C o r p o r At e o F F I C e r s C o r p o r At e o F F I C e r s ( C o n t d ) I n d e p e n d e n t A u d I t o r s

Transcription

1 2008 ANNUAL REPORT

2 SCICLONE PHARMACEUTICALS IS A PROFIT-DRIVEN BIOPHARMACEUTICAL COMPANY WITH A SUCCESSFUL INTERNATIONAL BUSINESS AND A PORTFOLIO OF NOVEL THERAPIES FOR CANCER AND INFECTIOUS DISEASES. WE ARE FOCUSED ON ACHIEVING INTERNATIONAL SALES GROWTH, A COST-CONTAINING CLINICAL DEVELOPMENT STRATEGY, AND TIGHT EXPENSE MANAGEMENT FOR THE BENEFIT OF OUR STOCKHOLDERS. OUR LEAD PRODUCT, ZADAXIN, IS SOLD IN OVER 30 COUNTRIES FOR THE TREATMENT OF HEPATITIS B AND HEPATITIS C, CERTAIN CANCERS AND AS A VACCINE ADJUVANT. OUR PIPELINE OF PHASE 2 AND 3 DRUG CANDIDATES INCLUDES THYMALFASIN FOR STAGE IV MELANOMA FOR WHICH WE HAVE REACHED AGREEMENT WITH THE FDA ON THE DESIGN OF A PHASE 3 TRIAL; RP101 IN PHASE 2 FOR THE TREATMENT OF PANCREATIC CANCER; SCV-07 IN A PHASE 2 TRIAL FOR THE DELAY OF ONSET OF SEVERE ORAL MUCOSITIS IN PATIENTS RECEIVING CHEMORADIATION THERAPY FOR THE TREATMENT OF CANCERS OF THE HEAD AND NECK; AND, AWAITING APPROVAL IN CHINA, DC BEAD FOR THE TREATMENT OF LIVER CANCER. PRODUCT DEVELOPMENT PHASE 1 PHASE 2 PHASE 3 MARKETED ZADAXIN HBV/HCV & Other Indications China, Russia & >30 other countries Stage IV Melanoma U.S. / Europe DC BEAD China RP101 Pancreatic Cancer U.S. & Canada SCV-07 Oral Mucositis in Head & Neck Cancer Global (Ex-Russia) HCV Global (Ex-Russia)

3 From Left To Right: Hans Schmid, Managing Director and President, SciClone Pharmaceuticals International, Ltd.; Israel Rios, M.D., Senior Vice President And Chief Medical Officer; Cynthia Tuthill, Ph.D., Senior Vice President and Chief Scientific Officer; Gary Titus, Senior Vice President and Chief Financial Officer; Jeffery Lange, Vice President, Business Development; Friedhelm Blobel, Ph.D., President and Chief Executive Officer, SciClone Pharmaceuticals, Inc.; Craig Halverson, Vice President, Regulatory Affairs & Quality Assurance. DEAR STOCKHOLDERS, 2008 was a year of remarkable revenue growth for SciClone. We achieved revenues of $54.1 million, an impressive growth of 46% over the prior year, largely driven by our China-based sales organization. We plan to leverage and expand this international commercial success to obtain and build profitability by growing our commercial activities through transactions focused on adding new products as well as expanding into new geographic markets. We are equally committed to advancing our phase 2 and 3 product portfolio in oncology and infectious disease, two areas with great need for new therapeutic options for patients around the globe. Our lead product ZADAXIN (thymalfasin or thymosin alpha 1), which is approved for sale in over 30 countries, is used in China primarily for the treatment of hepatitis B virus (HBV), liver cancer and other related cancers. We expect revenue growth for ZADAXIN to continue in 2009 and beyond. For more than ten years we have been building a strong sales and marketing organization in China, which we believe positions us for continued success as we seek to in-license additional therapeutics for our international business. We have already acquired exclusive Chinese marketing rights to DC Bead and are pursuing regulatory approval for this product in liver cancer, one of the most prevalent and deadly cancers in China, with the objective of extending this product s indications to colorectal cancer as well. We expect to launch this product in We intend to broaden our product portfolio further by in-licensing or acquiring the marketing rights to other synergistic, commercially attractive products in China.

4 REVENUE ($ IN MILLIONS) $ E As we strive to achieve profitability, it is vital that we make strategic and cost-effective decisions regarding the development and advancement of our pipeline. Our clinical development strategy is now focused on creating stockholder value by driving cost-efficient phase 1 and 2 development of promising compounds, while seeking development partners for costly phase 3 trials, allowing us to achieve the potential upside of a biotechnology business from our portfolio of drug candidates. Our phase 3-ready product candidate, thymalfasin, has shown compelling efficacy in hepatitis B and immune-sensitive cancers, such as melanoma. We have made significant progress to date with our development program for thymalfasin in stage IV melanoma, including reaching an agreement in late 2008 with the U.S. Food and Drug Administration (FDA), on a Special Protocol Assessment on the design of a phase 3 registration trial for this disease. Thymalfasin has been granted Orphan Drug Designation by the U.S. FDA for the treatment of stage IIb through stage IV melanoma. The Orphan Drug Designation will allow us a seven-year period of market exclusivity if thymalfasin is approved for this indication in the United States. We have also applied for, but have not yet been issued a patent with respect to the use of thymalfasin as a therapy for melanoma. Our goal for this program is to identify a collaborative partner before beginning the phase 3 trial. Current therapies for melanoma are ineffective at extending survival, which is typically only six to nine months for patients with stage IV melanoma, and we believe that thymalfasin has the potential to provide a better treatment option for patients. We estimate the worldwide market for stage IV melanoma to be $200 million, with a much larger additional market potential in the adjuvant setting.

5 Also in our oncology product portfolio, we are particularly hopeful about our drug in development, RP101, for pancreatic cancer, an aggressive and devastating disease that continues to be a significant unmet medical need for patients in North America and around the world. We were excited to announce in March of 2009 that we completed enrollment ahead of schedule in our phase 2 clinical trial for RP101 in patients with this disease. RP101 has been granted Orphan Drug Designation by the U.S. FDA for the adjunct treatment of pancreatic cancer. Previous data on RP101 have indicated that the drug, a nucleoside analog also known as BVdU, may help to extend the beneficial tumor-fighting effects of chemotherapy. We expect to report results from this phase 2 trial in the first half of Pancreatic cancer is one of the deadliest forms of cancer. The American Cancer Society estimates that in 2009, pancreatic cancer is expected to claim as many as 33,000 lives in the U.S. alone. There are few treatment options for these patients, who quickly develop resistance to chemotherapy, so there is an urgent need to find new treatment solutions. We expect that RP101 could offer a significant clinical benefit to patients, with a U.S. potential market opportunity of approximately $350 million. In addition to RP101, we have a phase 2 clinical program ongoing with SCV-07 in oncology. SCV-07 is a synthetic peptide with immune stimulating effects. In December 2008, SCV-07 entered a phase 2 safety and efficacy trial to assess the ability of SCV-07 to delay the onset of severe oral mucositis in patients receiving chemoradiation therapy for the treatment of cancers of the head and neck, and we expect to complete enrollment for SCV-07 in oral mucositis in SCV-07 also demonstrated encouraging antiviral activity in a phase 2a clinical trial as a sole agent administered to patients chronically infected with HCV. During 2009, we plan to initiate a phase 2 clinical trial of SCV-07 for the treatment of patients with HCV.

6 ATTACK RP101: BLOCKS RESISTANCE TO CHEMOTHERAPY SCV-07: MULTIPLE IMMUNE MODULATING EFFECTS Tumor Cells SCV-07 SCV-07 Radiation Damaged Cells MACROPHAGE / DENDRITIC CELL STAT3 STAT3 protects: normal tissue from radiation Tumors killed via: Tumor Cells Apoptosis Damage to DNA Antitumor immunity Decreased replication CHEMOTHERAPY Tumor Cells Tumors develop chemoresistance via changes in gene expression: Evade apoptosis Improve DNA repair Decrease immunity Increase replication, angiogenesis Increase extrusion pumps MACROPHAGE / DENDRITIC CELL promotes: neopterin production, dendritic cell maturation T Helper (CD4+ ) Cell promotes: IL-12, IL-2 production Cytotoxic T (CTL) Cell inhibits: IL-6, IL-10, VEGF production Natural Killer (NK) cell inhibits: T-Reg cells which suppress immune function T-Reg Cell RP101 prevents tumors from developing chemoresistance via blocking changes in gene expression: ATTACK ATTACK Block apoptosis evasion (STAT3, JUN-D, DDX1) Block DNA repair (APEX, UBE2N) Block replication, angiogenesis (VEGF, IL-10) Improve antitumor immunity (LTA, LTB, NK4, ICAM-1, TNSF14/LIGHT) Decrease extrusion pumps RP101 Tumor Cells Free Floating Viruses Virally Infected Cells Tumor Cells Virally Infected Cells Tumor Cells RP101 It has been a year of tremendous progress at SciClone, and we believe that our momentum is building. Our goals for the next twelve months are substantial. We plan to continue costcontaining clinical development strategies and tight expense management, and are focused on achieving and sustaining profitability - no small feat for a biopharmaceutical company in today s uncertain market environment. In 2009, we also plan to complete enrollment for SCV-07 in oral mucositis, in-license an additional product for the international market with a continuing strong focus on China, and establish a partnership for our melanoma development program. We would like to express our sincere appreciation to our investors for their continued support, particularly in this difficult financial climate. We are well-positioned to move ahead this year with our focus on profitability, particularly now that we have resolved the director election contest with our long standing partner Sigma-Tau and we welcome three directors nominated by them to our Board of Directors. Our primary focus in 2009 and beyond will be on continuing to build value for our stockholders, and we look forward to communicating our progress with you regularly during the coming year as we continue to achieve new commercial milestones and report clinical results. Finally, I would like to thank the team at SciClone for their hard work and dedication to achieving our goals in 2008 and their commitment to the future, with special thanks to our wellestablished sales organization in China was a transformative year in our Company s history, and we are working towards another year of significant progress and strong value creation for our stockholders in Friedhelm Blobel, Ph.D. President and Chief Executive Officer May 1, 2009

7 Corporate Officers Friedhelm Blobel, Ph.D. President and Chief Executive Officer Gary Titus Senior Vice President and Chief Financial Officer Hans Schmid President and Managing Director SciClone Pharmaceuticals International, Ltd. Israel Rios, M.D. Senior Vice President and Chief Medical Officer BOARD OF DIRECTORS* Dean Woodman 1,3,4 Chairman, SciClone Pharmaceuticals, Inc. Co-Founder, Robertson Coleman Stephens & Woodman Former Managing Director, ING Barings John Baxter, M.D. 4 Professor of Medicine University of California, San Francisco Friedhelm Blobel, Ph.D. President and Chief Executive Officer SciClone Pharmaceuticals, Inc. Roberto Camerini, M.D. 5 Head of Clinical Research II-Worldwide Drug Development, for Sigma-Tau Industrie Farmaceutiche Riunite SpA Richard Hawkins 1,2,5 Chairman and Chief Executive Officer LabNow, Inc. Rolf Henel 2,3 Partner, Naimark & Associates, Inc. *As of the Annual Meeting date and assuming the election of all nominees, SciClone will have eight directors consisting of Dean Woodman, Friedhelm Blobel, Roberto Camerini, Richard Hawkins, Trevor Jones, Gregg Lapointe, Ira Lawrence, and Jon Saxe. 1 Audit Committee Member 2 Compensation Committee Member 3 Nominating / Corporate Governance Committee Member 4 Business Development Committee Member 5 Scientific Review Committee Member Corporate Officers (CONT D) Trevor Jones, CBE, Ph.D. 2,3 Commander of the British Empire and former Vice Chair of King s College London Gregg Lapointe 4 Chief Executive Officer of Sigma-Tau Pharmaceuticals, Inc. Ira Lawrence, M.D. 4,5 Senior Vice President, Research and Development, Medicis Pharmaceuticals Jon Saxe 1,3,4 Former President, PDL BioPharma, Inc. (formerly Protein Design Labs, Inc.) Former Vice President, Hoffman-LaRoche Inc. CORPORATE HEADQUARTERS SciClone Pharmaceuticals, Inc. 950 Tower Lane, Suite 900 Foster City, CA T: or 800.SCICLONE Fax: Website You can obtain recent press releases and other corporate information by visiting SciClone s website at or Additional INFORMation If you need additional assistance or information regarding the Company, or would like to receive a free copy of the Company s 10-K or 10-Q reports filed with the Securities and Exchange Commission, please contact our Investor Relations department at or send an message to: investorrelations@sciclone.com. COMMON STOCK LISTING SciClone s common stock trades on the NASDAQ Stock Market LLC under the symbol SCLN. TRANSFER AGENT Communications concerning transfer requirements, lost certifications, changes of address and other similar inquiries should be directed to SciClone s transfer agent: BNY Mellon Shareowner Services P.O. Box Pittsburgh, PA T: shrrelations@mellon.com Independent Auditors Ernst & Young LLP Palo Alto, California Legal Counsel DLA Piper US LLP San Francisco, California ANNUAL MEETING The Annual Meeting of Stockholders will be held on June 9, 2009 at 10 am PT at the Marriott San Mateo/San Francisco Airport, 1770 S. Amphlett Blvd., San Mateo, CA Detailed information about the meeting is contained in the Notice of Annual Meeting of Stockholders and Proxy Statement sent with a copy of the Annual Report on Form 10-K to each stockholder of record as of April 24, TRADEMARKS SciClone, the SciClone logo, the Swirl logo and ZADAXIN are registered trademarks of SciClone Pharmaceuticals, Inc. in the United States and numerous other countries. Forward-looking Statements This annual report contains forward-looking statements regarding development objectives and timing expectations. You 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, or the negative of those words or other comparable words to be uncertain and forward-looking. These statements are subject to risks and uncertainties that are difficult to predict and actual outcomes may differ materially. These risks and uncertainties include our ability to achieve our product revenue goals which may be affected by economic conditions, competition, regulatory restrictions and other matters, developments with respect to our clinical programs, the performance of our partners, vendors and other third parties with which we do business, our future cash requirements, and other matters. Please also refer to other risks and uncertainties described in SciClone s filings with the Securities and Exchange Commission. All forward-looking statements are based on information currently available to SciClone and SciClone assumes no obligation to update any such forward-looking statements.

8 SciClone Pharmaceuticals, Inc. Inc Tower Tower Lane, Lane, Suite Suite Foster Foster City, City, CA CA T: T: or or 800.SCICLONE Fax: Fax: