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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 0-19825

SciClone Pharmaceuticals, Inc.

(650) 358-3456

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $180,927,000 as of March 4, 2003, based upon the closing sale price of the Registrant’s Common Stock on The Nasdaq National Market on such date. Shares of Common Stock held by each executive officer and director have been excluded from the calculation because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes o          No þ

      The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $72,081,000 as of June 28, 2002, based upon the closing sale price of the Registrant’s Common Stock on The Nasdaq National Market on such date. Shares of Common Stock held by each executive officer and director have been excluded from the calculation because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

      As of March 4, 2003, there were 37,465,064 shares of the Registrant’s Common Stock outstanding.

      Part III incorporates by reference from the definitive proxy statement for the Registrant’s 2003 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form.

TABLE OF CONTENTS

NOTE REGARDING FORWARD-LOOKING STATEMENTS:

      This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes” or similar expressions are intended to identify forward-looking statements including those statements we make regarding anticipated product sales; the timing and outcome of clinical trials; the timing of reporting of clinical trial results; partnering prospects for ZADAXIN; our expectations and ability to seek additional capital resources, initiate marketing collaborations and initiate new product development; ZADAXIN’s ability to enhance the immune system; research and development and other expense levels; level of gross margin and the allocation of financial resources to certain trials and programs. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors including, but not limited to, those described under the caption “Risk Factors” in this Annual Report on Form 10-K. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

PART I

Item 1.     Business

Overview

      SciClone Pharmaceuticals, Inc. (“SciClone” or the “Company”) is a biopharmaceutical company engaged in the development and commercialization of therapeutics to treat life-threatening diseases. Our lead product ZADAXIN is in several late-stage clinical trials, including two phase 3 hepatitis C clinical trials in the U.S., a recently completed phase 3 hepatitis B clinical trial in Japan, a phase 2 malignant melanoma clinical trial in Europe, and two phase 2 liver cancer trials in the U.S. In addition to ZADAXIN, our other drug development opportunities include SCV-07, a potentially orally available therapeutic to treat viral and infectious diseases, and products to address the protein-based disorder that causes cystic fibrosis.

      ZADAXIN has been approved for sale by the ministries of health in over 30 countries and is marketed in China and selected other countries outside the U.S. The cash flow generated by these operations contributes significant support to our ZADAXIN late-stage clinical trials. ZADAXIN has been administered to over 10,000 patients to date in both clinical and commercial use, alone and in combination with antiviral and anticancer drugs, without producing any known ZADAXIN related significant side effects or toxicities. ZADAXIN is manufactured by third party manufacturers in the U.S. and Europe in compliance with U.S. Food and Drug Administration (FDA) current Good Manufacturing Practices (cGMP), or the foreign equivalent of such standards.

      Our business strategy focuses on developing late-stage products to treat life-threatening diseases that offer significant market opportunities. ZADAXIN is currently in multiple phase 3 and phase 2 clinical trials for the treatment of viral diseases and cancer. These therapeutic categories currently represent multi-billion dollar markets in the U.S., Europe, and Japan. We design our clinical trials with the input of leading physicians and selected major pharmaceutical companies, and we structure trials to support regulatory approval for ZADAXIN in the U.S., Europe, and Japan.

      ZADAXIN is the only non-interferon based new drug that we know of in phase 3 hepatitis C clinical trials in the U.S. today. We are currently enrolling patients in our hepatitis C trials and all of the planned 1,000 patients must have previously failed hepatitis C therapies currently approved by the U.S. FDA. Half of all hepatitis C patients treated in the U.S. fail to respond to current therapy and become “non-responders.” Re-treatment of non-responders with the same drugs is rarely effective. Our trials are designed to prove that

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      In Japan, our over 300 patient phase 3 clinical trial using ZADAXIN as a therapy for hepatitis B is complete. We are compiling and analyzing the final data and expect to report the results in the second quarter of 2003. If the results are positive, we intend to submit a hepatitis B regulatory filing in Japan.

      Our European partner Sigma-Tau is targeting a European oncology approval for ZADAXIN. Sigma-Tau is currently enrolling patients in a phase 2 malignant melanoma clinical trial that is planned to enroll over 300 patients in Europe. In addition, Sigma-Tau intends to use data from our U.S. phase 3 hepatitis C clinical trials, if they are positive, to pursue regulatory approval for ZADAXIN for this indication in Europe.

      In the major pharmaceutical markets, we have maintained significant marketing rights and strong intellectual property protection for ZADAXIN. We anticipate that ZADAXIN should have enhanced partnering value at the conclusion of its U.S. phase 3 clinical trials, if they are successful, although there is no assurance such a partnering arrangement will be pursued or can be achieved. We have strong intellectual property protection for ZADAXIN as a therapy for hepatitis C with patent protection into 2015 in the U.S. and 2012 in the European Union and Japan. ZADAXIN as a therapy for hepatitis B is patent protected into 2012 in Japan.

ZADAXIN

      ZADAXIN is a pure synthetic preparation of thymosin alpha 1, a substance that circulates naturally and is instrumental in the body’s immune response to fight viral infections and certain cancers. ZADAXIN is easily and safely administered just under the skin twice a week. After administration, thymosin alpha 1 circulates at 50 to 100 times its normal level in the body. In over 10,000 patients to date, ZADAXIN has been administered in both clinical and commercial use, alone and in combination with antiviral and anticancer drugs, without producing any ZADAXIN related significant side effects or toxicities. ZADAXIN is also referred to as thymalfasin, the generic name for thymosin alpha 1.

      Published scientific and clinical studies have shown that ZADAXIN helps stimulate, maintain and direct the body’s antiviral and anticancer immune response. ZADAXIN helps the immune system target and eradicate virally infected or cancer cells.

      When the immune system recognizes virally infected or cancer cells, it responds by increasing white blood cells called CD4 helper T-cells. These cells can be directed towards one of two pathways, referred to as T-helper 1 (Th1) or T-helper 2 (Th2). Studies have shown that a Th1-directed immune response is fundamental to the eradication of certain viral disease, such as hepatitis C or hepatitis B, and certain cancers.

      ZADAXIN helps activate a Th1-directed immune response by promoting stem cell differentiation into CD4 T-cells and subsequent differentiation of those cells into the Th1 subset. At the same time, ZADAXIN helps increase the production of CD8 T-cells and NK or natural killer cells, a population of cells able to directly attack and kill virally-infected and certain cancer cells. As ZADAXIN increases Th1 cytokines such as interleukin-2 (IL-2) and gamma interferon, it also decreases production of Th2 cytokines such as IL-4. Both of these activities are important in an effective cellular response to a hepatitis C viral infection. Moreover, ZADAXIN reduces T-cell apoptosis, or programmed cell death, which allows these beneficial cells to circulate for a longer period of time.

      In addition to its positive effects on the immune system, ZADAXIN also exhibits direct antiviral effects. ZADAXIN enhances the expression of surface-marker proteins on virally-infected and certain cancer cells. These surface markers help the body’s immune system recognize and target virally infected and cancer cells for eradication by the immune response.

     Clinical Development Strategy

      Our U.S. clinical development strategy for ZADAXIN has been to select an indication that offers a large patient population representing a significant market potential, the opportunity for improvement to current

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     Hepatitis C

      In the U.S., we have selected hepatitis C as the first targeted U.S. FDA approved indication for ZADAXIN. We believe this indication offers a large patient population representing a significant market opportunity, the opportunity for improvement to current therapy, and the potential for an expedited review by the U.S. FDA.

      The hepatitis C virus (HCV) is one of the world’s most prevalent blood borne chronic infectious diseases. Complications from HCV include cirrhosis of the liver, liver failure and liver cancer. The World Health Organization estimates that more than 170 million people are infected with hepatitis C worldwide, including an estimated 10 million people in the U.S., Europe and Japan. The Centers for Disease Control estimate that four million people in the U.S. are infected with HCV. HCV related deaths among this group are expected to triple by 2010 to 30,000 annually. There is no vaccine to prevent HCV infection.

      The total market for HCV therapies in the U.S., Europe and Japan was $1.7 billion in 2001 and is expected to grow to $6.6 billion by 2011, according to Decision Resources’ estimates.

      The current standard of care for HCV patients is the new longer-acting pegylated form of interferon alpha, most typically used in combination therapy with the antiviral drug ribavirin. Pegylated interferon alpha can induce severe toxicities and ribavirin introduces additional toxicities of its own. Many patients cannot, or will not, tolerate a complete 12 month course of interferon alpha and ribavirin at approved optimal doses, and dose reduction of one or both drugs is commonly prescribed. Consequently, efficacy may be reduced.

      Current HCV therapy of pegylated interferon alpha and ribavirin is effective in just over half of all treated patients and the side effect profile is severe. For the estimated 2 million HCV carriers in the U.S. with a high viral load of a particularly difficult to treat HCV strain (genotype 1), current therapy is even less effective and works in only 30 percent of patients. Patients who fail current therapy (non-responders) seldom respond to re-treatment with the same therapy. The large majority of non-responders have a high viral load of HCV genotype 1.

      Published data indicate ZADAXIN in combination with pegylated interferon alpha has the potential to benefit HCV non-responders. Complete data from a twelve week study in 31 patients show that groups of HCV non-responders, all with a high viral load of genotype 1, treated with ZADAXIN in combination with pegylated interferon alpha reported ZADAXIN dose-related early virologic response rates ranging from 20 to 36 percent. These data, which showed increasing dose-related response rates, suggest ZADAXIN’s potential to add to the antiviral effects of pegylated interferon alpha. Early virologic response is suggested to be an early indicator of sustained response. A sustained response is evidence of complete clearance of the virus from the body six months after completion of 12 months of therapy. A sustained responder is considered effectively cured of hepatitis C.

      We are conducting two phase 3 clinical trials in the U.S. using ZADAXIN in combination with pegylated interferon alpha as a therapy for non-responders to previous hepatitis C therapy. Our goal is for ZADAXIN in combination with pegylated interferon alpha to be the first U.S. FDA approved hepatitis C therapy for non-responders, the most difficult group of HCV patients to treat. If this combination therapy is approved for non-responders, we believe that ZADAXIN could be beneficial in combination with current therapy (pegylated interferon alpha with or without ribavirin) as a first course of therapy for all HCV patients. Currently, ZADAXIN is the only non-interferon based new drug that we know of in phase 3 hepatitis C clinical trials in the U.S. ZADAXIN used alone or in combination with other drugs to treat hepatitis C is patent protected into 2015 in the U.S. and into 2012 in Europe and Japan.

      Our two ZADAXIN phase 3 hepatitis C clinical trials are designed to provide statistically significant results and demonstrate a clinical benefit from using ZADAXIN in combination with pegylated interferon

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      In these clinical trials, patients in equal numbers are being assigned to a 12 month course of ZADAXIN plus pegylated interferon alpha or placebo plus pegylated interferon alpha. After completing treatment, all patients will be followed for a six month observation period. These treatment and follow up periods are consistent with the U.S. FDA standard for demonstrating sustained response to hepatitis C therapy. Primary endpoints are a sustained virological response (clearance of the HCV virus) and an improvement in the liver histological activity index measured at the end of the six month follow up observation period. Secondary endpoints are the same as the primary endpoints but are measured at the end of the 12 months of therapy.

      The PEGASYS brand of pegylated interferon alpha for both trials is being provided at no cost to us by F. Hoffmann La-Roche, which receives the right to use the data resulting from the trials but does not receive any marketing rights to ZADAXIN or the combination therapy. These trials are also supported by our European partner Sigma-Tau, which has European marketing and development rights for ZADAXIN. In early 2002, Sigma-Tau contributed $2,685,000 to SciClone for funding of these trials, and is obligated to make an additional $1,000,000 milestone payment when the targeted 1,000 patients are enrolled in these trials. Sigma-Tau and affiliates currently own close to 10% of SciClone’s common stock outstanding.

     Hepatitis B

      The hepatitis B virus (HBV) is one of the world’s most prevalent blood borne chronic infectious diseases. The disease often leads to cirrhotic complications and progression to liver cancer. The World Health Organization estimates that more than 350 million people worldwide are chronically infected with HBV. There are effective hepatitis B vaccines that account for the relatively low incidence of the virus in certain markets, such as the U.S. with only 1.3 million chronically infected. However, in many areas of the world, particularly in Asia, the virus is highly prevalent.

      The worldwide market for HBV therapeutics was $325 million in 2001. Significant pharmaceutical markets for hepatitis B therapy exist in Japan, China, Southern Europe, and the Middle East. In Japan, there are 3.8 million chronically infected HBV carriers. We have regulatory approval and are marketing ZADAXIN as a hepatitis B therapy in certain countries, most notably in China. We recently completed a phase 3 clinical trial in Japan, encompassing over 300 patients using ZADAXIN as a monotherapy, and we expect to report the results in the second quarter of 2003.

      The goal of hepatitis B therapy is to induce a durable interruption of viral replication which will lead to a sustained response. Current HBV therapies in the U.S., Europe, and Japan are inadequate in achieving this goal of a sustained response. In Japan, these therapies include interferon alpha and the nucleoside analogue lamivudine.

      Interferon alpha, an injected drug, is effective in stopping HBV viral replication in approximately 40 percent of patients. However, many patients are unable to tolerate the manufacturers’ recommended four months of therapy administered at doses three to four times that of interferon alpha’s recommended HCV therapy dose. The severe side effects frequently require dose reduction and even termination of therapy. Lamivudine, an oral drug, is effective in achieving a sustained response in approximately 16 percent of patients after one year of therapy. Lamivudine’s primary benefit, while it is taken, is suppressing of the virus and slowing the progression of liver disease. However, after therapy is stopped the virus typically rebounds, sometimes so strongly it can be fatal. Another concern is that prolonged use of lamivudine causes the hepatitis B virus to mutate, sometimes to a form resistant to the drug, making therapy even more problematic. Viral mutations are common after just one year of therapy. Adefovir, recently approved in the U.S. and Europe but presently not in Japan, is a nucleotide reverse transcriptase inhibitor that, like lamivudine, suppresses hepatitis B viral replication while the drug is taken. Adefovir, also an oral drug, is effective in achieving a sustained response in approximately 12 percent of patients after one year of therapy. It is uncertain yet whether prolonged use of adefovir will lead to resistant viral mutations.

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      We have publicly reported positive preliminary data from our ZADAXIN phase 3 hepatitis B clinical trial in Japan. Preliminary data on the first evaluated one-third of patients in this over 300 patient study showed ZADAXIN produced a sustained response in 24 percent of patients after six months of therapy and 12 months of follow up. In separate smaller studies, ZADAXIN has produced sustained response rates of up to 40% when used as a monotherapy and up to 70% in pilot studies when used in combination with interferon alpha or lamivudine. ZADAXIN has not produced any significant reported adverse effects.

      Our ZADAXIN phase 3 hepatitis B clinical trial in Japan is designed to demonstrate a clinical benefit from using ZADAXIN in treating hepatitis B. The trial patients were assigned to either one of two different doses of ZADAXIN monotherapy for six months and then were observed for 12 months of follow up. At the end of treatment and follow up observation, the primary endpoint is global improvement, as measured by a virological, chemical, and biological response.

      We have completed the treatment and follow up observation in this clinical trial and are compiling and analyzing the complete data. We expect to report results from this trial during the second quarter of 2003. If the final data are positive and demonstrate an efficacy and safety benefit to using ZADAXIN in treating hepatitis B, we will prepare a regulatory filing document to submit to the Japanese Ministry of Health and Welfare. ZADAXIN as a therapy for hepatitis B is patent protected into 2012 in Japan.

     Oncology

      We believe that ZADAXIN’s mechanism of action and highly specific role in activating and directing immune response is applicable for various cancers as well as for viral infection. We believe that oncology will be a major market opportunity for ZADAXIN.

      We are conducting two phase 2 liver cancer clinical trials in the U.S. Our European partner Sigma-Tau is targeting a European oncology approval for ZADAXIN. Sigma-Tau is currently enrolling patients in a phase 2 malignant melanoma clinical trial and intends to use the data from this trial, if positive, to determine the optimal design for a pivotal phase 3 oncology trial. Sigma-Tau intends to use data from our U.S. phase 3 hepatitis C clinical trials, if positive, to pursue regulatory approval for ZADAXIN for this indication in Europe.

      Liver cancer (hepatocellular carcinoma or HCC) is a common result of untreated or progressive hepatitis C or hepatitis B and is one of the most prevalent fatal malignancies in the world with approximately one million new cases annually. The median survival for advanced HCC patients is only eight months.

      Current liver cancer therapies include transarterial chemoembolization (TACE) and radio frequency ablation (RFA). In the U.S., our ZADAXIN phase 2 liver cancer clinical trials are designed to demonstrate a clinical benefit from using ZADAXIN in combination with TACE or RFA. Patients are receiving either ZADAXIN in combination with TACE or ZADAXIN in combination with RFA, the two most common procedures for liver cancer patients whose tumors cannot be treated either by surgery or by liver transplantation. Patients are receiving six months of therapy and are being observed for a period of 12 months after the end of therapy. The endpoints are survival and tumor response. ZADAXIN for the treatment of liver cancer is protected by Orphan Drug status in both the U.S. and Europe.

      Malignant melanoma is one of the deadliest forms of cancer. There are 80,000 new melanoma cases diagnosed annually in the U.S. and Europe and the median survival for late-stage malignant melanoma patients is only five months.

      Current malignant melanoma therapies include interferon alpha and the chemotherapy drug dacarbazine (DTIC). Data from a previous European pilot study indicate that ZADAXIN in combination therapy with interferon alpha and DTIC chemotherapy increases tumor response rates and survival rates in malignant melanoma patients. In these studies, 23 of the 46 late-stage patients using ZADAXIN plus interferon alpha and DTIC showed a complete or partial response. Moreover, the median survival for participating patients was 12.5 months, more than double the historical average.

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      The ZADAXIN phase 2 malignant melanoma clinical trial in Europe is designed to demonstrate a clinical benefit from using ZADAXIN in combination with standard chemotherapy. This clinical trial is being funded and conducted by Sigma-Tau, which has exclusive marketing rights for ZADAXIN in most Western European countries. Sigma-Tau is currently enrolling stage 4 (metastatic) malignant melanoma patients and plans to enroll over 300 patients in this trial. All patients in this four-arm study are receiving DTIC chemotherapy. In addition to receiving DTIC, each patient is randomly assigned to receive either ZADAXIN (in varying doses), interferon alpha, or ZADAXIN plus interferon alpha. Patients are receiving six months of therapy and will be observed for a period of 12 months after the end of therapy. The endpoints are tumor response and survival. The results of this clinical trial, if positive, are expected to be used in the design of a ZADAXIN combination therapy phase 3 clinical trial for malignant melanoma.

      Although most of our resources and efforts are concentrated on developing ZADAXIN, our additional product development opportunities include a potentially orally administered therapeutic to treat viral and infectious diseases and products to address the protein-based disorder that causes cystic fibrosis.

      SciClone has acquired the rights to a new class of immunomodulators that stimulate the immune system in a manner similar to ZADAXIN. One of these is SCV-07, which also has the potential to be administered orally. In 1999, we acquired the exclusive worldwide rights outside of Russia to SCV-07 and other compounds of a new class of immunomodulators from Verta Ltd., a biotechnology company in St. Petersburg, Russia. SCV-07 and its related class of compounds are covered by a U.S. composition of matter patent as well as for their use as immunomodulators.

      The World Health Organization estimates that tuberculosis (TB) kills 2 million people each year, and is the most common infectious disease in the world today. TB is a highly infectious disease and getting a patient to a non-contagious state is a primary goal of treatment and is critical to efforts to contain the spread of the disease.

      Data from phase 2 clinical trials conducted by Verta in Russia demonstrated that SCV-07 has the capability to significantly increase the rate at which tuberculosis patients become non-contagious. In phase 2 clinical trials, 80 percent of TB patients undergoing standard anti-TB chemotherapy plus a five-day regimen of parenteral SCV-07 therapy were no longer contagious (as measured by negative sputum cultures) after three months compared to 37 percent of patients whose anti-TB therapy did not include SCV-07. In addition, all of the patients receiving SCV-07 reported an improvement in symptoms, including fever and cough, and there was a significant decrease in the number of patients with lung damage. SCV-07 did not lead to additional adverse events in any of the patients.

      We are pursuing grant funding to conduct additional clinical trials to test the optimal dosing and oral administration of SCV-07 in the treatment of infectious diseases with the intention of opening a U.S. Investigational New Drug application (IND) to study SCV-07 in the U.S.

      CPX is a novel small molecule protein-repair therapy that can be orally administered. CPX is targeted for the treatment of cystic fibrosis (CF), a common fatal genetic disorder among Caucasians. We licensed CPX and a related class of compounds from the National Institutes of Health (NIH). CPX has been granted Orphan Drug status in both the U.S. and Europe.

      In preclinical studies conducted at the NIH, CPX demonstrated the ability to repair the two principal protein defects underlying the cause of CF. CPX appears to enable the defective protein to travel through the cell and reach the epithelial cell membrane (“trafficking”) and to improve an originally impaired transport of chloride ions across the cell membrane. This mechanism of action is intended to prevent the build-up of viscous mucus in the first place, and thus lessen the danger of fatal infection common in CF patients.

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      Our first CPX phase 2 clinical trial in the U.S. was designed to demonstrate CPX’s protein repair activity in CF patients. Due to the erratic digestive absorption patterns of CF patients, the sustained circulatory drug levels required to assess efficacy were not achieved. We worked with the Cystic Fibrosis Foundation’s Therapeutic Development Network and reformulated CPX to prepare for additional toxicology and early human studies. We currently are conducting development activities with a reformulated CPX.

Marketing and Sales

      SciClone initially had marketing rights to ZADAXIN only outside of the U.S. and Europe. We began and developed our marketing and sales capabilities in the international markets available to us and to date we have received ZADAXIN approvals by the ministries of health in over 30 countries outside of the U.S., most of Europe, and Japan. ZADAXIN’s approvals are principally for the treatment of hepatitis B and hepatitis C, and also in certain countries as a vaccine or chemotherapy adjuvant for patients with weakened immune systems. Our international sales provide significant cash flow to help fund ZADAXIN’s phase 3 hepatitis C clinical trials in the U.S.

      After consolidating worldwide rights to ZADAXIN in 1998, we were able to begin implementing our plans to develop ZADAXIN for regulatory approval in the U.S. and Europe.

      In the U.S., we have retained full commercial rights to ZADAXIN. We currently are conducting phase 3 clinical trials in the U.S. and we anticipate that ZADAXIN should have enhanced partnering value after the conclusion of these trials, if they are successful. However, there is no assurance that we will pursue or achieve a partnering arrangement.

      In the European Union (EU), Sigma-Tau is our exclusive marketing and development partner for ZADAXIN. As part of our collaborative agreement, we will provide our U.S. hepatitis C phase 3 clinical trial data to assist Sigma-Tau’s efforts to obtain regulatory approval in the EU for ZADAXIN in hepatitis C therapy. In addition, Sigma-Tau intends to seek EU regulatory approval for ZADAXIN for other indications and is currently conducting and funding a large phase 2 clinical trial using ZADAXIN in combination therapy for malignant melanoma. We received from Sigma-Tau a $2,685,000 payment in January 2002 that is being recognized evenly as contract revenue over the period of our U.S. hepatitis C clinical development activities, estimated at three years beginning in the second quarter of 2002. This payment is part of the $3,685,000 Sigma-Tau has agreed to pay us to help fund the U.S. hepatitis C clinical trials. The remaining $1,000,000 will be paid upon completion of patient enrollment in our U.S. clinical trials.

      In Japan, we have recently completed a phase 3 clinical trial for ZADAXIN as a monotherapy for hepatitis B. Schering-Plough is our exclusive marketing partner for ZADAXIN in Japan.

      In the markets where ZADAXIN is approved and actively marketed, our marketing activities include providing ZADAXIN related medical education, clinical experience programs and participation in regional and international liver disease related medical conferences. Where appropriate, these programs will extend into other markets when ZADAXIN has regulatory approval.

      ZADAXIN sales are made in U.S. dollars and are managed by our wholly owned international subsidiary, SciClone Pharmaceuticals International Ltd. (SPIL). SPIL is registered in the Cayman Islands, headquartered in Hong Kong, and has international offices in Beijing, Hong Kong, Shanghai, and Singapore. SPIL manages a distribution center in Hong Kong that receives shipments of ZADAXIN manufactured in Europe under contract agreements and distributes from there to international markets. Under our established distribution arrangements, local importers and distributors are responsible for the importation, inventory, distribution, and invoicing of ZADAXIN.

      Our largest single market for ZADAXIN is currently the People’s Republic of China, which accounted for 88%, 89%, and 86% of ZADAXIN sales for the years ended December 31, 2002, 2001, and 2000, respectively. China is the world’s most populous nation and also has the largest population of hepatitis B, hepatitis C, and liver cancer patients. Although China and other developing countries generally do not reimburse patients for relatively expensive therapies such as ZADAXIN, SPIL has successfully established and expanded the use of ZADAXIN in China in recent years.

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      In China, SPIL sells ZADAXIN to well-established, government licensed importing agents. Sales are made on a no returns basis, except under limited terms regarding product quality. These importing agents in turn sell ZADAXIN to four licensed distributors who then distribute ZADAXIN to hospital pharmacies and physicians throughout the country. In addition to its Hong Kong office, SPIL also operates representative offices in Beijing and Shanghai, and employs a medical education team of approximately 60 full time employees in China to promote physicians’ knowledge and use of ZADAXIN.

Manufacturing

      ZADAXIN is manufactured in accordance with U.S. FDA current Good Manufacturing Practices (cGMP), and the Japanese or European equivalents of such standards. Products are manufactured by third parties under exclusive contract manufacturing and supply agreements. We closely monitor production runs of our products and regularly conduct our own quality assurance audit programs.

      For our phase 3 clinical trials in the U.S. and Japan, ZADAXIN is manufactured to U.S. FDA and Japanese cGMP standards by contract manufacturers in the U.S. For our phase 2 clinical trial in Europe and for sale in other international markets where approved, ZADAXIN is manufactured to European cGMP standards by contract manufacturers in Europe.

      In the event of the termination of an agreement with any single supplier or manufacturer, we believe that we would be able to enter into arrangements with similar terms with other suppliers or manufacturers. We do not intend to acquire or establish our own dedicated manufacturing facilities for any of our products at this time.

Patents and Proprietary Rights

      An important element of our product development strategy is to seek regulatory approval for our products for indications with significant market potential and where we have a strong proprietary position through patents covering use, process, or composition of matter of our products. For our lead product ZADAXIN, we have significant patent protection regarding the use of thymosin alpha 1, or thymalfasin, and its process of manufacture.

      We have patents covering the use of thymosin alpha 1 for treatment of hepatitis C that have been issued in the U.S., a majority of European countries and numerous international markets and extend into 2015 in the U.S. and 2012 in the European Union and Japan. In addition, patents for the specific use of thymosin alpha 1 in treating hepatitis C in non-responders to interferon alpha treatment have been issued to us in the U.S. and various international markets.

      We are the exclusive licensee or owners of patents that have been issued in the U.S., Japan, China and other international markets covering the treatment of hepatitis B using thymosin alpha 1. We are also the exclusive licensee of patents that have been issued in the U.S., a majority of European countries, Japan, and other international markets that cover the use of thymosin alpha 1 to treat small cell and non-small cell lung cancer. Several corresponding additional patent applications have been issued or patent applications are pending in other countries for each of the above named indications.

      For process patents, we are either a patentee or exclusive licensee of use and process patents related to the method of making and therapeutic uses of thymosin alpha 1. Our process patents are directed to methods of making thymosin alpha 1 and have been issued in the U.S., a majority of European countries, Japan, Canada, Hong Kong, Taiwan, and South Korea. Although the composition of matter patents related to thymosin alpha 1 have expired in the major pharmaceutical markets, we have several composition of matter patents and applications directed to analogs and derivatives of thymosin alpha 1 which have been granted in the U.S. and in important international markets. We continue to seek additional proprietary rights for thymosin alpha 1.

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      We are the exclusive licensee of an issued U.S. patent covering the use of CPX to treat cystic fibrosis, as well as an issued U.S. patent and pending foreign patent applications covering CPX analogs and their use in treating cystic fibrosis.

      We are the exclusive licensee of an issued U.S. patent covering the composition of matter of SCV-07 and related compounds, as well as similar pending foreign patent applications.

      In addition to our patent protection, we intend to use other means to protect our proprietary rights. We are pursuing marketing exclusivity periods that are available under regulatory provisions in certain countries including the U.S., Europe, and Japan. These marketing exclusivity periods benefit the holder of the first marketing approval for new chemical entities or their equivalents for a given indication.

      Orphan Drug protection has been or will be sought where available if such protection also grants additional market exclusivity. We hold an Orphan Drug product designation for thymosin alpha 1 for hepatocellular carcinoma, hepatitis B, and DiGeorge Anomaly in the U.S. and for hepatocellular carcinoma in Europe. We hold an Orphan Drug product designation for CPX to treat cystic fibrosis in the U.S. and Europe and are pursuing other types of protection where applicable.

      We have filed applications worldwide to recognize and protect trademarks for ZADAXIN and other trademarks that appear on our commercial packaging and promotional literature. Copyrights for the commercial packaging may prevent counterfeit products or genuine but unauthorized products from entering a particular country by parallel importation. We have also implemented anti-counterfeiting measures on commercial packaging and plan to register the packaging with customs departments in countries where such procedures exist. We also rely upon trade secrets, which we seek to protect in part by entering into confidentiality agreements with our employees, consultants, corporate partners, suppliers and licensees.

Competition

      There are few drugs currently approved by the U.S. FDA for the treatment of hepatitis C or hepatitis B. For the treatment of hepatitis C in the U.S., there are currently two versions of pegylated interferon alpha being marketed, one by Schering-Plough under the trade name “Peg-Intron™”, the other by F. Hoffmann La-Roche under the trade name “PEGASYS™”. Schering-Plough markets ribavirin under the trade name “Rebetol™” and F. Hoffmann La-Roche sells a separate brand of ribavirin under the trade name “COPEGUS™”. In previous clinical studies, ZADAXIN has demonstrated the ability to add to the antiviral effects of pegylated interferon alpha without adding to the side effects caused by pegylated interferon alpha. Of the many future potential hepatitis C therapies being developed, ZADAXIN is the only non-interferon new therapy currently in phase 3 clinical trials in the U.S. and we believe that other new therapies are years behind ZADAXIN’s late-stage of development.

      For the treatment of hepatitis B, current therapies marketed include interferon alpha, nucleoside analogues such as lamivudine, and the nucleotide reverse transcriptase inhibitor adefovir. In previous clinical studies, ZADAXIN as a monotherapy has demonstrated up to the same efficacy as interferon alpha without producing adverse side effects. Moreover, in small studies ZADAXIN in combination with interferon alpha or lamivudine has demonstrated significantly higher efficacy rates without producing additional side effects.

      There are numerous methods to treat other viral diseases and cancer and new therapeutic options continue to be developed. ZADAXIN, as a pure synthetic preparation of thymosin alpha 1, a substance that circulates naturally and is instrumental in the body’s immune response to fight viral infections and certain cancers, may be useful in combination therapy for these other indications. ZADAXIN is currently being studied in human clinical trials in combination with the chemotherapeutic agents DTIC and interferon alpha for the treatment of malignant melanoma. In over 10,000 patients to date, ZADAXIN has been administered in both clinical and commercial use, alone and in combination with antiviral and anticancer drugs, without producing any ZADAXIN related significant adverse side effects or toxicities. We believe that as newer and better directed antiviral and anticancer therapies are developed, ZADAXIN may increase these therapies’

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Government Regulation

      Regulation by governmental authorities in the U.S. and foreign countries is a significant factor in the manufacturing and marketing of our products, as well as in ongoing research and development activities and in preclinical and clinical trials and testing related to our products. When our products are manufactured, tested or sold in the U.S., they will be regulated in accordance with the Federal Food, Drug, and Cosmetic Act, commonly referred to as the FD&C Act and the U.S. Public Health Service Act. In addition to obtaining FDA approval for each product, each domestic manufacturing establishment must be registered with the FDA. Domestic manufacturing establishments are subject to inspections by the FDA and by other federal, state and local agencies and must comply with current U.S. Good Manufacturing Practices, or cGMP. In complying with cGMP standards, manufacturers must continue to expend time, money and effort in the area of production and quality control to ensure full technical compliance.

      The steps required before a new drug or biological product may be distributed commercially in the U.S. generally include:

	•	conducting appropriate preclinical laboratory evaluations of the product’s chemistry, formulation and stability, and animal studies to assess the potential safety and efficacy of the product;
	•	submitting the results of these evaluations and tests to the FDA, along with manufacturing information and analytical data, in an Investigational New Drug Application, or IND, and receiving FDA approval of the IND;
	•	obtaining approval of Institutional Review Boards, or IRBs, to introduce the drug into humans in clinical studies;
	•	conducting adequate and well-controlled human clinical trials that establish the safety and efficacy of the drug product candidate for the intended use, typically in the following three sequential, or slightly overlapping stages:

	•	Phase 1: The drug is initially introduced into healthy human subjects or patients and tested for safety, dose tolerance, absorption, metabolism, distribution and excretion;
	•	Phase 2: The drug is studied in patients to identify possible adverse effects and safety risks, to determine dose tolerance and the optimal dosage, and to collect initial efficacy data;
	•	Phase 3: The drug is studied in an expanded patient population at multiple clinical study sites, to confirm efficacy and safety at the optimized dose, by measuring a primary endpoint established at the outset of the study, and comparing it to that of established therapies, if any; and when required; and
	•	Phase 4: The drug is studied in an expanded patient population in a post-approval setting for continued monitoring of safety and sometimes continued efficacy

	•	submitting to the FDA the results of preclinical studies, clinical studies, and adequate data on chemistry, manufacturing and control information to ensure reproducible product quality batch after batch in a New Drug Application, or NDA, or Biologics License Application, or BLA; and
	•	obtaining FDA approval of the NDA or BLA prior to any commercial sale or shipment of the pharmaceutical agent.

      When used in connection with trials and filings in other countries, terms such as “phase 1,” “phase 2,” “phase 3,” “phase 4,” “new drug application” and “marketing application” refer to what we believe are comparable trials and filings in these other countries.

      After FDA approval has been obtained, the FDA will require post-marketing reporting to monitor the side effects of the drug. Further studies may be required to provide additional data on the product’s risks,

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      The FD&C Act includes provisions intended to facilitate and expedite the development and review of drugs and biological products intended for treatment of serious or life-threatening conditions that demonstrate the potential to address unmet medical needs for such conditions. These provisions set forth a procedure for designation of a drug as a “fast track product.” Concurrent with or after an IND is filed, the sponsor may request designation as a fast track product, and the FDA will respond within 60 days.

      An advantage of fast track designation is that sponsors may submit, and the FDA may commence review of, portions of an application before the complete application is submitted, provided that FDA approves a schedule for submission of the completed application. The sponsor of a fast track product also may seek and obtain FDA approval based upon a determination that the product has an effect on a clinical endpoint or on a surrogate endpoint that is reasonably likely to predict clinical benefit. A product approved on this basis is subject to rigorous postmarket compliance requirements, and the sponsor may be required to conduct post-approval studies to validate and/or confirm the endpoint. The FDA may withdraw approval of a fast track product if, for example, the sponsor fails to conduct required post-approval studies or disseminates false or misleading promotional materials.

      The Orphan Drug provisions of the FD&C Act provide incentives to drug and biologics manufacturers to develop and manufacture drugs for the treatment of rare diseases, currently defined as diseases that affect fewer than 200,000 individuals in the U.S. or, for a disease that affects more than 200,000 individuals in the U.S., where the sponsor does not realistically anticipate its product becoming profitable. Under these provisions, a manufacturer of a designated orphan product can seek tax benefits, and the holder of the first FDA approval of a designated orphan product will be granted a seven year period of marketing exclusivity for that product for the orphan indication. While the marketing exclusivity of an orphan drug would prevent other sponsors from obtaining approval of the same drug for the same indication without a showing of clinical superiority, it would not prevent other types of drugs from being approved for the same use. We have been granted orphan designation by the FDA for ZADAXIN for treatment of chronic active hepatitis B, DiGeorge Anomaly, and hepatocellular carcinoma, and for CPX for treatment of cystic fibrosis.

      In the European Union, incentives for manufacturers to develop medicinal products for the treatment of rare diseases are provided pursuant to the Orphan Medicinal Products Regulation (141/2000). Orphan medicinal products are those products designed to diagnose, treat or prevent a condition which occurs so infrequently that the cost of developing and bringing the product to the market would not be recovered by the expected sale of the product. In the EU, the criterion for designation is a prevalence of the relevant condition in no more than 5 per 10,000 of the population. The incentives include, amongst others, a reduction in the fees payable in respect of the marketing authorization application, protocol assistance for clinical trials in support of the application, and marketing exclusivity once the authorization is granted. In the EU, marketing exclusivity is granted to products with an orphan drug designation for a period of 10 years during which the EU will not accept another application for a marketing authorization for the same therapeutic indication in respect of a similar medicinal product, unless the second applicant can show its product is safer, more effective or otherwise clinically superior. A similar medicinal product is defined as a medicinal product containing a similar active substance as contained in the authorized orphan medicinal product.

      We have been granted orphan designation throughout the EU for ZADAXIN for treatment of hepatocellular carcinoma, and for CPX for treatment of cystic fibrosis. However, it should be noted that, as in the U.S., the granting of orphan drug status in the EU does not affect the likelihood of success of obtaining regulatory approval or marketing authorization for the relevant product in any way.

      Under the Drug Price Competition and Patent Term Restoration Act of 1984, or DPCPTRA, a sponsor may be granted marketing exclusivity for a period of time following FDA approval of certain drug applications, regardless of patent status, if the drug is a new chemical entity or new clinical studies were used to support the

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      We may seek the benefits of additional orphan, DPCPTRA, or fast track provisions, but we cannot assure that we will be able to obtain any such benefits.

      We are subject to foreign regulations governing human clinical trials and pharmaceutical sales. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country to country. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries is required prior to the commencement of marketing of our products in those countries. The approval process varies from country to country and the time required for approval may be longer or shorter than that required for FDA approval. In general, foreign countries use one of three forms of regulatory approval process. In one form, local clinical trials must be undertaken and the data must be compiled and submitted for review and approval. In Japan, for example, the process is time consuming and costly because certain preclinical studies and clinical trials must be conducted in Japan. A second form of approval process requires clinical trial submissions, but permits use of foreign clinical trials and typically also requires some form of local trial as well. A third form of approval process does not require local clinical trials, but rather contemplates submission of an application including proof of approval by countries that have clinical trial review procedures. Thus, a prior approval in one or more of the U.S., Japan, most European Union countries or Australia, among others, is often sufficient for approval in countries using this third form of approval process.

      The FDA regulates the export of drugs or bulk pharmaceuticals from the U.S. In general, a drug that has been approved for commercial sale in the U.S. may be exported for commercial sale. An unapproved drug may be exported to a “listed country” (Australia, Canada, Israel, Japan, New Zealand, Switzerland, South Africa, and countries in the European Union and the European Economic Area) for investigational purposes without FDA authorization if exported in accordance with laws of the foreign country, and in accordance with the export requirements. Export of drugs to an unlisted country for clinical trial purposes continues to require FDA approval. An unapproved drug can be exported to any country for commercial purposes without prior FDA approval, provided that the drug (i) complies with the laws of that country, and (ii) has valid marketing authorization or the equivalent from the appropriate authority in a listed country. Export of drugs not approved in the U.S. that do not have marketing authorization in a listed country continue to require FDA export approval. We have obtained, where necessary, FDA approval for all exports of ZADAXIN from the U.S. for clinical trial purposes, and will seek to obtain FDA approval, where necessary, for any future shipments from the U.S. to any unlisted country.

      Failure to comply with applicable U.S. or foreign regulatory requirements can, among other things, result in warning letters, fines, suspensions of regulatory approvals, product recalls or seizures, operating restrictions, injunctions, total or partial suspension of production, civil penalties, and criminal prosecutions. Further, additional government regulation may be established or imposed by legislation or otherwise, which could prevent or delay regulatory approval of ZADAXIN, CPX or any of our future products. Adverse events related to our products in any of our existing or future markets could cause regulatory authorities to withdraw market approval for such products, if any, or prevent us from receiving market approval in the future.

      The level of revenues and profitability of pharmaceutical companies may be affected by the continuing efforts of governmental and third party payors to contain or reduce the costs of health care through various means, including the extent and availability of reimbursement. We are unable to predict when any proposed health care reforms will be implemented, if ever, or the effect of the implemented reforms on our business.

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      We are also subject to various federal, state and local laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with research work and preclinical and clinical trials and testing. The extent of government regulation that might result from future legislation or administrative action in these areas cannot be accurately predicted.

      As the preceding discussion indicates, the research, preclinical development, clinical development, manufacturing, marketing and sales of pharmaceuticals, including ZADAXIN, SCV-07 and CPX, are subject to extensive regulation by governmental authorities. Products we develop cannot be marketed commercially in any jurisdiction in which they have not been approved. The process of obtaining regulatory approvals is lengthy, uncertain and requires the expenditure of substantial resources. For example, in some countries where we contemplate marketing ZADAXIN, the regulatory approval process for drugs not previously approved in countries that have established clinical trial review procedures is uncertain and this uncertainty may result in delays in granting regulatory approvals. In addition, in certain countries such as Japan, the process for obtaining regulatory approval is typically more time consuming and more costly than in other major markets. We are currently pursuing regulatory approvals of ZADAXIN in the U.S., Japan, and in a number of other countries, and in the EU through our EU marketing and development partner Sigma-Tau.

Third Party Reimbursement

      ZADAXIN is a relatively expensive therapeutic product. The amount of product utilized by the patient depends on the disease, the dose, and length of treatment. The cost will typically be several thousands of U.S. dollars for a course of therapy. Currently, ZADAXIN is sold principally in countries without broad government provided health care reimbursement programs or adequate and widely distributed private health insurers or other third party payor organizations. This lack of third party reimbursement impedes the availability of ZADAXIN to the broad affected patient populations in markets where it is approved. We believe that, in addition to regulatory marketing approvals, inclusion of ZADAXIN in drug insurance programs and government drug cost reimbursement programs in the U.S., Europe and Japan is essential to the commercial success of the product.

Employees

      As of December 31, 2002, we had 97 employees, 23 in the U.S., and 74 in foreign offices. We consider our relations with our employees to be satisfactory.

      We also have engaged the services of numerous experienced consultants worldwide with pharmaceutical and business backgrounds to assist in our product development and ZADAXIN commercialization activities. We plan to leverage our key personnel by continuing to make extensive use of clinical research organizations, contract laboratories, development consultants and collaborations with pharmaceutical companies to develop and market our products.

Recent Developments

      In January 2003, Sigma-Tau and its affiliates increased their aggregate ownership to close to 10% of SciClone’s common stock outstanding by purchasing approximately 504,938 unregistered shares of common stock directly from the company for $1.8 million. Prior to this transaction, all warrants held by Sigma-Tau to purchase a total of 400,000 shares of SciClone’s common stock were cancelled, and no new warrants were issued.

Available Information

      We file electronically with the Securities and Exchange Commission (or SEC) our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may

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      You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http:///www.sciclone.com, by contacting the Investor Relations Department at our corporate offices by calling 800-724-2566 or by sending an e-mail message to investorrelations@sciclone.com.

Executive Officers of the Registrant

      As of February 28, 2003, the executive officers of the Company, who are elected by and serve at the discretion of the Board of Directors, were as follows:

      Donald R. Sellers has served as SciClone’s President, Chief Executive Officer and Director since 1996. From 1993 to present, he has also served as Managing Director of SciClone Pharmaceuticals International Ltd. At SciClone, Mr. Sellers has helped to acquire global rights to ZADAXIN®, the Company’s leading immune system enhancing drug, to bring ZADAXIN into phase 3 clinical trials in the U.S. and Japan and into 30 countries where it is sold worldwide generating revenues of $17 million in 2002. Mr. Sellers has nearly 30 years of experience in the global pharmaceutical industry, working with SciClone, Pfizer, Revlon Healthcare Group and Sterling Drug International. Mr. Sellers spent five years in Military Intelligence serving with Special Forces and as a Counter-Intelligence Special Agent. He has an A.B. degree from Lafayette College and a Master of International Management degree with honors from the American Graduate School of International Management. Mr. Sellers speaks five languages.

      Alfred R. Rudolph, M.D., Chief Operating Officer of SciClone Pharmaceuticals, Inc., has over 30 years of experience in the biopharmaceutical industry. Since joining SciClone in April 1997, Dr. Rudolph has been responsible for the clinical, research, regulatory, manufacturing, and quality assurance functions of the Company. Before joining SciClone, Dr. Rudolph was President and Chief Operating Officer of Neptune Pharmaceuticals, Inc., a marine-based natural product screening company. Previously, Dr. Rudolph was Senior Vice President of T Cell Sciences, Inc., Director of Clinical Operations at Cetus Corporation, and Clinical Assistant Professor of Medicine at University of California, San Francisco. He began his pharmaceutical career with Bristol Myers, where he worked in cancer drug development. Dr. Rudolph earned a B.S. in Electrical Engineering from the University of Rochester, and completed his fellowship training in Hemotology-Oncology at Syracuse University.

      Richard A. Waldron,Chief Financial Officer of SciClone Pharmaceuticals, Inc., has over twenty years experience in the financing and management of biotechnology companies. Prior to joining SciClone in March 2001, he was Vice President and Chief Financial Officer from June 1999 to August 2000 for Genelabs Technologies, Inc., a biotechnology company. From July 1995 through March 1999 he was Vice President and Chief Financial Officer of GeneMedicine, Inc., a biotechnology company engaged in gene therapy. From 1990 to 1995, he was a managing director and the head of finance for technology-based companies at Rauscher Pierce Refsnes, Inc., an investment banking firm. From 1985 to 1990, he was a senior vice president responsible for health care investment banking at Cowen & Company. Mr. Waldron received his M.B.A. degree with honors from Harvard University and his A.B. degree magna cum laude in Economics from Princeton University.

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      There are no family relationships among any of the directors or executive officers of the Company.

Item 2.     Properties

      We currently lease approximately 14,768 square feet of office space at our headquarters in San Mateo, California and limited office space in Beijing, Hong Kong, Rome, Shanghai, Singapore, and Tokyo. We believe that our existing facilities will be adequate for our current needs and that additional space will be available as needed.

Item 3.     Legal Proceedings

      None

Item 4.     Submission of Matters to a Vote of Security Holders

      No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2002.

PART II

Item 5.     Market for the Registrant’s Common Equity and Related Shareholder Matters

      Our Common Stock trades on The Nasdaq National Market under the symbol “SCLN.”

      The following table sets forth the high and low sale prices per share for the quarterly periods indicated, as reported by The Nasdaq National Market. The quotations shown represent inter-dealer prices without adjustment for retail markups, markdowns, or commissions, and may not necessarily reflect actual transactions.

Recent Sales of Securities

      In January 2003, the Company completed a direct placement to affiliates of Sigma-Tau, in reliance upon Regulation D of the Securities Act of 1933, as amended. The affiliates purchased 504,938 shares of SciClone’s common stock at $3.5648 per share. The shares issued were restricted securities, and Sigma Tau and its affiliates are not permitted to sell any of the shares purchased in this private placement until January 24, 2004. Prior to this transaction, 400,000 warrants held by Sigma-Tau to purchase shares of SciClone’s common stock were cancelled.

      In June 2002, we completed a $10,600,000 direct offering of common stock to institutional investors. The direct offering consisted of 4,088,460 registered shares of common stock at $2.60 per share.

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Shareholders

      As of March 4, 2003, there were approximately 393 holders of record and approximately 17,910 beneficial holders of our common stock and 37,465,064 shares of common stock issued and outstanding.

      As of December 31, 2002, 36,904,916 shares of common stock were outstanding. If all options, warrants, and convertible securities outstanding were exercised or converted into shares of Common Stock, 8,436,262 shares would be issued and would result in total shares of common stock outstanding of 45,341,178.

Dividends

      We have not paid any dividends on our common stock during the fiscal years ended December 31, 2000, 2001, and 2002 and currently intend to retain any future earnings for use in our business.

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Item 6.     Selected Consolidated Financial Data

      This section presents selected historical financial data for each of the last five fiscal years and is qualified by reference to and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.