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SciClone Reports Financial Results for the Three and Six Months Ended June 30, 2013 and Updates 2013 Guidance

SciClone Reports Financial Results for the Three and Six Months Ended June 30, 
2013 and Updates 2013 Guidance 
FOSTER CITY, CA -- (Marketwired) -- 08/07/13 --  SciClone
Pharmaceuticals, Inc. (NASDAQ: SCLN) today reported financial results
for the three and six months ended June 30, 2013, and updated
guidance for 2013.  
Overall revenues were $59.1 million, a decrease of $23.3 million or
28% for the first half of 2013, compared to $82.4 million for the
same period of the prior year. ZADAXIN(R) revenues were $40.8
million, a 32% decrease compared to $60.2 million for the same period
in the prior year. Revenues attributable to the primary care and
oncology product lines were $18.3 million for the six months ended
June 30, 2013, a decrease of $3.9 million, compared to $22.2 million
for the same period in the prior year. For the three months ended
June 30, 2013, total revenues were $29.3 million compared to $41.4
million for the same period of the prior year. The previously
announced channel inventory build-up that impacted sales for the last
three quarters has been corrected, and the Company believes channel
inventory returned to normal levels as of June 30, 2013. During 2013
the Company made significant organizational and management
enhancements designed to improve its sales and marketing performance
going forward, including the hiring of an experienced Chief Executive
Officer for China Operations. 
Commented Friedhelm Blobel, Ph.D., SciClone Chief Executive Officer:
"We are pleased to report that the ZADAXIN channel inventory build-up
that slowed revenue growth in the last three quarters has been
resolved. We are encouraged by the growth in hospital demand for
ZADAXIN compared to the year ago period, which underscores ZADAXIN's
importance as a growth driver for our Company, and which we
anticipate to continue through the second half of the year. While we
are disappointed by the decrease in revenue for the first half of
2013, these results were in line with our expectations. With channel
inventory at normal levels, and with excellent progress on building
our team, we are focusing on reestablishing our Company's growth
trajectory as well as our ongoing efforts to operate with the highest
levels of compliance." 
Continued Dr. Blobel: "Our key strategies are t
o expand sales of
ZADAXIN in new markets and in new indications in the mid-term, as
well as to establish profitability throughout our product promotion
business and to drive our long-term growth through strategic
expansion and diversification of our marketed products. We believe we
have made progress in renegotiations with our promotion partners,
creating a foundation for greater profitability going forward in
these and future promotion arrangements, although with a smaller
product portfolio. We are extremely pleased with the licensing
collaborations we established in the second quarter -- with Zensun
(Shanghai) Science & Technology for Neucardin(TM) and with Taiwan
Liposome Company (TLC) for ProFlow(R). We believe that these two
products, which are quite advanced in their regulatory status and are
both novel, therapeutically differentiated and commercially
attractive cardiovascular products, have revenue potential on par
with, or even greater than, ZADAXIN. We look forward to working with
our new partners to advance these promising products through the
regulatory and commercial process and onto the China market." 
As previously disclosed, SciClone required consultation with the
Securities and Exchange Commission on one aspect of its accounting
for one of its contracts, which caused a delay in announcing its full
financial results and in filing of the Company's first quarter 2013
Form 10-Q. The result of that process is that SciClone is continuing
to use the same accounting methodology for that contract as in prior
years, and will, therefore, be able to conclude the process for
filing its first quarter 2013 Form 10-Q, which SciClone expects to
file on or around August 9, 2013 simultaneously with the Form 10-Q
for the second quarter. SciClone's full results for the first and
second quarters of 2013 on a GAAP and non-GAAP basis are included in
the tables accompanying this press release. 
Financial Results 
On a GAAP basis, SciClone's net income for the six months ended June
30, 2013 was $2.2 million, compared with $20.9 million for the same
period in the prior year, or $0.04 per share on both a basic and
diluted basis, compared with $0.36 and $0.35 per share on a basic and
diluted basis, respectively, for the same period in the prior year.
For the three months ended June 30, 2013, SciClone reported a net
loss of $2.0 million or ($0.04) per share on both a basic and diluted
basis, compared to net income of $11.2 million or $0.20 and $0.19 per
share on a basic and diluted basis, respectively, for the same period
of the prior year.  
SciClone's non-GAAP net income for the six months ended June 30, 2013
was $9.5 million, compared to $22.6 million for the same period in
the prior year, or $0.18 and $0.17 per share on a basic and diluted
basis, respectively, for the six months ended June 30, 2013, compared
to $0.39 and $0.38 per share for the same period in the prior year.
For the three months ended June 30, 2013, SciClone reported a
non-GAAP net income of $4.3 million or $0.08 per share on both a
basic and diluted basis, compared to $12.1 million or $0.21 and $0.20
per share on a basic and diluted basis, respectively, for the same
period of the prior year. 
SciClone believes this non-GAAP information is useful for investors,
taken in conjunction with SciClone's GAAP financial statements,
because management uses such information internally for its
operating, budgeting and financial planning purposes. Non-GAAP
information is not prepared under a comprehensive set of accounting
rules and should only be used to supplement an understanding of
SciClone's operating results as reported under GAAP. The non-GAAP
calculations and reconciliation are provided in the accompanying
table titled "Reconciliation of GAAP to Non-GAAP Net Income." 
Sales and marketing expenses for the six months ended June 30, 2013
were $25.5 million compared with $35.1 million for the same period
last year. In 2013, the Company began expense-saving measures in its
sales and marketing activities with the goal of bringing greater
focus, efficiency and cost-effectiveness to its sales and marketing
activities and contributing to its ability to achieve profitability
in all our product lines. These measures included the strategic
re-sizing of its sales force which, combined with departures, led to
a reduction of over 150 salespersons compared to June 30, 2012. For
the three months ended June 30, 2013, sales and marketing expenses
were $14.3 million, compared with $17.5 million, for the same period
last year.  
Research and development (R&D) expenses for the six months ended June
30, 2013 were $5.8 million, which included $5.0 million in upfront
costs related to new in-license arrangements with Zensun and TLC in
the second quarter. Excluding these upfront costs, R&D expenses were
$0.8 million for the six months ended June 30, 2013, compared with
$4.9 million for the same period last year. The decrease in R&D
expenses from operations for the six months ended June 30, 2013 is
primarily due to the discontinuation of the Company's SCV-07 program.
Excluding these upfront costs, R&D expenses were $0.4 million for the
three months ended June 30, 2013, compared with $1.5 million for the
same period last year.  
General and administrativ
e (G&A) expenses for the six months ended
June 30, 2013 were $16.6 million, compared with $8.4 million for the
same period last year. The increases were primarily attributable to
higher legal and accounting costs associated with the ongoing
government investigation, improvements to the Company's Foreign
Corrupt Practices Act (FCPA) compliance efforts, legal matters
associated with the MEDA arbitration, the escrow claim related to the
NovaMed acquisition and the restatement of previous financial
statements, as well as higher G&A personnel related costs. For the
three months ended June 30, 2013, G&A expenses were $8.0 million,
compared with $4.5 million, for the same period in the prior year.  
As of June 30, 2013, cash and cash equivalents, restricted cash, and
investments totaled $78.0 million, compared with $87.0 million as of
December 31, 2012. On July 2nd, the Company received $18 million of
additional cash as a result of an accounts receivable payment that
was delayed due to a banking holiday. In August 2013, SciClone's
Board of Director's authorized an increase in its share repurchase
program by $10.0 million to $50.5 million, of which approximately
$30.6 million has been utilized and approximately $19.9 million
remains available.  
Updated Guidance for 2013 
SciClone expects that ZADAXIN sales will rebound in the second half
of 2013, as anticipated and previously communicated, and that
increasing hospital demand will continue to be a major contributor to
the Company's revenue and profitability over the long term. The
Company also believes that there are other factors that may affect
its performance in the second half of the year, and considers it
prudent at this time to update its financial guidance for 2013.
Accordingly, SciClone is announcing updated revenue and non-GAAP EPS
for the fiscal year ending December 31, 2013, which excludes the
impact of its upfront licensing payments to Zensun and TLC, the $12.0
collateralized loan to Zensun, and common stock repurchase. 
As SciClone focuses on enhancing the profitability of its oncology
and primary care businesses by restructuring its promotion agreements
at more favorable terms, some products that are unprofitable, or have
become so because of significant price reduction through inclusion in
China's Essential Drug List (EDL), have and will be eliminated from
its portfolio. The reduction in the number of marketed products will
decrease revenue in the short term, but may not have an impact on
overall profitability. SciClone also believes ZADAXIN revenues in the
second half of the year will grow by approximately 50% compared to
the first half, as the channel inventory build-up that affected
revenue in the last three quarters has been resolved. SciClone
therefore anticipates 2013 revenues to be between $135 million and
$145 million.  
Apart from ongoing operational expenses, the Company's legal and
accounting fees relative to the SEC/DOJ investigations and recent
accounting challenges have had a near-term negative impact on its
earnings per share expectations of more than $0.10. While SciClone
expects that these legal and accounting expenses can be reduced going
forward, the Company is revising its earnings estimates for 2013. The
Company therefore expects non-GAAP earnings per share for the full
year 2013 to be between $0.55 and $0.61, including an estimated $0.05
contribution to EPS from the settlement of the Company's escrow claim
in the second half of 2013. SciClone's non-GAAP EPS forecast for 2013
excludes employee stock-based compensation and other expenses
described in the Company's reconciliation of GAAP to non-GAAP income. 
SciClone projects that cash and investments as of December 31, 2013
will be greater than $105 million, which remains unchanged from
previous guidance. This amount excludes the cash impact of the
upfront payments for the in-licensing deals, any future repurchases
of common stock from its remaining $19.9 million share repurchase
plan and the $12.0 million collateralized loan to Zensun. 
Conference Call Today 
SciClone is hosting a conference call today at 8:30 am ET (5:30 am
PT) to provide a financial update. The call will be hosted by
Friedhelm Blobel, Ph.D., President and CEO, and Wilson W. Cheung,
Senior Vice President and CFO.  
LIVE CALL: 
 800.299.9086 (U.S./Canada)
 617.786.2903
(International)
 Passcode: 10938708  
REPLAY: 
 888.286.8010 (U.S./Canada)
 617.801.6888 (International) 
Passcode: 83058937 
 (Replay available from Wednesday, August 7,
2013, at 12:30 pm ET until 11:59 pm ET on Wednesday, August 14, 2013) 
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.  
About SciClone  
SciClone Pharmaceuticals is a revenue-generating, specialty
pharmaceutical company with a substantial commercial business in
China and a product portfolio of therapies for oncology, infectious
diseases and cardiovascular, urological, respiratory, and central
nervous system disorders. SciClone's proprietary lead product,
ZADAXIN(R) (thymalfasin), is approved in over 30 countries and may be
used for the treatment of hepatitis B (HBV), hepatitis C (HCV), and
certain cancers, and as a vaccine adjuvant, according to the local
regulatory approvals. Through its promotion business with
pharmaceutical partners, SciClone markets multiple branded products
in China which are therapeutically differentiated. The Company has
successfully in-licensed products with the potential to become future
market leaders and to drive the Company's long-term growth. SciClone
is a publicly-held corporation based in Foster City, California, and
trades on the NASDAQ Global Select Market under the symbol SCLN. For
additional information, please visit www.sciclone.com.  
Forward-Looking Statements 
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 future pricing decisions by authorities in China;
the on-going regulatory investigations; the Company's ability to
execute on its goals in China and on its objectives for revenue in
fiscal 2013; the challenges presented by integrating an acquired
business into existing operations; the effect of management changes
and turnover in its China operations; the dependence of our current
and future revenue and prospects on third-party license, promotion or
distribution agreements including the need to renew such agreements
or end arrangements that the Company do
es not believe are beneficial;
operating an international business; uncertainty in the prospects for
unapproved products, including ProFlow and Neucardin, including
uncertainties as to pricing and competition 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; and the effect of changes in its practices and policies
related to the Company's compliance programs. SciClone cannot predict
the timing or outcome of the ongoing SEC and DOJ investigations, or
of the level of its efforts required to cooperate with those
investigations, however the Company has incurred substantial expenses
in connection with the investigations and related litigation and
expects to incur substantial additional expense and the
investigations could result in fines and further changes in its
internal control or other remediation measures that could adversely
affect its financial results. 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.  
SciClone, SciClone Pharmaceuticals, the SciClone Pharmaceuticals
design, the SciClone logo and ZADAXIN are registered trademarks of
SciClone Pharmaceuticals, Inc. in the United States and numerous
other countries. 


 
                                                                            
                       SCICLONE PHARMACEUTICALS, INC.                       
              UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS               
                  (in thousands, except per share amounts)                  
                                                                            
                    Three Months Ended Three Months Ended  Six Months Ended 
                         March 31,          June 30,           June 30,     
                    ------------------ ------------------ ----------------- 
                       2013     2012     2013      2012     2013     2012   
                    --------- -------- --------  -------- -------- -------- 
Net revenues:                                                               
  Product sales     $  20,533 $ 33,163 $ 21,683  $ 33,284 $ 42,216 $ 66,447 
  Promotion                                                                 
   services             9,273    7,905    7,609     8,085   16,882   15,990 
                    --------- -------- --------  -------- -------- -------- 
    Total net                                                               
     revenues          29,806   41,068   29,292    41,369   59,098   82,437 
                                                                            
Operating expenses:                                                         
  Cost of product                                                           
   sales                4,618    5,532    3,205     5,664    7,823   11,196 
  Sales and                                                                 
   marketing           11,199   17,640   14,269    17,504   25,468   35,144 
  Amortization of                                                           
   acquired                                                                 
   intangible                                                               
   assets, related                                                          
   to sales and                                                             
   marketing                -      884        -       882        -    1,766 
  Research and                                                              
   development            365    3,393    5,406     1,493    5,771    4,886 
  General and                                                               
   administrative       8,600    3,961    7,954     4,455   16,554    8,416 
  Contingent                                                                
   consideration            -     (916)       -    (1,171)       -   (2,087)
                    --------- -------- --------  -------- -------- -------- 
    Total operating                                                         
     expenses          24,782   30,494   30,834    28,827   55,616   59,321 
                    --------- -------- --------  -------- -------- -------- 
                                                                            
Income (loss) from                                                          
 operations             5,024   10,574   (1,542)   12,542    3,482   23,116 
                                                                            
Non-operating                                                               
 income (expense):                                                          
  Interest income          19       30       12        15       31       45 
  Interest expense        (37)     (55)     (45)      (55)     (82)    (110)
  Other income                                                              
   (expense), net         (16)      (1)      80       (14)      64      (15)
                    --------- -------- --------  -------- -------- -------- 
Income (loss)                                                               
 before provision                                                           
 for income tax         4,990   10,548   (1,495)   12,488    3,495   23,036 
Provision for                                                               
 income tax               787      883      488     1,260    1,275    2,142 
                    --------- -------- --------  -------- -------- -------- 
Net income (loss)   $   4,203 $  9,665 $ (1,983) $ 11,228 $  2,220 $ 20,894 
                    ========= ======== ========  ======== ======== ======== 
                                                                            
Basic net income                                                            
 (loss) per share   $    0.08 $   0.17 $  (0.04) $   0.20 $   0.04 $   0.36 
Diluted net income                                                          
 (loss) per share   $    0.08 $   0.16 $  (0.04) $   0.19 $   0.04 $   0.35 
                                                                            
Weighted average                                                            
 shares used in                                                             
 computing:                                                                 
  Basic net income                                                          
   (loss) per share    54,084   57,701   54,124    57,239   54,104   57,470 
  Diluted net                                                               
   income (loss)                                                            
   per share           55,472   59,691   54,124    59,517   55,461   59,612 
                                                                            
                                                                            

 
                                                                            
                       SCICLONE PHARMACEUTICALS, INC.                       
               RECONCILIATION OF GAAP TO NON-GAAP NET INCOME                
                  (in thousands, except per share amounts)                  
                                (unaudited)                                 
                                                                            
                    Three Months Ended Three Months Ended  Six Months Ended 
                        March 31,           June 30,           June 30,     
                    -----------------  ------------------ ----------------- 
                      2013     2012      2013      2012     2013     2012   
                    -------- --------  --------  -------- -------- -------- 
GAAP net income                                  
                           
 (loss)             $  4,203 $  9,665  $ (1,983) $ 11,228 $  2,220 $ 20,894 
Non-GAAP                                                                    
 adjustments:                                                               
  Employee stock-                                                           
   based                                                                    
   compensation        1,019      922     1,244     1,114    2,263    2,036 
  In-license                                                                
   upfront costs           -        -     5,000         -    5,000        - 
  Amortization of                                                           
   acquired                                                                 
   intangible                                                               
   assets                  -      884         -       882        -    1,766 
  Contingent                                                                
   consideration           -     (916)        -    (1,171)       -   (2,087)
                    -------- --------  --------  -------- -------- -------- 
    Non-GAAP net                                                            
     income         $  5,222 $ 10,555  $  4,261  $ 12,053 $  9,483 $ 22,609 
                    ======== ========  ========  ======== ======== ======== 
                                                                            
Non-GAAP basic net                                                          
 income per share   $   0.10 $   0.18  $   0.08  $   0.21 $   0.18 $   0.39 
Non-GAAP diluted                                                            
 net income per                                                             
 share              $   0.09 $   0.18  $   0.08  $   0.20 $   0.17 $   0.38 
                                                                            
Weighted average                                                            
 shares used in                                                             
 computing:                                                                 
Non-GAAP basic net                                                          
 income per share     54,084   57,701    54,124    57,239   54,104   57,470 
Non-GAAP diluted                                                            
 net income per                                                             
 share                55,472   59,691    55,452    59,517   55,461   59,612 

 
SciClone management uses these non-GAAP financial measures to monitor
and evaluate the Company's operating results and trends on an
on-going basis and internally for operations, budgeting and financial
planning purposes. SciClone believes the non-GAAP information is
useful for investors by offering them the ability to better
understand how management evaluates the business. These non-GAAP
measures have limitations, however, because they do not include all
items of income and expenses that affect SciClone. These non-GAAP
financial measures that management uses are not prepared in
accordance with, and should not be considered in isolation of, or as
an alternative to, measurements required by GAAP. 
SciClone's non-GAAP financial measures exclude the following items
from GAAP net income (loss) and net income (loss) per share: 


 
--  Employee stock-based compensation. The effects of non-cash employee
    stock-based compensation.
--  In-license upfront costs. We recorded $5.0 million to research and
    development expense related to upfront payments made under the Zensun
    and TLC licensing agreements.
--  Amortization of acquired intangible assets. We recorded intangible
    assets in connection with the acquisition of NovaMed. The amortization
    of these intangible assets is excluded from SciClone's non-GAAP
    financial measure.
--  Contingent consideration. The contingent consideration related to the
    acquisition of NovaMed was re-measured each reporting period and the
    change in fair value was recorded as an adjustment to operating
    expense. SciClone's non-GAAP financial measure excludes the change in
    fair value of the liability for contingent consideration in connection
    with the acquisition of NovaMed.

 
                                                                            
                       SCICLONE PHARMACEUTICALS, INC.                       
                    UNAUDITED SELECTED BALANCE SHEET DATA                   
                               (in thousands)                               
                                                                            
                                                                            
                                        June 30,     March 31,  December 31,
                                          2013         2013         2012    
                                      ------------ ------------ ------------
                                                                            
Cash and investments                  $     75,266 $     93,305 $     84,228
Restricted cash and investments              2,752        2,747        2,759
Accounts receivable                         46,957       27,826       38,109
Inventories                                  8,281        7,680       10,424
Goodwill                                    34,586       34,478       34,313
Total assets                               173,141      170,242      174,071
Total current liabilities                   27,116       24,072       30,812
Deferred tax liabilities                       382          153          153
Short-term borrowings                        2,019        2,012        1,445
Total shareholders' equity                 146,004      146,038      143,022

  
Corporate Contacts 
Wilson W. Cheung 
Chief Financial Officer 
650.358.3434 
wcheung@sciclone.com  
Jane Green 
Investors/Media
650.358.1447
jgreen@sciclone.com 
 
 
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