SciClone Buys U.S.-Backed Chinese Drug Company

April 19, 2011

SciClone Pharmaceuticals Inc. bought NovaMed Pharmaceuticals Inc., a Chinese specialty pharmaceutical company backed by American venture capital firm Atlas Ventures, in a cash and stock deal worth up to nearly $105 million.

SciClone (NASDAQ: SCLN), basedin Foster City, said the combined revenue of the company in 2011 would be $140 million to $145 million.

SciClone CEO Freidhelm Blobel told the San Francisco Business Times last year that his company would seek out deals in China, where it already sells its hepatitis B and hepatitis C treatment, Zadaxin.

The deal comes even as SciClone faces Securities and Exchange Commission and U.S. Justice Department probes that include looking at possible violations of the Foreign Corrupt Practices Act. SciClone said in a SEC filing last month that it, too, is undertaking an investigation.

A SciClone special committee has already told company management to take certain measures, including a pre-approval policy for certain expenses, including payments for or reimbursement of third-party gifts.

Shanghai-based NovaMed, which SciClone said had revenue of $31.5 million in 2010, has a portfolio of 18 drugs, covering oncology, cardiovascular disease, central nervous system disorders and urology/infection and has a sales team of 450 people. Its most successful drug are an anti-convulsant known as Depakine, a hypertension treatment called Tritace and a fast-acting hypnotic for short-term treatment of insomnia, called Stilnox.

Under terms of the deal, NovaMed shareholders will receive an upfront payment of about $24.7 million cash, plus nearly 8.3 million shares of SciClone common stock valued at $37.1 million, based on its Monday closing price of $4.47 per share. NovaMed shareholders also will have the right to additional cash payments of up to $43 million upon hitting revenue and earnings targets this year and in 2012.

SciClone and NovaMed will continue to operate as separate entities but under a single leader, co-founder and CEO Mark Lotter.

Lotter and Peter Barrett, a NovaMed director and a partner of NovaMed backer Atlas Ventures, also joined SciClone’s board.

Atlas is based in Cambridge, Mass.

Cowen Group Inc. was financial advisor and Katten Muchin Rosenman LLP was legal counsel for NovaMed. Piper Jaffray & Co. and Lazard Capital Markets were financial advisors for SciClone, and DLA Piper LLP was SciClone’s legal counsel.