<PAGE>   1
                                   FORM 10-Q


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

     (Mark One)

        [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934


                 For the quarterly period ended March 31, 2000

                                       OR

        [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

             For the transition period from           to
                                           -----------   -----------

                        Commission file number: 0-19825

                         SCICLONE PHARMACEUTICALS, INC.
                         ------------------------------
             (Exact name of registrant as specified in its charter)

               CALIFORNIA                                    94-3116852
               ----------                                    ----------
    (State or other jurisdiction                          (I.R.S. employer
  of incorporation or organization)                      Identification no.)


   901 MARINER'S ISLAND BLVD., SUITE 205, SAN MATEO, CALIFORNIA         94404
   ------------------------------------------------------------         -----
             (Address of principal executive offices)                 (Zip code)

                                 (650) 358-3456
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
                                 --------------
      (Former name, former address and former fiscal year, if changed since
                                  last report)

        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 [X] No [ ]

        As of April 25, 2000, 31,461,477 shares of the registrant's Common
Stock, no par value, were issued and outstanding.


<PAGE>   2

                         SCICLONE PHARMACEUTICALS, INC.


                                      INDEX
<TABLE>
<CAPTION>

PART I.               FINANCIAL INFORMATION                                               PAGE NO.
<S>                   <C>                                                                 <C>
Item 1.               Consolidated Financial Statements (Unaudited)

                           Consolidated Balance Sheets as of
                              March 31, 2000 and December 31, 1999                           4

                           Consolidated Statements of Operations for the
                              Three-month periods ended March 31, 2000 and 1999              5

                           Consolidated Statements of Cash Flows for the
                              Three-months periods ended March 31, 2000 and 1999             6

                           Notes to Consolidated Financial Statements                        7

Item 2.               Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                               10

Item 3.               Quantitative and Qualitative Disclosures About Market Risk             25

PART II.              OTHER INFORMATION

Item 2.               Changes in Securities and Use of Proceeds                              26

Item 6.               Exhibits and Reports on Form 8-K                                       27

Signatures                                                                                   28
</TABLE>


<PAGE>   3


PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                         SCICLONE PHARMACEUTICALS, INC.

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                                             March 31,          December 31,
                                                                               2000                 1999
                                                                           -------------       -------------
                                                                            (unaudited)           (Note 1)
<S>                                                                        <C>                 <C>
Current assets:
    Cash and cash equivalents                                              $   4,852,000       $   1,828,000
    Short-term investments                                                    14,886,000           1,793,000
    Accounts receivable, net                                                   6,446,000           4,343,000
    Inventory                                                                    443,000           1,081,000
    Prepaid expenses and other current assets                                    527,000             685,000
    Assets available-for sale                                                  1,184,000           1,184,000
                                                                           -------------       -------------
Total current assets                                                          28,338,000          10,914,000

Property and equipment, net                                                      208,000             235,000
Other assets                                                                   1,866,000           1,975,000
                                                                           -------------       -------------
Total assets                                                               $  30,412,000       $  13,124,000
                                                                           =============       =============

                                 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                       $   1,868,000       $     825,000
    Accrued compensation and benefits                                            346,000             730,000
    Accrued clinical trials expense                                              336,000             258,000
    Accrued professional fees                                                    648,000             865,000
    Other accrued expenses                                                         7,000             203,000
    Other current liabilities                                                    939,000             942,000
                                                                           -------------       -------------
Total current liabilities                                                      4,144,000           3,823,000

Shareholders' equity:
   Common stock, no par value; 75,000,000 shares authorized;
      30,703,677 and 25,258,395 shares issued and outstanding                142,156,000         124,328,000
    Net unrealized gain on available-for-sale securities                          16,000               2,000
    Accumulated deficit                                                     (115,904,000)       (115,029,000)
                                                                           -------------       -------------
Total shareholders' equity                                                    26,268,000           9,301,000
                                                                           -------------       -------------
Total liabilities and shareholders' equity                                 $  30,412,000       $  13,124,000
                                                                           =============       =============
</TABLE>

                 See notes to consolidated financial statements

                                       4

<PAGE>   4

                         SCICLONE PHARMACEUTICALS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)


<TABLE>
<CAPTION>

                                                Three months ended
                                                     March 31,
                                              2000               1999
                                          ------------       ------------
<S>                                       <C>                <C>
Product revenue                           $  3,499,000       $  1,577,000
Contract revenue                                                  200,000
                                          ------------       ------------

Total revenue                                3,499,000          1,777,000

Cost of product sales                          735,000            359,000
                                          ------------       ------------

Gross profit                                 2,764,000          1,418,000

Operating expenses:
     Research and development                1,259,000          1,912,000
     Marketing                               1,916,000          1,272,000
     General and administrative                643,000            909,000
                                          ------------       ------------
Total operating expenses                     3,818,000          4,093,000
                                          ------------       ------------

Loss from operations                        (1,054,000)        (2,675,000)

Interest and investment income, net            179,000             52,000
                                          ------------       ------------

Net loss                                  $   (875,000)      $ (2,623,000)
                                          ============       ============

Basic and diluted net loss per share      $      (0.03)      $      (0.13)
                                          ============       ============
Shares used in computing basic and
     diluted net loss per share             28,476,234         20,029,333
                                          ============       ============
</TABLE>


                 See notes to consolidated financial statements

                                       5
<PAGE>   5


                         SCICLONE PHARMACEUTICALS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                             Three months ended
                                                                                   March 31,
                                                                            2000               1999
                                                                        ------------       ------------
<S>                                                                     <C>                <C>
OPERATING ACTIVITIES:
   Net loss                                                             $   (875,000)      $ (2,623,000)
   Adjustments to reconcile net loss to net cash used in operating
      activities:
      Depreciation and amortization
                                                                             153,000             25,000
      Changes in operating assets and liabilities:
         Prepaid expenses and other assets                                   165,000            253,000
         Accounts receivable                                              (2,103,000)          (443,000)
         Inventory                                                           638,000            164,000
         Accounts payable and other accrued expenses                         844,000            210,000
         Accrued compensation and benefits                                  (384,000)           (71,000)
         Accrued clinical trials expense                                      78,000           (293,000)
         Accrued professional fees                                          (217,000)            53,000
                                                                        ------------       ------------
Net cash used in operating activities                                     (1,701,000)        (2,725,000)
                                                                        ------------       ------------

INVESTING ACTIVITIES:
   Purchase of property and equipment
                                                                             (24,000)            (3,000)
   Sale (purchase) of marketable securities, net                         (13,079,000)         1,661,000
                                                                        ------------       ------------
Net cash (used in) provided by investing activities                      (13,103,000)         1,658,000
                                                                        ------------       ------------

FINANCING ACTIVITIES:
   Proceeds from issuance of common stock and financing cost, net         17,828,000            (97,000)
   Payment on notes receivable from officer                                       --              1,000
                                                                        ------------       ------------
Net cash provided by (used in) financing activities                       17,828,000            (96,000)
                                                                        ------------       ------------

Net increase (decrease) in cash and cash equivalents                       3,024,000         (1,163,000)
Cash and cash equivalents, beginning of period                             1,828,000          3,490,000
                                                                        ------------       ------------
Cash and cash equivalents, end of period                                $  4,852,000       $  2,327,000
                                                                        ============       ============
</TABLE>


                 See notes to consolidated financial statements

                                       6

<PAGE>   6

                         SCICLONE PHARMACEUTICALS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.      The accompanying unaudited consolidated financial statements have been
        prepared in conformity with generally accepted accounting principles
        consistent with those applied in, and should be read in conjunction
        with, the audited financial statements for the year ended December 31,
        1999. The interim financial information reflects all normal recurring
        adjustments which are, in the opinion of management, necessary for a
        fair presentation of the results for the interim periods presented. The
        balance sheet data at December 31, 1999 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. The interim results are
        not necessarily indicative of results for subsequent interim periods or
        for the full year.

2.      In June 1998, the Financial Accounting Standards Board issued Statement
        No. 133, "Accounting for Derivative Instruments and Hedging Activities"
        ("SFAS 133"), which is required to be adopted for the year ending
        December 31, 2001. Management does not anticipate that the adoption of
        SFAS 133 will have a significant impact on results of operations or the
        financial position of the Company.

3.      In December 1999, the Securities and Exchange Commission issued Staff
        Accounting Bulletin No. 101, "Revenue Recognition in Financial
        Statements" ("SAB 101"). This summarizes certain areas of the staff's
        views in applying generally accepted accounting principles to revenue
        recognition in financial statements. The Company is currently evaluating
        the impact of SAB 101 on its results of operations and financial
        position.

4.      For the three-month periods ended March 31, 2000 and 1999, total
        comprehensive loss amounted to $(861,000) and $(2,618,000),
        respectively.

5.      The following is a summary of available-for sale securities at March 31,
        2000:

<TABLE>
<CAPTION>

                                                 Available-for-sale securities
                                 ------------------------------------------------------------
                                                     Gross          Gross         Estimated
                                  Amortized       Unrealized      Unrealized         Fair
                                    Cost             Gains          Losses           Value
                                 -----------      -----------     -----------     -----------
<S>                              <C>              <C>             <C>             <C>
Corporate obligations            $14,870,000      $        --     $    (3,000)    $14,867,000
Corporate equity securities               --           19,000              --          19,000
                                 -----------      -----------     -----------     -----------

                                 $14,870,000      $    19,000     $    (3,000)    $14,886,000
                                 ===========      ===========     ===========     ===========
</TABLE>

        As of March 31, 2000, the average portfolio duration was less than one
year.

                                       7
<PAGE>   7


6.      The following is a summary of inventories at March 31, 2000:

<TABLE>
<CAPTION>

<S>                 <C>
Raw materials       $304,000
Finished goods       139,000
                    --------
                    $443,000
                    ========
</TABLE>

7.      The following is a summary of other assets at March 31, 2000:
<TABLE>
<CAPTION>

<S>                                  <C>
Intangible product rights - net      $1,808,000
Other                                    58,000
                                     ----------
                                     $1,866,000
                                     ==========
</TABLE>

        Product rights acquired are being amortized over six years beginning in
        September 1998. The Company identifies and records impairment losses, as
        circumstances dictate, on intangible product rights when events and
        circumstances indicate that the assets might be impaired and the
        undiscounted cash flows estimated to be generated by those assets are
        less than the carrying amounts of those assets.

8.      In January 2000, the Company completed a $5,720,000 private placement to
        Brown Simpson Asset Management, a strategic institutional investor.
        Brown Simpson purchased 1,000,000 shares of the Company's common stock
        at a price of $6.00 per share, a slight premium to market, and five-year
        warrants to purchase 800,000 shares of the Company's common stock at an
        exercise price of $7.00 per share. The shares issued upon exercise of
        the warrants, if any, may not be sold prior to October 18, 2000 if the
        market price is less than $10.00 per share.

9.      In March 2000, the Company completed a $3,100,000 private placement to
        Italy-based Sigma-Tau Group, one of the leading pharmaceutical companies
        in Southern Europe. Sigma Tau purchased 198,072 shares of the Company's
        common stock at $15.14 per share and five-year warrants to purchase an
        aggregate of 400,000 shares of the Company's common stock, 200,000 of
        which are exercisable at a price of $15.67 per share and 200,000 of
        which are exercisable at a price of $31.33 per share. Sigma-Tau may not
        sell any of the shares purchased in this private placement until March
        2, 2001. In addition, Sigma-Tau was not granted any registration rights
        covering resale of the shares or the shares issuable upon exercise of
        the warrants.

10.     During the quarter ended March 31, 2000, the Company received
        approximately $8,973,000 in connection with exercises of outstanding
        options to purchase 450,399 shares of common stock and outstanding
        warrants to purchase 3,769,342 shares of common stock.

11.     The Company does not have any minimum purchase requirements under its
        contract manufacturing supply agreements for ZADAXIN(R) and CPX.

12.     The Company recognizes revenue from product sales at the time of
        shipment and recognizes contract/grant revenue when services have been
        performed. Sales to distributors are recognized at time of shipment when
        titles to the products are transferred to them. The distributors do not
        have contractual right of return. In March 1999, the Company received a
        non-refundable $200,000 FDA Orphan Drug Grant for phase 2


                                        8
<PAGE>   8

        development of CPX. As there were no future performance obligations with
        respect to this FDA grant, the Company recognized the entire amount as
        revenue in March 1999.

13.     The Company accounts for equity instruments issued to non-employees in
        accordance with the provisions of SFAS 123 and Emerging Issues Task
        Force ("EITF") 96-18. Warrants issued in connection with equity and debt
        arrangements are valued using the Black-Scholes option valuation model.
        Warrants issued to placement agents and similar parties in connection
        with equity financing are accounted as stock issuance cost with an equal
        amount recorded as additional paid-in capital. Warrants issued to
        purchasers of the Company's equities are not specifically accounted for
        as their value is a sub-component of additional paid-in capital. The
        fair value of warrants issued in connection with debt arrangements, if
        material, is accounted for as a debt discount and amortized as
        additional interest expense over the term of the related debt.

                                       9
<PAGE>   9


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and related notes appearing elsewhere in this report. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. The actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, such as those set forth under "Risk Factors" and the risks discussed in
our other SEC filings, including our Annual Report on Form 10-K filed March 30,
2000 with the SEC.

OVERVIEW

        SciClone Pharmaceuticals, Inc. is a global specialty biopharmaceutical
company that develops and commercializes novel medicines for treating a broad
range of the world's most serious diseases. We believe the significance,
prevalence and diversity of our disease targets, and the known limitations of
current treatment alternatives, have created a compelling need for improved
therapies, with novel medicines often enjoying premium pricing and rapid market
acceptance. Our current product development and commercial activities are
focused on this large, unmet market need. Specifically, we have focused our
current product development and commercial activities on the following diseases:

        -   hepatitis C, an infectious disease affecting 170 million people
            worldwide;

        -   hepatitis B, an infectious disease affecting 350 million people
            worldwide;

        -   the most common and deadliest form of liver cancer worldwide,
            hepatocellular carcinoma;

        -   the deadliest form of skin cancer and one of the most rapidly
            increasing types of cancer worldwide, malignant melanoma;

        -   HIV, the virus that causes AIDS;

        -   drug-resistant tuberculosis, an infectious disease reaching pandemic
            proportions worldwide; and

        -   cystic fibrosis, the most common fatal genetic disease among
            Caucasians.

        The fundamentals of the markets for therapies that treat cancer,
infectious disease and cystic fibrosis that are particularly advantageous for us
include:

        -   high incidence and prevalence of these diseases;

                                       10
<PAGE>   10


        -   inadequate treatment alternatives, characterized by limited efficacy
            and high risks of toxic side effects;

        -   potential for "fast track" FDA review;

        -   highly concentrated populations of specialists, allowing a small
            sales force to be effective; and

        -   favorable pricing and reimbursement environment.

        Our flagship drug is ZADAXIN(R), an immunotherapy. ZADAXIN boosts the
 body's immune system in the fight against multiple types of cancer and
 infectious diseases. ZADAXIN is in, or is expected to enter, phase 2 and phase
 3 development in the United States, Europe and Japan, the world's largest
 pharmaceutical markets, targeting six diseases: hepatitis C, hepatitis B,
 hepatocellular carcinoma, malignant melanoma, HIV and drug-resistant
 tuberculosis. Approximately 3,000 patients have been treated with ZADAXIN in
 over 70 clinical trials covering a broad range of life-threatening diseases in
 which the immune system plays a key role in the patient's ability to fight
 back.

        Unlike most global specialty biopharmaceutical companies, we are
 currently selling our lead drug ZADAXIN. ZADAXIN is currently approved for sale
 in Italy and 19 emerging markets in Asia, Latin America and the Middle East,
 principally for the treatment of hepatitis C and hepatitis B, and as a vaccine
 adjuvant. Total ZADAXIN sales for 1999 were $9.1 million, a 151% increase over
 1998 sales of $3.6 million, and for the three months ended March 31, 2000,
 sales were $3.5 million, a 122% increase over sales of $1.6 million in the
 three months ended March 31, 1999. We have filed 17 ZADAXIN marketing
 applications and plan to file 8 additional applications in 2000.

        Our second product in clinical development, CPX, is a novel
 protein-repair therapy for cystic fibrosis, the most common fatal genetic
 disease among Caucasians. Currently approved drugs treat only the symptoms of
 cystic fibrosis, not the underlying cause of the disease. CPX, which we
 in-licensed from the United States National Institutes of Health, is designed
 to repair the underlying protein-associated defect that is responsible for
 cystic fibrosis in most patients, not just the symptoms of the disease. CPX is
 currently undergoing phase 2 development in the United States.

        Additional preclinical drug candidates include SCV-07, the lead orally
 active compound in our new class of immunotherapies, and DAX. We expect to
 develop SCV-07 for drug-resistant tuberculosis, cancer and viral hepatitis. DAX
 is targeted at cystic fibrosis.

        From commencement of our operations in 1989 through March 31, 2000, we
 had incurred a cumulative net loss of approximately $115.9 million. We expect
 our operating expenses to increase over the next several years consistent with
 our expansion of sales, research and development, and preclincial and clinical
 testing. Our ability to expand our operations or achieve profitability is
 dependent in part on successful expansion of the market for ZADAXIN in Asia,
 Latin America and the Middle East, obtaining additional regulatory approvals
 for ZADAXIN and/or future products in the United States, Europe and Japan,
 entering into additional strategic


                                       11
<PAGE>   11

 arrangements for product development and commercialization, where appropriate,
 obtaining additional financing to support our long-term product development and
 commercialization efforts, and continuing to transition from a development
 operation into a successful marketing and development operation.

        Our operating results may fluctuate from period to period as a result
 of, among other things, market acceptance of ZADAXIN, the timing and costs
 associated with preclinical and clinical development of our products, the
 regulatory approval process, and the acquisition of additional product rights.
 RESULTS OF OPERATIONS

        Total revenue was approximately $3,499,000 for the three-month period
 ended March 31, 2000, as compared to approximately $1,777,000 for the
 corresponding period in 1999. For the three-month period ended March 31, 2000,
 all of our total revenue was derived from sales of ZADAXIN. For the three-month
 period ended March 31, 2000, four distributors in China accounted for 86% of
 our ZADAXIN sales. China, like Japan and other Asian countries, uses a tiered
 method to import and distribute products. The distributors make the sales in
 the country, but the product is imported for them by licensed importers. We
 currently work with two importing agents who resell ZADAXIN to four
 distributors within China. We have received ZADAXIN marketing approval in 20
 countries but have not yet commercially launched ZADAXIN in all of these
 countries. We have filed for approval to market ZADAXIN in 17 additional
 countries and anticipate additional filings in 8 other countries this year. As
 a result, if we are able to increase sales of ZADAXIN in existing markets, and
 commence sales of ZADAXIN in new markets once we have secured the requisite
 regulatory approvals, we expect our product revenue to continue to increase in
 2000. However, because the level of ZADAXIN sales in newly approved markets and
 increased sales in existing markets is dependent upon a number of factors,
 including our long-term product development and commercialization efforts,
 particularly those in the United States, Europe and Japan, approved pricing
 levels, increased market penetration, additional marketing approvals and
 successful launch activities, we cannot assure you that our product revenue
 will increase in 2000.

        Cost of product sales was approximately $735,000 for the three-month
 period ended March 31, 2000, as compared to approximately $359,000 for the
 corresponding period in 1999. The increase was attributable to increased
 ZADAXIN sales. We expect cost of sales to vary from quarter to quarter,
 dependent upon the level of ZADAXIN sales, the absorption of fixed
 product-related costs, and any charges associated with excess or expiring
 finished product.

        Research and development expenses were approximately $1,259,000 for the
 three-month period ended March 31, 2000, as compared to approximately
 $1,912,000 for the corresponding period in 1999. The decrease was primarily
 attributable to decreases in clinical trial expenses, consulting fees and
 payroll expenses. In general, we expect product research and development
 expenses to increase quarter to quarter as we pursue our strategy of initiating
 additional clinical trials and testing, particularly in the United States,
 acquiring product rights, and expanding regulatory activities.

                                       12
<PAGE>   12

        Marketing expenses were approximately $1,916,000 for the three-month
period ended March 31, 2000, as compared to approximately $1,272,000 for the
corresponding period in 1999. The increase relates to increased payroll and
travel expenses and expenses for advertising associated with the expansion in
our existing ZADAXIN markets. We expect our marketing expenses to increase as we
continue to expand our commercialization and marketing efforts and strategic
relationships.

        General and administrative expenses were approximately $643,000 for the
three-month period ended March 31, 2000, as compared to approximately $909,000
for the corresponding period in 1999. The decrease was attributable to decreased
payroll and travel expenses and decreased legal and consulting expenses,
partially offset by increased amortization expense. In the near term, we expect
general and administrative expenses to increase quarter to quarter as we engage
in additional clinical trials and testing, particularly in the United States,
and regulatory, pre-commercialization and marketing activities.

        Net interest and investment income was approximately $179,000 for the
three-month period ended March 31, 2000, as compared to approximately $52,000
for the corresponding period in 1999. The increase primarily resulted from
increased interest and investment income due to higher average invested cash
balances.

LIQUIDITY AND CAPITAL RESOURCES

        At March 31, 2000 and 1999, we had approximately $19,738,000 and
$2,591,000, respectively, in cash, cash equivalents and marketable securities.
The marketable securities consist primarily of highly liquid short-term
investments.

        Net cash used by us in operating activities amounted to approximately
$1,701,000 for the three-month period ended March 31, 2000. Net cash used in
operating activities in the 2000 period was greater than our net loss for such
period due to increases in accounts receivable and decreases in accrued
compensation and benefits and accrued professional fees. These uses of cash were
partially offset by non-cash charges associated with depreciation and
amortization, and decreases in prepayments of certain future expenses and
inventory, and increases in accounts payable and other accrued expenses. Net
cash used by us in operating activities amounted to approximately $2,725,000 for
the three-month period ended March 31, 1999. Net cash used in operating
activities in the 1999 period was greater than our net loss for such period due
to increases in accounts receivable and decreases in amounts owed to third
parties for clinical trials and to employees for compensation and benefits.

        Net cash used in investing activities amounted to approximately
$13,103,000 for the three-month period ended March 31, 2000 and related to the
net purchase of approximately $13,079,000 of marketable securities and the
purchase of approximately $24,000 in equipment and furniture. Net cash provided
by investing activities amounted to approximately $1,658,000 for the three-month
period ended March 31, 1999 and related to the net sale of approximately
$1,661,000 of marketable securities offset by the purchase of approximately
$3,000 in equipment and furniture.

        Net cash provided by financing activities for the three-month period
ended March 31, 2000 amounted to approximately $17,828,000, primarily consisting
of $14,695,000 in net


                                       13
<PAGE>   13

proceeds received from the issuance of common stock and redeemable warrants to
institutional and accredited investors, and $3,133,000 in net proceeds from the
issuance of common stock under our employee stock purchase plan and issuance of
common stock to Sigma-Tau, our European ZADAXIN development and marketing
partner. Net cash used in financing activities for the three-month period ended
March 31, 1999 amounted to approximately $96,000, primarily consisting of
various costs related to our 1998 financing activities and partially offset by
net proceeds from issuance of common stock under our employee stock purchase
plan.

        Our capital requirements may change depending upon numerous factors,
including the level of ZADAXIN sales, the availability of complementary
products, technologies and businesses, the initiation of preclinical and
clinical trials and testing, the timing of regulatory approvals, developments in
relationships with existing or future collaborative parties and the status of
competitive products. Assuming ZADAXIN sales continue to increase quarter to
quarter at growth rates similar to what we have achieved over the past nine
quarters, management believes our existing capital resources and interest on
funds available are adequate to maintain our current and planned operations. The
initiation and continuation of United States clinical development programs
could, however, require additional funding either from a collaborative source or
through equity or debt financing. The timing and sustainability of our operating
profitability and capital requirements may change depending upon numerous
factors, including the level of ZADAXIN sales, the timing and amount of
manufacturing costs related to ZADAXIN and CPX, the availability of
complementary products, technologies and businesses, the initiation and
continuation of preclinical and clinical trials and testing, particularly in the
United States, the timing of regulatory approvals, developments in relationships
with existing or future collaborative parties and the status of competitive
products. In the event we need to raise additional financing, the unavailability
or the timing of financing could prevent or delay our long-term product
development and commercialization programs. Without additional financing, or if
sales do not grow beyond management's expectations, or a combination thereof,
management believes our existing capital resources and interest on funds
available are adequate to maintain our current and planned operations for at
least the next twelve months.

RISK FACTORS

        You should carefully consider the risks described below, together with
all of the other information included in this report on Form 10-Q, before making
an investment decision. The risks below are not the only ones we face. If any of
the following risks actually occurs, our business, financial condition or
operating results could be harmed. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment.

                          RISKS RELATED TO OUR BUSINESS

WE HAVE A HISTORY OF OPERATING LOSSES AND AN ACCUMULATED DEFICIT AND EXPECT TO
CONTINUE TO INCUR LOSSES IN THE NEAR TERM AND MAY NEVER ACHIEVE PROFITABILITY.

        We have experienced significant operating losses since our inception and
as of March 31, 2000, we had an accumulated deficit of $115,904,000. We expect
our operating expenses to increase over the next several years as we plan to
dedicate substantially all of our resources to expanding our development,
testing and marketing capabilities.

                                       14
<PAGE>   14

 IF WE DO NOT INCREASE THE AMOUNT OF REVENUE WE DERIVE FROM SALES OF ZADAXIN AND
 ACHIEVE OPERATING PROFITABILITY, WE WILL NEED TO OBTAIN ADDITIONAL CAPITAL TO
 SUPPORT OUR LONG-TERM PRODUCT DEVELOPMENT AND COMMERCIALIZATION PROGRAMS.

        Our strategy in the near term to achieve and sustain operating
profitability depends in large part on our ability to:

        -  increase ZADAXIN sales in existing markets;

        -  launch ZADAXIN in new markets;

        -  commence and continue clinical programs for, and obtain additional
           regulatory approvals for, ZADAXIN, CPX, SCV-07, DAX and/or future
           products, particularly in the United States, Europe and Japan;

        -  maintain our partnering arrangements for development and marketing
           of ZADAXIN in Europe and Japan; and

        -  enter into other agreements for product development and
           commercialization of our products in the United States.

        If we do not increase the revenue we derive from the sales of ZADAXIN
 and achieve operating profitability, we will need to obtain additional
 financing to support our long-term product development and commercialization
 programs. We may seek additional funds through public and private stock
 offerings, arrangements with corporate partners, borrowings under lease lines
 of credit or other sources. If we cannot raise the necessary funds, we will
 have to reduce our capital expenditures, scale back our development of new
 products, reduce our workforce and license to others products or technologies
 that we otherwise would seek to commercialize ourselves.

        The amount of capital we need will depend on many factors, including:

        -  the level of future ZADAXIN sales;

        -  the timing, location, scope and results of ongoing and planned
           preclinical studies and clinical trials;

        -  the cost of manufacturing or obtaining preclinical and clinical
           materials;

        -  the timing and cost involved in applying for and obtaining FDA and
           international regulatory approvals;

        -  the costs involved in filing, prosecuting and enforcing patent
           claims;

        -  competing technological and market developments;



                                       15
<PAGE>   15

        -  whether any or all of our outstanding common stock warrants are
           exercised and the timing and amount of these exercises;

        -  our ability to establish and maintain strategic arrangements for
           development, sales, manufacturing and marketing of our products; and

        -  whether we elect to establish additional partnering arrangements for
           development, sales, manufacturing, and marketing of our products.

        Many of the foregoing factors are not within our control. If we need to
 raise additional funds and such funds are not available on reasonable terms, we
 may be required to delay or cancel our long-term product development and
 commercialization programs. We have no commitments or arrangements for
 additional funding and we may not be able to obtain financing if and when
 needed. Any additional equity financing may be dilutive to shareholders, and
 debt financing, if available, may include restrictive convenants.

 WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP OR COMMERCIALIZE OUR PRODUCTS.

        Many of our products are in the development stage and will require the
 commitment of substantial resources, devoted to extensive research,
 development, preclinical testing, clinical trials, manufacturing scale-up and
 regulatory approval prior to being ready for sale. We have not yet sold any of
 our products other than ZADAXIN. All of our other products will require further
 development, clinical testing and regulatory approvals, and we can not assure
 you that commercially viable products will result from these efforts. We face
 significant technological risks of failure inherent in developing these
 products. We may also abandon some or all of our proposed products before they
 become commercially viable. If any of our products, even if developed and
 approved, cannot be successfully commercialized in a timely manner, our
 business will be harmed and the price of our stock may decline.

 IF WE EXPERIENCE DIFFICULTIES IN OUR FOREIGN SALES AND OPERATIONS, OUR
 FINANCIAL CONDITION WILL BE HARMED.

        Our financial condition in the near term is highly dependent on the sale
 of ZADAXIN in foreign jurisdictions. If we experience difficulties in our
 foreign sales and operations, our business will suffer and our financial
 condition will be harmed. The majority of our ZADAXIN sales are to customers in
 China. However, ZADAXIN sales in China may be limited due to its low average
 income and poorly developed infrastructure. In addition, our ZADAXIN sales and
 operations in other parts of Asia, as well as in Latin America and the Middle
 East, are subject to inherent risks, including:

        -  difficulties and delays in obtaining pricing approvals and
           reimbursement;

        -  difficulties and delays in obtaining product health registration;

        -  difficulties and delays in obtaining importation permits;

                                       16
<PAGE>   16

        -  unexpected changes in regulatory requirements;

        -  tariffs and other barriers;

        -  political instability;

        -  difficulties in staffing and managing foreign operations;

        -  long payment cycles;

        -  difficulties in accounts receivable collection;

        -  currency fluctuations; and

        -  potential adverse tax consequences.

        We do not have any product sales in the United States with which to
 offset any decrease in our revenue from ZADAXIN sales in Asia, Latin America
 and the Middle East. In addition, some countries in these territories regulate
 pharmaceutical prices. These regulations may reduce prices for ZADAXIN to
 levels significantly below those that would prevail in a free market, which
 will cause our revenues to fall and our business to suffer.

 IF WE FAIL TO COMPLY WITH GOVERNMENTAL REGULATIONS, OUR BUSINESS WILL SUFFER.

        All new drugs, including our products which have been developed or are
 currently under development, are subject to extensive and rigorous regulation
 by the FDA, and comparable agencies in state and local jurisdictions and in
 foreign countries. These regulations govern, among other things, the
 development, testing, manufacturing, labeling, storage, premarket approval,
 advertising, promotion, sale and distribution of our products. Satisfaction of
 these requirements typically takes several years and the time needed to satisfy
 them vary substantially, based on the type, complexity and novelty of the
 pharmaceutical product. The effect of government regulation may be to delay or
 to prevent marketing of our existing or potential products for a considerable
 period of time and to impose costly procedures upon our activities. If
 regulatory approval of our products is granted, such approval may impose
 limitations on the indicated uses for which our products may be marketed.
 Further, even if regulatory approval is obtained for a product, later discovery
 of previously unknown products may result in restrictions of the product,
 including withdrawal of the product from the market.

 IF WE FAIL TO OBTAIN REGULATORY APPROVALS IN THE UNITED STATES, EUROPE OR
 JAPAN, OUR REVENUE MAY NOT GROW SIGNIFICANTLY AND OUR STOCK PRICE MAY DECLINE.

        If we fail to obtain regulatory approvals for ZADAXIN in the United
 States, Europe or Japan for the treatment of hepatitis C, our revenue may not
 grow significantly and the price of our stock may fall. To secure these
 approvals in the United States, Europe and Japan, we need favorable results
 from additional clinical trials of ZADAXIN. We cannot assure you that


                                       17
<PAGE>   17
 these additional clinical trials will yield favorable results or that if they
 do, we will obtain any regulatory approvals.

        Our failure to obtain regulatory approvals for, and successfully
 commercialize, CPX for the treatment of cystic fibrosis will harm our
 operations. Our failure to demonstrate, in preclinical and clinical trials, the
 safety and efficacy of CPX as a treatment for cystic fibrosis and to obtain
 regulatory approval of CPX in the United States as a treatment for cystic
 fibrosis will impair our operations. CPX is currently undergoing phase 2
 testing in the United States. We cannot assure you that we will not experience
 delays and difficulties in the preclinical and clinical development of CPX. In
 addition, clinical trials may prove that CPX is not an effective treatment for
 cystic fibrosis.

 WE HAVE LIMITED SALES, MARKETING AND DISTRIBUTION CAPABILITIES, WHICH MAY
 ADVERSELY AFFECT OUR ABILITY TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCTS.

        We currently have limited sales, marketing and distribution
 capabilities, and we anticipate that we will be relying on third parties to
 sell, market and distribute our products in the foreseeable future. If our
 arrangements with third parties are not successful, or if we are unable to
 enter into third-party arrangements, we may need to substantially expand our
 sales, marketing and distribution force. Our plans to expand may not succeed,
 or we may lack the sufficient resources to expand in a timely manner. If we do
 develop such capabilities, we will compete with other companies that have
 experienced and well funded operations. If we fail to establish successful
 sales and marketing capabilities or to enter into successful marketing
 arrangements with third parties, or if our third party distributors fail to
 perform their obligations, our business and operations will be materially and
 adversely affected.

 IF WE FAIL TO SUCCESSFULLY MARKET AND COMMERCIALIZE OUR PRODUCTS, OUR REVENUE
 WILL NOT GROW.

        Our future revenue growth depends on increased market acceptance and
 commercialization of ZADAXIN in additional countries. If we fail to
 successfully market ZADAXIN, or if we cannot commercialize this drug in
 additional markets, our revenue and operating results will suffer. Our future
 revenue will also depend in part on our ability to develop other commercially
 viable and accepted products. Market acceptance of our products will depend on
 many factors, including our ability to:

        -   convince prospective strategic partners and customers that our
            products are an attractive alternative to other treatments and
            therapies; and

        -   manufacture products in sufficient quantities with acceptable
            quality and at an acceptable cost.

        In many of our current markets for ZADAXIN, particularly China, low
 average per capita income and poorly developed distribution infrastructure make
 it difficult to successfully commercialize ZADAXIN.

 IF WE ARE NOT ABLE TO ESTABLISH AND MAINTAIN ADEQUATE MANUFACTURING AND SUPPLY
 RELATIONSHIPS, THE DEVELOPMENT AND SALE OF OUR PRODUCTS COULD BE IMPAIRED.

                                       18
<PAGE>   18

        To be successful, our products must be manufactured in commercial
 quantities, in compliance with regulatory requirements and at an acceptable
 cost. We may not be able to maintain the long-term manufacturing relationships
 we currently have with our suppliers of ZADAXIN and CPX. Manufacturing
 interruptions, if any, could significantly delay clinical development of
 potential products and reduce third-party or clinical researcher interest and
 support of proposed trials. These interruptions could also impede
 commercialization of our products, including sales of ZADAXIN in approved
 markets, and impair our competitive position. Any of these developments would
 harm our business. We have recently changed and upgraded our manufacturing
 source of ZADAXIN for our international markets, excluding Japan. In some
 countries, this change may require additional regulatory approvals. If we do
 not obtain the required regulatory approvals of this manufacturing change in a
 timely fashion, new ZADAXIN marketing approvals may be delayed or sales may be
 interrupted until the manufacturing change is approved. Either of these results
 will hurt our business.

        Manufacturing, supply and quality control problems may arise as we,
 either alone or with subcontractors, attempt to scale-up manufacturing
 procedures. We may not be able to scale-up in a timely manner or at a
 commercially reasonable cost. Problems could lead to delays or pose a threat to
 the ultimate commercialization of our products and harm us.

 IF WE DO NOT OBTAIN RIGHTS TO ADDITIONAL PRODUCTS FROM THIRD PARTIES, OUR
 REVENUE MAY DECLINE AND OUR FUTURE DEVELOPMENT EXPENSES MAY INCREASE.

        We are only actively pursuing clinical development of ZADAXIN and CPX at
 this time. If we do not license or otherwise acquire rights to additional drugs
 or advance SCV-07 and DAX, the other products to which we have in-licensed
 rights, from preclinical into clinical development, we may have a shortage of
 drugs to develop and commercialize. Any shortage in the number of drugs that we
 are able to develop and commercialize may cause our revenues to fall and
 increase our future development expenses.

 COMMERCIALIZATION OF SOME OF OUR PRODUCTS DEPENDS ON COLLABORATIONS WITH
 OTHERS. IF OUR COLLABORATORS ARE NOT SUCCESSFUL, OR IF WE ARE UNABLE TO FIND
 FUTURE COLLABORATORS, WE MAY NOT BE ABLE TO PROPERLY DEVELOP AND COMMERCIALIZE
 OUR PRODUCTS.

        We depend on our licensees to develop and promote our drugs, and if they
 are not successful in their efforts or fail to do so, our business will suffer.
 We have exclusively sublicensed our rights to develop and market ZADAXIN in
 Europe to Sigma-Tau S.p.A. and in Japan to Schering-Plough K.K. However, we
 generally do not have control over the amount and timing of resources that
 Sigma-Tau and Schering Plough devote to their ZADAXIN development activities.
 If they do not perform their obligations as we expect, our development expenses
 would increase and the development and sale of our products could be limited or
 delayed, which could cause our business to suffer and our stock price to
 decline. In addition, these companies already have a substantial commitment to
 alpha interferon, which is an approved drug for cancer, hepatitis B and
 hepatitis C in Europe and Japan. Our relationships with these companies may not
 be successful. Disputes may arise over ownership rights to intellectual
 property, know-how or technologies developed with our collaborators, and we may
 not be able to negotiate similar


                                       19
<PAGE>   19

 additional arrangements in the future in Europe and Japan or other major
 markets to develop and commercialize ZADAXIN.

 IF WE FAIL TO PROTECT OUR PRODUCTS, TECHNOLOGIES AND TRADE SECRETS, WE MAY NOT
 BE ABLE TO SUCCESSFULLY USE, MANUFACTURE OR MARKET AND SELL OUR PRODUCTS OR WE
 MAY FAIL TO ADVANCE OR MAINTAIN OUR COMPETITIVE POSITION.

        Our success depends significantly on our ability to obtain and maintain
 meaningful patent protection for our products and technologies, to preserve our
 trade secrets and to avoid infringing on the proprietary rights of third
 parties. Our pending patent applications may not result in the issuance of
 patents in the future. Our patent applications may not have priority over
 others' applications and, even if any patents are issued, they may not provide
 a competitive advantage to us or may be invalidated or circumvented by our
 competitors. Others may independently develop similar products or design around
 patents issued or licensed to us. Patents issued to, or patent applications
 filed by, other companies could harm our ability to use, manufacture or market
 our products or maintain our competitive position with respect to our products.
 Many of our patents relating to ZADAXIN have expired, and we have rights to
 other patents and patent applications relating to ZADAXIN under exclusive
 licenses. If we breach the terms of any of these licenses, we could lose our
 rights to these patents and patent applications.

        Our commercial success also depends in part on us neither infringing
 valid, enforceable patents or proprietary rights of third parties, nor
 breaching any licenses that may relate to our technologies and products. We are
 aware of third-party patents that may relate to our technology. It is possible
 that we may unintentionally infringe these patents or other patents or
 proprietary rights of third parties. We may in the future receive notices
 claiming infringement from third parties as well as invitations to take
 licenses under third-party patents. Any legal action against us or our
 collaborative partners claiming damages and seeking to enjoin commercial
 activities relating to our products and processes affected by third-party
 rights may require us or our collaborative partners to obtain licenses in order
 to continue to manufacture or market the affected products and processes. Our
 efforts to defend against such claims, even if unmeritorious, would require us
 to devote resources and attention that could have been directed to our
 operation and growth plans. In addition, these actions may subject us to
 potential liability for damages. We or our collaborative partners may not
 prevail in a patent action and any license required under a patent may not be
 made available on commercially acceptable terms, or at all.

        Pharmaceuticals are either not patentable or have only recently become
 patentable in some of the countries outside of the United States, in which we
 have exclusive rights to ZADAXIN. Past enforcement of intellectual property
 rights in many of these countries has been limited or non-existent. Future
 enforcement of patents and proprietary rights in many other countries will
 likely be problematic or unpredictable. Moreover, the issuance of a patent in
 one country does not assure the issuance of a similar patent in another
 country. Claim interpretation and infringement laws vary by nation, so the
 extent of any patent protection is uncertain and may vary in different
 jurisdictions.

 IF WE FAIL TO OBTAIN REGULATORY APPROVALS IN COUNTRIES IN WHICH OUR PRODUCTS
 HAVE NOT BEEN APPROVED, OUR REVENUE GROWTH MAY BE HARMED.

                                       20
<PAGE>   20

        The research, preclinical and clinical development, manufacturing,
 marketing and sale of ZADAXIN, CPX and our other drug candidates are subject to
 extensive regulation by governmental authorities. ZADAXIN, CPX and any other
 products must be approved by the FDA or its foreign counterparts before they
 can be sold in any jurisdiction. Obtaining regulatory approval is
 time-consuming and expensive. In some countries where we are contemplating
 marketing and selling ZADAXIN, the regulatory approval process for drugs that
 have not been previously approved in countries with established clinical trial
 review procedures is uncertain, and this may delay the grant of regulatory
 approvals for ZADAXIN. Our failure to obtain, develop, market and sell our
 products in countries where we currently do not have such approvals may limit
 the growth of our revenues.

        We may not be able to commence or complete the clinical trials we have
 sponsored or are planning relating to ZADAXIN and CPX in a timely or
 cost-effective manner. Even if completed, these trials may not fulfill the
 applicable regulatory approval criteria, in which case we will not be able to
 obtain regulatory approvals in these countries. Failure to obtain additional
 regulatory approvals will harm our operating results. In addition, adverse
 results in our development programs also could result in restrictions on the
 use of ZADAXIN and, if approved, CPX.

        Our failure, or the failure by one or more of our partners, to comply
 with applicable United States or foreign regulatory requirements could, among
 other things, result in warning letters, fines, suspensions of regulatory
 approvals, product recalls or seizures, operating restrictions, injunctions and
 criminal prosecutions. In addition, government regulations may be established
 or imposed which prevent or delay regulatory approval of ZADAXIN, CPX or our
 future products.

        Our ability to obtain regulatory approval in one country may be delayed
 or adversely affected by the timing of regulatory activities and approvals in
 other countries, particularly if we do not participate in the regulatory
 approval process in these other countries. Any delay or failure to achieve
 regulatory approvals may limit our potential future revenue.

 IF WE MAKE ANY ACQUISITIONS, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER
 REALIZE THE ANTICIPATED BENEFITS.

        If appropriate opportunities become available, we may attempt to acquire
 products, product candidates or businesses that we believe fit strategically
 with our business. We currently have no commitments or agreements with respect
 to material acquisitions. If we do undertake any transaction of this tort, the
 process of integrating an acquired product, product candidate or business may
 result in operating difficulties and expenditures and may absorb significant
 management attention that would otherwise be available for our ongoing business
 development plans. Moreover, we may never realize the anticipated benefits of
 any acquisition. Future acquisitions could result in potentially dilutive
 issuances of equity securities, the incurrence of debt, contingent liabilities
 and/or amortization expenses related to goodwill and other intangible assets,
 which could adversely affect our business, financial condition and results of
 operations.

 WE MAY LOSE MARKET SHARE OR OTHERWISE FAIL TO COMPETE EFFECTIVELY IN THE
 INTENSELY COMPETITIVE BIOPHARMACEUTICAL INDUSTRY.

                                       21
<PAGE>   21

        Competition in the biopharmaceutical industry is intense and we expect
 that competition to increase. Our success depends on our ability to compete. We
 believe that the principal competitive factors in this industry include the
 efficacy, safety, price, therapeutic regimen and manufacturing quality
 assurance associated with a given drug. Our competitors include
 bio-pharmaceutical companies, biotechnology firms, universities and other
 research institutions, both in the United States and abroad, that are actively
 engaged in research and development of chronic and life-threatening diseases
 such as hepatitis C, hepatitis B, cancer, immune system disorders and cystic
 fibrosis.

        Most of our competitors, particularly large bio-pharmaceutical
 companies, have substantially greater financial, technical, regulatory,
 manufacturing, marketing and human resource capabilities than we do. Most of
 them also have extensive experience in undertaking the clinical testing and
 obtaining the regulatory approvals necessary to market drugs. We currently rely
 on sales of ZADAXIN as a treatment for hepatitis C and hepatitis B as our
 primary source of revenue. However, several large bio-pharmaceutical companies
 have substantial commitments to alpha interferon, which is an approved drug for
 treating hepatitis B and hepatitis C and the primary competitor to ZADAXIN. We
 cannot assure you that we will compete successfully against our competitors or
 that our competitors, or potential competitors, will not develop drugs or other
 treatments for hepatitis C, hepatitis B, cystic fibrosis, cancer and other
 diseases that will be superior to ours. Increased competitive pressure could
 also lead to intensified price-based competition resulting in lower prices and
 margins, which would hurt our operating results.

 IF THIRD-PARTY REIMBURSEMENT IS NOT AVAILABLE OR PATIENTS CANNOT OTHERWISE PAY
 FOR ZADAXIN, WE MAY NOT BE ABLE TO SUCCESSFULLY MARKET ZADAXIN.

        If third-party reimbursement, either from government health
 administration authorities, private health insurers and other organizations, is
 not available or patients cannot otherwise pay for ZADAXIN, we may not be able
 to successfully market ZADAXIN. Third-party reimbursement for new therapeutic
 products such as ZADAXIN is highly uncertain and may not be available for our
 future products. In most of the foreign countries in which we sell ZADAXIN or
 intend to sell ZADAXIN, reimbursement for ZADAXIN under government or private
 health insurance programs is not widely available. The failure to obtain
 third-party reimbursement for our products will hurt our business. In the
 United States, proposed health care reforms could limit the amount of
 third-party reimbursement available for our products. In many countries where
 we have marketing rights to ZADAXIN, government resources and per capita income
 may be so low that our products will be prohibitively expensive. In these
 countries, we may not be able to market our products on economically favorable
 terms, if at all.

        Efforts by governmental and third-party payors to contain or reduce
 health care costs could cause us to reduce the prices at which we market our
 drugs, which will reduce our gross margins and may harm our business. There are
 efforts by governmental and third-party payors to contain or reduce the costs
 of health care through various means. We expect that there will continue to be
 a number of legislative proposals to implement government controls. The
 announcement of proposals or reforms could cause us to reduce the prices at
 which we market our drugs, which will reduce our gross margins and may harm our
 business.

                                       22
<PAGE>   22

 IF WE LOSE KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL, HIGHLY
 SKILLED PERSONNEL REQUIRED FOR THE EXPANSION OF OUR ACTIVITIES, OUR BUSINESS
 WILL SUFFER.

        We are highly dependent upon our ability to attract and retain qualified
 personnel because of the specialized, scientific and international nature of
 our business. There is intense competition for qualified management, scientific
 and technical personnel in the pharmaceutical industry, and we may not be able
 to attract and retain the qualified personnel we need to grow and develop our
 business globally. In addition, numerous key responsibilities at SciClone are
 assigned to a small number of individuals, including our president and chief
 executive officer, chief operating officer, chief business officer and our
 regional managing director for greater China. If we are unable to attract and
 retain qualified personnel as needed or promptly replace those employees who
 are critical to our product development and commercialization, the development
 and commercialization of our products would adversely be affected. At this
 time, we do not maintain "key person" life insurance on any of our key
 personnel.

 WE MAY BE SUBJECT TO PRODUCT LIABILITY LAWSUITS AND OUR INSURANCE MAY BE
 INADEQUATE TO COVER DAMAGES.

        Clinical trials or marketing of any of our current and potential
 products may expose us to liability claims from the use of these products. We
 currently carry product liability insurance. However, we cannot be certain that
 we will be able to maintain insurance on acceptable terms for clinical and
 commercial activities or that the insurance would be sufficient to cover any
 potential product liability claim or recall. If we fail to have sufficient
 coverage, our business, results of operation and cash flows could be adversely
 affected.

 IF WE ARE UNABLE TO COMPLY WITH ENVIRONMENTAL LAWS AND REGULATIONS, OUR
 BUSINESS MAY BE HARMED.

        We are subject to federal, state and local laws and regulations
 governing the use, manufacture, storage, handling and disposal of hazardous
 materials and waste products. We currently maintain a supply of hazardous
 materials at our facilities. In the event of an accident, we could be liable
 for any damages that result, and the liability could exceed our resources.
 While we currently outsource our research and development programs involving
 the controlled use of biohazardous materials, if in the future we conduct these
 programs, we might be required to incur significant cost to comply with the
 environmental laws and regulations.

 THE PRICE OF OUR COMMON STOCK HAS EXPERIENCED SUBSTANTIAL VOLATILITY AND MAY
 FLUCTUATE DUE TO FACTORS BEYOND OUR CONTROL.

        There has been significant volatility in the market prices for publicly
 traded shares of pharmaceutical and biotechnology companies, including ours.
 The following factors may have an adverse impact on the market price of our
 common stock:

        -   announcements of technical or product developments by us or our
            competitors;

        -   market conditions for pharmaceutical and biotechnology stocks;

                                       23
<PAGE>   23

        -  market conditions generally;

        -  governmental regulation;

        -  healthcare legislation;

        -  public announcements regarding advances in the treatment of the
           disease states that we are targeting;

        -  public announcements from government officials relating to the
           biotechnology or pharmaceutical industries;

        -  patent or proprietary rights developments;

        -  changes in third-party reimbursement policies for our products; and

        -  fluctuations in our operating results.

        In 1999, the price of our common stock fluctuated from a low of $1.06 to
 a high of $6.13. On May 1, 2000, our common stock closed at a price of $10.87.
 The price of our common stock may not remain at or exceed current levels.

 SUBSTANTIAL SALES OF OUR STOCK OR CONVERTIBLE SECURITIES MAY IMPACT THE MARKET
 PRICE OF OUR COMMON STOCK.

        As of May 1, 2000, stock options for 4,124,093 shares of common stock
 were outstanding, of which options for 3,124,172 shares were currently
 exercisable, and there were warrants exercisable for 2,052,623 shares of common
 stock outstanding. Upon exercise and issuance, all of these shares of common
 stock will be freely tradable.

        Future sales of substantial amounts of our common stock could adversely
 affect the market price of our common stock. Similarly, if we raise additional
 funds through the issuance of common stock or securities convertible into or
 exercisable for common stock, the percentage ownership of our shareholders will
 be reduced and the price of our common stock may fall.

 ISSUING PREFERRED STOCK WITH RIGHTS SENIOR TO THOSE OF OUR COMMON STOCK COULD
 ADVERSELY AFFECT HOLDERS OF COMMON STOCK.

 Our charter documents give our board of directors the authority to issue
 additional series of preferred stock without a vote or action by our
 shareholders. The board also has the authority to determine the terms of
 preferred stock, including price, preferences and voting rights. The rights of
 holders of our common stock may be adversely affected by the rights granted to
 holders of preferred stock. For example, a series of preferred stock may be
 granted the right to receive a liquidation preference -- a pre-set distribution
 in the event SciClone is liquidated -- that would reduce the amount available
 for distribution to holders of common stock. In addition, the issuance of
 preferred stock could make it more difficult for a third party to acquire a
 majority of


                                       24
<PAGE>   24

 our outstanding voting stock. As a result, common shareholders could be
 prevented from participating in transactions that would offer an optimal price
 for their shares.

 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        The primary objective of our investment activities is to preserve
 principal while at the same time maximizing yields without significantly
 increasing risk. To achieve this objective, we invest in highly liquid and high
 quality debt securities. Our investments in debt securities are subject to
 interest rate risk. To minimize the exposure due to adverse shift in the
 interest rates we invest in short term securities and maintain an average
 maturity of less than 1 year. A hypothetical 60 basis point increase in
 interest rates would result in an approximate $28,098 decrease (less than 0.6%)
 in fair value of our available-for-sale securities.

        The potential change noted above is based on sensitivity analyses
 performed on our financial positions at March 31, 2000. Actual results may
 differ materially.

                                       25
<PAGE>   25

 PART II.  OTHER INFORMATION


 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

    (c)  Recent Sales of Unregistered Securities

        In January 2000, we completed a $5,720,000 private placement to Brown
 Simpson Asset Management, a strategic institutional investor. Brown Simpson
 purchased 1,000,000 shares of our common stock at a price of $6.00 per share, a
 slight premium to market, and five-year warrants to purchase 800,000 shares of
 our common stock at an exercise price of $7.00 per share. The shares issued
 upon exercise of the warrants, if any, may not be sold prior to October 18,
 2000 if the market price is less than $10.00 per share.

        In March 2000, we completed a $3,100,000 private placement to
 Italy-based Sigma-Tau Group, one of the leading pharmaceutical companies in
 Southern Europe. Sigma Tau purchased 198,072 shares of our common stock at
 $15.14 per share and five-year warrants to purchase an aggregate of 400,000
 shares of our common stock, 200,000 of which are exercisable at a price of
 $15.67 per share and 200,000 of which are exercisable at a price of $31.33 per
 share. Sigma-Tau may not sell any of the shares purchased in this private
 placement until March 2, 2001. In addition, Sigma-Tau was not granted any
 registration rights covering resale of the shares or the shares issuable upon
 exercise of the warrants.

        During the quarter ended March 31, 2000, we received approximately
 $8,973,000 in connection with exercises of outstanding options to purchase
 450,399 shares of common stock and outstanding warrants to purchase 3,769,342
 shares of common stock.

    (d)

    None.

                                       26
<PAGE>   26

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)     Exhibits

                3(i).1  Restated Articles of Incorporation (incorporated by
                        reference from the Company's Registration Statement on
                        Form S-1 (No. 33-45446), declared effective by the
                        Commission on March 17, 1992).

                3(i).2  Certificate of Amendment of Restated Articles of
                        Incorporation (incorporated by reference from the
                        Company's Registration Statement on Form S-8 (No.
                        33-66832) filed with the Commission on August 3, 1993).

                3(i).3  Certificate of Determination (incorporated by reference
                        from the Company's Current Report on Form 8-K filed on
                        October 14, 1997).

                3(ii).1 Bylaws (incorporated by reference from the Company's
                        Registration Statement on Form S-1 (No. 33-45446),
                        declared effective by the Commission on March 17, 1992).

                3(ii).2 Certificate of Amendment of Bylaws (incorporated by
                        reference from the Company's Registration Statement on
                        Form S-8 (No. 33-66832) filed with the Commission on
                        August 3, 1993).

                4.2     Rights Agreement, dated as of July 25, 1997, between
                        SciClone and ChaseMellon Shareholder Services, LLC.
                        (incorporated by reference to the Company's Current
                        Report on Form 8-K filed on October 14, 1997).

                10.5    Common Stock Purchase Agreement between SciClone
                        Pharmaceuticals, Inc. and Sigma-Tau Finance S.A., dated
                        March 3, 2000.

                10.6    Form of Sigma-Tau Finance S.A. Warrant to Purchase
                        Shares of Common Stock of SciClone Pharmaceuticals,
                        Inc., dated March 3, 2000

                27      Financial Data Schedule

        (b)     Reports on Form 8-K

                None.

                                       27
<PAGE>   27


                                   SIGNATURES

               Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.


                                           SCICLONE PHARMACEUTICALS, INC.
                                                    (Registrant)



Date:  May 15, 2000                                Donald R. Sellers
                                     -----------------------------------------
                                                   Donald R. Sellers
                                         President, Chief Executive Officer and
                                            Interim Chief Financial Officer
                                            (Principal Executive Officer and
                                       Principal Financial & Accounting Officer)


                                       28


<PAGE>   28
<TABLE>
<CAPTION>
                 Exhibit
                 Number                  Description
                --------                 -----------
<S>                     <C>
                3(i).1  Restated Articles of Incorporation (incorporated by
                        reference from the Company's Registration Statement on
                        Form S-1 (No. 33-45446), declared effective by the
                        Commission on March 17, 1992).

                3(i).2  Certificate of Amendment of Restated Articles of
                        Incorporation (incorporated by reference from the
                        Company's Registration Statement on Form S-8 (No.
                        33-66832) filed with the Commission on August 3, 1993).

                3(i).3  Certificate of Determination (incorporated by reference
                        from the Company's Current Report on Form 8-K filed on
                        October 14, 1997).

                3(ii).1 Bylaws (incorporated by reference from the Company's
                        Registration Statement on Form S-1 (No. 33-45446),
                        declared effective by the Commission on March 17, 1992).

                3(ii).2 Certificate of Amendment of Bylaws (incorporated by
                        reference from the Company's Registration Statement on
                        Form S-8 (No. 33-66832) filed with the Commission on
                        August 3, 1993).

                4.2     Rights Agreement, dated as of July 25, 1997, between
                        SciClone and ChaseMellon Shareholder Services, LLC.
                        (incorporated by reference to the Company's Current
                        Report on Form 8-K filed on October 14, 1997).

                10.4    Prospectus to January 18, 2000 private placement
                        (incorporated by reference to the Company's filing
                        pursuant to Ru1e 424(b)(3) (No. 333-30938) filed with
                        the Commission on April 25, 2000).

                10.5    Common Stock Purchase Agreement between SciClone
                        Pharmaceuticals, Inc. and Sigma-Tau Finance S.A., dated
                        March 3, 2000.

                10.6    Form of Sigma-Tau Finance S.A. Warrant to Purchase
                        Shares of Common Stock of SciClone Pharmaceuticals,
                        Inc., dated March 3, 2000

                27      Financial Data Schedule
</TABLE>