded to
treatment in the Company's phase 2a proof of concept study of SCV-07 for
the prevention of severe oral mucositis (OM; WHO grades 3-4) in patients
with advanced head and neck cancer. The Company believes that the discovery
of these gene clusters may assist in providing the framework for
effectively identifying those patients most likely to respond to SCV-07 in
future clinical trials based on their individual genomic profile or gene
signature. Based on the findings from the phase 2a study and completed
discussions with the U.S. Food and Drug Administration, SciClone is
planning to initiate a phase 2b study in late 2010 or early 2011. As
compared to the completed phase 2a trial, the phase 2b study design is
expected to include higher doses of SCV-07 and be adequately powered to
demonstrate statistical significance. Additionally, researchers expect to
continue to investigate the role of specific genetic profiles on patient
response to SCV-07, as well as the potential link between cytokine activity
and SCV-07's sub-cellular mechanism of action.
In October 2010, SciClone announced that Silicon Valley Bank (SVB), the
primary subsidiary of SVB Financial Group, has increased the prior debt
financing facility (the Bank Line) to the Company's operating subsidiaries.
The new Bank Line, for a total of $15 million, provides SciClone's
subsidiaries with access to additional working capital to support the
Company's growth strategy. In late 2008, SVB provided its initial $6
million Bank Line to SciClone's operating subsidiaries, though the Company
has not borrowed against that Bank Line.
In November, the Company was awarded a total of $978,000 in non-taxable
grants as part of the U.S. Department of Treasury's Therapeutic Discovery
Project Program related to its research and development activities in
SCV-07 and ZADAXIN.
Third Quarter Conference Call
SciClone will hold a conference call today at 4:30 pm ET to discuss third
quarter 2010 financial results and give a business and product update for
2010. The call will be hosted by Friedhelm Blobel, and Gary Titus, Senior
Vice President and Chief Financial Officer.
LIVE CALL:
866.831.6224 (U.S./Canada)
617.213.8853 (International)
17214706 (Participant code)
REPLAY:
888.286.8010 (U.S./Canada)
617.801.6888 (International)
Passcode: 79622734
(Replay available from Monday, November 8, 2010 at 7:30 p.m. ET until
Monday, November 15, 2010)
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 only accurate at the time of
the conference call, and SciClone will take no responsibility for providing
updated information except as required by law.
About SciClone
SciClone Pharmaceuticals (NASDAQ: SCLN) is a revenue-generating,
China-centric, specialty pharmaceutical company with a substantial
international business and a product portfolio of novel therapies for
cancer and infectious diseases. The Company is focused on continuing sales
growth and executing a clinical development strategy with prudently managed
costs. ZADAXIN® (thymalfasin) is approved in over 30 countries for the
treatment of hepatitis B (HBV) and hepatitis C (HCV), certain cancers, and
as a vaccine adjuvant. In addition to further studying thymalfasin's use as
a vaccine enhancer, SciClone is planning to evaluate SCV-07 in a phase 2b
trial to modify the course of oral mucositis in patients with head and neck
cancer; and is evaluating SCV-07 in a phase 2b trial for the treatment of
HCV. The Company also has exclusive commercialization and distribution
rights in China to a novel treatment for advanced liver cancer, DC Bead®,
currently under review by regulatory agencies in that country.
Additionally, SciClone owns exclusive commercialization and distribution
rights to the anti-nausea drug ondansetron RapidFilm® in China, including
Hong Kong and Macau, and Vietnam. The Company intends to seek regulatory
approval for the product, commonly used to treat and prevent nausea and
vomiting caused by chemotherapy, radiotherapy, and surgery, in these
markets. For additional information, please visit www.sciclone.com.
Forward-Looking Statements
This press release contains forward-looking statements regarding expected
financial results and expenses, regulatory decisions and development
objectives and timing 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 risks and
uncertainties include the course, cost and outcome of regulatory decisions
in China, the on-going regulatory investigations and its independent
investigation, the Company's ability to execute on its goals for ZADAXIN
sales to China, execute on its objectives for revenue in fiscal 2010, risks
related to operating an international business and risks relating to the
clinical trial process, including the regulatory approval and the process
of initiating trials at, and enrolling patients at, clinical sites.
SciClone cannot predict the timing or outcome of its own internal
investigation, of the SEC and DOJ investigations, of the various
litigations that have or may be filed subsequent to its announcement of the
investigations, or of its efforts to cooperate with those investigations,
however the Company expects to incur substantial expenses in connection
with the investigations and the results of the investigations could include
fines and changes in its internal control or other remediation 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.
DC Bead is a registered trademark of Biocompatibles UK Limited.
RapidFilm is a registered trademark of Labtec Gesellschaft für
technologische Forschung und Entwicklung mbH.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Product sales $ 22,840 $ 17,240 $ 61,496 $ 54,280
Cost of product sales 3,146 3,098 9,445 9,185
-------- -------- -------- --------
Gross margin 19,694 14,142 52,051 45,095
Operating expenses:
Research and development 2,618 4,101 7,700 12,498
Sales and marketing 5,445 4,625 15,996 13,523
General and administrative 3,820 3,137 10,403 9,076
-------- -------- -------- --------
Total operating expenses 11,883 11,863 34,099 35,097
-------- -------- -------- --------
Income from operations 7,811 2,279 17,952 9,998
Interest and investment income 31 23 79 128
Interest and investment expense (19) (49) (57) (149)
Other income (expense), net 64 (27) (19) (4)
-------- -------- -------- --------
Income before income tax 7,887 2,226 17,955 9,973
Provision for income tax 259 162 654 474
-------- -------- -------- --------
Net income $ 7,628 $ 2,064 $ 17,301 $ 9,499
======== ======== ======== ========
Basic net income per share $ 0.16 $ 0.04 $ 0.36 $ 0.20
Diluted net income per share $ 0.16 $ 0.04 $ 0.35 $ 0.20
Weighted average shares used in
computing:
Basic net income per share 47,795 46,615 47,535 46,360
Diluted net income per share 49,169 49,569 49,398 47,097
UNAUDITED SELECTED BALANCE SHEET DATA
(in thousands)
September 30, December 31,
2010 2009
------------- -------------
Balance Sheet Data:
Cash and cash equivalents $ 45,697 $ 29,687
Short-term investments 7,278 1,717
Accounts receivable 21,588 21,394
Inventories 7,376 10,149
Long-term investments 390 415
Total assets 85,592 66,900
Total current liabilities 7,188 8,528
Total Shareholders' equity 77,404 57,393
Source: SciClone Pharmaceuticals, Inc.
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