SciClone Reports Financial Results for the Three and Nine Months Ended September 30, 2013

SciClone Reports Financial Results for the Three and Nine Months Ended 
September 30, 2013 
FOSTER CITY, CA -- (Marketwired) -- 11/12/13 --  SciClone
Pharmaceuticals, Inc. (NASDAQ: SCLN) today reported financial results
for the third quarter and for the nine months ended September 30,
2013. 


 
--  Revenues: In the third quarter 2013, SciClone reported revenues of
    $35.2 million, compared to $40.7 million for the same period in 2012;
    revenues for the nine months ended September 30, 2013 were $94.3
    million, compared to $123.1 million for the same period in 2012.
--  GAAP Basic EPS: In the third quarter 2013, SciClone reported GAAP
    basic earnings per share of $0.16, compared to a loss of ($0.23) for
    the same period in 2012, and $0.20 for the nine months ended September
    30, 2013, compared to $0.14 for the same period in 2012.
--  Non-GAAP EPS: In the third quarter 2013, SciClone reported non-GAAP
    earnings per share of $0.18, compared to $0.21 for the same period in
    2012, and $0.35 for the nine months ended September 30, 2013, compared
    to $0.61 for the same period in 2012.

  
ZADAXIN(R) sales increased 15% in the third quarter of 2013, compared
to the second quarter of 2013, and, combined with revenues from other
marketed products, drove our overall company revenue growth of 20% in
the third quarter of 2013, compared to the second quarter of 2013.
ZADAXIN revenues were $25.0 million, a 20% decrease compared to $31.2
million for the same period of last year. ZADAXIN revenues were $65.8
million for the nine months ended September 30, 2013, a $25.6 million
or 28% decrease, compared to $91.4 million for the same period of
last year. 
On a GAAP basis, SciClone's net income for the third quarter of 2013
was $8.7 million, compared to a loss of $13.2 million for the same
period of last year, or $0.16 per share on both a basic and diluted
basis, compared with a loss of ($0.23) per share on both a basic and
diluted basis for the same period of last year. For the nine months
ended September 30, 2013, SciClone reported net income of $10.9
million or $0.20 per share on both a basic and diluted basis,
compared to net income of $7.7 million or $0.14 and $0.13 per share
on a basic and diluted basis, respectively, for the same pe
riod last
year.  
SciClone's non-GAAP net income for the third quarter of 2013 was $9.7
million, compared to $12.0 million for the same period of last year,
or $0.18 per share on both a basic and diluted basis for the third
quarter of 2013, compared to $0.21 per share on both a basic and
diluted basis for the same period of last year. For the nine months
ended September 30, 2013, SciClone reported a non-GAAP net income of
$19.1 million or $0.35 per share on both a basic and diluted basis,
respectively, compared to $34.6 million or $0.61 and $0.59 per share
on a basic and diluted basis, respectively, for the same period of
last year. 
Commented Friedhelm Blobel, PhD., SciClone's Chief Executive Officer:
"The China pharmaceuticals market continues to represent significant
long-term growth opportunities, but also presents some near-term
challenges, as the government continues to expand healthcare access
and coverage throughout the population, but also conducts an
investigation of pharmaceutical sales and marketing practices.
Despite these external challenges, we believe that SciClone is well
positioned for growth, especially given the significant strengthening
of our compliance practices over the last several years. In the third
quarter, we were able to grow ZADAXIN sales by 15% compared to the
second quarter of 2013, reflecting continued strong demand. While we
expect to see continued ZADAXIN growth through the remainder of the
year, we expect the rate of growth to continue to be affected by
external economic and industry factors. We are working diligently to
increase ZADAXIN market penetration in major and secondary markets,
and to potentially expand utilization in additional therapeutic
indications." 
Continued Dr. Blobel: "Establishing a profitable promotion business
remains a valuable commercial strategy and key priority for SciClone.
Our negotiations to restructure our promotion partnerships with
Baxter and Pfizer have proceeded well. Our partnership with Baxter
has been finalized, and we are pleased with the financial terms we
have achieved. We are also pleased with the direction of our
discussions with Pfizer. We are disappointed not to have reached an
agreement with Sanofi on favorable terms, and that agreement will
expire at the end of the 2013. Accordingly, we are working on a
transition plan with Sanofi and expect to complete that before the
end of the year. We are working on additional promotion agreements
that can be favorably structured relative to profitability potential
and quality of products. We look forward to continuing to build the
success of our proprietary and promotion product portfolio, and to
seeing programs in our development portfolio progress to the market." 
Sales and marketing expenses for the third quarter of 2013 were $16.5
million, compared to $17.1 million for the same period of last year.
The decrease of $0.6 million in the 2013 period was a result of the
expense-saving measures we implemented in our sales and marketing
activities with the goal of achieving profitability in all of our
product lines. For the nine months ended September 30, 2013, sales
and marketing expenses were $42.0 million, compared with $52.2
million for the same period of last year. 
Research and development (R&D) expenses for the third quarter of 2013
were $0.6 million, compared with $0.9 million for the same period of
last year. The decrease in R&D expenses from operations for the third
quarter is primarily due to the discontinuation of the Company's
SCV-07 program. For the nine months ended September 30, 2013, R&D
expenses were $6.3 million, which included $5.0 million in upfront
costs related to new in-license arrangements with Zensun and Taiwan
Liposome Company (TLC), compared to $5.8 million for the same period
of last year.  
General and administrative (G&A) expenses for the third quarter of
2013 were $8.2 million, compared with $5.7 million for the same
period of 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 and bad debt expense. For the
nine months ended September 30, 2013, general and administrative
expenses were $24.8 million, compared with $14.1 million for the same
period of last year. 
In July 2013, the Company and the representatives of the former
stockholders of NovaMed entered into a Confidential "Escrow
Settlement Agreement" pursuant to which the Company retained
approximately $0.8 million in cash and 342,300 shares of its common
stock, having a combined value of approximately $2.6 million on the
settlement date that was recorded to other income during the third
quarter of 2013. 
As of September 30, 2013, cash and cash equivalents, restricted cash
and investments totaled $89.2 million, compared to $87.0 million as
of December 31, 2012. In August 2013, SciClone's Board of Directors
authorized an increase in its share repurchase program by $10.0
million to $50.5 million, of which approximately $38.2 million had
been utilized through September 30, 2013, and approximately $12.3
million remained available.  
SciClone has presen
ted non-GAAP information above as the Company
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." 
SciClone is confirming its revenue guidance for 2013 at the lower end
of the range between $135 and $145 million, and its non-GAAP earnings
per share guidance at the lower end of the range between $0.55 and
$0.61. The Company's guidance expectations are subject to some
uncertainty regarding the fourth quarter impact of the non-renewal of
the Sanofi promotion agreement, and are based on its continued
promotion of Sanofi products as planned through the end of 2013. If
current transition discussions with Sanofi do not result in
continuing to promote their products during the fourth quarter as
planned, the Company may experience a decline in revenues and in
earnings per share. SciClone expects that the expiration of the
Sanofi promotion agreement will lead to a restructuring within some
parts of the organization, which may result in a restructuring charge
in the fourth quarter. 
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 any
repurchases of common stock during 2013, any in-licensing related
payments to Zensun and TLC, and restructuring charge payments.  
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, Wilson W. Cheung, Senior
Vice President and CFO.  
LIVE CALL:
 866.277.1184 (U.S./Canada)
 617.597.5360 (International) 
Passcode: 96149779  
REPLAY:
 888.286.8010 (U.S./Canada) 
617.801.6888 (International)
 Passcode: 87005117
 (Replay available
from Tuesday, November 12, 2013, at 10:30 am ET until 11:59 pm ET on
Tuesday, November 19, 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 risks 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 its 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 does not believe are beneficial
and the uncertainties as to the timing and impact of the non-renewal
of our agreement with Sanofi; operating an international business;
uncertainty in the prospects for unapproved products, including
ProFlow(TM) and Neucardin(R), 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     Nine Months Ended  
                                     September 30,         September 30,    
                                 --------------------  -------------------- 
              
                      2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
Net revenues:                                                               
  Product sales                  $  25,273  $  32,137  $  67,489  $  98,584 
  Promotion services                 9,953      8,556     26,835     24,546 
                                 ---------  ---------  ---------  --------- 
    Total net revenues              35,226     40,693     94,324    123,130 
                                                                            
Operating expenses:                                                         
  Cost of product sales              3,808      5,474     11,631     16,670 
  Sales and marketing               16,498     17,063     41,966     52,207 
  Amortization of acquired                                                  
   intangible assets, related to                                            
   sales and marketing                   -        879          -      2,645 
  Research and development             550        864      6,321      5,750 
  General and administrative         8,238      5,673     24,792     14,089 
  Intangible asset impairment            -     42,728          -     42,728 
  Contingent consideration               -    (12,773)         -    (14,860)
                                 ---------  ---------  ---------  --------- 
    Total operating expenses        29,094     59,908     84,710    119,229 
                                 ---------  ---------  ---------  --------- 
                                                                            
Income (loss) from operations        6,132    (19,215)     9,614      3,901 
                                                                            
Non-operating income (expense):                                             
  Interest income                       31         28         62         73 
  Interest expense                     (13)       (57)       (95)      (167)
  Other income (expense), net        2,711         (7)     2,775        (22)
                                 ---------  ---------  ---------  --------- 
Income (loss) before provision                                              
 for income tax                      8,861    (19,251)    12,356      3,785 
Provision for income tax               153     (6,090)     1,428     (3,947)
                                 ---------  ---------  ---------  --------- 
Net income (loss)                $   8,708  $ (13,161) $  10,928  $   7,732 
                                 =========  =========  =========  ========= 
                                                                            
Basic net income (loss) per                                                 
 share                           $    0.16  $   (0.23) $    0.20  $    0.14 
Diluted net income (loss) per                                               
 share                           $    0.16  $   (0.23) $    0.20  $    0.13 
                                                                            
Weighted average shares used in                                             
 computing:                                                                 
  Basic net income (loss) per                                               
   share                            53,591     56,617     53,931     57,184 
  Diluted net income (loss) per                                             
   share                            55,070     56,617     55,330     59,161 
                                                                            
                                                                            
                                                                            
                                                                            
                       SCICLONE PHARMACEUTICALS, INC.                       
               RECONCILIATION OF GAAP TO NON-GAAP NET INCOME                
                  (in thousands, except per share amounts)                  
                                (unaudited)                                 
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                     September 30,         September 30,    
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
GAAP net income (loss)           $   8,708  $ (13,161) $  10,928  $   7,732 
Non-GAAP adjustments:                                                       
  Employee stock-based                                                      
   compensation                        945      1,163      3,208      3,199 
  In-license upfront costs               -          -      5,000          - 
  Amortization of acquired                                                  
   intangible assets                     -        879          -      2,645 
  Intangible asset impairment            -     42,728          -     42,728 
  Contingent consideration               -    (12,773)         -    (14,860)
  Net tax benefit related to                                                
   NovaMed deferred tax assets                                              
   and liabilities                       -     (6,800)         -     (6,800)
                                 ---------  ---------  ---------  --------- 
    Non-GAAP net income          $   9,653  $  12,036  $  19,136  $  34,644 
                                 =========  =========  =========  ========= 
                                                                            
Non-GAAP basic net income per                                               
 share                           $    0.18  $    0.21  $    0.35  $    0.61 
Non-GAAP diluted net income per                                             
 share                           $    0.18  $    0.21  $    0.35  $    0.59 
                                                                            
Weighted average shares used in                                             
 computing:                                                                 
Non-GAAP basic net income per                                               
 share                              53,591     56,617     53,931     57,184 
Non-GAAP diluted net income per                                             
 share                              55,070     58,289     55,330     59,161 

 
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 int
ernally 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.
--  Intangible assets impairment. We recorded a one-time non-cash
    impairment loss to fully write-down the intangible assets acquired in
    connection with the acquisition of NovaMed. The impairment loss on
    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.
--  Net tax benefit related to NovaMed deferred tax assets and
    liabilities. We recorded a non-cash net tax benefit related to
    NovaMed, primarily due to the impairment of intangible assets, which
    resulted in reversal of related deferred tax liabilities, and the
    impact of recording a full valuation allowance on any remaining
    NovaMed deferred tax assets.
    
    

 
                                                                            
                       SCICLONE PHARMACEUTICALS, INC.                       
                    UNAUDITED SELECTED BALANCE SHEET DATA                   
                               (in thousands)                               
                                                                            
                                               September 30,   December 31, 
                                                   2013            2012     
                                              --------------  --------------
                                                                            
Cash, cash equivalents, and investments       $       89,157  $       86,987
Accounts receivable                                   35,401          38,109
Inventories                                            9,850          10,424
Goodwill                                              34,992          34,313
Total assets                                         172,837         174,071
Total current liabilities                             24,908          30,812
Deferred tax liabilities                                 382             153
Short-term borrowings                                      -           1,445
Total shareholders' equity                           147,924         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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