Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 business, industry, management's beliefs and certain assumptions made by us. Words such as "anticipate," "expect," "intend," "plan," "believe" or similar expressions are intended to identify forward-looking statements including those statements we make regarding our future financial results; anticipated product sales of current or anticipated products; the sufficiency of our resources to complete clinical trials and other new product development initiatives; government regulatory actions that may affect product reimbursement, product pricing or otherwise affect the scope of our sales and marketing; the timing and outcome of clinical trials; prospects for ZADAXIN® and our plans for its enhancement and commercialization; future size of the worldwide hepatitis B virus ("HBV") and hepatitis C virus ("HCV") and other markets; research and development and other expense levels; the ability of our suppliers to continue financially viable production of our products; cash and other asset levels; the allocation of financial resources to certain trials and programs, and expenses related to litigation and regulatory investigations. 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 Quarterly Report on Form 10-Q. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Overview

SciClone Pharmaceuticals (NASDAQ: SCLN) is a revenue-generating, profitable, United States ("US")-based, China-focused, specialty pharmaceutical company with a substantial commercial business and a product portfolio of therapies for oncology, infectious diseases, cardiovascular, urological, respiratory, and central nervous system disorders. We are focused on continuing international sales growth through our strong sales and marketing efforts and growing our profitability. Our business and corporate strategy is focused primarily on the People's Republic of China ("China") where we have built a solid reputation and established a strong brand through our many years of experience marketing our lead product, ZADAXIN. We believe our strengths position us to benefit from the expansion of the pharmaceutical market in China. We believe China will rank second among global pharmaceutical markets by 2016, with projected annual growth rates of 15-20% or more annually over the next several years. We seek to grow sales of our current product portfolio in the region while we leverage our strong balance sheet for future acquisitions and product in-licensing.

We acquired NovaMed Pharmaceuticals, Inc. ("NovaMed") on April 18, 2011, and our results of operations include the operations of NovaMed as of that date forward. We believe the NovaMed acquisition positions us as a leading specialty pharmaceutical company in China, with key pharmaceutical assets, new therapeutic areas of focus, an expanded management team, and a larger and stronger commercial infrastructure, including a combined sales force of approximately 850 professionals. We aim to expand our presence in China by increasing revenues from our key products, by in-licensing additional products, and by expanding our sales force to further penetrate the market. Our broadened portfolio has 16 marketed products and spans major therapeutic areas including oncology, infectious diseases, cardiovascular, urological, respiratory and central nervous system disorders. The acquisition increased our portfolio of commercial and development stage products through exclusive licensing and promotion agreements with a number of leading pharmaceutical companies. Since the acquisition, we have operated in two segments which are generally based on the nature and location of our customers: 1) China and 2) Rest of the World, including the US.

We have two categories of revenues: "product sales revenues" and "promotion services revenues". Our product sales revenues result from our proprietary and in-licensed products, including our lead product, ZADAXIN, and products from Pfizer Inc. and Iroko Pharmaceuticals LLC. ZADAXIN has the highest margins in our portfolio as it is a premium proprietary product sold exclusively by SciClone. Aggrastat ®, an in-licensed product which we recently began selling in China, also has higher margins than our promoted products and we expect that revenues from this product will grow significantly as it further penetrates the China market. In addition, we anticipate that new marketed products, when and if introduced, such as DC Bead ®, Tramadol®, and ondansetron RapidFilm®, will increase the future revenues and profitability of our growing pharmaceutical business in China over the coming years. We recently received notification of the approval of Tramadol for use in the treatment of moderate to severe pain. See Part II, Item 1 "Legal Proceedings" regarding the status of our agreement with MEDA Pharma GmbH & Co. KG regarding Tramadol and other products in development. Our "promotion services revenues" result from fees

we receive for exclusively promoting products from certain partners including Sanofi and Baxter International, Inc. in China. We recognize promotion services revenues as a percentage of our collaborators' product sales revenue for our exclusively promoted products such as Depakine®, Stilnox ®, and Tritace®. Over time, as additional proprietary or in-licensed products come to the market, we expect our product mix will shift towards those higher margin products.

SciClone's ZADAXIN (thymalfasin) is approved in over 30 countries and may be used for the treatment of hepatitis B ("HBV"), hepatitis C ("HCV"), and certain cancers, and as a vaccine adjuvant according to the local regulatory approvals we have in these countries. In China, thymalfasin is also included in the treatment guidelines issued by the Ministry of Health ("MOH") for liver cancer. To continue to grow ZADAXIN sales to China, our sales force is focused on increasing sales to the country's largest hospitals (class 3 with over 500 beds) as well as midsize hospitals (class 2). These hospitals serve Tier 1 and Tier 2 cities located mostly in the eastern part of China which are the largest and generally have the most affluent populations.

SciClone's marketed portfolio also includes Depakine, the most widely prescribed broad-spectrum anti-convulsant in China; Tritace, an ACE inhibitor for the treatment of hypertension; Stilnox, a fast-acting hypnotic for the short-term treatment of insomnia (marketed as Ambien® in the US); and Aggrastat, an intervention cardiology product launched in 2009. SciClone is also pursuing the registration of several other therapeutic products in China.

ZADAXIN and Aggrastat list prices in China are currently under review by regulatory authorities. We anticipate that price reductions may occur, and if a substantial reduction in the list prices occurs, our revenues and gross margins for ZADAXIN and Aggrastat would be substantially reduced. The timing and extent of a price reduction is unknown.

We continue to look for in-licensing opportunities of approved or late-stage branded, well-differentiated products that if not yet approved, have a clear regulatory approval pathway in China based on existing regulatory approval outside of China. Our preference is to in-license products with higher margins that can augment our product sales revenue category, and we continue to explore opportunities to optimize our promotion services revenues category. We are also working on the final stage of the regulatory approval in China for our in-licensed candidate DC Bead, and on the approval process for our other product candidates, all of which are in clinical trials or in other stages of the regulatory approval process in China.

We were developing SCV-07 in a phase 2b clinical trial for the prevention of oral mucositis ("OM"). On March 2, 2012, we announced the discontinuation of this trial based on the pre-planned interim analysis results that indicated the trial would not meet the pre-specified efficacy endpoints, and our intention to further curtail our US-based development efforts. In March 2012, the Company implemented a reduction in its workforce of 11 full-time employees, primarily in research and development, and will record severance-related charges of approximately $1.0 million, of which approximately $0.1 million and $0.7 million were recognized to general and administrative and research and development expense, respectively, for the three-month period ended March 31, 2012. The Company expects to complete the restructuring in the second quarter of 2012.

The United States Securities and Exchange Commission ("SEC") and the United States Department of Justice ("DOJ") are each conducting formal investigations of SciClone regarding a range of matters including the possibility of violations of the Foreign Corrupt Practices Act ("FCPA"). We will continue to cooperate fully with the SEC and DOJ in the conduct of their investigations. In response to these matters, our Board appointed a Special Committee of independent directors (the "Special Committee") to oversee our response to the government inquiry. The Special Committee has substantially concluded its investigation and on May 4 and 5, 2011 reported its findings and recommendations to the Board of Directors. As part of its continuing cooperation with the ongoing investigation of the SEC and the DOJ, the Special Committee has also reported findings to the SEC and DOJ. The SEC's and DOJ's formal investigations are continuing. These continuing investigations could result in administrative orders against us, the imposition of significant penalties and/or fines against us, and/or the imposition of civil or criminal sanctions against us or certain of our officers, directors and/or employees. We cannot predict what the outcome of those investigations will be, or the timing of any resolution. Refer to Footnote 8 "Other Corporate Matters" and Part II, Item 1 "Legal Proceedings" in this Form 10-Q for further information regarding the investigation and remedial measures, and related litigation.

We believe our cash and investments as of March 31, 2012 and ongoing revenue generating business operations will be sufficient to support our current operating plan for at least the next 12 months. Our results may fluctuate from quarter to quarter and we may report quarterly losses in the future.

Results of Operations

Revenues:

The following table summarizes the period over period changes in our product
sales and promotion services (in thousands):



                                       Three Months Ended
                                            March 31,
                                        2012          2011       Change
                Product Sales        $   31,258     $ 21,662          44 %
                Promotion Services        7,905           -

                Total Net Revenues   $   39,163     $ 21,662          81 %

Product sales were $31.3 million for the three-month period ended March 31, 2012, compared to $21.7 million for the corresponding period in 2011. The increase of $9.6 million, or 44%, for the three-months ended March 31, 2012, compared to the same period in the prior year, was primarily attributable to increased sales of ZADAXIN and due to the addition of NovaMed product sales as a result of the acquisition of NovaMed. ZADAXIN sales were $29.7 million the three-month period ended March 31, 2012, compared to $21.7 million for the corresponding period of 2011. Our overall ZADAXIN revenue growth was attributable to an increase in the quantity of ZADAXIN sold primarily due to further market penetration in China.

Promotion services revenue of $7.9 million for the three-month period ended March 31, 2012 reflects the addition of NovaMed promotion services as a result of the acquisition of NovaMed and was related to the distribution of products under promotional contracts.

Total China revenues were $38.5 million, or 98% of sales for the three-month period ended March 31, 2012, compared to $20.9 million, or 96% of sales for the corresponding period in 2011.

For the three-month period ended March 31, 2012, sales to two importing or distributor agents in China accounted for approximately 74% and 18% of our product sales. For the three-month period ended March 31, 2011, sales to two importing or distributor agents in China accounted for approximately 81% and 15% of our product sales. Our experience with our largest importers or distributors has been good and we anticipate that we will continue to sell a majority of our product to them.

Cost of Product Sales:

The following tables summarize the period over period changes in our cost of product sales (in thousands):

Three Months Ended March 31, 2012 2011 Change Cost of Product Sales $ 4,941 $ 3,103 59 %

Cost of product sales were $4.9 million for the three-month period ended March 31, 2012, compared to $3.1 million for the same period in the prior year. The increase of $1.8 million, or 59%, and for the three-month period ended March 31, 2012 compared to the same period in the prior year was attributable to higher ZADAXIN sales and the addition of NovaMed cost of product sales as a result of the acquisition of NovaMed. ZADAXIN cost of sales were $4.1 million for the three-month period ended March 31, 2012, compared to $3.1 million for the corresponding period in 2011. Gross margin for ZADAXIN was 86.1% and 85.7% for the three months ended March 31, 2012 and 2011, respectively. The increase in gross margin for ZADAXIN for the three-month period ended March 31, 2012, compared to the three-month period ended March 31, 2011, was due primarily to lower per vial production costs mainly as a result of manufacturing volume efficiencies.

We expect total revenues and cost of product sales to increase in 2012 compared to 2011 due to increased unit sales of ZADAXIN related to further market penetration in China, partially offset by potential price reductions of ZADAXIN, and as a result of the addition of revenues from NovaMed's product portfolio.

ZADAXIN and Aggrastat list prices in China are currently under review by regulatory authorities. We anticipate that price reductions may occur, and if a substantial reduction in the list prices occurred, our revenues and our gross margins for these products would be substantially reduced.

Through March 31, 2012, we have been able to maintain our ZADAXIN gross margin in part due to relatively stable or even decreasing costs of sales, and in part due to maintaining a relatively stable sales price. We expect our ZADAXIN cost of product sales and gross margins to fluctuate from period to period depending upon the level of sales and price of our products, the absorption of product-related fixed costs, currency exchange fluctuations, any charges associated with excess or expiring finished product inventory, and the timing of other inventory period costs such as manufacturing process improvements for the goal of future cost reductions.

Sales and Marketing:

The following table summarizes the period over period changes in our sales and marketing expenses (in thousands):

Three Months Ended March 31, 2012 2011 Change Sales and Marketing $ 17,640 $ 5,228 237 %

Sales and marketing expenses for the three months ended March 31, 2012 increased by $12.4 million, or 237%, compared to the same period in 2011. Increases of $8.6 million, for the three-month period ended March 31, 2012, were attributable to NovaMed operations as a result of the acquisition of NovaMed and its sales force of over 460 individuals. The remaining increases of $3.8 million for the three-month period ended March 31, 2012, related to increased growth in the ZADAXIN sales force in China of over 100 additional sales individuals, and further market penetration in China resulting in increased sales and marketing costs for compensation and benefits including sales incentives, rent, travel, medical training, and business taxes. We expect sales and marketing expenses to be higher in 2012 compared to 2011 due to increased sales efforts of ZADAXIN, primarily in China, and the addition of NovaMed sales and marketing expenses as a result of our acquisition of NovaMed in April 2011.

Amortization of Acquired Intangible Assets:

For the three-months ended March 31, 2012 we recognized $0.9 million in amortization of acquired intangible assets expense, reflecting the amortization of promotion and distribution contract intangible assets acquired as part of the NovaMed acquisition. There was no similar expense for the corresponding period of 2011. We expect $3.5 million per year of annual amortization expenses in future years.

Research and Development ("R&D"):

The following table summarizes the period over period changes in our R&D expenses (in thousands):

Three Months Ended March 31, 2012 2011 Change Research and Development $ 3,393 $ 3,109 9 %

R&D expenses for the three months ended March 31, 2012 increased by $0.3 million, or 9%, compared to the same period in 2011. As of March 2, 2012, we announced the discontinuation of our SCV-07 phase 2b clinical trial for the delay to onset of severe OM based on the results of the pre-planned interim analysis that indicated that the trial would not meet the pre-specified efficacy endpoints. The increases in R&D expenses for the three-month period were primarily related to a $0.7 million increase in severance costs associated with the discontinuation of the SCV-07 phase 2b clinical trial, and a $0.1 million increase related to the addition of NovaMed R&D expenses due to our acquisition of NovaMed, offset partially by a reduction in third-party expenses related to the discontinuance of our SCV-07 phase 2b clinical trial.

The major components of R&D expenses include salaries and other personnel-related expenses, including associated stock-based compensation, facility-related expenses, depreciation of facilities and equipment, license-related fees, services performed by clinical research organizations and research institutions and other outside service providers.

The completion of our US-based clinical development programs had and is expected to continue to have a significant effect on our research and development expenses. We expect our research and development expenses to

decrease significantly in 2012, compared to 2011, as a result of the discontinuation of the SCV-07 phase 2b clinical trial, and further curtailment of our US-based development expenses. We continue to evaluate opportunities to in-license the marketing rights to proprietary products primarily in China, which may result in increased research and development expenses due to license fee payments, local registration clinical trials, or other expenses related to in-licensing and development of new products in the future.

General and Administrative:

The following table summarizes the period over period changes in our general and administrative expenses (in thousands):

Three Months Ended March 31, 2012 2011 Change General and Administrative $ 3,961 $ 5,958 -34 %

General and administrative expenses for the three months ended March 31, 2012 decreased by $2.0 million, or 34%, compared to the same period in 2011. The decrease was attributable to $2.5 million in lower corporate and legal expenses related to the SEC and DOJ investigations and shareholder litigations that had been filed following the announcement of those investigations and also related to lower legal, accounting and professional expenses in connection with due diligence related to our acquisition of NovaMed. These decreases were partially offset by increased general and administrative expenses attributable to our NovaMed operations due to our acquisition of NovaMed.

We expect our general and administrative expenses will decrease in 2012 compared to 2011 as a result of lower legal, accounting and professional expenses. We do not expect to incur any significant acquisition-related costs in 2012, though we continue to evaluate opportunities in China, which may result in increased general and administrative expenses in the future.

Contingent Consideration:

As part of the acquisition of NovaMed, we may be required to pay up to an additional $43.0 million in earn-out payments upon the successful achievement of revenue and earnings targets for the 2011 and 2012 fiscal years (the "earn-out" or "contingent consideration.") We initially recorded $18.9 million as the estimated fair value of the contingent consideration. The fair value of the contingent consideration is re-measured each period, and changes to the fair value are recorded to contingent consideration expense. As of March 31, 2012, we estimate the payment of the contingent consideration will be $14.5 million, resulting in a gain of $0.9 million for the three-months ended March 31, 2012 from the remeasurement of the contingent consideration. Our fair value estimates are based on a variety of factors that may significantly fluctuate from period to period, including the likelihood that earn-out targets will be achieved and present value factors associated with the timing of the earn-out targets, and may result in significant fluctuations to contingent consideration expense in the future.

Provision for Income Tax:

The provision for income tax was $0.6 million for the three-month period ended March 31, 2012, compared to $0.4 million for the three-month period ended March 31, 2011, and related to our foreign operations in China. Tax expense increased $0.2 million for the three-month period ended March 31, 2012, compared to the same period in 2011, as a result of growth in our China operations, partially offset by benefits recognized of $0.1 million for the three-month period ended March 31, 2012 on deferred tax assets and liabilities acquired as a result of our acquisition of NovaMed in April 2011. Our statutory tax rate in China was 24-25% in 2011 and is 25% for 2012. We expect that our tax expense will increase in 2012 compared to 2011 as we expect an increase in tax expense related to growth in China in 2012.

Liquidity and Capital Resources

The majority of our sales are to importers and distributors in China where our accounts receivable collections have standard credit terms generally ranging from 45 to 180 days.

The following tables summarize our cash and investments and our cash flow activities as of the end of, and for each of, the periods presented (in thousands):

                                        As of                 As of
                                   March 31, 2012       December 31, 2011
            Cash and investments   $        74,855     $            67,018

As of March 31, 2012, we had $74.9 million in cash and investments of which $56.5 million was located in subsidiaries of the Company outside the US. Cash held by subsidiaries outside the US is held primarily in US dollars. Such cash is used to fund the operating activities of our foreign subsidiaries and for further investment in foreign operations which may include in-licensing new products, particularly for China, and for potential acquisitions. Generally, we consider such cash to be permanently reinvested in our foreign operations and our current plans do not demonstrate a need to repatriate such cash to fund US operations. Because of our net operating loss and credit carryforwards, we do not anticipate that repatriation of cash held by foreign subsidiaries would result in payment of taxes in the US.

                                                Three Months Ended
                                                    March  31,
                                                2012           2011
                Cash provided by (used in):
                Operating activities          $   9,253      $ 14,598
                Investing activities          $    (754 )    $  2,348
                Financing activities          $    (710 )    $    106

Net cash provided by operating activities was $9.3 million for the three months ended March 31, 2012 and primarily reflected the net income for the period, adjusted for non-cash items such as stock-based compensation expense, depreciation and amortization expense and changes in operating assets and liabilities.

Net cash provided by operating activities was $14.6 million for the three months ended March 31, 2011 and primarily reflected the net income for the period adjusted for non-cash items such as stock-based compensation expense, depreciation and amortization expense and changes in operating assets and liabilities. Such changes included a decrease in accounts receivable of $9.3 million as a result of cash received from customers during the first quarter of 2011, and an increase in net accounts payable and accrued liabilities of $1.0 million mainly as a result of timing of payments for manufacturing costs.

Net cash (used in) provided by investing activities was ($0.8) million and $2.3 million for the three months ended March 31, 2012 and 2011, respectively. For the three months ended March 31, 2012, cash used in investing activities was related to the purchases of property and equipment. For the three months ended March 31, 2011, cash used in investing activities was related the sale of available-for-sale investments, net of purchases of available-for-sale investments and property and equipment.

Net cash (used in) provided by financing activities was ($0.7) million and $0.1 million for the three months ended March 31, 2012 and 2011, respectively. During the three months ended March 31, 2012, we used $1.1 million to repurchase 253,480 shares of our common stock under our stock repurchase program. For the three months ended March 31, 2012 and 2011, we also received $0.4 million and $0.1 million, respectively, of proceeds from the issuances of common stock made under our stock award plans.

The following summarizes our future contractual obligations as of March 31, 2012 (in thousands):

                                                                Payments Due by Period
                                                      Less than                                     More Than
. . .