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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 10-K

<Table>
<C>          <S>
    [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934



             FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001,



                                   OR




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



               FOR THE TRANSITION PERIOD FROM           TO           .
</Table>

                         COMMISSION FILE NUMBER 0-19825
                             ---------------------

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

<Table>
<S>                                            <C>
                  CALIFORNIA                                     94-3116852
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

        901 MARINER'S ISLAND BOULEVARD
            SAN MATEO, CALIFORNIA                                  94404
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</Table>

                                 (650) 358-3456
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                           COMMON STOCK, NO PAR VALUE
                                (TITLE OF CLASS)

     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 [ ]

     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.  [X]

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $137,930,000 as of March 13, 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 13, 2002, there were 32,671,204 shares of the Registrant's
Common Stock outstanding.

     Part III incorporates by reference from the definitive proxy statement for
the Registrant's 2002 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.
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                   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 and our forward looking statements include those statements we make
regarding the timing and outcome of clinical trails, anticipated sales and
research and development expense levels. 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
and our other SEC filings discuss some of the important risk factors that may
affect our business, results of operations and financial condition. 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") develops and
commercializes pharmaceutical and biological therapeutic compounds that are
acquired or in-licensed at the stage of late pre-clinical or early clinical
development. SciClone's strategic goal, based on the broad therapeutic potential
of its lead drug ZADAXIN, is to become the preeminent worldwide provider of
immune system enhancers, or ISEs, as monotherapies and as critical components of
combination drug therapies for infectious diseases and cancer. ZADAXIN has been
approved for sale primarily as a monotherapy for hepatitis B in 26 countries
with additional approvals anticipated and has been administered without observed
significant side effects or toxicities to over 10,000 patients worldwide.
Currently, SciClone is targeting major market regulatory approval for ZADAXIN by
focusing on its U.S. hepatitis C phase 3 clinical trials, Japanese hepatitis B
phase 3 clinical trial and European cancer phase 2-3 clinical trials in
collaboration with SciClone's European partner, Sigma-Tau, S.p.A.

     ZADAXIN is a synthetic preparation of a natural peptide, thymosin alpha 1,
that enhances the body's Th1 immune response. There are no reports of
significant side effects in more than 10,000 patients to date, in both clinical
trial and commercial use for several different diseases, including viral
diseases (hepatitis C and B) and cancers (hepatocellular carcinoma and malignant
melanoma). This safety profile, combined with its unique mechanism of action,
ideally positions ZADAXIN as the immune system enhancer of choice for use in
combination therapies for infectious diseases and cancer. Other drugs in
SciClone's pipeline are intended to protect and expand this franchise, and to
address the protein-based disorder that causes cystic fibrosis.

     While SciClone has obtained ZADAXIN marketing approvals in 26 countries
overseas, the Company's clinical development strategy has been to focus on
hepatitis C as the first indication for commercial registration of ZADAXIN in
the U.S. In Europe, SciClone's collaboration partner Sigma Tau is pursuing
regulatory approval for ZADAXIN for oncology indications with a phase 2-3
clinical program, initially focused on malignant melanoma. In addition, Sigma
Tau will pursue regulatory approval in Europe for ZADAXIN as a therapy for
hepatitis C using data from SciClone's phase 3 clinical trials in the U.S.
SciClone is also developing ZADAXIN for use as a therapy for hepatitis B in
Japan. SciClone produces ZADAXIN for current commercial sales through contract
manufacturers in Western Europe and most of the company's current sales are to
importing agents in the People's Republic of China for distribution in that
country. In the U.S., SciClone anticipates moving toward entering into a
marketing collaboration in the later stages of its phase 3 clinical trials when
the Company believes the product should have enhanced partnering value, though
there is no assurance such a partnering arrangement can be successfully
achieved.
                                        1
<PAGE>

ZADAXIN

     ZADAXIN, an immune system enhancer, is a synthetic preparation of thymosin
alpha 1, an immune system peptide that occurs naturally and whose activities
increasingly are being recognized to regulate the body's immune response to
viral infection or malignancy. Published scientific and clinical studies have
shown that ZADAXIN's activities include helping to stimulate, maintain and
direct the body's antiviral and anticancer immune response -- to both target the
intended affected cells and to enhance the immune system's capabilities for
cell-specific eradication.

     Disease-causing agents which remain circulating in the blood usually are
quickly recognized and eliminated by the body's humoral, or antibody-based,
immune component. ZADAXIN's critical role in the immune response is played out
in the more complicated realm of cellular immunity, when certain of the body's
own cells need to be the target of an immune response because of infection or
malignancy, even though the immune system does not recognize these cells as
foreign. Diseases requiring a cellular immune response, such as HIV, hepatitis C
and cancer, have generally been the most resistant to therapeutic intervention
to date, and remain at the frontier of current medical investigation.

     Humoral and cellular immune response to some degree "cross-regulate" each
other, with cytokine production determining which holds precedence. ZADAXIN
seems to be an important regulator of these responses. Increasingly, studies
have suggested that ZADAXIN enhances the maturation of stem cells and their
differentiation into mature CD4, CD8, T and natural killer cells. ZADAXIN
increases the Th1 subset of CD4 cells (which favors cellular immunity) by
increasing the production of cytokines such as IL-2 and gamma interferon.
ZADAXIN also enhances the expression of class I MHC molecules on diseased human
cells, which leads to increased recognition and their destruction by CD8 cells.

     Studies also have demonstrated that hepatitis C is able to evade the body's
immune response leading to chronic viral infection if the body's immune response
is "switched" to the Th2 mode. A Th1 response, on the other hand, is fundamental
to hepatitis C eradication. Current treatments for hepatitis C, such as alpha
interferon, actually induce a counter-regulatory increase in Th2 cytokine
production. The addition of ZADAXIN counterbalances this Th2 cytokine production
process. There are no reports that ZADAXIN has produced any serious, adverse
side effects in more than 3,000 patients in various clinical trials to date and
in thousands more in commercial use, thereby suggesting that ZADAXIN should not
add to the toxicity profile of a multi-drug regimen.

     SciClone's proprietary position for ZADAXIN is protected by patents in the
U.S., Europe, Japan and various other countries, either alone or in combination
with a variety of other drugs, for its use as a treatment for hepatitis C,
hepatitis B and for certain cancers. For use as a treatment for hepatitis C,
patent coverage extends to 2015 in the U.S. and to 2012 in the European Union
and in Japan.

  HEPATITIS C (HCV)

     The Centers for Disease Control estimate that up to 4 million people in the
U.S. are infected by HCV, and no vaccine for it has been developed. There are
approximately 40,000 new cases each year. While only 30 percent of those
infected are initially symptomatic, in approximately 85 percent the infection
becomes chronic, and some 70 percent suffer from complications of chronic liver
disease. HCV currently causes 8,000 to 10,000 deaths per year in the U.S. These
numbers are expected to triple by 2010. As a rapidly mutating RNA virus (like
HIV), there already are at least six different genotypes, or "strains", of HCV.
Genotype 1 is the most difficult to treat and is the most common variant in the
U.S., infecting approximately 75 percent of all patients.

     Current year-long treatment regimens can cost more than $17,000 per patient
in the U.S., with the total therapeutic market in the U.S. and Europe estimated
to be $2 billion and expected to grow to $4-5 billion by 2004. Alpha interferon
has been the backbone of treatment, predominantly used in combination with the
antiviral ribavirin (the combination treatment is marketed by Schering-Plough
under the tradename "Rebetron(TM)"). Alpha interferon can induce relatively
severe toxicity, and ribavirin introduces additional toxicities of its own. Many
patients cannot, or will not, tolerate a full-year regimen of alpha interferon
and

                                        2
<PAGE>

ribavirin. More recently, longer acting forms of alpha interferon, pegylated
alpha interferon, have been developed by Schering-Plough and by F. Hoffmann
La-Roche under the tradenames "Peg-Intron(TM)" and "Pegasys(TM)", respectively.
Even in its pegylated form, which stays in the bloodstream longer allowing for
less frequent dosing and more consistent viral suppression, alpha interferon
plus ribavirin is effective in eliminating the virus in the long-term in only
about 50 percent of patients and the side effect profile is severe. Moreover,
the effectiveness of current therapy is highly dependent on the genotype of the
infecting virus and the viral load, or level of virus present in the patient.
For genotype 1 patients with a high viral load, which characterizes about half
of all HCV patients in the U.S., current therapy is effective in only about 30
percent of the cases. Patients that fail to respond to therapy seldom respond to
a second 12-month regimen of the same treatment. The success rate for treating
non-responders with non pegylated alpha interferon plus ribavirin is only
approximately 8 percent. In early clinical studies, the combination of ZADAXIN
and alpha interferon, when used to treat non-responders, achieved a 22 percent
response rate. We believe that this improvement is clinically significant and
have designed and implemented our U.S. phase 3 hepatitis C clinical program
based on these data.

     ZADAXIN, we believe, represents the closest new opportunity for improving
the treatment for hepatitis C patients in the foreseeable future. Based upon our
review of the market, virtually nothing else is on the horizon in a similar
advanced clinical stage of development. We redesigned and timed the
implementation of our phase 3 U.S. clinical program of ZADAXIN to use it in
combination with the newest form of interferon, pegylated alpha interferon.

  CLINICAL DEVELOPMENT STRATEGY

     Our clinical development strategy for ZADAXIN in the U.S. has been to
select an indication where ZADAXIN may add the greatest efficacy compared to
current standard treatment, where the likelihood of expedited review is greatest
due to a lack of an approved treatment, where the initial patient population
supports the greatest financial return upon successful registration and where
SciClone has a strong intellectual property position for the use of ZADAXIN.
Results from clinical trials suggest that using ZADAXIN with interferon produces
better results than using interferon independently or interferon with ribavirin
for the treatment of hepatitis C in primary non-responders. Thus, we have
focused our phase 3 clinical trials on hepatitis C non-responders (no
virological response at the end of a standard course of therapy) to interferon
or to interferon plus ribavirin.

     Non-responders typically have high viral loads of HCV genotype 1, which is
also characteristic of half of all HCV patients in the U.S. We estimate that
there are approximately 200,000 patients in the U.S. alone who have failed to
respond to treatment using interferon independently or interferon in combination
with ribavirin and that this patient group will grow to approximately 500,000
identifiable non-responders by 2005. Non-responders are a commercially
attractive initial target market for ZADAXIN. Such patients generally are
motivated to seek treatment, are already identified by their physicians, are in
the health care and insurance systems, and their number is growing as more new
patients seek and ultimately fail first-time therapy for HCV.

     The phase 3 U.S. clinical trials consist of two 500-patient, multicenter,
randomized, double-blinded studies, and the trials are designed to provide the
data and safeguards required to file a successful marketing application if the
data demonstrate clinical benefit. Patients in equal numbers are being assigned
to a one-year course of ZADAXIN plus pegylated interferon or to a course of
pegylated interferon plus placebo. Primary endpoints are a sustained virological
response and an improvement in the liver histological activity index measured
six months after the end of the 12-month therapy, consistent with the U.S. Food
and Drug Administration, or the FDA, standard for demonstrating sustained
response to HCV therapy. Efficacy data at the end of the 12-month treatment
period will be included as a secondary endpoint of the trial.

     The Pegasys brand of pegylated interferon 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. The costs of this U.S. study are also
supported, without any U.S. marketing rights, by our European partner,
Sigma-Tau. In early 2002 Sigma-Tau

                                        3
<PAGE>

contributed $2.7 million and will make an additional $1 million milestone
payment when the 1,000 patients are recruited in our U.S. clinical trials. We
expect to begin patient enrollment in the early part of the second quarter of
2002. Under this plan the treatment and observation periods for the first
patients would be completed by the end of 2003 and for all patients in the phase
3 clinical trials by mid-2004, though there is no assurance that patients can be
recruited to plan.

     We believe that oncology will be another large market opportunity for
ZADAXIN as the immune system enhancer of choice in certain cancer multi-drug
treatments. ZADAXIN's mechanism of action stimulates and directs the body's
immune response toward many forms of malignant cells. In addition, use of
ZADAXIN has not demonstrated any serious, adverse side effects in combination
with many known anticancer drugs. In comparison, most anticancer drugs are
normally highly toxic which complicates the efficacy of many combination
treatments often raising prohibitive safety issues and hindering patient
compliance.

     Our clinical strategy in oncology is to implement a broad phase 2 clinical
program with leading cancer investigators in the U.S. and Europe concurrent with
the phase 3 HCV clinical and registration program. We intend to generate a
substantial body of published phase 2 data in specific cancers where ZADAXIN has
shown preclinical or early clinical potential as a component of therapy in order
to determine the feasibility and design of pivotal phase 3 trials in oncology.
We are currently sponsoring two phase 2 U.S. trials for liver cancer, which is a
common result of untreated or progressive hepatitis C or hepatitis B. ZADAXIN is
being combined with transarterial chemoembolization (TACE) or with radio
frequency ablation (RFA), the two most common procedures for hepatocellular
carcinoma (HCC) patients whose tumors cannot be treated either by surgery or by
liver transplantation. The studies are designed to duplicate the survival
benefits that were demonstrated in our European phase 2 HCC studies. HCC
accounts for more than 80 percent of all primary liver tumors and is the most
prevalent fatal malignancy in the world, with an annual incidence of
approximately one million new cases. In the U.S., there are some 4,000 to 6,000
new cases of HCC diagnosed each year. ZADAXIN's use also has been investigated
with promising early results in malignant melanoma, and non-small cell lung
cancer.

  INTERNATIONAL STRATEGY

     While U.S. clinical efforts are at the forefront of our current activities,
our commercialization strategy has always been global. Our initial target
markets for ZADAXIN have been in emerging growth countries. ZADAXIN is now
approved for sale in 26 countries, including China, India and Mexico. ZADAXIN is
approved principally for the treatment of hepatitis B and hepatitis C, and also
in certain countries as a vaccine adjuvant for patients with weakened immune
systems and as an adjuvant to chemotherapy for the treatment of various cancers.
Additional marketing approvals are pending in significant hepatitis markets such
as Turkey, Hong Kong and Indonesia. Commercial activities in these countries,
and most significantly in China, have played an important role in our early
development. We believe that the demonstration of continued progress in this
international sales program will significantly increase the value of any future
development or marketing alliance to our shareholders. Overseas efforts also
provide invaluable experience in the successful marketing and sales of ZADAXIN,
particularly in economically challenged conditions.

     Together with Sigma-Tau, we are engaged in a regulatory development
strategy for ZADAXIN targeting a pan-European hepatitis C registration intended
to run concurrently with U.S. registration efforts. Sigma-Tau has exclusive
marketing rights for ZADAXIN in most Western European countries. Sigma-Tau will
fund the ZADAXIN European hepatitis C regulatory efforts utilizing the U.S.
phase 3 clinical trial data that SciClone will provide to Sigma-Tau. In
addition, Sigma-Tau will fund and conduct phase 2-3 oncology clinical trials in
Europe. Combination therapy of ZADAXIN with the cytotoxic agent dacarbazine
(DTIC) for the treatment of malignant melanoma is the first clinical effort of
this collaboration, and the clinical trial is expected to commence in 2002.

     In Japan, we are conducting a phase 3 clinical trial in over 300 patients
using ZADAXIN as a monotherapy for the treatment of hepatitis B (HBV). In March
2002 we announced positive preliminary data on the first evaluated one-third of
these patients indicating that, after 6 months of therapy and 12 months of
follow up, 24% demonstrated a successful interruption of viral replication, as
measured by sustained

                                        4
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seroconversion of hepatitis B e-antigen (loss of HBeAg and the development of
antibody to HBeAg). By comparison, published data on lamivudine, the drug most
widely used for treatment of hepatitis B worldwide, indicate that lamivudine is
capable of inducing sustained HBeAg seroconversion in 16% of Asian patients that
took the drug for one year. Over two-thirds of the patients in the trial have
already completed the therapy and follow-up evaluation periods. The remaining
patients are scheduled to complete the therapy and evaluation periods by the end
of 2002. There are approximately 31.5 million carriers of HBV in Japan, of which
approximately 10 percent are chronically infected.

     We also will continue to supply ZADAXIN to qualified investigators outside
of the U.S. and Europe for non-company sponsored hepatitis and cancer studies.
For example, currently, leading oncology researchers in Australia are studying
ZADAXIN in combination with dendritic cell-based vaccination for malignant
melanoma, the first pure immunotherapy combination study for ZADAXIN in cancer.
Malignant melanoma is one of the most prevalent cancers in Australia. Worldwide,
there are at least 50,000 new cases of malignant melanoma diagnosed each year,
and there currently is no effective treatment.

  SECOND GENERATION IMMUNE SYSTEM ENHANCERS

     In 1999, we acquired exclusive rights to a new class of immunomodulators
which in preclinical studies enhanced the immune system in a manner similar to
ZADAXIN. At least one of these compounds, SCV-07, has the potential to be orally
active (ZADAXIN is administered as a subcutaneous injection). With the $300,000
grant awarded by the U.S. Civilian Research and Development Foundation's "Next
Steps to Market Program", several preclinical and clinical studies of SCV-07
treatment in tuberculosis, or TB, have been conducted in collaboration with
Verta Ltd., a biotechnology company located in St. Petersburg, Russia. These
studies have shown potential for efficacy in this difficult to treat and
emerging disease. SCV-07 and its related class of compounds are covered by a
composition of matter patent in the U.S. as well as for their use as
immunomodulators. We have also obtained a Notice of Allowance for a U.S.
composition of matter patent for various analogs of ZADAXIN that we have
determined could have proprietary therapeutic or biologic distinctions from its
current "natural synthetic" formulation, such as length of circulation in the
blood or alternative delivery techniques.

CPX FOR CYSTIC FIBROSIS

     While ZADAXIN is SciClone's clear current focus, the Company continues to
develop CPX, a novel small molecule protein-repair therapy for cystic fibrosis,
or CF. a common fatal genetic disorder among Caucasians. Current treatments for
CF address only the symptoms, which ultimately include a build-up of viscous
mucus in the lungs that harbor infections and which lead to death in most
patients. We licensed CPX from the National Institutes of Health (NIH) after the
gene encoding for the Cystic Fibrosis Transmembrane Conductance Regulator (CFTR)
protein was identified. In preclinical studies conducted at the NIH utilizing
several different approaches to examine the efficacy of CPX, including the use
of cells explanted from cystic fibrosis patients, CPX demonstrated the ability
to repair the two principal protein defects underlying the cause of CF in most
patients at the cellular level: it enables the defective protein to travel
through the cell and reach the epithelial cell membrane, a process called
"trafficking", and improves an originally impaired transport of chloride ions
across the cell membrane. Because of erratic digestive absorption patterns in CF
patients our first U.S. phase 2 trial aimed at demonstrating this protein repair
activity in CF patients did not produce the sustained circulatory drug levels
required to assess efficacy. We reformulated CPX to prepare for additional
toxicology and early human studies. Development activities aimed at new Phase 2
studies continue. We have been granted Orphan Drug Status for CPX in both the
U.S. and Europe, protecting market exclusivity. The NIH has granted us an
exclusive license for a class of related compounds, one of which, DAX, is
another protein-repair candidate. DAX currently is in preclinical development.

MARKETING AND SALES

     Assuming FDA, European and Japanese regulatory approval, we plan to market
ZADAXIN in the U.S., Europe and Japan in collaboration with larger
pharmaceutical companies. In the U.S., SciClone anticipates moving toward
entering into a marketing collaboration in the later stages of its phase 3
clinical trials when the
                                        5
<PAGE>

Company believes the product should have enhanced partnering value, though there
is no assurance such a partnering arrangement can be successfully achieved.
Outside these territories we plan to market ZADAXIN through our established
broad distribution network.

     In our ZADAXIN markets in Asia (excluding Japan), Latin America, the Middle
East and Eastern Europe, we conduct medical education and clinical trial
programs targeting the leading specialists (e.g. hepatologists, immunologists
and oncologists) at the leading hospitals in each of our markets. Local
importers/distributors assist us with regulatory submissions to the ministries
of health and are responsible for the importation, inventory, physical
distribution and invoicing of ZADAXIN. Our wholly owned international
subsidiary, SciClone Pharmaceuticals International Ltd., which we refer to as
SPIL, is a Cayman Islands registered company that is based in Hong Kong and has
international offices in Beijing, Hong Kong, Shanghai, and Singapore. SPIL
manages a distribution center in Hong Kong that we use as the center for
receiving ZADAXIN from our European contract manufacturer and for distributing
it to our currently approved markets. We have established distribution
arrangements with local pharmaceutical wholesale/distribution companies covering
54 countries outside of the U.S., Western Europe, and Japan. In those markets
where ZADAXIN is approved in Asia, Latin America and the Middle East, we have
established or plan to establish in the near term ZADAXIN marketing programs.
ZADAXIN sales in our currently approved markets and pending markets are and will
be managed by SPIL employees. SciClone also has wholly owned subsidiaries in
Italy and Japan.

     The People's Republic of China is currently our largest single market for
ZADAXIN representing approximately 89%, 86% and 87% of our product sales for the
years ended December 31, 2001, 2000 and 1999, respectively. China is the world's
most populous nation and also has the largest population of hepatitis B,
hepatitis C and liver cancer patients. Like most developing countries, China
generally does not provide patient cost reimbursement for relatively expensive
therapies such as ZADAXIN, however, SPIL has successfully established and
expanded the use of ZADAXIN in China in recent years. SPIL employs a medical
education team of approximately 60 to promote physicians' knowledge of ZADAXIN
and its use. Distribution of ZADAXIN to hospital pharmacies and physicians in
China is through four licensed distributors who purchase the product through
four importing agents. These importing agents are well established government
licensed importers in China. SPIL sells ZADAXIN to the importing agents on a no
returns basis except under limited terms regarding product quality, and sales
are in U.S. dollars.

MANUFACTURING

     We do not intend to acquire or establish our own dedicated manufacturing
facilities for any of our products at this time. We believe there are numerous
facilities in compliance with FDA current Good Manufacturing Practices (cGMP),
or the foreign equivalent of such standards, available for contract
manufacturing. We have entered into exclusive contract manufacturing and supply
agreements to produce ZADAXIN and CPX. These manufacturers are supplying the
ZADAXIN and CPX required for our current and planned clinical trial activities,
and have demonstrated, with respect to ZADAXIN, the capability to supply
commercial quantities of the drug to fulfill our expected near term commercial
requirements. We believe that, in the event of the termination of an agreement
with any single supplier or manufacturer, we would likely be able to enter into
arrangements with other suppliers or manufacturers on similar terms. We monitor
production runs of our products and maintain our own quality assurance audit
programs.

     For the U.S. and Japanese clinical trials ZADAXIN is manufactured to cGMP
in the U.S. For Europe and all currently approved markets ZADAXIN is
manufactured to cGMP standards in Europe.

PATENTS AND PROPRIETARY RIGHTS

     We are either a patentee or exclusive licensee of composition of matter,
process and use patents and pending applications related to thymosin alpha 1 or
thymalfasin, the generic name, of ZADAXIN, in the U.S. and abroad.

     We are the exclusive licensee of foreign patents directed to the thymosin
alpha 1 composition of matter which are owned by F. Hoffmann-La Roche AG and the
Board of Regents of the University of Texas System.
                                        6
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Most of these foreign composition of matter patents have expired. However, we
are a patentee of a number of composition of matter patents and applications
directed to analogs and derivatives of thymosin alpha 1 which have been granted
in the U.S. and numerous international markets. We are seeking numerous other
proprietary rights for thymosin alpha 1. We are either a patentee or exclusive
licensee and are directing prosecution of use and process patents related to the
method of making and therapeutic uses of thymosin alpha 1.

     We are also a co-patentee of patents and pending applications covering
numerous uses of thymosin alpha 1. Patents covering use of thymosin alpha 1 for
treatment of hepatitis C have been issued in the U.S., a majority of European
countries and numerous international markets and extend to 2015 in the U.S. and
2012 in the European Union and Japan. Patents for the use of thymosin alpha 1 in
treating hepatitis C in non-responders to interferon treatment have been issued
in the U.S. and various international markets. Patents have been issued in the
U.S. and various international markets covering the use of thymosin alpha 1 to
treat decompensated liver disease. Patents which we own covering the use of
thymosin alpha 1 to treat hepatitis B carriers with minimal disease have been
issued in the U.S., Japan, China and other international markets. We are the
exclusive licensee of patents which have been issued in the U.S., Japan and
other international markets covering the treatment of hepatitis B using thymosin
alpha 1 and in the U.S., a majority of European countries, Japan and other
international markets which 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.

     Our process patents are directed to methods of making thymosin alpha 1 and
have issued in the U.S., a majority of European countries, Japan, Canada, Hong
Kong, Taiwan and South Korea.

     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 DAX and other 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 patent protection, we intend to use other means to protect
our portfolio of proprietary rights. Certain marketing exclusivity periods may
be available under regulatory provisions in certain countries including the
U.S., European Union countries and Japan, which benefits the holder of the first
marketing approval for new chemical entities or their equivalents for a given
indication and we are pursuing such rights. Orphan drug protection has been or
will be sought where available, granting 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. Recognition and
protection of trademarks for thymosin alpha 1 is being accomplished through
worldwide filing of trademark applications for ZADAXIN and other trademarks
which appear on the commercial packaging of the product and are used in
promotional literature. Copyrights for the commercial packaging may provide us
with means to take advantage of procedures available in certain countries to
exclude 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 plans to register the
packaging with customs departments in countries where such procedures exist.

     We are pursuing similar types of protection for CPX, where applicable. We
hold an orphan drug product designation for CPX to treat cystic fibrosis in the
U.S. and Europe.

     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.

SPONSORED RESEARCH AND DEVELOPMENT

     For the years ended December 31, 2001, 2000 and 1999, we expended
$8,561,000, $4,182,000 and $4,604,000, respectively, in our sponsored research
and development activities.

                                        7
<PAGE>

COMPETITION

     In the area of immune system enhancer therapy, we believe that we
participate in an important and growing therapeutic niche, stimulating an immune
system response in a disease state often characterized by an inadequate immune
response. ZADAXIN is a product that has demonstrated a unique safety profile
among immunomodulatory agents. ZADAXIN has shown in clinical trials that it can
be added safely and effectively to existing anti-viral and anti-cancer
therapies. We believe that this "cocktail" approach to anti-viral and anti-
cancer therapy will become more popular in the future. We believe that ZADAXIN's
suggested mechanism of action will encourage it to be used in new multiple
combination therapies over time. We anticipate that as newer and better directed
anti-viral and anti-cancer therapies are developed there will continue to be a
need for an immune system enhancement component and this in turn may create new
opportunities for ZADAXIN. Competition with ZADAXIN may be reduced because
ZADAXIN, administered in combination with numerous anti-viral and anti-cancer
agents, is expected to be complementary rather than competitive to these agents
in enhancing the immune system. We expect that continuing advancements in and
increasing awareness of the use of immune system enhancer therapy to fight some
cancer and infectious diseases may create new competitors as well as numerous
new opportunities for expanded use of ZADAXIN. We know of no other immune system
enhancer therapy that has ZADAXIN's combination of clinically evident safety and
efficacy. In addition, SCV-07 shows early signs of having many of the immune
system enhancer qualities of ZADAXIN, but in an orally available form.

     Competition among therapeutic treatments for the diseases and cancers is
intense. Numerous alternative methods to treat viral diseases and cancers exist
and new treatments will be developed. All of these will compete with each other
and ZADAXIN for therapeutic use. The principal therapy for hepatitis C is year
long treatment with interferon alpha plus ribavirin. For hepatitis B, the main
therapies are lamivudine or interferon alpha. We believe that in many cases
ZADAXIN will prove itself complementary to these other therapies.

GOVERNMENT REGULATION

     Regulation by governmental authorities in the U.S. and foreign countries is
a significant factor in the manufacturing of products for us and the 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. The standard process
required by the FDA before a pharmaceutical agent may be marketed in the U.S.
includes: (i) preclinical laboratory and animal tests; (ii) submission to the
FDA of an Investigational New Drug Application, or IND, which must become
effective before human clinical trials may commence; (iii) adequate
well-controlled human clinical trials to establish the safety and efficacy of
the product for its intended indication, and adequate data to support the
Chemistry, Manufacturing and Controls aspect of the process which will ensure
reproducible product quality batch after batch; (iv) submission to the FDA of a
New Drug Application, or NDA, with respect to drugs, or Biologics License
Application, or BLA, for biological products; and (v) FDA approval of the NDA
prior to any commercial marketing, sale or shipment of the drug. 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.

     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 IND;

                                        8
<PAGE>

     - making the IND effective after the resolution of any safety or regulatory
       concerns of the FDA;

     - 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; and

      - 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

      - 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 the results of preliminary research, preclinical studies, and
       clinical studies as well as chemistry, manufacturing and control
       information on the drug to the FDA in a NDA or BLA; and

     - obtaining FDA approval of the NDA or BLA prior to any commercial sale or
       shipment of the drug product.

     In approving an NDA or BLA, the FDA may require further post-marketing
studies, referred to as phase 4 studies. 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.

     Congress has amended the FD&C Act 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, which combine
existing FDA expedited approval and accelerated approval procedures, set forth a
new procedure for designation of a drug as a "fast track product." Concurrent
with or after a NDA is filed, the sponsor may request designation as a fast
track product, and the FDA will respond within 60 days.

     If the FDA designates a product for fast track review, the FDA is obligated
to take such actions as are appropriate to facilitate and expedite review of the
application. Another 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 a schedule for submission
of the completed application is provided. 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. For example, the
sponsor may be required to conduct post-approval studies to validate or confirm
the endpoint or may be required to submit copies of all promotional materials 30
days prior to their dissemination. 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.

     Even after initial FDA approval has been obtained, further studies,
including post-marketing studies, may be required to provide additional data on
the product's risks, benefits, and optimal use, and will be required to gain
approval for the use of the product as a treatment for clinical indications
other than those for which the product was initially tested. Also, the FDA will
require post-marketing reporting to monitor the side effects of the drug.
Results of post-marketing programs may limit or expand the further marketing of
the product. Further, if there are any modifications to the drug, including
changes in indication, labeling, or a change in manufacturing facility, a NDA or
BLA supplement may be required to be submitted to the FDA. Pursuant to
                                        9
<PAGE>

recent amendments to the FD&C Act, major manufacturing changes, defined as
changes that have substantial potential to have an adverse effect on the
identity, strength, quality, purity, or potency of a product as they may relate
to the safety and effectiveness of the product, require the submission of a
supplement and approval by the FDA prior to distribution of the product made
using the change. Moderate changes are defined as having moderate potential to
have an adverse effect on the identity, strength, quality, purity, or potency of
the product as they may relate to the product's safety or effectiveness. Some
moderate changes, such as a move to a different manufacturing site for the
manufacture or processing of any drug product, in-process material, or drug
substance, require submission of a supplement to the FDA at least 30 days before
the distribution of the product made using the change. Other moderate changes,
including a move to a different manufacturing site for the manufacture or
processing of the final intermediate, may occur when the FDA receives the
supplement. The manufacturer must describe minor changes, defined as having
minimal potential to have an adverse effect on the identity, strength, quality,
purity, or potency of the product as they may relate to the safety or
effectiveness, in the next required annual report to the FDA.

     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 without benefits under the provisions. 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 compound for the same
indication, 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
chronic active hepatitis B, DiGeorge Anomaly and hepatocellular carcinoma, and
for CPX for cystic fibrosis.

     Orphan drug legislation was recently introduced into the European Union, or
EU, pursuant to the Orphan Medicinal Products Regulation. 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
legislation, consistent with that already in place in the United States, aims to
provide incentives for the development of orphan medicinal products which
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.

     In March 2001, we were granted orphan drug status throughout the EU for CPX
for the 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 marketing application. This marketing exclusivity would prevent a
third party from obtaining FDA approval for a similar or identical drug through
an Abbreviated New Drug Application, or ANDA, which is the application form
typically used by manufacturers seeking approval of a generic drug, or 505(b)(2)
application. The DPCPTRA also allows a patent owner to extend the term of the
patent for a period equal to one-half the period of time elapsed between the
filing of an IND and the filing of the corresponding NDA plus the period of time
between the filing of the NDA and FDA approval with the maximum patent extension
term
                                        10
<PAGE>

being five years. Once a drug is granted some form of marketing exclusivity, the
recently enacted FDA Modernization Act provides an additional six months of
marketing exclusivity for certain pediatric research conducted at the written
request of the FDA.

     We may seek the benefits of orphan, DPCPTRA, or fast track provisions, but
we cannot assure you 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 clinical trials and preclinical studies 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.

     In addition to required foreign approvals, 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. In
1996, the U.S. Congress passed export reform legislation that provides that an
unapproved drug may be exported to a "listed country" for investigational
purposes without FDA authorization if exported in accordance with laws of the
foreign country, and in accordance with the export requirements. The listed
countries include Australia, Canada, Israel, Japan, New Zealand, Switzerland,
South Africa, and countries in the European Union and the European Economic
Area. Export of drugs to an unlisted country for clinical trial purposes
continues to require FDA 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. The export reform legislation further
provides that 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.

     Pursuant to the Prescription Drug User Fee Act ("PDUFA") of 1992, as
amended in 1997, manufacturers of drugs and biologics generally are required to
pay three types of user fees: (1) a one-time application fee for approval of an
NDA or BLA; (2) an annual product fee imposed on prescription drugs and
biologics after FDA approval; and (3) an annual establishment fee imposed on
facilities used to manufacture prescription drugs and biologics. The fee rates
for 2001 were: (1) $309,647 for an application requiring clinical data, or
$154,823 for an application not requiring clinical data; (2) $145,989 for the
establishment fee; and (3) $21,892 for the product fee. The fee rates for 2002
are: (1) $313,320 for an application requiring clinical data, or $156,660 for an
application not requiring clinical data; (2) $140,109 for the establishment fee;
and (3) $21,630 for the product fee. Fee waivers or reductions are available in
certain circumstances, including a waiver of the application fee for the first
application filed by a small business. Additionally, no user fees are assessed
on NDAs or BLAs for products designated as orphan drugs, unless the drug also
includes a non-orphan indication. PDUFA will expire on October 1, 2002, and is
in the process of being re-authorized, but re-authorization is not certain.

     Among the conditions for NDA or BLA approval in the U.S. is the requirement
that the prospective manufacturer's quality control and manufacturing procedures
conform to cGMP. In complying with standards

                                        11
<PAGE>

set forth in these regulations, manufacturers must continue to expend time,
money and effort in the area of production and quality control to ensure full
technical compliance.

     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 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 collaborator Sigma-Tau, and regulatory approval of CPX in
the U.S.

THIRD PARTY REIMBURSEMENT

     ZADAXIN is a relatively expensive therapeutic product. The amount of
product utilized by the patient depends on the disease and the related dose and
length of treatment, and the cost will typically be several thousands of U.S.
dollars for a course of therapy. ZADAXIN is currently sold principally in
countries without broad government provided health care reimbursement programs
or adequate and widely distributed private health insurers and other third party
payor organizations. The lack of third party reimbursement impedes the exposure
and availability of ZADAXIN to the broad affected patient populations in our
currently approved markets. 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, 2001, we had 84 employees, 18 in the U.S., and 66 in
foreign offices. We consider our relations with our employees to be
satisfactory. We expect to hire other experienced professionals in 2002 to
address, among other things, expanded clinical, regulatory, manufacturing and
marketing activities.

     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

     As part of SciClone's collaborative agreement with Sigma-Tau, in January
2002 SciClone received from Sigma-Tau a $2,685,000 payment which will be
recognized evenly as contract revenue over the period of our U.S. hepatitis C
clinical development activities, estimated at two years beginning in the second
quarter of 2002. This payment is part of the $3.7 million Sigma-Tau has agreed
to pay us to help fund the U.S. hepatitis C clinical trials. The remaining $1
million will be earned upon completion of patient enrollment in these clinical
trials.

                                        12
<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT

     As of March 5, 2002, the executive officers of the Company, who are elected
by and serve at the discretion of the Board of Directors, were as follows:

<Table>
<Caption>
NAME                                        AGE                    POSITION
----                                        ---                    --------
<S>                                         <C>   <C>
Donald R. Sellers.........................  57    President, Chief Executive Officer, and
                                                  Director, SciClone Pharmaceuticals, Inc.;
                                                  Managing Director, SciClone
                                                  Pharmaceuticals International Ltd.
Alfred R. Rudolph, M.D....................  54    Chief Operating Officer
Richard A. Waldron........................  48    Chief Financial Officer
</Table>

     Donald R. Sellers has served as the Company's Chief Executive Officer since
April 1996 and as President and Director since January 1996. From May 1993 to
present, he has also served as Managing Director, SciClone Pharmaceuticals
International Ltd., the international arm of the Company. From 1990 to 1993, Mr.
Sellers was Corporate Vice President of Getz Bros., a U.S.-based international
trading company, as well as President of one of its Japanese operations. From
1983 to 1990, Mr. Sellers was employed by Sterling Drug International, initially
as Vice President of Marketing and Operations in Asia and later as President of
its Latin American Andina Group. Mr. Sellers began his pharmaceutical career in
1973 with Pfizer as Country Manager, Vietnam and Hong Kong, and he later worked
with the Revlon Healthcare Group as Director of Worldwide Exports and Pacific
Area Director. Mr. Sellers spent five years in Military Intelligence serving
with Special Forces and as a Counter-Intelligence Special Agent. He has an AB
degree from Lafayette College and a Masters of International Management degree
with honors from the American Graduate School of International Management.

     Alfred R. Rudolph, M.D. joined the Company in April 1997 as Chief Technical
Officer and was promoted to Chief Operating Officer in August 1997. From January
1995 to September 1995, Dr. Rudolph was President and Chief Operating Officer of
Neptune Pharmaceuticals, Inc., a marine-based natural product screening company.
Dr. Rudolph was Senior Vice President of T Cell Sciences, Inc., a biotechnology
company, from December 1991 to September 1994 and was Vice President, Medical
Affairs from March 1990 to December 1991. Dr. Rudolph was Director of Clinical
Operations at Cetus Corporation from 1984 to 1989, and Clinical Assistant
Professor of Medicine at University of California, San Francisco ("UCSF") during
this period. Prior to that, he worked at Bristol Myers in cancer drug
development. His fellowship training in Hemotology-Oncology was done at Syracuse
University.

     Richard A. Waldron joined the Company in March 2001 as Chief Financial
Officer. Prior to joining SciClone 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.

     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.

                                        13
<PAGE>

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, 2001.

                                    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.

<Table>
<Caption>
                                                               PRICE RANGE
                                                               COMMON STOCK
                                                              --------------
                                                               HIGH     LOW
                                                              ------   -----
<S>                                                           <C>      <C>
2001
  4th quarter...............................................  $ 3.45   $2.50
  3rd quarter...............................................    5.13    2.50
  2nd quarter...............................................    5.83    3.77
  1st quarter...............................................    7.75    3.69
2000
  4th quarter...............................................  $11.13   $2.50
  3rd quarter...............................................   14.19    9.50
  2nd quarter...............................................   15.25    5.81
  1st quarter...............................................   22.75    5.06
</Table>

     In April 1999, we completed a $1,000,000 private placement of 445,000
shares of restricted common stock to the Sigma-Tau Group, an accredited investor
and one of the leading pharmaceutical companies in Southern Europe, in reliance
upon Regulation D of the Securities Act of 1933, as amended. The Sigma-Tau Group
was not granted any registration rights covering resale of the shares.

     On July 2, 1999, we completed a $2,000,000 (before deducting expenses)
private placement to strategic institutional and other accredited investors in
reliance upon Regulation D of the Securities Act of 1933, as amended. The
offering consisted of units of 1,370,145 shares of common stock and redeemable
warrants to purchase 1,370,145 shares of common stock. Each unit was priced at
$1.46 and consisted of one share of common stock and one five-year redeemable
warrant to purchase one share of common stock at an exercise price of $1.33 per
share. In addition, we issued to our placement agents an aggregate of 183,179
five-year redeemable warrants to purchase 183,179 shares of common stock at an
exercise price of $1.66 per share.

     On July 21, 1999, we completed a $4,000,000 (before deducting expenses)
private placement to strategic institutional investors led by Brown Simpson
Asset Management and The New York Life Insurance Company, all accredited
investors, in reliance upon Regulation D of the Securities Act of 1933, as
amended. The offering consisted of units of 2,515,934 shares of common stock and
redeemable warrants to purchase 2,515,934 shares of common stock. Each unit was
priced at $1.59 and consisted of one share of common stock and one five-year
redeemable warrant to purchase one share of common stock at an exercise price of
$1.72 per share. In addition, we issued to our placement agents an aggregate of
345,932 five-year redeemable warrants to purchase 345,932 shares of common stock
at an exercise price of $1.83 per share.

                                        14
<PAGE>

     In January 2000, we completed a private placement to Brown Simpson Asset
Management, an accredited investor, in reliance upon Regulation D of the
Securities Act of 1933, as amended. 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 common stock at an exercise
price of $7.00 per share. As of December 31, 2001, none of these warrants had
been exercised.

     In March 2000, we completed a private placement to Italy-based Sigma-Tau
Group, an accredited investor, in reliance upon Regulation D of the Securities
Act of 1933, as amended. Sigma-Tau purchased 198,072 shares of our common stock
at $15.14 per share and five-year warrants to purchase 400,000 shares of our
common stock. Warrants for 200,000 shares are exercisable at a price of $15.67
per share and warrants for 200,000 shares are exercisable at a price of $31.33
per share. The shares issued to Sigma-Tau were "restricted securities," that is
Sigma Tau was not permitted to 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.

     In March/April 2000, we received approximately $8,606,000 in connection
with exercises of outstanding warrants to purchase 4,597,690 shares of common
stock.

     In December 2000, we completed a $4 million senior unsecured convertible
note with an investment affiliate of UBS AG, an accredited investor, in reliance
upon Regulation D of the Securities Act of 1933, as amended. The $4 million note
is convertible into 407,610 shares of our common stock at a fixed conversion
price of $9.8133 per share. The note will accrue interest at a rate of 6% per
year and will mature in December 2005. The note was not convertible prior to
December 2001. We also received $900,000 for granting the investor the right to
purchase, at any time up to the maturity date, approximately $5.9 million of
senior unsecured convertible notes due December 2005. The $900,000 was accounted
for as an increase to shareholders' equity. If issued, the notes will bear no
interest (zero coupon) and will be convertible into 407,610 shares of our common
stock at a fixed conversion price of $14.5066 per share.

     In March 2001, we completed a $1.6 million senior unsecured convertible
note with an investment affiliate of UBS AG., an accredited investor, in
reliance upon Regulation D of the Securities Act of 1933, as amended. The $1.6
million note is convertible into 276,530 shares of our common stock at a fixed
conversion price of $5.7860 per share. The note will accrue interest at a rate
of 6% per year and will mature in March 2006. The note is not convertible prior
to March 21, 2002. We also received approximately $354,000 for granting the
investor the right to purchase, at any time up to the maturity date,
approximately $2.4 million of senior unsecured convertible notes due March 2006.
The $354,000 was accounted for as an increase to shareholders' equity. If
issued, the notes will bear no interest (zero coupon) and will be convertible
into 276,530 shares of our common stock at a fixed conversion price of $8.5532
per share.

     As of March 15, 2002, there were approximately 350 holders of record and
approximately 19,250 beneficial holders of our common stock.

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

                                        15
<PAGE>

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.

<Table>
<Caption>
                                    2001          2000          1999          1998           1997
                                 -----------   -----------   ----------   ------------   ------------
<S>                              <C>           <C>           <C>          <C>            <C>
STATEMENTS OF OPERATIONS DATA:
Product sales..................  $13,831,000   $15,357,000   $9,091,000   $  3,625,000   $  2,223,000
Contract/grant revenue.........           --            --      307,000        100,000             --
                                 -----------   -----------   ----------   ------------   ------------
     Total revenue.............   13,831,000    15,357,000    9,398,000      3,725,000      2,223,000
Cost of product sales..........    2,742,000     3,113,000    1,761,000      1,036,000        990,000
                                 -----------   -----------   ----------   ------------   ------------
Gross margin...................   11,089,000    12,244,000    7,637,000      2,689,000      1,233,000
                                 -----------   -----------   ----------   ------------   ------------
Operating expenses:
  Research and development.....    8,561,000     4,182,000    4,604,000      9,293,000      8,642,000
  Sales and marketing..........    8,764,000     7,720,000    5,503,000      5,123,000      3,988,000
  General and administrative...    3,897,000     3,538,000    3,386,000      3,982,000      3,819,000
                                 -----------   -----------   ----------   ------------   ------------
     Total operating
       expenses................   21,222,000    15,440,000   13,493,000     18,398,000     16,449,000
                                 -----------   -----------   ----------   ------------   ------------
Loss from operations...........  (10,133,000)   (3,196,000)  (5,856,000)   (15,709,000)   (15,216,000)
Writedown of note receivable
  from former officer..........           --            --           --     (5,944,000)            --
Income from payment on note
  receivable from former
  officer......................    3,497,000       400,000       20,000             --             --
Interest and investment
  income.......................      751,000     1,066,000      157,000        514,000      1,321,000
Interest and investment
  expense......................     (334,000)      (36,000)          --        (21,000)      (174,000)
Other income (expense), net....      (13,000)       49,000      212,000         89,000         72,000
                                 -----------   -----------   ----------   ------------   ------------
Net loss.......................   (6,232,000)   (1,717,000)  (5,467,000)   (21,071,000)   (13,997,000)
Deemed dividend on issuance of
  preferred stock..............           --            --           --     (3,143,000)            --
                                 -----------   -----------   ----------   ------------   ------------
Net loss attributable to common
  stockholders.................   (6,232,000)   (1,717,000)  (5,467,000)   (24,214,000)   (13,997,000)
                                 ===========   ===========   ==========   ============   ============
Basic and diluted net loss per
  share........................  $     (0.19)  $     (0.06)  $    (0.26)  $      (1.48)  $      (0.85)
                                 ===========   ===========   ==========   ============   ============
Weighted average shares used in
  computing basic and diluted
  net loss per share...........   32,356,287    29,904,924   21,162,936     16,335,096     16,472,765
                                 ===========   ===========   ==========   ============   ============
BALANCE SHEET DATA:
Cash, cash equivalents and
  investments..................  $16,468,000   $22,497,000   $3,621,000   $  5,410,000   $ 12,901,000
Working capital................   26,930,000    30,281,000    7,091,000      3,845,000      7,416,000
Total assets...................   32,096,000    36,167,000   13,124,000     11,727,000     19,196,000
Redeemable preferred stock.....           --            --           --        848,000             --
Total shareholders' equity.....   22,774,000    28,077,000    9,301,000      6,428,000     15,724,000
</Table>

                                        16
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the "Selected
Consolidated Financial Data" and our financial statements and related notes
thereto included elsewhere in this Annual Report on Form 10-K. This Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other parts of this Annual Report on Form 10-K contain forward-looking
statements which involve risks and uncertainties. See "Note Regarding
Forward-Looking Statements" and "Risk Factors."

OVERVIEW

     During the periods encompassed by this Annual Report on Form 10-K, we have
devoted substantially all of our resources to our ZADAXIN and CPX product
development programs and our ZADAXIN commercialization activities. We conduct
our research and product development efforts through a combination of internal
and collaborative programs. In addition to internal management and staff, we
rely upon arrangements with universities, other clinical research sites and
contract research organizations for a significant portion of our product
development efforts. Oversight of all external and collaborative programs are
conducted by our executive officers and other staff from our headquarters
located in San Mateo, California.

     From commencement of operations through December 31, 2001, we incurred a
cumulative net loss of approximately $123 million. We expect our sales, gross
margin and operating expenses to increase over the next several years as we
expand our sales, research and development, clinical testing and marketing
capabilities. Our ability to achieve and sustain operating profitability is
primarily dependent on the initiation, execution and completion of new ZADAXIN
clinical trials, securing regulatory approvals for ZADAXIN in additional
countries, particularly in the U.S., Europe and Japan, successfully launching
ZADAXIN, if approved, in those countries, increasing ZADAXIN sales in approved
markets, and developing and maintaining ZADAXIN corporate partnering
arrangements in the U.S., Europe and Japan. In addition, other factors may also
impact our ability to achieve and sustain operating profitability, including
manufacturing costs of ZADAXIN, our ability to obtain additional financing to
support our operations, long-term product development and commercialization
programs, acquiring rights to additional drugs, and entering into and extending
agreements for product development and commercialization, where appropriate.

     Our operating results may fluctuate from quarter to quarter and these
fluctuations may be substantial as a result of, among other factors, the number,
timing, costs and results of preclinical and clinical trials of our products,
market acceptance of ZADAXIN and the timing of large orders for ZADAXIN, the
regulatory approval process, the timing of FDA or international regulatory
approvals, and the acquisition of additional product rights and the funding, if
any, provided as a result of corporate partnering arrangements. Setbacks in the
launch, sale or distribution of ZADAXIN, preclinical or clinical development of
our products, the regulatory approval process or relationships with
collaborative partners, and any shortfalls in revenue or earnings from levels
expected by securities analysts, among other developments, in the past had, and
could in the future have, an immediate and significant adverse effect on the
trading price of our common stock in any given period.

CRITICAL ACCOUNTING POLICIES

  GENERAL

     We have identified the policies below as critical to our business
operations and the understanding of our results of operations. The impact and
any associated risks related to these policies on our business operations is
discussed throughout management's Discussion and Analysis of Financial Condition
and Results of Operations where such policies affect our reported and expected
financial results. For a detailed discussion on the application of these and
other accounting policies, see Note 1 in the Notes to the Consolidated Financial
Statements in Item 8 of this Annual Report on Form 10-K. The Consolidated
Financial Statements have been prepared in accordance with accounting principles
generally accepted in the United Sates, that requires us to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of our financial
statements, and the reported amounts of revenue

                                        17
<PAGE>

and expenses during the reporting period. On an on-going basis, we evaluate the
relevance of our estimates. We base our estimates on historical experience and
on various other market specific assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. There can be no assurance that actual
results will not differ from those estimates.

  REVENUE RECOGNITION

     The Company recognizes revenue from product sales at the time of shipment
and recognizes contract/ grant revenue over the period services are performed.
The People's Republic of China, currently ZADAXIN's largest market, like Japan
and certain other Asian markets, 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 recognize revenue on sales to
principal importing agents who then resell to distributors inside China. Sales
to customers (importing agents or distributors) are recognized at time of
shipment when title to the products is transferred to them. There are no
significant customer acceptance requirements or post shipment obligations on the
part of the Company. The importing agents and distributors do not have
contractual rights of return except under limited terms regarding product
quality. Payments to us by the importing agents and distributors are not
contingent upon sale to the end user by the import agents or distributors.

     To date we have not recorded estimated reductions to revenue for expected
sales returns. If conditions become more competitive in any of the markets
served by ZADAXIN or if other circumstances change, we may take actions to
record product return estimates that would result in a reduction of future
revenue at the time the return estimate is changed.

  ACCOUNTS RECEIVABLE

     We are required to estimate the collectibility of our trade receivables. A
considerable amount of judgment is required in assessing the ultimate
realization of these receivables including the current credit-worthiness of each
customer. Our ability to collect outstanding receivables from our customers is
critical to our operating performance and cash flows. We maintain allowances for
doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. If the financial condition of our customers
were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required. For the year ended December 31,
2001, importing agents in China accounted for 89% of the Company's product sales
and accounted for 86% and 87% of our product sales for the years ended December
31, 2000 and 1999, respectively. As of December 31, 2001, approximately
$8,653,000 or, 91% of our accounts receivable were attributable to these four
customers in China. The Company performs on-going credit evaluations of its
customers' financial condition, and generally does not require collateral from
its customers. We maintain reserves for credit losses, and such losses have been
within our expectations. We recognize reserves for bad debts ranging from 25% to
100% based on the length of time the receivables are past due.

  INVENTORIES

     We are required to state our inventories at the lower of cost or realizable
market value. In assessing the ultimate realization of inventories, we are
required to make judgments as to future demand requirements and compare that
with the current and committed inventory levels. It is possible that changes in
inventory reserves may be required in the future due to a change in market
conditions.

  IMPAIRMENT OF INTANGIBLE ASSETS

     At December 31, 2001, we had net intangible assets of $1,091,000 related to
ZADAXIN product rights and had never recorded any impairment losses related to
intangible assets. In assessing the recoverability of our intangible assets we
must make assumptions regarding estimated future cash flows and other factors to

                                        18
<PAGE>

determine the fair value of the respective assets. If these estimates or their
related assumptions change in the future, we may be required to record
impairment charges for these assets not previously recorded.

  RESEARCH AND DEVELOPMENT EXPENSES

     Research and development expenditures are charged to operations as incurred
including accruals for estimated clinical and preclinical study costs. Our
late-stage clinical programs in the U.S. and Japan will increase our research
and development expenditures significantly over the next several years. Contract
research organization management fees are expensed monthly, while remaining
clinical program activity generally is expensed on a straight-line basis over
the life of the individual contract or study. We monitor patient enrollment
levels and related activity to the extent possible and adjust our estimates
accordingly, however, if management has underestimated activity levels
associated with various studies at a given point in time, we could underestimate
our actual research and development expenses.

RESULTS OF OPERATIONS

     Product sales were $13,831,000, $15,357,000 and $9,091,000 for the years
ended December 31, 2001, 2000 and 1999, respectively. The decrease in sales from
2000 to 2001 was mostly due to a large sale of ZADAXIN to a new customer in
China during the third quarter of 2000. As of March 2002, ZADAXIN is approved
for sale in 26 countries worldwide. For the year ended December 31, 2001,
importing agents in China accounted for 89% of our product sales and accounted
for 86% and 87% for the years ended December 31, 2000 and 1999, respectively.
Sales emphasis is concentrated in China because, as one of our more developed
markets, marketing expenditures can result in rapid benefits in sales and
profits compared to newer markets which require investment and development
spending. We expect ZADAXIN sales to increase both in our existing approved
markets and in new markets once regulatory approvals are secured and ZADAXIN is
launched. The level of this sales increase is dependent upon increased ZADAXIN
market penetration in our existing approved markets, additional ZADAXIN
marketing approvals and the successful launch of ZADAXIN in new markets.
Although we remain optimistic regarding the prospects of ZADAXIN, we cannot
assure you that we will achieve sales increases, maintain existing sales levels,
or ever achieve significant levels of sales or that we will receive additional
ZADAXIN market approvals. Revenue results are difficult to predict, and any
shortfall in revenue or any delay in recognizing revenue could cause our
operating results to vary significantly from quarter to quarter and could result
in future operating losses.

     Cost of product sales was $2,742,000, $3,113,000 and $1,761,000 for the
years ended December 31, 2001, 2000 and 1999, respectively. We expect cost of
product sales to vary from quarter to quarter, depending upon the level of
ZADAXIN sales, the absorption of fixed product-related costs, and any charges
associated with excess or expiring finished product.

     Gross margin was $11,089,000, $12,244,000 and $7,637,000 for the years
ended December 31, 2001, 2000 and 1999, respectively. Gross profit margin was
80% in 2001, 80% in 2000 and 81% in 1999. We expect to maintain approximately
the same gross margin going forward, however, there can be no assurance that it
will not decrease.

     In 2001, 2000 and 1999, research and development (R&D) expenses represented
approximately 40%, 27% and 34%, respectively, of our total costs and expenses.
The major components of R&D expenses consist of personnel costs, including
salaries and benefits, clinical studies performed by contract research
organizations, materials and supplies, and overhead allocations consisting of
various support and facilities related costs. Our research and development
activities are also separated into three main categories: research, clinical
development and pharmaceutical development. Research costs typically consist of
preclinical and toxicology work. Clinical development costs include Phase 1, 2,
and 3 clinical trials as well as expanded access programs. Pharmaceutical
development costs consist of product formulation and chemical analysis. During
2001, we recorded approximately $2.8 million on research, $5.0 million on
clinical development, and $0.8 million on pharmaceutical development activities.
This compares to expenses in 2000 of approximately $2.4 million on research,
$0.5 million on clinical development, and $1.3 million on pharmaceutical
development activities and

                                        19
<PAGE>

expenses in 1999 of approximately $2.7 million on research, $1 million on
clinical development, and $0.9 million on pharmaceutical development activities.

     Research and development expenses were $8,561,000, $4,182,000 and
$4,604,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
The increase in 2001 over 2000 was to support our late-stage clinical programs
in the U.S. and Japan. The initiation and continuation of ZADAXIN, CPX and other
product clinical development programs has had and will continue to have a
significant effect on our research and development expenses and is expected to
require us to seek additional capital resources. The decrease in 2000 over 1999
was primarily attributable to decreased clinical trial expenses related to CPX
and consulting fees. We are currently sponsoring two phase 2 clinical trials
using ZADAXIN for treatment in liver cancer development work to support a new
phase 2 trial using CPX for treatment in cystic fibrosis, and two phase 3 U.S.
trials using ZADAXIN plus pegylated interferon for treatment in hepatitis C in
U.S. We are conducting a phase 3 clinical trial using ZADAXIN as a monotherapy
for the treatment of hepatitis B in Japan. We are conducting several preclinical
and clinical studies of SCV-07 for treatment in tuberculosis in Russia. Major
components of research and development expenses consist of personnel costs,
including salaries and benefits, clinical development performed by contract
research organizations, preclinical work, pharmaceutical development, materials
and supplies, third party research funding and overhead allocations consisting
of various administrative and facilities related costs. Due to the uncertain
nature of the trial process, it is not possible to determine the timing of
completion or total cost expected to be incurred for each trial. CPX
expenditures are expected to decrease from the level in 2001, while ZADAXIN
expenditures will increase and account for most of our development expenditures.
In general, we expect product research and development expenses to increase
significantly over the next several years and to vary substantially from quarter
to quarter as we pursue our strategy of initiating additional preclinical and
clinical trials and testing, acquiring product rights, and expanding regulatory
activities.

     Sales and marketing expenses were $8,764,000, $7,720,000 and $5,503,000 for
the years ended December 31, 2001, 2000 and 1999, respectively. The increase
over these years is related to increased payroll expenses and expenses for
advertising and conferences associated with the expansion of our markets for
ZADAXIN. We expect sales and marketing expenses to increase in the next several
quarters and years as we expand our commercialization and marketing efforts and
pursue additional strategic collaborations.

     General and administrative expenses were $3,897,000, $3,538,000 and
$3,386,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
This increase was attributable to greater general and administrative activities
to support an increased level of research and development on our late-stage
clinical programs. In the near term, we expect general and administrative
expenses to vary quarter to quarter as we augment our general and administrative
activities and resources to support increased expenditures on preclinical and
clinical trials and testing, and regulatory, pre-commercialization and marketing
activities.

     Income from payment on a note receivable from a former officer was
approximately $3,497,000, $400,000 and $20,000 for the years ended December 31,
2001, 2000 and 1999, respectively. In July 1997, the Company loaned to the
former officer $5,944,000 in exchange for a promissory note and the pledge of
1,882,500 shares of SciClone Common Stock as collateral for such loan. During
1998 it was determined that the value of the collateral underlying the loan was
more than temporarily impaired and that a writedown of the book value of the
note would be required. For accounting purposes, the Company wrote off the
entire remaining book value in a non-cash charge to earnings in the fourth
quarter of 1998. Under a new agreement in 1999, the 1,882,500 shares of SciClone
common stock held as collateral were retired and the value of these shares at
that date was applied as a credit against the total indebtedness of the former
officer. After applying a credit for the retired stock of $3,142,000, the
officer entered into a new note in the amount of $3,615,000. The note has been
fully repaid.

     Interest and investment income was approximately $751,000, $1,066,000, and
$157,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The
decrease in 2001 over 2000 was due to lower average invested cash balances and
lower interest rates. The increase in 2000 over 1999 was due to higher average
invested cash balances.

                                        20
<PAGE>

     Interest and investment expense was approximately $334,000, $36,000 and $0
for the years ended December 31, 2001, 2000 and 1999, respectively. The increase
over the years was from the interest accrued on senior unsecured convertible
notes that we have with an investment institution.

     Other income (expense) was approximately $(13,000), $49,000 and $212,000
for the years ended December 31, 2001, 2000 and 1999, respectively. In 1999, we
recognized other income of approximately $262,000, related to a gain generated
on a loan foreclosure.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2001, 2000 and 1999, we had $16,468,000, $22,497,000 and
$3,621,000, respectively, in cash, cash equivalents and short-term investments.
The short-term investments consist primarily of highly liquid marketable
securities. Under our lease agreement, we are required to have a line of credit
in the amount of $633,000. This line of credit is secured by a certificate of
deposit that totaled $633,000 at December 31, 2001.

     Net cash used in operating activities totaled $12,008,000, $5,917,000 and
$8,929,000 for the years ended December 31, 2001, 2000, and 1999, respectively.
Net cash used in operating activities for the year ended December 31, 2001 was
greater than the net loss primarily due to a gain of $3,497,000 related to
collection of a note receivable, which had previously been written off in 1998,
from a former officer, an increase in inventory and a decrease in accounts
payable and other accrued expenses. Net cash used in operating activities for
the year ended December 31, 2000 was greater than the net loss primarily due to
increases in accounts receivable and inventory. These amounts were partially
offset by a decrease in prepaid expenses and other assets and an increase in
accounts payable. Net cash used in operating activities for the year ended
December 31, 1999 was greater than the net loss due to an increase in accounts
receivable and a decrease in amounts owed to third parties for clinical trials.
These amounts were partially offset by increases in accrued compensation and
employee benefits and accounts payable and other accrued expenses.

     Net cash used in investing activities of $450,000 for the year ended
December 31, 2001 related to the net purchase of $351,000 in marketable
securities and $99,000 in equipment and furniture. Net cash used in investing
activities of $430,000 for the year ended December 31, 2000 related to the net
purchase of $331,000 in marketable securities partially offset by the purchase
of $99,000 in equipment and furniture. Net cash provided by investing activities
of $349,000 for the year ended December 31, 1999 related to the net sale of
$391,000 in marketable securities partially offset by the purchase of $42,000 in
equipment and furniture.

     Net cash provided by financing activities totaled $5,995,000, $24,886,000
and $7,189,000 for the years ended December 31, 2001, 2000 and 1999,
respectively. Net cash provided by financing activities for the year ended
December 31, 2001 consisted of $1,600,000 in proceeds from the issuance of a
convertible note, $544,000 in net proceeds from the issuance of common stock,
$354,000 for granting an investor the right to purchase approximately $2,400,000
of senior unsecured convertible notes, and $3,497,000 from the payment on a note
receivable from a former officer Net cash provided by financing activities for
the year ended December 31, 2000 consisted of approximately $5,326,000 from a
private placement of common stock and warrants to institutional investors,
approximately $8,606,000 from the exercise of outstanding warrants to purchase
common stock by institutional and accredited investors, approximately $191,000
from the issuance of common stock under our employee stock purchase plan,
approximately $3,100,000 from a private placement of 198,072 of common stock to
Sigma-Tau, our partner for the development and marketing of ZADAXIN in Europe,
approximately $2,363,000 from the exercises of outstanding options under our
employee stock option plans, $4,000,000 from the issuance of a convertible note
and $900,000 for granting investors the right to purchase approximately
$5,900,000 of senior unsecured convertible notes and $400,000 from the payment
on a note receivable from a former officer. Net cash provided by financing
activities for the year ended December 31, 1999 consisted of approximately
$5,430,000 from the issuance of common stock and warrants to institutional and
accredited investors in two private placements, $235,000 from the payment in
full of a note receivable from our President and Chief Executive Officer
approximately $1,504,000 from the issuance of common stock under our employee
stock purchase plan, exercise of warrants and issuance of restricted common
stock to Sigma-Tau, and $20,000 from the payment on a note receivable from a
former officer.

                                        21
<PAGE>

<Table>
<Caption>
                                                PAYMENTS DUE BY PERIOD
                          -------------------------------------------------------------------
CONTRACTUAL                             LESS THAN 1
OBLIGATIONS                  TOTAL         YEAR       1-3 YEARS    4-5 YEARS    AFTER 5 YEARS
-----------               -----------   -----------   ----------   ----------   -------------
<S>                       <C>           <C>           <C>          <C>          <C>
Long Term Debt..........  $ 5,600,000           --            --   $5,600,000         --
Operating Leases........  $ 5,315,000   $1,311,000    $2,734,000   $1,270,000         --
Total Contractual Cash
  Obligations...........  $10,915,000   $1,311,000    $2,734,000   $6,870,000         --
</Table>

<Table>
<Caption>
                                                      AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
                                                     --------------------------------------------
OTHER COMMERCIAL                     TOTAL AMOUNTS                        1-3      4-5     OVER 5
COMMITMENTS                            COMMITTED     LESS THAN 1 YEAR    YEARS    YEARS    YEARS
----------------                     -------------   ----------------    -----    -----    ------
<S>                                  <C>             <C>                 <C>      <C>      <C>
Letter of Credit...................    $633,000          $633,000         --       --       --
</Table>

     In January 2000, we completed a private placement of common stock and
immediately exercisable common stock warrants to an institutional investor which
resulted in gross proceeds of approximately $6,100,000. If the warrants issued
in connection with this private placement are fully exercised, we will receive
an additional $5,600,000. In March 2000, we completed a $3,100,000 private
placement to Sigma-Tau consisting of 198,072 shares of restricted common stock
and warrants for 400,000 shares of common stock, which, if fully exercised, will
result in additional gross proceeds of $9,400,000. In March and April 2000, an
aggregate of 4,597,690 other common stock warrants were exercised resulting in
aggregate gross proceeds of approximately $8,606,000. In December 2000, we
completed a $4 million senior unsecured convertible note with an investment
affiliate of UBS AG. The $4 million note is convertible into 407,610 shares of
our common stock at a fixed conversion price of $9.8133 per share. The note will
accrue interest at a rate of 6% per year and will mature in December 2005. We
also received $900,000 for granting the investor the right to purchase at any
time up to the notes' maturity date approximately $5.9 million of senior
unsecured convertible notes due December 2005. If issued, the notes will bear no
interest (zero coupon) and will be convertible into 407,610 shares of our common
stock at a fixed conversion price of $14.5066 per share. We may elect in lieu of
delivering convertible notes to deliver the respective number of shares of
common stock. In March 2001, we received $1.6 million under a senior unsecured
convertible note with an investment affiliate of UBS AG. The $1.6 million note
is convertible into 276,530 shares of our common stock at a fixed conversion
price of $5.7860 per share. The note will accrue interest at a rate of 6% per
year and will mature in March 2006. We also received $354,000 for granting the
investor the right to purchase at any time up to the notes' maturity date
approximately $2.4 million of senior unsecured convertible notes due March 2006.
If issued, the notes will bear no interest (zero coupon) and will be convertible
into 276,530 shares of our common stock at a fixed conversion price of $8.5532
per share. We may elect in lieu of delivering convertible notes to deliver the
respective number of shares of common stock.

     Besides the last note receivable payment from a former officer, there are
no officers or directors that were involved in related party transactions in
2001.

     Management believes ZADAXIN product sales should continue to increase and
remain a valuable source of capital generation. The initiation and continuation
of U.S. clinical development programs, however, is expected to require
additional funding either from a collaborative partner or through equity or debt
financing. The timing, achievement and sustainability of our operating
profitability and capital requirements may change depending upon numerous
factors, including the level of ZADAXIN product sales, the timing and amount of
manufacturing costs related to ZADAXIN, the availability of complementary
products, technologies and businesses, the initiation and continuation of
preclinical and clinical trials and testing, particularly in the U.S., the
timing of regulatory approvals, developments in relationships with existing or
future collaborative partners and the status of competitive products. Without
additional financing, or sales growth beyond management's expectations, or a
combination thereof, management believes its existing capital resources and
interest on funds available are adequate to maintain its current and planned
operations through the end of 2002. The Company is actively reviewing
alternatives for equity debt financings and potential partnering activities.

                                        22
<PAGE>

INCOME TAXES

     At December 31, 2001, we had net operating loss carryforwards for federal
income tax purposes of approximately $59,700,000 which expire in the years 2006
through 2021. The difference between the cumulative losses for financial
reporting purposes and federal income tax purposes is primarily attributable to
losses incurred by our foreign subsidiaries. At December 31, 2001, we had
federal tax credit carryforwards of approximately $3,200,000 which expire in the
years 2009 through 2021.

     Because of the "change in ownership" provisions of the Internal Revenue
Code, a portion of our net operating loss carryforwards and tax credit
carryforwards may be subject to an annual limitation regarding their utilization
against taxable income in future periods. As a result of the annual limitation,
a portion of these carryforwards may expire before ultimately becoming available
to reduce future income tax liabilities.

RECENT ACCOUNTING PRONOUNCEMENTS

     The Financial Accounting Standards Board issued Statements of Financial
Accounting Standards, No. 141, "Business Combinations", (SFAS 141) and No. 142,
"Goodwill and Other Intangible Assets", (SFAS 142) in June 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subjected to annual impairment tests in
accordance with these statements. Other intangible assets will continue to be
amortized over their useful economic lives. These statements are effective for
combinations initiated after July 1, 2001 and SFAS 142 applies to assets related
to acquisitions prior to that date as of January 1, 2002. Based on current
circumstances, we believe the application of the new rules will not have a
material impact on our consolidated financial statements.

     The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" (SFAS 144) in August 2001. The statement addresses financial
accounting and reporting of the impairment or disposal of long-lived assets.
SFAS 144 is effective for fiscal years beginning after December 15, 2001, with
earlier application encouraged. Based on current circumstances, we believe
application of the new rules will not have a material impact on our consolidated
financial statements.

RISK FACTORS

     You should carefully consider the risks described below, together with all
of the other information included in this Report on Form 10-K, before making an
investment decision. Each of these risk factors could adversely affect our
business, financial condition, and operating results as well as adversely affect
the value of an investment in our common stock.

OUR PHASE 3 PROGRAM IN THE U.S. FOR THE APPROVAL OF ZADAXIN IN COMBINATION WITH
PEGYLATED INTERFERON FOR THE TREATMENT OF HEPATITIS C MAY FAIL, WHICH WILL HARM
OUR BUSINESS.

     We conservatively designed a phase 3 study program based on the use of
ZADAXIN in combination with pegylated interferon. There can be no assurances
that the results from our previous phase 2 and phase 3 hepatitis C studies which
enabled us to produce this design will carryover to the trials involving a
combination of ZADAXIN and pegylated interferon and any resulting data may be
insufficient to demonstrate efficacy under FDA guidelines. We may not be able to
enroll patients quickly enough to meet our expectations for completing the
trial. The independent use of the pegylated form of interferon may perform
better than anticipated. If that results, our efforts to market and sell ZADAXIN
in combination with pegylated interferon will be impaired.

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 cannot assure you that commercially
viable products will result from these efforts. We face significant
technological risks inherent in developing these

                                        23
<PAGE>

products. We may also abandon some or all of our proposed products before they
become commercially viable. We have limited experience in conducting and
managing U.S. clinical trials and we rely, in part, on third parties,
particularly clinical research organizations and our development partners, to
assist us in managing and monitoring clinical trials. Our reliance on these
third parties may result in delays in completing, or failure to complete, these
clinical trials if third parties fail to perform their obligations to us. 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.

     We have not yet sold any product other than ZADAXIN. Our future revenue
growth depends on increased market acceptance and commercialization of ZADAXIN
in additional countries, particularly in the U.S., Europe and Japan. If we fail
to successfully market ZADAXIN, or if we cannot commercialize this drug in the
U.S. and other 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 customers and prospective strategic partners 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.

IF WE FAIL TO SATISFY AND COMPLY WITH GOVERNMENTAL REGULATIONS OR IF GOVERNMENT
REGULATIONS CHANGE, OUR BUSINESS WILL SUFFER.

     All new drugs, including our products, which have been developed or are
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, pre-market approval, importation,
advertising, promotion, sale and distribution of our products. These regulations
change from time to time and new regulations may be adopted. For example, in
prior years, legislation has been introduced in the U.S. Congress that would
restrict the duration of the marketing exclusivity of an orphan drug. There can
be no assurances that this type of legislation will not be reintroduced and
passed into law, or that the benefits of the existing statute will remain in
effect. Our failure to satisfy and comply with regulations adopted by the FDA,
and comparable agencies in state and local jurisdictions and in foreign
countries, may delay or stop approval of our drugs. In particular, such failure
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. Furthermore, additional government regulation may be
established or imposed by legislation or otherwise, which could prevent or delay
regulatory approval of ZADAXIN or any of our other 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. There is no
assurance that ZADAXIN, or any of our other products, will demonstrate efficacy
sufficient to obtain approval by the FDA or its counterpart regulatory agencies
in other countries.

     Satisfaction of government regulations may take several years and the time
needed to satisfy them varies substantially, based on the type, complexity and
novelty of the pharmaceutical product. As a result, government regulation may
cause us to delay the introduction of, or prevent us from marketing, 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. The pegylated interferon we will use in our phase
3 program in the U.S. has not yet been approved by the FDA. If this pegylated
interferon is not approved by the FDA, we would need to conduct an additional
trial with an approved form, resulting in additional delays and expenses.

IF WE FAIL TO OBTAIN REGULATORY APPROVALS FOR OUR PRODUCTS IN COUNTRIES WHERE WE
HAVE TARGETED REGULATORY APPROVAL, WE MAY NOT BE ABLE TO SUSTAIN OR INCREASE OUR
REVENUES AND OUR STOCK PRICE MAY DECLINE.

     The research, preclinical and clinical development, manufacturing,
marketing and sale of ZADAXIN and our other drug candidates are subject to
extensive regulation by governmental authorities. ZADAXIN
                                        24
<PAGE>

and any other products we may sell in countries outside the U.S. must be
approved by the foreign counterparts of the FDA 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. In addition, to
secure these regulatory approvals, we will need, among other things, to
demonstrate favorable results from additional clinical trials of ZADAXIN and the
safety and efficacy of CPX as a treatment for cystic fibrosis in preclinical and
clinical trials. There can be no assurance that we will ultimately obtain
regulatory approvals in our targeted countries in a timely and cost-effective
manner or at all. Our failure to obtain the required regulatory approvals so
that we can develop, market and sell our products in countries where we
currently do not have such rights may limit our revenues.

     Even if we are able to complete the clinical trials we have sponsored or
are planning in a timely or cost-effective manner, 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 that occur in our clinical trials could result in restrictions on the
use of ZADAXIN.

WE WILL NEED TO OBTAIN ADDITIONAL CAPITAL TO SUPPORT OUR LONG-TERM PRODUCT
DEVELOPMENT AND COMMERCIALIZATION PROGRAMS.

     Our ability to achieve and sustain operating profitability depends in large
part on our ability to commence, execute and complete clinical programs for, and
obtain additional regulatory approvals for ZADAXIN and other drug candidates,
particularly in the U.S., Europe and Japan, increase ZADAXIN sales in existing
markets, and launch ZADAXIN in new markets. We cannot assure you that we will
ever achieve significant levels of sales or that we will receive additional
ZADAXIN market approvals.

     Our current sales levels of ZADAXIN are not expected to generate all the
funds we anticipate will be needed to support our current plans for product
development including our U.S. phase 3 clinical trials for ZADAXIN. We will need
to obtain additional financing to support our 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, curtail or delay our phase 3
clinical trials, scale back our development of new products, reduce our
workforce and out-license to others products or technologies that we otherwise
would seek to commercialize ourselves.

     The amount of capital we will need will depend on many factors, including:
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; whether we elect to
establish additional partnering arrangements for development, sales,
manufacturing, and marketing of our products; the level of future ZADAXIN sales;
expense levels for our international sales and marketing efforts; our ability to
establish and maintain strategic arrangements for development, sales,
manufacturing and marketing of our products; competing technological and market
developments; the costs involved in filing, prosecuting and enforcing patent
claims; and whether any or all of our outstanding common stock warrants are
exercised and the timing and amount of these exercises.

     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 product development and commercialization
programs. Any additional equity financing will be dilutive to shareholders, and
any debt financing, if available, may include restrictive covenants.

                                        25
<PAGE>

WE HAVE A HISTORY OF OPERATING LOSSES AND AN ACCUMULATED DEFICIT. WE 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 December 31, 2001, we had an accumulated deficit of approximately
$123,000,000. 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, particularly in the U.S., and
we may never achieve profitability. Our failure to achieve profitability may
cause our stock price to decline.

WE ARE DEPENDENT ON THE SALE OF ZADAXIN IN FOREIGN COUNTRIES, PARTICULARLY
CHINA, AND IF WE EXPERIENCE DIFFICULTIES IN OUR FOREIGN SALES EFFORTS, OUR
FINANCIAL CONDITION WILL BE HARMED.

     Our financial condition in the near term is highly dependent on the sale of
ZADAXIN in foreign countries. If we experience difficulties in our foreign sales
efforts, our business will suffer and our financial condition will be harmed.
Substantially all of our ZADAXIN sales are to customers in the People's Republic
of China. Sales of ZADAXIN in China may be limited due to its low average
income, lack of patient cost reimbursement, poorly developed infrastructure, and
existing and potential competition from other products, possibly including
generics. China uses a tiered method to import and distribute finished
pharmaceutical products. At each port of entry, and prior to moving the product
forward to the distributors, government licensed importing agents must process
and evaluate each shipment to determine whether such shipment satisfies China's
quality assurance requirements. In order to efficiently manage this process, the
importing agents place relatively few orders from time to time over any six
month period and each order is typically for large quantities. Therefore, our
sales to an importing agent can vary substantially from quarter to quarter
depending on the size and timing of the orders, which has in the past and may in
the future cause our quarterly results to fluctuate. Because we use four
importing agents in China, our account receivable from any one importing agent
is material and if we were unable to collect receivables from any importer, our
business and cash-flow would be adversely affected, at least in the short term.

     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 a number of risks,
including: difficulties and delays in obtaining pricing approvals and
reimbursement, product health registrations and importation permits; unexpected
changes in regulatory requirements; difficulties in staffing and managing
foreign operations; long payment cycles; difficulties in accounts receivable
collection; difficulties in enforcing our proprietary rights; currency
fluctuations; adverse or deteriorating economic conditions; and potential
adverse tax consequences.

     We do not have product sales in the U.S. 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 regions, including China, regulate
pharmaceutical prices and pharmaceutical importation. These regulations may
reduce prices for ZADAXIN to levels significantly below those that would prevail
in an unregulated market, limit the volume of product which may be imported and
sold, or place high import duties on the product, any of which may limit the
growth of our revenues or cause them to decline.

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-party collaborators to sell,
market and distribute our products for the foreseeable future. If our
arrangements with these third parties are not successful, or if we are unable to
enter into additional third-party arrangements, we may need to substantially
expand our sales, marketing and distribution force. Our efforts to expand may
not succeed, or we may lack sufficient resources to expand in a timely manner,
either of which will harm our operating results. In addition, if we are able to
further expand our sales, marketing and distribution capabilities, we will begin
competing with other companies that have experienced and well funded operations.
If we cannot successfully compete with these larger companies, our revenues may
not grow and our business may suffer.

                                        26
<PAGE>

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

     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. Manufacturing interruptions 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.

     In some countries, a manufacturing change may require additional regulatory
approvals. If we do not obtain the required regulatory approvals for a
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 harm our business.

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

IF WE DO NOT OBTAIN RIGHTS TO ADDITIONAL PRODUCTS FROM THIRD PARTIES, OUR
PROSPECTS FOR FUTURE REVENUE MAY DECLINE.

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

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 in part on our distributors and business partners to develop
and/or promote our drugs, and if they are not successful in their efforts or
fail to do so, our business will suffer. We generally do not have control over
the amount and timing of resources that our business partners devote to ZADAXIN
and they have not always performed as or when expected. If they do not perform
their obligations as we expect, particularly obligations regarding clinical
trials, our development expenses would increase and the development and/or sale
of our products could be limited or delayed, which could cause our business to
suffer and our stock price to decline. In addition, 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 additional
arrangements in the future to develop and commercialize ZADAXIN or other
products.

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 patents or patent applications may not have priority
over others' applications. Our existing patents and additional patents, if any,
that issued, 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
                                        27
<PAGE>

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 not infringing valid,
enforceable patents or proprietary rights of third parties, and not breaching
any licenses that may relate to our technologies and products. We are aware of
third-party patents that may relate to our products. 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 any of these 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 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 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 sort, 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 in-process research and
development expenses, potentially dilutive issuances of equity securities, the
incurrence of debt, contingent liabilities and/or impairment of goodwill and
amortization or impairment of 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.

     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, manufacturing quality assurance,
and patents associated with a given drug. Our competitors include
biopharmaceutical companies, biotechnology firms, universities and other
research institutions, both in the U.S. and abroad, that are actively engaged in
research and development of products in the therapeutic areas we are pursuing,
particularly hepatitis C, hepatitis B, cancer, and cystic fibrosis. Competitors
are currently marketing drugs for hepatitis C, hepatitis B and cancer, or have
products in late-stage clinical trials.

                                        28
<PAGE>

     Most of our competitors, particularly large biopharmaceutical 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 preclinical and clinical testing and in
obtaining the regulatory approvals necessary to market drugs. Additional mergers
and acquisitions in the pharmaceutical industry may result in even more
resources being concentrated with our competitors. Where comparable products are
marketed by other companies price is a competitive factor. Increased competitive
pressure could lead to intensified price-based competition resulting in lower
prices and margins, which would hurt our operating results.

     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
biopharmaceutical companies have substantial commitments to alpha interferon, an
approved drug for treating hepatitis B and hepatitis C, and to lamivudine, an
approved drug to treat hepatitis B. 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. However, in the area of immune system enhancer therapy, we anticipate that
our competition for ZADAXIN may be reduced by the fact that ZADAXIN,
administered in combination with numerous antiviral and anti-cancer agents, is
expected to be complementary rather than competitive to these agents in
enhancing the immune system. We believe that we can position ZADAXIN as a
complementary rather than competitive drug to many therapies, but cannot
guarantee that we will be successful in this endeavor. We expect continuing
advancements in and increasing awareness of the use of immune system enhancer
therapy to fight cancer and infectious diseases and that this may create new
competitors as well as numerous new opportunities for expanded use of ZADAXIN
worldwide. We cannot assure you that we will be able to meet these objectives,
however.

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

     Our ability to successfully commercialize our products may depend in part
on the extent to which coverage and reimbursement to patients for our products
will be available from government health care programs, private health insurers
and other third party payors or organizations. Significant uncertainty exists as
to the reimbursement status of new therapeutic products, such as ZADAXIN, and we
cannot assure you that third party insurance coverage and reimbursement will be
available for therapeutic products we might develop. In most of the emerging
markets in which we sell ZADAXIN or intend to sell ZADAXIN, reimbursement for
ZADAXIN under government or private health insurance programs is not yet widely
available. The failure to obtain third-party reimbursement for our products,
particularly in the U.S., Europe and Japan, will harm our business. In the U.S.,
proposed health care reforms could limit the amount of third-party reimbursement
available for our products. We cannot assure you that additional limitations
will not be imposed in the future on drug coverage and reimbursement. In many
emerging markets 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. Various
governments and third-party payors are trying 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.

IF THE CURRENT ECONOMIC SLOWDOWN IN THE U.S. CAUSES THE ECONOMIES OF OTHER
COUNTRIES, PARTICULARLY THOSE IN ASIA, LATIN AMERICA AND THE MIDDLE EAST TO
EXPERIENCE A SLOWDOWN OR RECESSION, OUR BUSINESS WILL SUFFER.

     The U.S. is the world's largest consumer and as such, the current economic
slowdown in the U.S. may adversely affect the economies of other countries,
including the developing countries in Asia, Latin America
                                        29
<PAGE>

and the Middle East from which we derive all of our revenues. If the economic
conditions in the U.S. continue or worsen, these developing countries may also
experience an economic slowdown or recession, which would likely result in a
decrease of sales of ZADAXIN. Any decrease in sales of ZADAXIN would harm our
operating results, delay our efforts to achieve profitability, and likely cause
our stock price to decline.

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. 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 operations 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 outsource our
research and development programs involving the controlled use of biohazardous
materials, if in the future we conduct these programs ourselves, 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.

     As a result of the September 11, 2001 events in Pennsylvania, New York City
and Washington, D.C., U.S. and global economies have weakened, which may result
in a decrease in our revenues and cause our stock price to decline. Further,
high profile corporate governance and accounting problems and resulting
corporate failures have eroded investor confidence. In the wake of these events,
U.S. and global capital markets have experienced a period of extreme volatility,
and this may continue for some time.

     In addition, 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: significant negative changes in the major equity market
indices; announcements of technical or product developments by us or our
competitors; governmental regulation; health care 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 addition, the price of our common
stock may not remain at or exceed current levels.

                                        30
<PAGE>

IF THE CURRENT WAR ON TERRORISM CAUSES ECONOMIC SLOWDOWNS IN THE ECONOMIES OF
CERTAIN COUNTRIES OUR BUSINESS WILL SUFFER.

     The United States and its allied nations are aggressively attacking
terrorism with military and economic actions. If these actions lead to economic
slowdowns in the economies of developing countries in Asia, Latin America and
the Middle East from which we currently derive all of our product revenue, then
our sales could decrease. Any decrease in sales would harm our operating
results, delay our efforts to achieve profitability, and likely cause our stock
price to decline.

OUR INDEBTEDNESS MAY RESULT IN FUTURE LIQUIDITY PROBLEMS.

     As of December 31, 2001, we had $5.6 million in convertible notes payable,
of which $4.0 million were issued in the quarter ended December 31, 2000 and
$1.6 million were issued in the quarter ended March 31, 2001. This increased
indebtedness has and will continue to impact us by increasing interest expense
and making it more difficult to obtain additional financing. The notes are
payable five years after issuance unless converted into common stock at the sole
discretion of the holder. If we are unable to satisfy our debt service
requirements, substantial liquidity problems could result which would negatively
impact our future prospects. As of December 31, 2001 we had cash and short-term
investments of $16.5 million.

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

     As of December 31, 2001, stock options for 4,926,857 shares of common stock
were outstanding, of which options for 3,457,061 shares were exercisable, and
there were warrants exercisable for 1,970,500 shares of common stock
outstanding. Two issues of convertible notes payable as of December 31, 2001
were convertible into a total of 684,140 shares of common stock beginning one
year from date of issuance of the notes. In addition, the investors were given
the right to purchase senior unsecured convertible notes due December 2005 and
March 2006. If issued, the additional notes will bear no interest (zero coupon)
and will be convertible into 684,140 shares of our common stock. Upon exercise
of options or warrants, or conversion of the notes, these issued 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 of a liquidation -- 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
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.

                                        31
<PAGE>

ITEM 7A.  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 an adverse shift in interest rates, we
invest in short-term securities and maintain an average maturity of less than
one year. A hypothetical 60 basis point increase in interest rates would result
in an approximate $92,448 decrease (0.6%) in fair value of our
available-for-sale securities. This potential change is based on sensitivity
analyses performed on our financial position at December 31, 2001. Actual
results may differ materially.

                                        32
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         SCICLONE PHARMACEUTICALS, INC.

                         INDEX TO FINANCIAL STATEMENTS
    CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2001 AND 2000 AND FOR
         EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001

<Table>
<Caption>
                                                                   PAGE
                                                                   ----
<S>  <C>                                                           <C>
1.   Report of Ernst & Young LLP, Independent Auditors...........   34
2.   Consolidated Balance Sheets at December 31, 2001 and 2000...   35
3.   Consolidated Statements of Operations for each of the three
       years in the period ended December 31, 2001...............   36
4.   Consolidated Statement of Shareholders' Equity for each of
       the three years in the period ended December 31, 2001.....   37
5.   Consolidated Statements of Cash Flows for each of the three
       years in the period ended December 31, 2001...............   38
6.   Notes to Consolidated Financial Statements..................   39
</Table>

                                        33
<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
SciClone Pharmaceuticals, Inc.

     We have audited the accompanying consolidated balance sheets of SciClone
Pharmaceuticals, Inc. as of December 31, 2001 and 2000, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 2001. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of SciClone
Pharmaceuticals, Inc. at December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

                                          /s/ ERNST & YOUNG LLP

Palo Alto, California
January 24, 2002

                                        34
<PAGE>

                         SCICLONE PHARMACEUTICALS, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                              DECEMBER 31,    DECEMBER 31,
                                                                  2001            2000
                                                              -------------   -------------
<S>                                                           <C>             <C>
                                          ASSETS
Current assets:
  Cash and cash equivalents.................................  $  15,518,000   $  21,981,000
  Restricted short-term investments.........................        633,000         316,000
  Other short-term investments..............................        317,000         200,000
  Accounts receivable, net of allowances of $638,000 in 2001
     and $394,000 in 2000...................................      8,792,000       8,621,000
  Inventories...............................................      4,059,000       2,020,000
  Prepaid expenses and other current assets.................      1,333,000       1,233,000
                                                              -------------   -------------
     Total current assets...................................     30,652,000      34,371,000
Property and equipment, net.................................        167,000         214,000
Other assets................................................      1,277,000       1,582,000
                                                              -------------   -------------
     Total assets...........................................  $  32,096,000   $  36,167,000
                                                              =============   =============

                           LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $   1,575,000   $   2,327,000
  Accrued compensation and employee benefits................        960,000         787,000
  Accrued clinical trials expense...........................        296,000         202,000
  Accrued professional fees.................................        633,000         665,000
  Other accrued expenses....................................        258,000         109,000
                                                              -------------   -------------
     Total current liabilities..............................      3,722,000       4,090,000
Convertible notes payable...................................      5,600,000       4,000,000
Shareholders' equity:
  Preferred stock, no par value; issuable in series;
     10,000,000 shares authorized; none outstanding.........             --              --
  Common stock, no par value; 75,000,000 shares authorized;
     32,474,150 shares in 2001 and 32,209,286 shares in 2000
     issued and outstanding.................................    145,713,000     144,815,000
  Accumulated other comprehensive income....................         39,000           8,000
  Accumulated deficit.......................................   (122,978,000)   (116,746,000)
                                                              -------------   -------------
     Total shareholders' equity.............................     22,774,000      28,077,000
                                                              -------------   -------------
     Total liabilities and shareholders' equity.............  $  32,096,000   $  36,167,000
                                                              =============   =============
</Table>

                See notes to consolidated financial statements.
                                        35
<PAGE>

                         SCICLONE PHARMACEUTICALS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Revenues:
  Product sales.......................................  $13,831,000   $15,357,000   $ 9,091,000
  Contract/grant revenue..............................           --            --       307,000
                                                        -----------   -----------   -----------
     Total revenues...................................   13,831,000    15,357,000     9,398,000
Cost of product sales.................................    2,742,000     3,113,000     1,761,000
                                                        -----------   -----------   -----------
Gross margin..........................................   11,089,000    12,244,000     7,637,000
                                                        -----------   -----------   -----------
Operating expenses:
  Research and development............................    8,561,000     4,182,000     4,604,000
  Sales and marketing.................................    8,764,000     7,720,000     5,503,000
  General and administrative..........................    3,897,000     3,538,000     3,386,000
                                                        -----------   -----------   -----------
     Total operating expenses.........................   21,222,000    15,440,000    13,493,000
                                                        -----------   -----------   -----------
Loss from operations..................................  (10,133,000)   (3,196,000)   (5,856,000)
Income from payment on note receivable from former
  officer.............................................    3,497,000       400,000        20,000
Interest and investment income........................      751,000     1,066,000       157,000
Interest and investment expense.......................     (334,000)      (36,000)           --
Other income (expense), net...........................      (13,000)       49,000       212,000
                                                        -----------   -----------   -----------
Net loss..............................................  $(6,232,000)  $(1,717,000)  $(5,467,000)
                                                        -----------   -----------   -----------
Basic and diluted net loss per share..................  $     (0.19)  $     (0.06)  $     (0.26)
                                                        ===========   ===========   ===========
Weighted average shares used in computing basic and
  diluted net loss per share..........................   32,356,287    29,904,924    21,162,936
                                                        ===========   ===========   ===========
</Table>

                See notes to consolidated financial statements.
                                        36
<PAGE>

                         SCICLONE PHARMACEUTICALS, INC.

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<Table>
<Caption>
                                                                      ACCUMULATED
                                               COMMON STOCK              OTHER                           TOTAL
                                         -------------------------   COMPREHENSIVE    ACCUMULATED    SHAREHOLDERS'
                                           SHARES        AMOUNT         INCOME          DEFICIT         EQUITY
                                         ----------   ------------   -------------   -------------   -------------
<S>                                      <C>          <C>            <C>             <C>             <C>
Balance at December 31, 1998...........  21,534,056   $115,981,000      $ 9,000      $(109,562,000)   $ 6,428,000
Retirement of common stock from former
  officer..............................  (1,882,500)            --           --                 --             --
Issuance of common stock from exercise
  of stock options, warrants and
  employee stock purchase plan.........     361,427        581,000           --                 --        581,000
Issuance of common stock bonus.........     411,330        565,000           --                 --        565,000
Issuance of common stock in asset
  purchase.............................      50,297         69,000           --                 --         69,000
Issuance of common stock to vendors....     153,223        189,000           --                 --        189,000
Issuance of common stock from private
  placements...........................   4,331,079      6,430,000           --                 --      6,430,000
Conversion of preferred stock to common
  stock................................     299,483        513,000           --                 --        513,000
Net loss...............................          --             --           --         (5,467,000)    (5,467,000)
Net unrealized loss on
  available-for-sale securities........          --             --       (7,000)                --         (7,000)
                                                                                                      -----------
Total comprehensive loss...............                                                                (5,474,000)
                                         ----------   ------------      -------      -------------    -----------
Balance at December 31, 1999...........  25,258,395    124,328,000        2,000       (115,029,000)     9,301,000
Issuance of common stock from exercise
  of stock options, warrants and
  employee stock purchase plan.........   5,752,819     11,160,000           --                 --     11,160,000
Issuance of common stock from private
  Placements...........................   1,198,072      8,427,000           --                 --      8,427,000
Issuance of rights to purchase
  convertible note.....................          --        900,000           --                 --        900,000
Net loss...............................          --             --           --         (1,717,000)    (1,717,000)
Net unrealized gain on
  Available-for-sale securities........          --             --        6,000                 --          6,000
                                                                                                      -----------
Total comprehensive loss...............                                                                (1,711,000)
                                         ----------   ------------      -------      -------------    -----------
Balance at December 31, 2000...........  32,209,286    144,815,000        8,000       (116,746,000)    28,077,000
Issuance of common stock from exercise
  of stock options, warrants and
  employee stock purchase plan.........     264,864        544,000           --                 --        544,000
Issuance of rights to purchase
  convertible note.....................          --        354,000           --                 --        354,000
Net loss...............................          --             --           --         (6,232,000)    (6,232,000)
Net unrealized gain on
  available-for-sale securities........          --             --       31,000                 --         31,000
                                                                                                      -----------
Total comprehensive loss...............                                                                (6,201,000)
                                         ----------   ------------      -------      -------------    -----------
Balance at December 31, 2001...........  32,474,150   $145,713,000      $39,000      $(122,978,000)   $22,774,000
                                         ==========   ============      =======      =============    ===========
</Table>

                See notes to consolidated financial statements.
                                        37
<PAGE>

                         SCICLONE PHARMACEUTICALS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31,
                                                       ----------------------------------------
                                                           2001          2000          1999
                                                       ------------   -----------   -----------
<S>                                                    <C>            <C>           <C>
OPERATING ACTIVITIES:
Net loss.............................................  $ (6,232,000)  $(1,717,000)  $(5,467,000)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization......................       556,000       529,000       626,000
  Non-cash income from the foreclosure of loan from
     former officer..................................            --            --      (242,000)
  Non-cash gain on equity securities.................       (52,000)           --            --
  Gain from payment on note receivable from former
     officer.........................................    (3,497,000)     (400,000)      (20,000)
  Changes in operating assets and liabilities:
     Accounts receivable.............................      (171,000)   (4,278,000)   (3,042,000)
     Inventory.......................................    (2,039,000)     (939,000)      272,000
     Prepaid expenses and other assets...............      (205,000)      621,000       (51,000)
     Accounts payable and other accrued expenses.....      (603,000)      466,000       441,000
     Accrued clinical trials expense.................        94,000       (57,000)   (2,144,000)
     Accrued professional fees.......................       (32,000)     (199,000)      134,000
     Accrued compensation and employee benefits......       173,000        57,000       564,000
                                                       ------------   -----------   -----------
       Net cash used in operating activities.........   (12,008,000)   (5,917,000)   (8,929,000)
                                                       ------------   -----------   -----------
INVESTING ACTIVITIES:
  Purchase of property and equipment.................       (99,000)      (99,000)      (42,000)
  Proceeds from sale of marketable securities........            --            --       400,000
  Payment on purchase of marketable securities.......      (351,000)     (331,000)       (9,000)
                                                       ------------   -----------   -----------
       Net cash provided by (used in) investing
          activities.................................      (450,000)     (430,000)      349,000
                                                       ------------   -----------   -----------
FINANCING ACTIVITIES:
  Proceeds from issuance of common stock, net........       898,000    20,486,000     6,934,000
  Payment on notes receivable from former and current
     officers........................................     3,497,000       400,000       255,000
  Proceeds from issuance of convertible note.........     1,600,000     4,000,000            --
                                                       ------------   -----------   -----------
       Net cash provided by financing activities.....     5,995,000    24,886,000     7,189,000
                                                       ------------   -----------   -----------
Net increase (decrease) in cash and cash
  equivalents........................................    (6,463,000)   18,539,000    (1,391,000)
Cash and cash equivalents, beginning of year.........    21,981,000     3,442,000     4,833,000
                                                       ------------   -----------   -----------
Cash and cash equivalents, end of year...............  $ 15,518,000   $21,981,000   $ 3,442,000
                                                       ============   ===========   ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND
  INVESTING ACTIVITIES:
  Issuance of common stock in lieu of bonus..........  $         --   $        --   $   565,000
  Issuance of common stock for professional fees.....  $         --   $        --   $   189,000
  Issuance of common stock in asset purchase.........  $         --   $        --   $    69,000
  Conversion of preferred stock to common stock......  $         --   $        --   $   513,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for interest.............................  $    308,000   $        --   $        --
</Table>

                See notes to consolidated financial statements.
                                        38
<PAGE>

                         SCICLONE PHARMACEUTICALS, INC.

                  NOTES TO CONSOLIDATED FINANCIALS STATEMENTS

NOTE 1 -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  THE COMPANY

     SciClone Pharmaceuticals, Inc. ("SciClone" or the "Company") develops and
commercializes pharmaceutical and biological therapeutic compounds that are
acquired or in-licensed at the stage of late pre-clinical or early clinical
development. The Company's current product development and commercial activities
are focused on hepatitis B, hepatitis C, cancer and cystic fibrosis.

  BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, SciClone Pharmaceuticals International
Limited, SciClone Italy S.R.L. and SciClone Japan K.K. SciClone Pharmaceuticals
International Limited is registered in the Cayman Islands with its principal
office located in Hong Kong. SciClone Italy S.R.L. is registered in Italy with
its principal office located in Rome. SciClone Japan K.K. is registered in Japan
with its principal office located in Tokyo. All significant intercompany
accounts and transactions have been eliminated.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the U.S. requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

  CASH EQUIVALENTS AND INVESTMENTS

     Cash equivalents consist of highly liquid investments with original
maturities of three months or less. All cash equivalents are carried at cost
plus accrued interest, which approximates market value.

     Under the Company's lease agreement, the Company is required to maintain a
letter of credit in the amount of $633,000 in favor of the lessor. This letter
of credit is secured by a certificate of deposit in the amount of $633,000.

     The Company classifies it's entire investment portfolio as
available-for-sale and records these investments at fair value, as determined by
available market information, on the balance sheet. The portfolio primarily
consists of U.S. Government securities and short-term and long-term debt
instruments. Unrealized holding gains or losses are included in accumulated
other comprehensive income. The amortized cost of debt securities is adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in investment income along with interest earned.
Realized gains or losses, determined on the basis of specific identification,
and declines in value judged to be other than temporary are also included in
investment income. Management believes the credit risk associated with these
investments is limited due to the nature of investments.

     For the years ended December 31, 2001, 2000 and 1999, net unrealized gains
(loss) of approximately $31,000, $6,000 and $(7,000), respectively, were charged
to accumulated other comprehensive income. For the years ended December 31,
2001, 2000 and 1999, net realized gains (loss) were less than $1,000 for all
years.

  PROPERTY AND EQUIPMENT

     Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is provided over the estimated useful lives of the respective
assets (three to five years) on the straight-line basis. Depreciation expense
for the years ended December 31, 2001, 2000 and 1999 was $146,000, $120,000 and
$184,000, respectively.
                                        39
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

  OTHER INCOME

     In January 1999, the Company foreclosed on loans extended to one of its
former executive officers and board members and was in possession of the real
property securing the loans. The Company recorded the net value of the property
in assets available-for-sale at approximately $1,184,000, the related assumed
mortgage liability in other current liabilities at approximately $942,000, and
other income of approximately $242,000. In November 2000, the Company sold the
property and recorded an additional $21,000 in other income from the sale.

  OTHER ASSETS

     Other assets include the following:

<Table>
<Caption>
                                                                    DECEMBER 31,
                                                              ------------------------
                                                                 2001          2000
                                                              -----------   ----------
<S>                                                           <C>           <C>
Intangible product rights...................................  $ 2,456,000   $2,456,000
Accumulated amortization....................................   (1,365,000)    (955,000)
                                                              -----------   ----------
                                                                1,091,000    1,501,000
Other.......................................................      186,000       81,000
                                                              -----------   ----------
                                                              $ 1,277,000   $1,582,000
                                                              ===========   ==========
</Table>

     Product rights acquired are being amortized over six years (See Note 5).
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.

     In July 1998 the Company acquired the worldwide rights to ZADAXIN from
Alpha 1 Biomedicals, Inc. ("A1B"), which rights A1B had licensed from
Hoffmann-LaRoche, Inc. and F. Hoffmann-LaRoche AG, for approximately $1,800,000.
The transaction eliminated the Company's royalty obligation to A1B with respect
to all sales of ZADAXIN after the acquisition date. The A1B transaction allowed
SciClone to market ZADAXIN worldwide, except in Italy, Spain and Portugal, where
Sclavo S.p.A. ("Sclavo"), an international pharmaceutical entity, owned
exclusive marketing rights. In April 1998, the Company acquired ZADAXIN rights
for Italy, Spain and Portugal from Sclavo for approximately $1,400,000.

     In connection with the foregoing transactions, the Company estimated the
fair market value of the intangible assets purchased to be approximately
$2,456,000 and wrote off the remaining $700,000.

     Although the Company has a history of operating and cash flow losses, the
Company believes that there is no impairment to the intangible assets because
ZADAXIN was approved for sale in 26 countries as of March 15, 2002, principally
as a treatment for hepatitis B or hepatitis C. Based on the Company's
anticipated financial results for ZADAXIN sales from 2001 to 2005, it has
determined that the net present value of the future cash flows exceed the
carrying amount of the asset.

  FOREIGN CURRENCY TRANSLATION

     The Company has determined the U.S. dollar to be the functional currency
for its wholly owned subsidiary. Adjustments resulting from translation and
foreign currency transactions are included in results of operations and have not
been significant.

                                        40
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

  REVENUE RECOGNITION

     The Company recognizes revenue from product sales at the time of shipment
and recognizes contract/ grant revenue when services have been performed. There
are no significant customer acceptance requirements or post shipment obligations
on the part of the Company. Sales to importing agents or distributors are
recognized at time of shipment when title to the product is transferred to them,
and they do not have contractual rights of return except under limited terms
regarding product quality. However, the Company will replace products that have
expired or are deemed to be damaged or defective when delivered. Payments by the
importing agents and distributors are not contingent upon sale to the end user
by the importing agents or distributors.

     Contract revenue for research and development is recorded as earned based
on the performance requirements of the contract. Nonrefundable contract fees for
which no further performance obligations exist, and there is no continuing
involvement by SciClone, are recognized on the earlier of when the payments are
received or when collection is assured.

     Revenue associated with substantive performance milestones is recognized
based upon the achievement of the milestones, as defined in the respective
agreements. Revenue under research and development cost reimbursement contracts
is recognized as the related costs are incurred.

  RESEARCH AND DEVELOPMENT

     Research and development expenditures are charged to operations as
incurred. Major components of research and development expenses consist of
personnel costs, including salaries and benefits, clinical development performed
by contract research organizations, preclinical work, pharmaceutical
development, materials and supplies, third party research funding and overhead
allocations consisting of various administrative and facilities related costs.
Our research and development activities are also separated into three main
categories: research, clinical development and pharmaceutical development.
Research costs typically consist of preclinical and toxicology work. Clinical
development costs include Phase 1, 2, and 3 clinical trials as well as expanded
access programs. Pharmaceutical development costs consist of product formulation
and chemical analysis.

     Contract research organization management fees are expensed monthly, while
remaining clinical program activity generally is expensed on a straight-line
basis over the life of the individual contract or study. The Company monitors
patient enrollment levels and related activity to the extent possible and
adjusts estimates accordingly.

  SHIPPING AND HANDLING COSTS

     Costs related to shipping and handling are included in cost of sales for
all periods presented.

  ADVERTISING EXPENSES

     The Company accounts for advertising costs as expense in the period in
which they are incurred and are included in marketing expenses for all periods
presented. Advertising expense for the years ended December 31, 2001, 2000 and
1999 were $233,000, $204,000, and $188,000, respectively.

  INCOME TAXES

     Income tax expense is based on reported results of operations before
extraordinary items and income taxes. Deferred income taxes reflect the impact
of temporary differences between the amount of assets and liabilities recognized
for financial reporting purposes and such amounts recognized for tax purposes.
These

                                        41
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

deferred taxes are measured by applying current tax laws. Based on the Company's
lack of earnings history, deferred tax assets have been fully offset by a
valuation allowance.

  RETIREMENT BENEFITS

     The Company has a pre-tax savings plan covering substantially all U.S.
employees, which qualifies under Section 401(k) of the Internal Revenue Code.
Under the plan, eligible employees may contribute a portion of their pre-tax
salary, subject to certain limitations. The Company contributes and matches 50%
of the employee contributions, up to 15% of the employee's salary. Company
contributions, which can be terminated at the Company's discretion, were
$73,000, $58,000 and $17,000 for the years ended December 31, 2001, 2000 and
1999, respectively.

  NET LOSS PER SHARE

     Basic net loss per share has been computed using the weighted average
number of shares of common stock outstanding during the period. The weighted
average number of shares excludes shares held as collateral against a former
officer's loan which shares were retired in 1999. Diluted net loss per share
equals basic net loss per share given the Company's history of net losses.

     Had the Company been in a net income position, diluted earnings per share
would have included the shares used in the computation of basic net loss per
share as well as an additional 6,897,357, 6,396,577 and 9,822,008 shares in
2001, 2000 and 1999, respectively, related to outstanding options and warrants
not included in the calculation of basic net loss per share.

  ACCOUNTING FOR STOCK-BASED COMPENSATION

     The Company accounts for its stock option and employee stock purchase plans
under the provisions of Accounting Principles Board Opinion 25 ("APB 25") and
related Interpretations. Accordingly, the Company does not recognize
compensation expense in accounting for its stock option and employee stock
purchase plans for awards to employees and directors.

     Warrants issued in connection with equity and debt arrangements and equity
instruments issued to non-employees are valued using the Black-Scholes option
valuation model. Warrants issued to placement agents and similar parties in
connection with equity financing are accounted for as stock issuance costs 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.

  REPORTING COMPREHENSIVE INCOME (LOSS)

     The Company reports unrealized gains or losses on the Company's
available-for-sale securities in comprehensive income (loss). For the years
ended December 31, 2001, 2000 and 1999, total comprehensive loss attributable to
common shareholders amounted to $6,201,000, $1,711,000 and $5,474,000,
respectively.

  SEGMENT INFORMATION

     The Company operates in one segment (see Note 9).

  CONCENTRATION OF CREDIT RISK

     The People's Republic of China, like Japan and certain other Asian markets,
uses a tiered method to import and distribute products. The distributors make
the sales in the country, but the product is imported for

                                        42
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

them by licensed importers. In 1997, the Company sold to one principal importing
agent who then resold to four distributors inside the People's Republic of
China. Reflecting the expansion and stability of the Company's sales to the
People's Republic of China in 1998, the Company began working extensively with a
second importing agent in addition to the agent used in 1997. In 2000, the
Company began selling to a third importing agent and in 2001 the Company began
selling to a fourth importing agent. This enabled the expansion of sales to the
four distributors. For the year ended December 31, 2001, importing agents in
China accounted for 89% of the Company's product sales. As of December 31, 2001,
approximately $8,653,000, 91% of the Company's accounts receivable were
attributable to these four customers in China. The Company performs on-going
credit evaluations of its customers' financial condition, and generally does not
require collateral from its customers. The Company maintains reserves for credit
losses, and such losses have been within management's expectation. The Company
recognizes reserves for bad debts ranging from 25% to 100% based on the length
of time the receivables are past due.

  RECENT ACCOUNTING PRONOUNCEMENTS

     The Financial Accounting Standards Board issued Statements of Financial
Accounting Standards, No. 141, "Business Combinations", (SFAS 141) and No. 142,
"Goodwill and Other Intangible Assets", (SFAS 142) in June 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subjected to annual impairment tests in
accordance with these statements. Other intangible assets will continue to be
amortized over their useful economic lives. These statements are effective for
combinations initiated after July 1, 2001 and apply to assets related to
acquisitions prior to that date as of January 1, 2002. Based on current
circumstances, management believes the application of the new rules will not
have a material impact on the Company's consolidated financial statements.

     The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" (SFAS 144) in August 2001. The statement addresses financial
accounting and reporting of the impairment or disposal of long-lived assets.
SFAS 144 is effective for fiscal years beginning after December 15, 2001, with
earlier application encouraged. Based on current circumstances, management
believes application of the new rules will not have a material impact on the
Company's consolidated financial statements.

  RECLASSIFICATIONS

     Certain prior year amounts have been reclassified to conform to the current
year's presentation. The reclassifications did not have a material impact on our
consolidated financial statements.

                                        43
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

NOTE 2 -- AVAILABLE-FOR-SALE SECURITIES

     The following is a summary of available-for-sale securities:

<Table>
<Caption>
                                                     AVAILABLE-FOR SALE SECURITIES
                                               ------------------------------------------
                                                                 GROSS         ESTIMATED
                                                AMORTIZED      UNREALIZED        FAIR
                                                  COST       GAINS (LOSSES)      VALUE
                                               -----------   --------------   -----------
<S>                                            <C>           <C>              <C>
DECEMBER 31, 2001:
  Certificate of deposit.....................  $   865,000      $    --       $   865,000
  Corporate obligations......................   10,858,000        6,000        10,864,000
  Corporate equity securities................       51,000       33,000            84,000
                                               -----------      -------       -----------
                                               $11,774,000      $39,000       $11,813,000
                                               ===========      =======       ===========
DECEMBER 31, 2000:
  Certificate of deposit.....................  $   507,000      $    --       $   507,000
  Corporate obligations......................  $18,482,000      $    --       $18,482,000
  Corporate equity securities................           --        8,000             8,000
                                               -----------      -------       -----------
                                               $18,989,000      $ 8,000       $18,997,000
                                               ===========      =======       ===========
</Table>

     As of December 31, 2001, the total available-for-sale securities are
included as follows, $10,897,000, in cash and cash equivalents, $633,000, in
restricted short-term investments and $283,000 in other short-term investments.
As of December 31, 2000, the total available for sale securities are included as
follows, $18,482,000, in cash and cash equivalents, $317,000, in restricted
short-term investments and $198,000 in other short-term investments. As of
December 31, 2001 and 2000 all available-for-sale securities had maturities of
12 months or less.

NOTE 3 -- INVENTORIES

     Inventories are stated at the lower of cost (first-in, first-out basis) or
market. Inventories consisted of the following:

<Table>
<Caption>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2001         2000
                                                              ----------   ----------
<S>                                                           <C>          <C>
Raw materials...............................................  $2,759,000   $  815,000
Work in progress............................................   1,269,000    1,015,000
Finished goods..............................................     431,000      420,000
Reserve.....................................................    (400,000)    (230,000)
                                                              ----------   ----------
                                                              $4,059,000   $2,020,000
                                                              ==========   ==========
</Table>

                                        44
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

NOTE 4 -- PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following:

<Table>
<Caption>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                2001         2000
                                                              ---------   -----------
<S>                                                           <C>         <C>
Office furniture and fixtures...............................  $ 120,000   $   328,000
Office equipment............................................    465,000       894,000
Leasehold improvements......................................    108,000        96,000
                                                              ---------   -----------
                                                                693,000     1,318,000
Less accumulated depreciation...............................   (526,000)   (1,104,000)
                                                              ---------   -----------
Net property and equipment..................................  $ 167,000   $   214,000
                                                              =========   ===========
</Table>

NOTE 5 -- COLLABORATIVE AGREEMENTS

     In April 1999, the Company licensed to Sigma-Tau semi-exclusive ZADAXIN
development and marketing rights in Italy and Spain, and exclusive rights in
Switzerland. In March 2000, this license was expanded and amended to include all
of the countries in the European Union and Sigma-Tau was made exclusive licensee
in these countries.

     In September 1998, the Company acquired all rights of Sclavo to ZADAXIN in
Italy, Spain and Portugal, including Sclavo's marketing approval for ZADAXIN in
Italy as an influenza vaccine adjuvant. The purchase price consisted of $297,000
in cash, 375,000 shares of the Company's common stock, and warrants to purchase
375,000 shares of common stock at an exercise price of $4.125 per share, which
warrants were exercised in January 2000.

     Pursuant to its 1994 license agreement with A1B, the Company obtained
worldwide marketing, development and manufacturing rights to ZADAXIN, with the
exception of Italy, Spain and Portugal. In April 1997, SciClone entered into an
arrangement with A1B to administer the sublicense activities of the A1B licensee
for Italy, Spain and Portugal. Under this 1997 agreement, the Company also
acquired control of A1B's patent portfolio for ZADAXIN. In December 1997,
SciClone and A1B entered into an Asset Purchase Agreement pursuant to which the
Company acquired A1B's worldwide rights to ZADAXIN, which rights A1B licensed
from Hoffmann-LaRoche, Inc. and F. Hoffmann-LaRoche AG, and eliminated the
Company's and its current and future sublicensees' royalty obligations to A1B
with respect to future sales of ZADAXIN. In July 1998, the Company and A1B
closed the Asset Purchase Agreement. In accordance with the agreement, the
Company issued to A1B 600,000 shares of common stock and loaned to A1B $210,000
in exchange for the assets described above.

     In connection with the foregoing transactions with Sclavo and A1B, the
Company estimated the fair market value of the intangible assets purchased to be
approximately $2,456,000 and wrote off the remaining $700,000.

     In August 1997 the Company entered into a ZADAXIN Patent License Agreement
with The Fitzsimons Army Medical Center of the U.S. Army (the "Army"). The
Company is obligated to pay the Army a minimum annual royalty, and upon
commercialization of ZADAXIN for treatment of chronic hepatitis C in certain
countries. The Company will be obligated to pay the Army a royalty based on a
percentage of ZADAXIN net sales revenue.

     In October 1996, the Company entered into an agreement with Schering-Plough
K.K., giving Schering-Plough K.K. exclusive marketing rights to ZADAXIN in
Japan. Under the agreement Schering-Plough K.K. initiated development of ZADAXIN
as a monotherapy for the treatment of hepatitis B and hepatitis C.

                                        45
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

Historically, Schering-Plough K.K. managed the development process and the
parties shared certain development expenses. In 2001, the Company exercised its
right to participate directly in the development process and now manages the
process through its wholly owned subsidiary, SciClone Japan K.K., using a
Japanese clinical research organization and Schering-Plough K.K. as a
consultant. Schering-Plough K.K. continues to have exclusive marketing rights to
ZADAXIN in Japan.

     In April 1996, the Company acquired an exclusive license to CPX, a
synthetic compound, from the National Institutes of Health ("NIH"). The NIH
developed CPX as a potential treatment for cystic fibrosis. Under this license
agreement, the Company is obligated to pay the NIH a minimum annual royalty
payment and, upon product approval, the NIH will receive a milestone payment in
addition to royalties based on a percentage of CPX net sales revenue.

NOTE 6 -- INCOME TAXES

     The Company uses the liability method to account for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities.
Deferred tax assets and liabilities are measured using enacted tax rates and
laws that will be in effect when the differences are expected to reverse.

     The domestic and foreign components of loss before income tax at December
31 are as follows:

<Table>
<Caption>
                                                   2001          2000          1999
                                                -----------   -----------   -----------
<S>                                             <C>           <C>           <C>
Domestic......................................  $(4,445,000)  $(3,287,000)  $(4,968,000)
Foreign.......................................   (1,787,000)   (1,570,000)     (499,000)
                                                -----------   -----------   -----------
Loss before income tax expense................  $(6,232,000)  $(1,717,000)  $(5,467,000)
                                                ===========   ===========   ===========
</Table>

     Significant components of the Company's deferred tax assets at December 31
are as follows:

<Table>
<Caption>
                                                               2001           2000
                                                           ------------   ------------
<S>                                                        <C>            <C>
ASSETS
Net operating loss carryforwards.........................  $ 21,158,000   $ 20,057,000
R&D credit carryforwards.................................     3,462,000      2,847,000
Note receivable written off for financial reporting......     1,275,000      1,069,000
Other....................................................     1,553,000      1,741,000
                                                           ------------   ------------
Gross deferred tax assets................................    27,448,000     25,714,000
Valuation allowance......................................   (27,448,000)   (25,714,000)
                                                           ------------   ------------
     Total deferred tax assets...........................  $         --   $         --
                                                           ============   ============
</Table>

     The valuation allowance increased by approximately $1,734,000, $3,774,000
and $1,200,000 in the years ended December 31, 2001, 2000 and 1999,
respectively. Deferred tax assets relating to carryforwards as of December 31,
2001 include approximately $6,265,000 associated with stock option activity for
which any subsequently recognized tax benefits will be credited directly to
shareholders' equity. The Company did not have any deferred tax liabilities at
December 31, 2000 or 2001.

     At December 31, 2001, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $59,700,000 which expire in the
years 2006 through 2021. The difference between the cumulative losses for
financial reporting purposes and federal income tax purposes is primarily
attributable to losses incurred by the Company's foreign subsidiaries. At
December 31, 2001, the Company has federal tax credit carryforwards of
approximately $3,200,000, which expire in the years 2009 through 2021.

                                        46
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

     Because of the "change in ownership" provisions of the Internal Revenue
Code, a portion of the Company's net operating loss carryforwards and tax credit
carryforwards may be subject to an annual limitation regarding their utilization
against taxable income in future periods. As a result of the annual limitation,
a portion of these carryforwards may expire before ultimately becoming available
to reduce future income tax liabilities.

     As a result of net operating losses and valuation allowances, the Company
did not record any state income tax expense for the years ended December 31,
2001, 2000 and 1999.

NOTE 7 -- COMMITMENTS AND CONTINGENCIES

  LEASES

     The Company leases its main office facility under a non-cancelable
operating lease agreement which expires in August 2005. The lease is for a
period of five years and requires the Company to pay insurance and taxes and its
pro-rata share of operating expenses. The Company also leases various office
facilities abroad under non-cancelable lease agreements, expiring in 2001.
Rental expense in 2001, 2000 and 1999 was $1,296,000, $498,000 and $398,000,
respectively. Minimum future rental commitments amount to $1,311,000 in 2002,
$1,349,000 in 2003, $1,385,000 in 2004 and $1,270,000 in 2005.

  ROYALTIES

     Under the August 1997 ZADAXIN Patent License Agreement with The Fitzsimons
Army Medical Center of the U.S. Army (the "Army"), the Company is obligated to
pay the Army a minimum annual royalty, and upon commercialization of ZADAXIN for
treatment of chronic hepatitis C in certain countries. The Company will be
obligated to pay the Army a royalty based on a percentage of ZADAXIN net sales
revenue.

     Under the April 1996 CPX license agreement with the NIH, the Company is
obligated to pay the NIH a minimum annual royalty and, upon commercialization of
CPX, the Company will be obligated to pay the NIH a royalty based on a
percentage of CPX net sales revenue. During 2001, 2000 and 1999 the Company paid
$30,000, $10,000 and $10,000, respectively, related to the minimum annual
royalty.

  CONVERTIBLE NOTES PAYABLE

     In March 2001, the Company issued a $1.6 million senior unsecured
convertible note with an investment affiliate of UBS AG. The $1.6 million note
is convertible into 276,530 shares of common stock at a fixed conversion price
of $5.7860 per share. The note will accrue interest at a rate of 6% per year and
will mature in March 2006. The note is convertible after March 21, 2002. The
Company also received $354,000 for granting the investor the right to purchase,
at any time up to the notes' maturity date, approximately $2.4 million of senior
unsecured convertible notes due March 2006. If issued, the notes will bear no
interest (zero coupon) and will be convertible into 276,530 shares of common
stock at a fixed conversion price of $8.5532 per share. The Company may elect in
lieu of delivering convertible notes to deliver the respective number of shares
of common stock.

     In December 2000, the Company issued a $4 million senior unsecured
convertible note with an investment affiliate of UBS AG. The $4 million note is
convertible into 407,610 shares of common stock at a fixed conversion price of
$9.8133 per share. The note will accrue interest at a rate of 6% per year and
will mature in December 2005. The Company also received $900,000 for granting
the investor the right to purchase, at any time up to the notes' maturity date,
approximately $5.9 million of senior unsecured convertible notes due December
2005. If issued, the notes will bear no interest (zero coupon) and will be
convertible into 407,610 shares of common stock at a fixed conversion price of
$14.5066 per share. The Company may elect in lieu of delivering convertible
notes to deliver the respective number of shares of common stock.
                                        47
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

NOTE 8 -- SHAREHOLDERS' EQUITY

  COMMON STOCK, PREFERRED STOCK AND WARRANTS

     In March 2000, the Company licensed to Sigma-Tau exclusive development and
marketing rights to ZADAXIN in Europe. In addition, the Company completed a
$3,100,000 million private placement to Sigma-Tau consisting of 198,072 shares
of common stock, five-year immediately exercisable warrants to purchase 200,000
shares of common stock at $15.67 per share and five-year immediately exercisable
warrants to purchase 200,000 shares of common stock at $31.33 per share.
Sigma-Tau has no registration rights with respect to the shares purchased or
issuable upon exercise of the warrants. As of December 31, 2001, none of the
foregoing warrants had been exercised.

     In January 2000, the Company completed a $6,100,000 private placement to
Brown Simpson Asset Management which purchased 1,000,000 shares of common stock
at a price of $6.00 per share, a slight premium to market, and five-year
immediately exercisable warrants to purchase 800,000 shares of common stock at
an exercise price of $7.00 per share. As of December 31, 2001, none of these
warrants had been exercised.

     On July 21, 1999, the Company completed a $3,620,000 private placement to
strategic institutional investors. The offering consisted of units of 2,515,934
shares of common stock and immediately exercisable warrants to purchase
2,515,934 shares of common stock. Each unit was priced at $1.59 and consisted of
one share of common stock and one five-year immediately exercisable warrant to
purchase one share of common stock at an exercise price of $1.72 per share. In
connection with this private placement, the Company's placement agents received
five-year immediately exercisable warrants to purchase 345,933 shares of common
stock at an exercise price of $1.83 per share. As of December 31, 2001, none of
the warrants were outstanding and, all of the 2,515,934 investor warrants had
been exercised for aggregate proceeds to the Company of approximately
$4,327,000.

     On July 2, 1999, the Company completed a $1,810,000 private placement to
strategic institutional and accredited investors. The offering consisted of
units of 1,370,145 shares of common stock and immediately exercisable warrants
to purchase 1,370,145 shares of common stock. Each unit was priced at $1.46 and
consisted of one share of common stock and one five-year immediately exercisable
warrant to purchase one share of common stock, at an exercise price of $1.33 per
share. In connection with this private placement, the Company's placement agents
received five-year immediately exercisable warrants to purchase 183,179 shares
of common stock, at an exercise price of $1.66 per share. As of December 31,
2001, none of the warrants were outstanding, all of the 1,370,145 investor
warrants had been exercised for aggregate proceeds to the Company of
approximately $1,822,000.

     In May 1999, the Company issued 411,330 shares of common stock to the
Company's employees in lieu of cash bonuses.

     In April 1999, Sigma-Tau paid $1,000,000 for 445,000 shares of the
Company's unregistered common stock. Sigma-Tau was not granted any registration
rights covering resale of the shares.

     In June 1998, the Company entered into an agreement with an institutional
investor for an equity line which allowed the Company to access up to $32
million through sales of its common stock over a two-year period, subject to
certain limitations. The decision to draw any funds and the timing for any such
draw was solely at the Company's discretion. The Company was not obligated to
draw any minimum amount under the equity line and did not draw any amounts under
the equity line. As a commitment fee to the investor, the Company issued
five-year warrants to purchase 300,000 shares of its common stock at an exercise
price of $3.50 per share and five-year warrants to purchase 200,000 shares of
its common stock at an exercise price of $5.53 per share. The Company cancelled
the equity line in November 1999. As of December 31, 2001, none of the foregoing
warrants had been exercised.

                                        48
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

     In April 1998, the Company sold 661,157 shares of Series C preferred stock
at $6.05 per share and received $3,931,000 in net proceeds from the offering. In
the second quarter ended June 30, 1998, the Company recognized a deemed dividend
in the amount of $3,143,000 in connection with the issuance of the Series C
preferred stock. This amount was computed in accordance with EITF Appendix D-60,
"Accounting for the Issuance of Convertible Preferred Stock and Debt Securities
with a Non-detachable Conversion Feature" ("EITF D-60"), because the Series C
preferred stock had a beneficial conversion feature at the date of issuance that
allowed it to be converted to common stock at a discount to the common stock's
market price at the date of issuance. This amount increased net loss per share
attributable to common shareholders and was calculated as required by the SEC.
As of December 31, 1998 all but 58,356 shares of Series C preferred stock were
converted into 3,168,404 shares of common stock. In January 1999, 46,922 of the
remaining 58,536 shares were converted into 299,483 shares of common stock and
11,434 of such remaining shares of Series C preferred stock were redeemed at a
conversion price of approximately $0.95 per common share. As a result, there are
no shares of Series C preferred stock outstanding. In conjunction with the
offering, the Company granted to the investors five-year warrants to purchase
100,000 shares of common stock at an exercise price of $5.67 per share. As of
December 31, 2001, none of the warrants were outstanding, the remaining 37,500
of the 100,000 investor warrants had been exercised for aggregate proceeds to
the Company of approximately $213,000.

  STOCK AWARD PLANS

     In August 1991, the Board of Directors and shareholders of the Company
approved the 1991 Stock Plan (the "1991 Plan") and reserved 1,300,000 shares for
issuance thereunder. In May 1993, the Board of Directors and shareholders of the
Company approved a 2,150,000 increase in the shares reserved under the 1991
Plan. The 1991 Plan permits the award of incentive or nonqualified stock options
and shares of common stock under restricted stock purchase agreements. In
January 1992, the Board of Directors and shareholders of the Company approved
the 1992 Stock Plan (the "1992 Plan") and reserved 240,000 shares for issuance
thereunder. The 1992 Plan permits the award of incentive or nonqualified stock
options which must be exercised in cash. In June 1995, the Board of Directors
and the shareholders of the Company approved the 1995 Equity Incentive Plan (the
"1995 Plan") and reserved 1,250,000 shares for issuance thereunder. The 1995
Plan permits the award of incentive or nonqualified stock options and shares of
common stock under restricted stock awards. In May 1997, the Board of Directors
and shareholders of the Company approved a 750,000 increase in the shares
reserved under the 1995 Plan. In June 1998 and June 2000, the Board of Directors
and shareholders of the Company approved increases of 1,500,000 and 1,250,000,
respectively, in the shares reserved under the 1995 Plan.

     Under the 1991, 1992 and 1995 Plans, options are exercisable upon
conditions determined by the Board of Directors and expire ten years from the
date of grant. Options are generally granted at fair market value on the date of
grant and vest over time, generally four years.

     In June 1995, the Board of Directors and the shareholders of the Company
approved the Nonemployee Director Stock Option Plan (the "Nonemployee Director
Plan") and reserved 250,000 shares for issuance thereunder. The Nonemployee
Director Plan automatically grants nonqualified stock options to nonemployee
directors upon their appointment or first election to the Company's Board of
Directors ("Initial Grant") and annually upon their reelection to the Board of
Directors at the Company's Annual Meeting of Shareholders ("Annual Grant"). The
options are granted at fair market value on the date of grant. Initial Grants
vest annually over a period of three years. Annual Grants vest monthly over a
period of one year. In June 2000, the Board of Directors and shareholders of the
Company approved a 250,000 increase in the shares reserved under the Nonemployee
Director Plan.

     In July 1996, the Board of Directors and shareholders of the Company
approved the 1996 Employee Stock Purchase Plan (the "ESPP") and reserved 500,000
shares for issuance thereunder. All full-time

                                        49
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

employees are eligible to participate in the ESPP. Under the terms of the ESPP,
employees can choose to have up to 15% of their salary withheld to purchase the
Company's common stock. The purchase price of the stock is 85% of the lower of
the fair market value as of the first trading day of each quarterly
participation period, or of the fair market value as of the last trading day of
each quarterly participation period. Under the ESPP, the Company sold 33,009,
144,505 and 47,038 shares to employees in 2001, 2000 and 1999, respectively.

     The following table summarizes the stock option activity under the 1991,
1992 and 1995 plans and the Nonemployee Director Plan:

<Table>
<Caption>
                                                                               WEIGHTED
                                                                               AVERAGE
                                                                               EXERCISE
                                                      SHARES       SHARES       PRICE
                                                    AVAILABLE      UNDER      OF SHARES
                                                    FOR GRANT      OPTION     UNDER PLAN
                                                    ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>
BALANCE AT DECEMBER 31, 1998......................   2,300,933    3,548,978     $4.92
  Options canceled................................   1,195,985   (1,195,985)     4.43
  Options granted.................................  (2,243,062)   2,243,062      1.38
  Options exercised...............................          --      (34,238)     1.03
                                                    ----------   ----------
BALANCE AT DECEMBER 31, 1999......................   1,253,856    4,561,817      3.34
  1995 Plan shares reserved.......................   1,250,000           --        --
  Nonemployee Director Plan shares reserved.......     250,000           --        --
  Options canceled................................      56,366      (56,366)     1.43
  Options granted.................................    (931,250)     931,250     10.46
  Options exercised...............................          --   (1,010,624)     2.48
                                                    ----------   ----------
BALANCE AT DECEMBER 31, 2000......................   1,878,972    4,426,077      5.00
  Options canceled................................      93,697      (93,697)     7.27
  Options granted.................................    (946,800)     946,800      3.98
  Options exercised...............................          --     (231,605)     1.83
  Plan shares expired.............................          --     (120,718)       --
                                                    ----------   ----------
BALANCE AT DECEMBER 31, 2001......................   1,025,869    4,926,857     $4.86
                                                    ==========   ==========
</Table>

     The following table summarizes information concerning outstanding and
exercisable options as of December 31, 2001:

<Table>
<Caption>
                                   OPTIONS OUTSTANDING
                           ------------------------------------    OPTIONS EXERCISABLE
                                          WEIGHTED                ----------------------
                                           AVERAGE     WEIGHTED                 WEIGHTED
                                          REMAINING    AVERAGE                  AVERAGE
                             NUMBER      CONTRACTUAL   EXERCISE     NUMBER      EXERCISE
RANGE OF EXERCISE PRICES   OUTSTANDING      LIFE        PRICE     EXERCISABLE    PRICE
------------------------   -----------   -----------   --------   -----------   --------
<S>                        <C>           <C>           <C>        <C>           <C>
  $ 1.22 - $ 1.59           1,123,738       7.37        $1.40      1,067,650     $1.40
  $ 1.75 - $ 3.68           1,370,001       7.98         3.07        582,849      2.43
  $ 3.69 - $ 5.38             918,929       5.61         5.01        806,427      5.04
  $ 5.50 - $10.50             767,964       5.25         6.96        665,277      6.78
  $10.75 - $10.75             645,225       8.64        10.75        233,858     10.75
  $12.50 - $12.50             101,000       1.66        12.50        101,000     12.50
                            ---------                              ---------
                            4,926,857       6.93         4.86      3,457,061      4.41
                            =========                              =========
</Table>

                                        50
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

     Pro forma information regarding net loss and net loss per share is required
by SFAS 123 and has been determined as if the Company had accounted for its
stock awards under the fair value method of that Statement. The fair value for
the options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 2001, 2000 and
1999: risk-free interest rates of 4.00%, 6.00% and 6.00%, respectively; dividend
yields of 0%; volatility factors of the expected market price of the Company's
common stock of 0.96 for 2001 and 0.97 for 2000 and 0.91 for 1999 and a weighted
average expected life of the option of 3.94 years for 2001, 3.90 years for 2000
and 3.92 years for 1999. The weighted average estimated fair value of options
granted was $2.72 for 2001, $7.31 for 2000, and $0.93 for 1999. The fair value
for the employee stock purchases was also estimated using the Black-Scholes
model with the following assumptions for 2001, 2000 and 1999: risk-free interest
rate of 4.00%, 6.00% and 6.00%, respectively; dividend yield of 0%; expected
volatility of 0.96, 0.97 and 0.91, respectively, and expected life of 0.25
years. The weighted average estimated fair value of the employee stock purchase
plan shares purchased was $1.86 for 2001, $1.96 for 2000, and $0.55 for 1999.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock awards have characteristics
significantly different from those of traded options, and because changes in
subjective input assumptions can materially affect the fair value estimate, in
the Company's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options and stock
purchases.

     Had compensation expense for the Company's option and employee purchase
plans been determined based on the fair value at the grant date for awards in
2001, 2000 and 1999 consistent with the provisions of SFAS 123, the Company's
net loss and net loss per share would have been adjusted to the pro forma
amounts for the years ended December 31 indicated below:

<Table>
<Caption>
                                                   2001          2000          1999
                                                -----------   -----------   -----------
<S>                                             <C>           <C>           <C>
Net loss -- as reported.......................  $(6,232,000)  $(1,717,000)  $(5,467,000)
                                                ===========   ===========   ===========
Net loss -- pro forma.........................  $(8,988,000)  $(3,679,000)  $(7,896,000)
                                                ===========   ===========   ===========
Net loss per share -- as reported.............  $     (0.19)  $     (0.06)  $     (0.26)
                                                ===========   ===========   ===========
Net loss per share -- pro forma...............  $     (0.28)  $     (0.12)  $     (0.37)
                                                ===========   ===========   ===========
</Table>

     The effects of applying SFAS 123 for pro forma disclosures are not likely
to be representative of the effects on reported net loss for future years.

  RESERVED SHARES

     As of December 31, 2001, the Company had reserved shares of common stock
for future issuance as follows:

<Table>
<S>                                                            <C>
Options outstanding.........................................   4,926,857
Warrants outstanding........................................   1,970,500
                                                               ---------
                                                               6,897,357
                                                               =========
</Table>

                                        51
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

NOTE 9 -- SIGNIFICANT GEOGRAPHIC INFORMATION

     The Company operates in one business segment, the development and
commercialization of specialist-oriented proprietary drugs for the treatment of
chronic and life threatening diseases. Currently, the Company's principal focus
has been the development and commercialization of ZADAXIN and the development of
CPX.

     The Chief Executive Officer has been identified as the Chief Operating
Decision Maker ("CODM") because he has final authority over resource allocation
decisions and performance assessment. The CODM does not receive discrete
financial information about the individual components.

     The Company's domestic operations primarily consist of product development.
The Company's wholly owned international subsidiary, SciClone Pharmaceuticals
International Ltd., is based in Hong Kong and is engaged in sales and marketing
and product distribution worldwide.

     Information regarding geographic areas is as follows at December 31:

<Table>
<Caption>
                                                                    LONG
                                                                   LIVED
                                                  PRODUCT SALES    ASSETS    NET ASSETS
                                                  -------------   --------   -----------
<S>                                               <C>             <C>        <C>
2001:
  U.S...........................................   $        --    $ 61,000   $ 8,407,000
  China.........................................    12,325,000     103,000    13,968,000
  Other.........................................     1,506,000       3,000       399,000
                                                   -----------    --------   -----------
       Total....................................   $13,831,000    $167,000   $22,774,000
                                                   ===========    ========   ===========
2000:
  U.S...........................................   $        --    $101,000   $17,063,000
  China.........................................    13,174,000     106,000    10,973,000
  Other.........................................     2,183,000       7,000        41,000
                                                   -----------    --------   -----------
       Total....................................   $15,357,000    $214,000   $28,077,000
                                                   ===========    ========   ===========
1999:
  U.S...........................................   $        --    $153,000   $ 3,535,000
  China.........................................     7,906,000      72,000     5,726,000
  Other.........................................     1,185,000      10,000        40,000
                                                   -----------    --------   -----------
       Total....................................   $ 9,091,000    $235,000   $ 9,301,000
                                                   ===========    ========   ===========
</Table>

     Two customers accounted for 10% or more of total revenues (46% and 29%) for
the year ended December 31, 2001. Two customers accounted for 10% or more of
total revenues (63%, and 16%) for the year ended December 31, 2000. One customer
accounted for 10% or more of total revenues (77%) for the year ended December
31, 1999. No other customer accounted for more than 10% of revenues during these
years.

                                        52
<PAGE>
                         SCICLONE PHARMACEUTICALS, INC.

           NOTES TO CONSOLIDATED FINANCIALS STATEMENTS -- (CONTINUED)

NOTE 10 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<Table>
<Caption>
                                                     THREE MONTHS ENDED
                                   ------------------------------------------------------
                                    MARCH 31       JUNE 30     SEPTEMBER 30   DECEMBER 31
                                   -----------   -----------   ------------   -----------
<S>                                <C>           <C>           <C>            <C>
2001:
  Product sales..................  $ 3,113,000   $ 3,250,000    $3,580,000    $ 3,888,000
  Cost of product sales..........  $   598,000   $   636,000    $  714,000    $   794,000
  Gross margin...................  $ 2,515,000   $ 2,614,000    $2,866,000    $ 3,094,000
  Net loss.......................  $(2,125,000)  $(2,219,000)   $ (173,000)   $(1,715,000)
  Basic and diluted net loss per
     share.......................  $     (0.07)  $     (0.07)   $    (0.01)   $     (0.05)
2000:
  Product sales..................  $ 3,499,000   $ 4,206,000    $4,675,000    $ 2,977,000
  Cost of product sales..........  $   735,000   $   849,000    $  914,000    $   616,000
  Gross margin...................  $ 2,764,000   $ 3,357,000    $3,761,000    $ 2,361,000
  Net loss.......................  $  (875,000)  $  (589,000)   $ (137,000)   $  (117,000)
  Basic and diluted net loss per
     share.......................  $     (0.03)  $     (0.02)   $    (0.00)   $     (0.00)
</Table>

                                        53
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     Not Applicable.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by Item 401 of Regulation S-K is incorporated by
reference from the definitive proxy statement for the Company's 2002 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 (the "Proxy Statement") under the caption "ELECTION OF
DIRECTORS -- Nominees." Information relating to the executive officers of the
Company is set forth in Part I of this report under the caption "Executive
Officers of the Registrant."

     The information required by Item 405 of Regulation S-K is incorporated by
reference from the Proxy Statement under the caption "EXECUTIVE COMPENSATION AND
OTHER MATTERS -- Section 16(a) Beneficial Ownership Reporting Compliance."

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference from the
Proxy Statement under the captions "EXECUTIVE COMPENSATION AND OTHER MATTERS,"
"COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION," "ELECTION OF
DIRECTORS -- Compensation of Directors" and "STOCK PERFORMANCE GRAPH."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference from the
Proxy Statement under the caption "STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT."

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference from the
Proxy Statement under the caption "EXECUTIVE COMPENSATION AND OTHER
MATTERS -- Certain Relationships and Related Transactions."

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Report:

     (1) Financial Statements.  The following financial statements of the
Company are contained on pages 33 -- 53 of this Report on Form 10-K:

       Report of Ernst & Young LLP, Independent Auditors.

       Consolidated Balance Sheets at December 31, 2001 and 2000.

       Consolidated Statements of Operations for each of the three years in the
       period ended December 31, 2001.

       Consolidated Statement of Shareholders' Equity for each of the three
       years in the period ended December 31, 2001.

       Consolidated Statements of Cash Flows for each of the three years in the
       period ended December 31, 2001.

                                        54
<PAGE>

       Notes to Consolidated Financial Statements.

     (2) Financial Statement Schedules

     The following schedule is filed as part of this Report:

       Schedule II -- Valuation and Qualifying Accounts for each of the three
       years in the period ended December 31, 2001.

     All other schedules have been omitted because they are either inapplicable
or the required information has been given in the consolidated financial
statements or the notes hereto.

     (3) Exhibits.

     Refer to Item 14(c) below.

(b) REPORTS ON FORM 8-K.

     None

(c) EXHIBITS.

     Exhibits (numbered in accordance with Item 601 of Regulation S-K):

<Table>
<Caption>
EXHIBIT
NUMBER                               DESCRIPTION
-------                              -----------
<S>          <C>
3(i).1(1)    Restated Articles of Incorporation.
3(i).2(2)    Certificate of Amendment of Restated Articles of
             Incorporation.
3(i).3(14)   Certificate of Determination.
3(i).4(20)   Certificate of Determination Regarding the terms of the
             Series C Preferred Stock.
3(ii).1(1)   Bylaws.
3(ii).2(2)   Certificate of Amendment of Bylaws.
4.2(14)      Rights Agreement dated as of July 25, 1997 between the
             Registrant and Chase Mellon Shareholder Services, L.L.C.
4.3(21)*     6% Convertible Note dated as of December 7, 2000 by the
             Registrant in favor of UBS AG, London Branch.
4.4(21)*     Option Agreement dated as of October 26, 2000 by and between
             the Registrant and UBS AG, London Branch.
4.5(21)*     Amendment No. 1 to Option Agreement dated as of December 19,
             2000 by and between the Registrant and UBS AG, London
             Branch.
4.6(22)*     6% Convertible Note dated as of March 21, 2001 by the
             Company in favor of UBS AG, London Branch.
4.7(22)*     Option Agreement dated as of February 16, 2001 by and
             between the Company and UBS AG, London Branch.
4.8(22)*     Amendment No. 1 to Option Agreement dated as of March 21,
             2001 by and between the Company and UBS AG, London Branch.
10.7(2)**    Registrant's 1991 Stock Plan, together with forms of
             agreements thereunder.
10.8(1)**    Registrant's 1992 Stock Plan, together with forms of
             agreements thereunder.
10.10(1)     Lease, dated September 10, 1991, between the Registrant and
             Spieker-Singleton68 concerning property, located at 901
             Mariners Island Boulevard, San Mateo, California, as amended
             (the "Spieker Lease").
10.11(7)     Amendment No. 4 to Spieker Lease, dated October 4, 1994.
10.12(9)     Amendment No. 7 to Spieker Lease, dated November 14, 1995.
10.13(8)**   Registrant's 1995 Equity Incentive Plan, together with forms
             of agreement thereunder.
10.14(8)**   Registrant's 1995 Nonemployee Director Stock Option Plan,
             together with forms of agreement thereunder.
</Table>

                                        55
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                               DESCRIPTION
-------                              -----------
<S>          <C>
10.16(21)    Second Amendment of Employment Agreement dated December,
             2000 between the Registrant and Donald R. Sellers.
10.17(10)    License Agreement effective April 19, 1996 between the
             Registrant and the National Institute of Health Office of
             Technology Transfer.
10.19(11)    Amendment No. 8 to Spieker Lease, dated August 26, 1996.
10.20(21)    Amendment No. 14 to Spieker Lease dated November 21, 2000.
10.21(15)    Alpha Rights Acquisition Agreement by and between the
             Registrant and Alpha 1 Biomedicals, Inc., dated December 17,
             1997.
10.22(16)*   Expanded and Amended Alpha 1 License, Distributorship and
             Supply Agreement by and between the Company and Sigma-Tau
             Industrie Farmadeutiche Riunite S.p.A. dated as of March 3,
             2000.
10.23(17)    Preferred Stock Investment Agreement by and among the
             Company, Halifax Fund, L.P., Themis Partners L.P. and
             Heracles Fund dated as of March 27, 1998.
10.24(17)    Registration Rights Agreement by and among Registrant,
             Halifax Fund, L.P., Themis Partners L.P. and Heracles Fund
             dated as of April 1, 1998.
10.26(18)    Warrant to purchase up to 200,000 shares of Common Stock of
             the Company issued to Cheyenne LLC dated as of June 30,
             1998.
10.27(18)    Registration Rights Agreement by and between the Company and
             Cheyenne LLC dated as of June 30, 1998.
10.28(19)    Acquisition Agreement between the Company and Sclavo S.p.A.
             dated April 20,1998.
10.29(19)    First Amendment to Acquisition Agreement between the Company
             and Sclavo S.p.A., dated April 20, 1998.
10.30(19)    Stock Purchase Warrant to purchase up to 375,000 shares of
             Common Stock of the Company issued to Sclavo S.p.A. dated
             September 3, 1998.
10.31(22)*   Registration Rights Agreement by and between the Company and
             UBS AG, London Branch dated as of February 16, 2001.
10.32(21)    Change in Control Agreement between the Company and Alfred
             Rudolph dated as of November 19, 1999.
10.33(21)    Change in Control Agreement between the Company and Donald
             R. Sellers dated as of November 19, 1999.
10.34        Change in Control Agreement between the Company and Richard
             A. Waldron dated as of April 30, 2001.
21.1         Subsidiaries of Registrant.
23.1         Consent of Ernst & Young LLP, Independent Auditors.
24.1         Powers of Attorney. See page 58.
</Table>

---------------

   * Certain information in this exhibit has been omitted and filed separately
     with the Securities and Exchange Commission pursuant to a confidential
     treatment request under 17 C.F.R. Sections 200, 80(b)(4), 200.83 and
     230.46.

  ** Management compensatory plan or arrangement.

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

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

 (7) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 1994.

 (8) Incorporated by reference from the Company's Registration Statement on Form
     S-8 (No. 33-80911) filed with the Commission on December 28, 1995.

                                        56
<PAGE>

 (9) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 1995.

(10) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
     for the quarter ended March 31, 1996.

(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
     for the quarter ended June 30, 1996.

(14) Incorporated by reference from the Company's Current Report on Form 8-K
     filed on October 14, 1997.

(15) Incorporated by reference from the Company's Current Report on Form 8-K
     filed on January 26, 1998.

(16) Incorporated by reference from the Company's Form 8-K filed on April 20,
     2000.

(17) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 1998.

(18) Incorporated by reference to the Company's Current Report on Form 8-K filed
     on July 23, 1998.

(19) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
     on November 17, 1998.

(20) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 1997.

(21) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 2000.

(22) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
     on May 15, 2001.

                                        57
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
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.

                                          By:     /s/ DONALD R. SELLERS
                                            ------------------------------------
                                                     Donald R. Sellers
                                               President and Chief Executive
                                                           Officer

Date: March 22, 2002

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Donald R. Sellers and Richard A. Waldron,
and each of them, his attorneys-in-fact and agents, each with the power of
substitution and resubstitution, for him in any and all capacities, to sign any
and all amendments to this Report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary, to be done in connection therewith,
as fully as to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
either of them, or their or his substitute or substitutes, may do or cause to be
done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and on
the dates indicated.

<Table>
<Caption>
                   SIGNATURE                                     TITLE                       DATE
                   ---------                                     -----                       ----
<C>                                               <S>                                   <C>
             /s/ DONALD R. SELLERS                President and Chief Executive         March 22, 2002
------------------------------------------------  Officer, Director Principal
              (Donald R. Sellers)                 Executive Officer

             /s/ RICHARD A. WALDRON               Chief Financial Officer Principal     March 22, 2002
------------------------------------------------  Financial Officer
              (Richard A. Waldron)

                /s/ IVAN B. HUI                   Corporate Controller Principal        March 22, 2002
------------------------------------------------  Accounting Officer
                 (Ivan B. Hui)

            /s/ JOHN D. BAXTER, M.D.              Director                              March 22, 2002
------------------------------------------------
             (John D. Baxter, M.D.)

           /s/ EDWIN C. CADMAN, M.D.              Director                              March 22, 2002
------------------------------------------------
            (Edwin C. Cadman, M.D.)

            /s/ JERE E. GOYAN, PH.D.              Chairman of Board of Directors        March 22, 2002
------------------------------------------------
             (Jere E. Goyan, Ph.D.)

               /s/ ROLF H. HENEL                  Director                              March 22, 2002
------------------------------------------------
                (Rolf H. Henel)

                /s/ JON S. SAXE                   Director                              March 22, 2002
------------------------------------------------
                 (Jon S. Saxe)

              /s/ DEAN S. WOODMAN                 Director                              March 22, 2002
------------------------------------------------
               (Dean S. Woodman)
</Table>

                                        58
<PAGE>

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                         SCICLONE PHARMACEUTICALS INC.

<Table>
<Caption>
                                                            ADDITIONS
                                                     -----------------------
                                       BALANCE AT    CHARGED TO   CHARGED TO
                                      BEGINNING OF   COSTS AND      OTHER                    BALANCE AT
DESCRIPTION                              PERIOD       EXPENSES     ACCOUNTS    DEDUCTIONS   END OF PERIOD
-----------                           ------------   ----------   ----------   ----------   -------------
<S>                                   <C>            <C>          <C>          <C>          <C>
YEAR ENDED DECEMBER 31, 2001
  Reserves and allowances deducted
     from asset accounts:
     Allowance for uncollectable
       accounts.....................    $394,000      $244,000       $ --       $    --       $638,000
     Inventory reserve..............    $230,000      $170,000       $ --       $    --       $400,000
YEAR ENDED DECEMBER 31, 2000
  Reserves and allowances deducted
     from asset accounts:
     Allowance for uncollectable
       accounts.....................    $ 74,000      $320,000       $ --       $    --       $394,000
     Inventory reserve..............    $ 81,000      $149,000       $ --       $    --       $230,000
YEAR ENDED DECEMBER 31, 1999
  Reserves and allowances deducted
     from asset accounts:
     Allowance for uncollectable
       accounts.....................    $ 76,000      $     --       $ --       $ 2,000       $ 74,000
     Inventory reserve..............    $129,000      $     --       $ --       $48,000       $ 81,000
</Table>

                                        59
<PAGE>

                               INDEX TO EXHIBITS

<Table>
<Caption>
                                                                           SEQUENTIALLY
EXHIBIT                                                                      NUMBERED
NUMBER                                 EXHIBIT                                 PAGE
-------                                -------                             ------------
<S>          <C>                                                           <C>
3(i).1(1)    Restated Articles of Incorporation..........................
3(i).2(2)    Certificate of Amendment of Restated Articles of
             Incorporation...............................................
3(i).3(14)   Certificate of Determination................................
3(i).4(20)   Certificate of Determination Regarding the terms of the
             Series C Preferred Stock....................................
3(ii).1(1)   Bylaws......................................................
3(ii).2(2)   Certificate of Amendment of Bylaws..........................
4.2(14)      Rights Agreement dated as of July 25, 1997 between the
             Registrant and Chase Mellon Shareholder Services, L.L.C.....
4.3(21)*     6% Convertible Note dated as of December 7, 2000 by the
             Registrant in favor of UBS AG, London Branch................
4.4(21)*     Option Agreement dated as of October 26, 2000 by and between
             the Registrant and UBS AG, London Branch....................
4.5(21)*     Amendment No. 1 to Option Agreement dated as of December 19,
             2000 by and between the Registrant and UBS AG, London
             Branch......................................................
4.6(22)*     6% Convertible Note dated as of March 21, 2001 by the
             Company in favor of UBS AG, London Branch...................
4.7(22)*     Option Agreement dated as of February 16, 2001 by and
             between the Company and UBS AG, London Branch...............
4.8(22)*     Amendment No. 1 to Option Agreement dated as of March 21,
             2001 by and between the Company and UBS AG, London
             Branch......................................................
10.7(2)**    Registrant's 1991 Stock Plan, together with forms of
             agreements thereunder.......................................
10.8(1)**    Registrant's 1992 Stock Plan, together with forms of
             agreements thereunder.......................................
10.10(1)     Lease, dated September 10, 1991, between the Registrant and
             Spieker-Singleton68 concerning property, located at 901
             Mariners Island Boulevard, San Mateo, California, as amended
             (the "Spieker Lease").......................................
10.11(7)     Amendment No. 4 to Spieker Lease, dated October 4, 1994.....
10.12(9)     Amendment No. 7 to Spieker Lease, dated November 14,
             1995........................................................
10.13(8)**   Registrant's 1995 Equity Incentive Plan, together with forms
             of agreement thereunder.....................................
10.14(8)**   Registrant's 1995 Nonemployee Director Stock Option Plan,
             together with forms of agreement thereunder.................
10.16(21)    Second Amendment of Employment Agreement dated December,
             2000 between the Registrant and Donald R. Sellers...........
10.17(10)    License Agreement effective April 19, 1996 between the
             Registrant and the National Institute of Health Office of
             Technology Transfer.........................................
10.19(11)    Amendment No. 8 to Spieker Lease, dated August 26, 1996.....
10.20(21)    Amendment No. 14 to Spieker Lease dated November 21,
             2000........................................................
10.21(15)    Alpha Rights Acquisition Agreement by and between the
             Registrant and Alpha 1 Biomedicals, Inc., dated December 17,
             1997........................................................
10.22(16)*   Expanded and Amended Alpha 1 License, Distributorship and
             Supply Agreement by and between the Company and Sigma-Tau
             Industrie Farmadeutiche Riunite S.p.A. dated as of March 3,
             2000........................................................
10.23(17)    Preferred Stock Investment Agreement by and among the
             Company, Halifax Fund, L.P., Themis Partners L.P. and
             Heracles Fund dated as of March 27, 1998....................
</Table>

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<PAGE>

<Table>
<Caption>
                                                                           SEQUENTIALLY
EXHIBIT                                                                      NUMBERED
NUMBER                                 EXHIBIT                                 PAGE
-------                                -------                             ------------
<S>          <C>                                                           <C>
10.24(17)    Registration Rights Agreement by and among Registrant,
             Halifax Fund, L.P., Themis Partners L.P. and Heracles Fund
             dated as of April 1, 1998...................................
10.26(18)    Warrant to purchase up to 200,000 shares of Common Stock of
             the Company issued to Cheyenne LLC dated as of June 30,
             1998........................................................
10.27(18)    Registration Rights Agreement by and between the Company and
             Cheyenne LLC dated as of June 30, 1998......................
10.28(19)    Acquisition Agreement between the Company and Sclavo S.p.A.
             dated April 20,1998.........................................
10.29(19)    First Amendment to Acquisition Agreement between the Company
             and Sclavo S.p.A., dated April 20, 1998.....................
10.30(19)    Stock Purchase Warrant to purchase up to 375,000 shares of
             Common Stock of the Company issued to Sclavo S.p.A. dated
             September 3, 1998...........................................
10.31(22)*   Registration Rights Agreement by and between the Company and
             UBS AG, London Branch dated as of February 16, 2001.........
10.32(21)    Change in Control Agreement between the Company and Alfred
             Rudolph dated as of November 19, 1999.......................
10.33(21)    Change in Control Agreement between the Company and Donald
             R. Sellers dated as of November 19, 1999....................
10.34        Change in Control Agreement between the Company and Richard
             A. Waldron dated as of April 30, 2001.......................
21.1         Subsidiaries of Registrant..................................
23.1         Consent of Ernst & Young LLP, Independent Auditors..........
24.1         Powers of Attorney. See page 58.............................
</Table>

---------------

   * Certain information in this exhibit has been omitted and filed separately
     with the Securities and Exchange Commission pursuant to a confidential
     treatment request under 17 C.F.R. Sections 200, 80(b)(4), 200.83 and
     230.46.

  ** Management compensatory plan or arrangement.

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

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

 (7) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 1994.

 (8) Incorporated by reference from the Company's Registration Statement on Form
     S-8 (No. 33-80911) filed with the Commission on December 28, 1995.

 (9) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 1995.

(10) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
     for the quarter ended March 31, 1996.

(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
     for the quarter ended June 30, 1996.

(14) Incorporated by reference from the Company's Current Report on Form 8-K
     filed on October 14, 1997.

(15) Incorporated by reference from the Company's Current Report on Form 8-K
     filed on January 26, 1998.

(16) Incorporated by reference from the Company's Form 8-K filed on April 20,
     2000.

                                        61
<PAGE>

(17) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 1998.

(18) Incorporated by reference to the Company's Current Report on Form 8-K filed
     on July 23, 1998.

(19) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
     on November 17, 1998.

(20) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 1997.

(21) Incorporated by reference from the Company's Annual Report on Form 10-K for
     the year ended December 31, 2000.

(22) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
     on May 15, 2001.

                                        62