UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) INTRODUCTION

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1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ALAN C. LEWIS, Individually And On Behalf of All Others Similarly Situated, Plaintiff, vs. SCICLONE PHARMACEUTICALS, INC., FRIEDHELM BLOBEL and GARY S. TITUS, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION NO. CLASS ACTION COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED INTRODUCTION This is a federal class action on behalf of purchasers of the common stock of SciClone Pharmaceuticals, Inc. ( SciClone or the Company ) between May 11, 2009 and August 10, 2010, inclusive (the Class Period ), seeking to pursue remedies under the Securities Exchange Act of 1934 (the Exchange Act ). As alleged herein, defendants published a series of materially false and misleading statements which defendants knew and/or deliberately disregarded were false and materially misleading at the time of such publication, and which omitted to reveal material information necessary to make defendants statements, in light of such material omissions, not materially false and misleading. OVERVIEW 1. Throughout the Class Period, SciClone engaged in the development and commercialization of therapeutics for the treatment of cancer and infectious diseases in the People s Republic of China and internationally. Its principal product is ZADAXIN for the treatment of hepatitis B and hepatitis C viruses and certain cancers, as well as for use as a

2 vaccine adjuvant or as a chemotherapy adjuvant for cancer patients with weakened immune systems. Throughout the Class Period, SciClone claimed to have commercialization rights for DC Bead, a product candidate for the treatment of advanced liver cancer in China, as well as for ondansetron RapidFilm, an oral thin film formulation of ondansetron to treat and prevent nausea and vomiting caused by chemotherapy, radiotherapy, and surgery in China and Vietnam. 2. As investors ultimately learned, however, the Company s expansion in the market in China as well as its representations concerning its systems of controls and procedures were patently untrue. Throughout the Class Period, defendants were instead engaged in illegal and improper sales and marketing activities in China and abroad. This ultimately caused the Company to become the focus of a joint investigation by the Securities and Exchange Commission ( SEC ) and the Department of Justice ( DOJ ) for possible violations of the Foreign Corrupt Practices Act ( FCPA ). Accordingly : * At all times during the Class Period, it was not true that the Company s purported success was the result of its sales, in substantial part, in China when, in fact, throughout the Class Period, defendants had propped up the Company s results by manipulating SciClone s sales abroad by engaging in illegal and improper sales behavior that eventually caused the Company to become the subject of investigations by the SEC and DOJ for violations of the FCPA. * Throughout the Class Period, it was not true that SciClone had adequate systems of internal operational or financial controls, such that SciClone s reported financial statements were true, accurate, or reliable. * As a result of the foregoing, throughout the Class Period it was not true that the Company s financial statements and reports were prepared in accordance with Generally Accepted Accounting Principles ( GAAP ) and SEC rules. * As a result of the aforementioned adverse conditions which defendants failed to disclose, throughout the Class Period, defendants lacked any reasonable basis to claim that SciClone was operating according to plan, or that SciClone could achieve guidance sponsored and/or endorsed by defendants. 2

3 3. It was only at the end of the Class Period, however, that investors ultimately learned the truth about the Company s operations after it was reported that the SEC and DOJ were investigating the Company for violations of the FCPA. At that time, shares of the Company declined almost 40% in the single trading day, on abnormally large trading volume. The chart below evidences the artificial inflation in the price of Company stock during the Class Period and the dramatic decline in the price of SciClone shares upon the truth about the Company being revealed to investors: 4. Defendants were motivated to, and did, conceal the true operational and financial condition of SciClone, and materially misrepresented and failed to disclose the conditions that were adversely affecting SciClone throughout the Class Period, because their scheme: (a) deceived the investing public regarding SciClone s business, operations, management and the intrinsic value of SciClone common stock; (b) enabled defendants to register for sale with the SEC millions of shares of Company stock; and, (c) caused plaintiff and other members of the Class to purchase SciClone common stock at artificially inflated prices. 3

4 JURISDICTION AND VENUE 5. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act [15 U.S.C. 78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by the SEC [17 C.F.R b-5]. 6. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C and 1337, and Section 27 of the Exchange Act [15 U.S.C. 78aa]. 7. Venue is proper in this District pursuant to Section 27 of the Exchange Act, and 28 U.S.C. 1391(b). SciClone maintains its principal place of business in this District and many of the acts and practices complained of herein occurred in substantial part in this District. 8. In connection with the acts alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications and the facilities of the national securities markets. PARTIES 9. Plaintiff ALAN C. LEWIS, as set forth in the accompanying certification, incorporated by reference herein, purchased the common stock of SciClone at artificially inflated prices during the Class Period and has been damaged thereby. 10. Defendant SCICLONE PHARMACEUTICALS, INC. is a Delaware corporation with its principal place of business at 950 Tower Lane, Foster City, CA According to the Company s profile, SciClone engages in the development and commercialization of therapeutics for the treatment of cancer and infectious diseases in the People s Republic of China and internationally. Its principal product is ZADAXIN for the treatment of hepatitis B and hepatitis C viruses, and certain cancers, as well as for use as a 4

5 vaccine adjuvant or as a chemotherapy adjuvant for cancer patients with weakened immune systems. Throughout the Class Period, SciClone claimed to have commercialization rights for DC Bead, a product candidate for the treatment of advanced liver cancer in China, as well as for ondansetron RapidFilm, an oral thin film formulation of ondansetron to treat and prevent nausea and vomiting caused by chemotherapy, radiotherapy, and surgery in China and Vietnam. 11. Defendant FRIEDHELM BLOBEL ( Blobel ) was, during the relevant period, Chief Executive Officer and President of the Company. During the Class Period, defendant Blobel signed and/or certified the Company s SEC filings, including but not limited to SciClone s Form(s) 10-Q and Form 10-K. 12. Defendant GARY S. TITUS ( Titus ) was, during the Class Period, Chief Financial Officer and Senior Vice-President of Finance and the Principal Accounting Officer of the Company. During the Class Period, defendant Titus signed and/or certified the Company s SEC filings, including but not limited to SciClone s Form(s) 10-Q and Form 10-K. 13. The defendants referenced above in are referred to herein as the Individual Defendants. 14. Because of the Individual Defendants positions with the Company, they had access to the adverse undisclosed information about its business, operations, products, operational trends, financial statements, markets, and present and future business prospects via access to internal corporate documents (including the Company s operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management and Board of Directors meetings and committees thereof, and reports and other information provided to them in connection therewith. 5

6 15. As officers and controlling persons of a publicly-held company whose common stock was, and is, registered with the SEC pursuant to the Exchange Act, traded on the Nasdaq National Market Exchange (the Nasdaq ), and governed by the provisions of the federal securities laws, the Individual Defendants each had a duty to promptly disseminate accurate and truthful information with respect to the Company s financial condition and performance, growth, operations, financial statements, business, products, markets, management, earnings, and present and future business prospects, and to correct any previously-issued statements that had become materially misleading or untrue, so that the market price of the Company s publicly-traded common stock would be based upon truthful and accurate information. The Individual Defendants misrepresentations and omissions during the Class Period violated these specific requirements and obligations. 16. The Individual Defendants, because of their positions of control and authority as officers and/or directors of the Company, were able to -- and did -- control the content of the various SEC filings, press releases, and other public statements pertaining to the Company during the Class Period. Each Individual Defendant was provided with copies of the documents alleged herein to be misleading prior to or shortly after their issuance and/or had the ability and/or opportunity to prevent their issuance or cause them to be corrected. Accordingly, each of the Individual Defendants is responsible for the accuracy of the public reports and releases detailed herein and is therefore primarily liable for the representations contained therein. 17. Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of SciClone common stock by disseminating materially false and misleading statements and/or concealing material adverse facts. The scheme: (a) deceived the investing public regarding SciClone s business, operations, 6

7 management and the intrinsic value of SciClone common stock; (b) enabled defendants to register for sale with the SEC millions of shares of Company stock; and, (c) caused plaintiff and other members of the Class to purchase SciClone common stock at artificially inflated prices. PLAINTIFF S CLASS ACTION ALLEGATIONS 18. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or otherwise acquired the common stock of SciClone between May 11, 2009 and August 10, 2010, inclusive (the Class ), and who were damaged thereby. Excluded from the Class are defendants; officers and directors of the Company at all relevant times; members of their immediate families and their legal representatives; heirs, successors, or assigns; and, any entity in which defendants have or had a controlling interest. 19. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, SciClone common shares were actively traded on the Nasdaq. As of May 6, 2010, the Company had over million shares of common stock issued and outstanding. While the exact number of Class members is unknown to plaintiff at this time and can only be ascertained through appropriate discovery, plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by SciClone or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 20. Plaintiff s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by defendants wrongful conduct in violation of federal law that is complained of herein. 7

8 21. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. 22. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether the federal securities laws were violated by defendants acts as alleged herein; (b) whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations, and management of SciClone; and, (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 23. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. SUBSTANTIVE ALLEGATIONS Defendants Materially False and Misleading Statements Made During the Class Period 24. 1Q:09 Results Announced. On May 11, 2009, the inception of the Class Period, SciClone published a release announcing results for the first quarter ended March 31,

9 including a purported increase in revenues of 42% compared to 1Q:08. In addition to the foregoing, this release stated, in part, the following: SciClone Reports Financial Results for the First Quarter of 2009 Revenue Increased 42% Compared to the First Quarter of 2008; Increase of Full Year Guidance for Revenues and Earnings FOSTER CITY, CA, May 11, 2009 (MARKETWIRE via COMTEX) -- SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) today reported financial results for the first quarter of Revenues for the quarter grew 42% to $15.1 million over the same period last year. SciClone reported net income of $0.1 million or $0.00 per share on a basic and diluted basis, compared to a net loss of $5.7 million, or $0.12 per share for the same period of last year. Financial Results * * * For the first quarter of 2009, product revenues from the sale of ZADAXIN were $15.1 million, an increase of 42% compared to revenues of $10.6 million for the same period in the prior year. The increase in product revenues for the first quarter of 2009 was primarily attributable to an increase in the quantity of ZADAXIN sold to China. 25. Commenting on these purported strong financial and operational results, this release also quoted defendant Blobel, in part as follows: "The continued strong revenue growth from ZADAXIN during the first quarter allows us to increase our revenue and earnings guidance for the full year. We are off to an excellent start in 2009 with our strategy to manage the company as a profit-driven biopharmaceutical company with attractive upside through its late stage development assets. Executing on our cost-containing clinical development strategy and focused expense management contributed to these better than expected results. The completion of enrollment in the RP101 trial ahead of schedule underlines the quality of the work of our clinical group and brings us an important step closer to unblinding this trial," said Friedhelm Blobel, Ph.D., SciClone's President and Chief Executive Officer. "We look forward to regular progress updates in the coming quarters on our milestones, including profitability in 2009, in-licensing efforts, and to reporting results from our clinical trials." 26. In addition to the foregoing, the Company s May 11, 2009 release also provided purported guidance, in part, as follows: 9

10 Financial Outlook for 2009 SciClone is updating its financial guidance for The Company anticipates revenues of between $65 and $67 million, an increase of approximately 20% to 24% over SciClone anticipates earnings per share for the full year to be between $0.05 and $0.07. SciClone's cash, cash equivalents, investments and restricted investments at December 31, 2009, are projected to be between $20 and $22 million. 27. Taking advantage of the artificial inflation in the price of SciClone shares caused by the publication of defendants materially false and misleading statements about the financial health and stability of the Company, on May 20, 2009, SciClone announced that it had filed a shelf registration in connection with future expected sales of as much as $50 million in Company securities. That day, defendants also published a release that stated, in part, the following: FOSTER CITY, CA, May 20, 2009 (MARKETWIRE via COMTEX) -- SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) has filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission ("SEC"). When the shelf registration statement is declared effective by the SEC, it will allow SciClone to periodically sell, in one or more offerings, up to $50 million of securities, with the amount that SciClone expects to be able to offer in the next twelve month period limited to approximately $21.8 million, subject to changes in the trading price of SciClone's common stock. Specific terms and share prices will be determined at the time of each offering under a separate prospectus supplement to be filed with the SEC at the time of each offering. SciClone has not made a decision to make any offering at this time. "As outlined in today's SEC filing, SciClone plans to use proceeds of any offering for general corporate purposes including, in particular, potential product acquisitions to build on our international sales platform," stated Gary S. Titus, Senior Vice President, Finance and Chief Financial Officer of SciClone. "Once the registration statement becomes effective, it will offer us additional flexibility in accessing capital markets over a 3 year period when market conditions are favorable and our strategic needs warrant such access." 28. 1Q:09 Form 10-Q. Also on May 11, 2009, defendants filed with the SEC the Company s 1Q:09 Form 10-Q, for the quarter ended March 31, 2009, signed by defendant Titus 10

11 and certified by defendants Blobel and Titus. In addition to making substantially similar statements concerning the Company operations and financial performance as had been published earlier, the Company s 1Q:09 Form 10-Q also stated, in part, the following: Basis of Presentation The accompanying unaudited condensed consolidated financial statements of SciClone Pharmaceuticals, Inc. ( SciClone or the Company ) have been prepared in conformity with generally accepted accounting principles in the United States ( GAAP ) consistent with those applied in, and should be read in conjunction with, the audited financial statements for the year ended December 31, 2008 included in the Company s Form 10-K as filed with the Securities and Exchange Commission. The interim financial information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. The condensed consolidated balance sheet data at December 31, 2008 is derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 29. Controls. In addition to the foregoing, the Company s 1Q:09 Form 10-Q also contained representations that attested to the purported sufficiency and reliability of the Company s controls and procedures, as follows: tem 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer ( CEO ) and Chief Financial Officer ( CFO ), we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report. Changes in Internal Controls As of December 31, 2008, we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief 11

12 Executive Officer and Senior Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures in ensuring that material information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, has been made known to them in a timely fashion. Based on this evaluation, our President and Chief Executive Officer and Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2008 because we failed to expense approximately $540,000 in research and development costs related to changes in the scope of activities performed by our clinical research organization during 2008 with respect to our RP101 clinical trial. We therefore made certain adjustments to our research and development expenses for the year ended December 31, 2008 and prepaid and other current asset balances as of December 31, This control failure was discovered prior to both the public announcement of our earnings and the completion of the audit of our financial statements by Ernst & Young LLP for the fiscal year ended December 31, As a result of the material weakness, subsequent to December 31, 2008, we have significantly strengthened our disclosure controls and procedures and internal control over financial reporting to remediate the deficiencies that gave rise to the material weakness. Specifically, we implemented the following internal control improvements in the first quarter of Changes in scope activities related to clinical trials are required to be formally documented and executed through change orders processed on a timely basis. Our finance department is now required to review all material clinical contracts (including amendments) and evaluate the underlying clinical expense estimations against the financial terms of the contract on a quarterly basis. A finance-department representative will meet with a representative of our clinical development department to validate the completeness of the agreements, including informal or in process agreements. A communication or confirmation with our contracted Clinical Research Organizations will occur quarterly regarding work performed. As required by Rule 13a-15(d) of the Exchange Act, our management, including our CEO and CFO, conducted an evaluation of our internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) to determine whether any changes in our internal control over financial reporting occurred during the first quarter of fiscal 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that 12

13 evaluation, other than as described above, there have been no such changes during the first quarter of fiscal Certifications. The Company s 1Q:09 Form 10-Q also contained certifications by defendants Blobel and Titus, which attested to the purported accuracy and completeness of the Company s financial and operational reports, in part, as follows: SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Friedhelm Blobel, Chief Executive Officer, of SciClone Pharmaceuticals, Inc. (the Registrant ), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the Report ), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: May 11, 2009 /s/ Friedhelm Blobel, Ph.D. Friedhelm Blobel, Ph.D. Chief Executive Officer * * * SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Gary S. Titus, Senior Vice President, Finance and Chief Financial Officer, of SciClone Pharmaceuticals, Inc. (the Registrant ), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the Report ), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. 13

14 Date: May 11, 2009 /s/ Gary S. Titus Gary S. Titus Senior Vice President, Finance and Chief Financial Officer 31. On July 27, 2009, defendants published a release that again conditioned investors to believe that the Company was making significant strides in developing its products in the Chinese market. As evidence of this, that day, defendants published a release that stated, in part, the following: SciClone Pharmaceuticals Expands Portfolio by Licensing Ondansetron RapidFilm for Chinese Market FOSTER CITY, CA and BALERNA, SWITZERLAND, Jul 27, 2009 (MARKETWIRE via COMTEX) -- SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) and APR Applied Pharma Research S.A. ("APR") today announced that they have entered into an exclusive licensing agreement granting SciClone the commercialization rights for APR's innovative anti-nausea drug ondansetron RapidFilm for China and Vietnam. Ondansetron RapidFilm is a rapidly dissolving thin-film formulation of a drug widely used to treat common side effects of nausea and vomiting, following surgery, chemotherapy, and radiotherapy. "As access to quality healthcare and cancer therapies expands in China, the market for novel anti-emetic pharmaceuticals is growing rapidly," said Friedhelm Blobel, PhD, President and Chief Executive Officer of SciClone Pharmaceuticals. "Meeting this growing need with a potentially best-in-class formulation makes ondansetron RapidFilm a natural fit for SciClone's portfolio and underscores our commitment to expanding our presence in the Chinese healthcare market." Paolo Galfetti, CEO of APR, stated, "SciClone's more than 175-strong sales organization in China uniquely positions the company to introduce our ondansetron thin film product to that market. We are excited to be entering into this relationship with SciClone and anticipate a successful product launch and commercialization effort." * * * Serotonin 5-HT3 receptor antagonists, such as ondansetron, are the most commonly prescribed treatment for chemotherapy and radiotherapy-induced nausea and vomiting in China, where 2008 sales reached more than $110 million, according to SciClone's estimates. 14

15 32. In an effort to further condition investors to believe that the Company was operating according to plan and that defendants were successfully introducing its products into the China market, on August 5, 2009, defendant Blobel appeared and presented a corporate overview at the BMO Capital Markets 9th Annual Focus on Healthcare Conference in New York City. 33. The statements contained in SciClone s May 11, 2009, May 20, 2009 and July 27, 2009 press releases, and in the Company s 1Q:09 Form 10-Q, as well as those statements made by defendant Blobel at the BMC Conference on August 5, 2009, were each materially false and misleading when made and known by defendants to be false, or deliberately disregarded as such, for the following reasons, among others: (a) At all times during the Class Period, it was not true that the Company s purported success was the result of its sales, in substantial part, in China because, in fact, throughout the Class Period, defendants had propped up the Company s results by manipulating SciClone s sales abroad by engaging in illegal and improper sales behavior that eventually caused the Company to become the subject of investigations by the SEC and Department of Justices for violations of the Foreign Corrupt Practices Act; (b) Throughout the Class Period, it was also not true that SciClone had adequate systems of internal operational or financial controls, such that SciClone s reported financial statements were true, accurate, or reliable; (c) As a result of the foregoing, throughout the Class Period it was not true that the Company s financial statements and reports were prepared in accordance with GAAP and SEC rules; and, 15

16 (d) As a result of the aforementioned adverse conditions which defendants failed to disclose, throughout the Class Period, defendants lacked any reasonable basis to claim that SciClone was operating according to plan, or that SciClone could achieve guidance sponsored and/or endorsed by defendants Q:09 Results Announced. On August 4, 2009, SciClone published a release announcing results for the second quarter ended June 30, including a purported increase in revenues of 59% compared to 2Q:08. In addition to the foregoing, this release stated, in part, the following: SciClone Reports Financial Results and Provides Pipeline Update for the Second Quarter of 2009 Revenues Increased 59% Compared With the Second Quarter of 2008; Full Year Guidance Increased for Revenues and Earnings FOSTER CITY, CA, Aug 04, 2009 (MARKETWIRE via COMTEX) -- SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) today reported financial results for the second quarter of Revenues for the quarter grew 59% to $22.0 million compared with the same period in SciClone reported net income of $7.3 million or $0.16 per share on a basic and diluted basis, compared with a net loss of $0.3 million, or $0.01 per share for the same period of last year. Financial Results * * * Sales and marketing expenses for the second quarter of 2009 were $4.9 million, compared with $4.2 million for the same period last year. The increase in sales and marketing expenses in the second quarter of 2009 was primarily due to increases in marketing activities related to expanding sales efforts for SciClone's lead product ZADAXIN in China. For the six months ended June 30, 2009, sales and marketing expenses were $9.2 million, compared with $8.1 million for the same period last year. 35. Commenting on these purported strong financial and operational results, this release also quoted defendant Blobel, in part as follows: "We are very pleased with the exceptional results in this quarter, which allow us to increase our revenue and earnings guidance for the full year. These robust 16

17 financial results, combined with our cost-containing clinical development strategy and focused expense management, are a result of the execution of our corporate strategy. The recent licensing of the oral anti-nausea product, ondansetron RapidFilm, shows further progress with our corporate strategy to broaden our product pipeline for China and Vietnam, where we see strong growth opportunities," said Friedhelm Blobel, Ph.D., SciClone's President and Chief Executive Officer. "Importantly, we are also preparing for the opportunity to develop ZADAXIN in certain countries as an enhancer of novel H1N1 flu vaccines for immune-compromised populations. This plan entails many uncertainties, therefore we have not reflected additional sales or earnings in our updated 2009 guidance but we are building inventories to address the potential increased demand associated with this difficult healthcare situation." 36. In addition to the foregoing, the Company s August 4, 2009 release also provided purported guidance, in part, as follows: Financial Outlook for 2009 SciClone is updating its financial guidance for The Company anticipates full year 2009 revenues of between $69 and $71 million, an increase of approximately 28% to 31% over SciClone anticipates earnings per share for the full year 2009 to be between $0.10 and $0.14. Although revenues were higher than expected in the second quarter of 2009, largely due to higher demand in China for ZADAXIN related to H1N1 flu virus concerns, for the rest of the year the Company expects its quarterly sales growth to return to levels more consistent with its established business. SciClone expects increased R&D expenses in the second half of 2009 associated with H1N1 animal and, potentially, human studies; timing of other clinical development expenses; and costs of in-licensing products for China. SciClone's cash, cash equivalents, investments and restricted investments at December 31, 2009, are projected to be between $20 and $22 million Q:09 Form 10-Q. On or about August 6, 2009, defendants filed with the SEC the Company s 2Q:09 Form 10-Q, for the quarter ended June 30, 2009, signed by defendant Titus and certified by defendants Blobel and Titus. In addition to making substantially similar statements concerning the Company operations and financial performance as had been published earlier, the Company s 2Q:09 Form 10-Q also stated, in part, the following: 1. Basis of Presentation 17

18 The accompanying unaudited condensed consolidated financial statements of SciClone Pharmaceuticals, Inc. ( SciClone or the Company ) have been prepared in conformity with generally accepted accounting principles in the United States ( GAAP ) consistent with those applied in, and should be read in conjunction with, the audited financial statements for the year ended December 31, 2008 included in the Company s Form 10-K as filed with the Securities and Exchange Commission. The interim financial information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. The condensed consolidated balance sheet data at December 31, 2008 is derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 38. Controls. In addition to the foregoing, the Company s 2Q:09 Form 10-Q also contained representations that attested to the purported sufficiency and reliability of the Company s controls and procedures, as follows: Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer ( CEO ) and Chief Financial Officer ( CFO ), we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report. Changes in Internal Controls As required by Rule 13a-15(d) of the Exchange Act, our management, including our CEO and CFO, conducted an evaluation of our internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) to determine whether any changes in our internal control over financial reporting occurred during the second quarter of fiscal 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our CEO and CFO concluded that there have been no such changes during the second quarter of fiscal 2009 and that the changes in internal controls implemented in the first quarter of 2009 remediated the material weakness identified in our Form 10-K for the period ended December 31,

19 39. Certifications. The Company s 2Q:09 Form 10-Q also contained certifications by defendants Blobel and Titus, which attested to the purported accuracy and completeness of the Company s financial and operational reports, in part, as follows: SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Friedhelm Blobel, Chief Executive Officer, of SciClone Pharmaceuticals, Inc. (the Registrant ), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the Report ), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: August 6, 2009 /s/ Friedhelm Blobel, Ph.D. Friedhelm Blobel, Ph.D. Chief Executive Officer * * * SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Gary S. Titus, Senior Vice President, Finance and Chief Financial Officer, of SciClone Pharmaceuticals, Inc. (the Registrant ), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the Report ), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: August 6, 2009 /s/ Gary S. Titus 19

20 Gary S. Titus Senior Vice President, Finance and Chief Financial Officer 40. Thereafter, in an effort to further condition investors to believe that the Company was operating according to plan and that defendants were successfully introducing its products into the China market, defendants Blobel and/or Titus appeared and presented corporate overviews, at a series of investor conferences, including the following: September 10, 2009, defendant Blobel presented at the Rodman & Renshaw Annual Global Investment Conference in New York City, NY.. September 16, 2009, defendant Blobel presented at the ThinkEquity Annual Growth Conference in San Francisco, California. September 23, 2009, defendant Blobel presented at the UBS Global Life Sciences Conference in New York City, NY. November 10, 2009, defendant Titus presented at the Merriman Investor Summit in New York City, NY. November 17, 2009, defendant Titus presented at the Lazard Capital Markets 6th Annual Healthcare Conference in New York City, NY. 41. The statements made by defendants and contained in the Company s August 4, 2009 release, the Company s 2Q:09 Form 10-Q, as well as those statements made by defendant Blobel and Titus at the September 10, 2009, September 16, 2009, September 23, 2009, November 10, 2009 and November 17, 2009 investor conferences, were each materially false and misleading and known by defendants to be false at that time, or deliberately disregarded as such, for the reasons stated herein in 33, supra Q:09 Results Announced. On November 9, 2009, SciClone published a release announcing results for the third quarter ended September 30, including a purported increase in revenues of 20% compared to 3Q:08. In addition to the foregoing, this release stated, in part, the following: 20

21 SciClone Reports Financial Results and Provides Commercial and Pipeline Updates for the Third Quarter of 2009 Full Year Revenues, EPS and Year End Cash Guidance Increased FOSTER CITY, CA, Nov 09, 2009 (MARKETWIRE via COMTEX) -- SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) today reported financial results for the third quarter of Revenues for the quarter grew 20% to $17.2 million compared with the same period last year. SciClone reported net income of $2.1 million or $0.04 per share on a basic and diluted basis, compared with a net income of $0.8 million, or $0.02 per share for the same period last year. Financial Results * * * During the third quarter of 2009, revenues increased by 20% to $17.2 million, compared with revenues of $14.3 million for the same period last year. The increase in product revenues for the third quarter of 2009 was primarily attributable to an increase in the quantity of ZADAXIN sold to China. Research and development expenses for the third quarter of 2009 totaled $4.3 million, compared with $4.7 million for the same period last year. The decrease was primarily related to lower clinical trial-related expenses as well as lower consulting and employee-related costs during the third quarter and was partially offset by expenses related to the ongoing studies to determine the potential of ZADAXIN to enhance the immune response to pandemic flu H1N1 vaccines. Sales and marketing expenses for the third quarter of 2009 were $4.7 million, compared with $4.2 million for the same period last year. The increase in sales and marketing expenses in the third quarter of 2009 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 in China. 43. Commenting on these purported strong financial and operational results, this release also quoted defendant Blobel, in part as follows: "We are proud of our commercial and financial results this quarter which allowed us to build on our strong cash position and moved SciClone closer to achieving full year profitability. These positive results also underscore our continued growth, as we build our China business and advance our proprietary pipeline of product candidates, targeted for China and the rest of the world, including the United States," said Friedhelm Blobel, Ph.D., SciClone's President and Chief Executive Officer. "In the third quarter we advanced our clinical studies of SCV- 07 into a phase 2 trial in hepatitis C, the second indication for this compound, 21

22 which is also in phase 2 testing as a treatment for severe oral mucositis with enrollment expected to be completed shortly and we look forward to initiation of a clinical study of thymalfasin (ZADAXIN ) as an enhancer of H1N1 flu vaccines in the fourth quarter." 44. In addition to the foregoing, the Company s November 9, 2009 release also provided purported guidance, in part, as follows: Financial Outlook for 2009 SciClone is updating its full year revenue, EPS and year end cash guidance for 2009, and now expects: -- Revenues for the full year 2009 between $70 and $72 million, an increase of approximately 29% to 33% over Earnings per share for the full year 2009 between $0.18 and $ Cash, cash equivalents, and short-term investments at December 31, 2009 between $25 and $27 million. 45. In an effort to further condition investors to believe that the Company was operating according to plan and that defendants were successfully introducing its products into the China market, on December 1, 2009, defendant Blobel appeared and presented a corporate overview at the Piper Jaffray Annual Healthcare Conference in New York City Q:09 Form 10-Q. On or about November 11, 2009, defendants filed with the SEC the Company s 3Q:09 Form 10-Q, for the quarter ended September 30, 2009, signed by defendant Titus and certified by defendants Blobel and Titus. In addition to making substantially similar statements concerning the Company operations and financial performance as had been published earlier, the Company s 3Q:09 Form 10-Q also stated, in part, the following: 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of SciClone Pharmaceuticals, Inc. ( SciClone or the Company ) have been prepared in conformity with generally accepted accounting principles in the United States ( GAAP ) consistent with those applied in, and should be read in conjunction with, the audited financial statements for the year ended December 22

23 31, 2008 included in the Company s Form 10-K as filed with the Securities and Exchange Commission. The interim financial information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. The condensed consolidated balance sheet data at December 31, 2008 is derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 47. Controls. In addition to the foregoing, the Company s 3Q:09 Form 10-Q also contained representations that attested to the purported sufficiency and reliability of the Company s controls and procedures, as follows: Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer ( CEO ) and Chief Financial Officer ( CFO ), we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report. Changes in Internal Controls As required by Rule 13a-15(d) of the Exchange Act, our management, including our CEO and CFO, conducted an evaluation of our internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) to determine whether any changes in our internal control over financial reporting occurred during the third quarter of fiscal 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our CEO and CFO concluded that there have been no such changes during the third quarter of fiscal Certifications. The Company s 3Q:09 Form 10-Q also contained certifications by defendants Blobel and Titus, which attested to the purported accuracy and completeness of the Company s financial and operational reports, in part, as follows: SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER 23

24 I, Friedhelm Blobel, Chief Executive Officer, of SciClone Pharmaceuticals, Inc. (the Registrant ), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the Report ), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 9, 2009 /s/ Friedhelm Blobel, Ph.D. Friedhelm Blobel, Ph.D. Chief Executive Officer * * * SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Gary S. Titus, Senior Vice President, Finance and Chief Financial Officer, of SciClone Pharmaceuticals, Inc. (the Registrant ), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the Report ), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 9, 2009 /s/ Gary S. Titus Gary S. Titus Senior Vice President, Finance and Chief Financial Officer 49. The statements made by defendants and contained in the Company s November 9, 2009 release and those statements contained in the Company s 3Q:09 Form 10-Q were each 24

25 materially false and misleading and known by defendants to be false at that time, or deliberately disregarded as such, for the reasons stated herein in 33, supra. 50. Preliminary 4Q and FY:09 Results Announced. On January 11, 2010, SciClone published a release announcing results for the fourth quarter and fiscal year ended December 31, including a purported increase in revenues of 34% compared to In addition to the foregoing, this release stated, in part, the following: SciClone Provides 2009 Financial Update and Initial 2010 Sales Revenue Guidance FOSTER CITY, CA, Jan 11, 2010 (MARKETWIRE via COMTEX News Network) -- SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) today announced its full year 2009 sales revenue, 2010 sales revenue guidance and its year-end cash position as follows: -- For 2009, the company anticipates revenues of approximately $72.4 million (unaudited), a 34% increase over Cash, cash equivalents, short and long-term investments are anticipated to be approximately $31.8 million (unaudited) at December 31, 2009, compared with $29.7 million at December 31, The company expects 2010 sales revenue of $82 to $85 million, a 15% increase over 2009 This release also quoted defendant Blobel, in part, as follows: "During 2009, we executed on our corporate strategy of managing the company as a profit-driven specialty pharmaceutical business with a strong pipeline to fuel future growth. We expect to achieve significant full year operating profitability during 2009 and are very pleased with both our commercial sales growth and cash position," commented Friedhelm Blobel, Ph.D. SciClone's President and Chief Executive Officer. "Given the strong performance of our international commercial operations and careful expense management, we expect profits to continue to grow in We look forward to providing full 2010 financial guidance as well as an update on our pipeline later this quarter." 51. 4Q and FY:09 Results Announced. On March 2, 2010, SciClone published a release announcing results for the fourth quart and year ended December 31, including a 25