PWC quits right at the beginning of the work for the 2013 audit. The timing can't be an accident. SciClone engages the PWC Chinese affiliate, but they and the Chinese affiliates of the other Big Four auditing firms were barred two days ago by a U.S. judge from auditing US-listed companies for six months. I guess there will be appeals to the ruling and such, but what happens with the timing of the 2013 audit? This is not good. E&Y quit about 10 months ago, now PWC just drops SCLN like a dead fish. What's next, besides DC Bead approval any day now?
Today Blobel says 2014 anticipated revenues of $130-135 million. Exactly one year ago he said 2013 revenues would be $150-155 million! This is going backwards! Last year he said year end 2012 cash would be $87 million. Today he says year end 2013 cash will be $86 million. Wow! What a difference a year makes. But there's even more. Over the same one year period SCLN stock has gone UP 6%! However, the Nasdaq Biotech index over the past year has gone UP 61%! Even the S&P went up 30%. To add a bit more potential difficulty, the Chinese Health Ministry last week said that they can bar the sale of any company's products for 2 years if they are found to be involved in bribery. Just how bad is SciClone's potential exposure here?
Only 2.3 million more shares to go to buy back all the stock Blobel wasted on NovaMed! At August 7, 2013, SciClone had repurchased 6 million shares for $30.6 million. They gave away 8.3 million shares in the NovaMed disaster. So with the authorized additional cash to buy back more stock, for only about $12 million the stockholders can finally mop up this end of the NovaMed debacle. Too bad it cost over $42 million in cash, not to mention the additional $28 million in cash p*** away in the acquisition itself. No wonder the board felt that Blobel deserved a special $200K bonus for 2012 which was almost twice the paltry amount of 'performance-based' bonus the board could conceivably justify paying him.
Use off-label is entirely permissible almost every where - certainly in U.S., Europe, and also in China. However, the PROMOTION of off-label use is illegal in U.S. and in Europe (just look at Baxter's big fine). In China, its a gray area because there is the very reasonable exception of the dissemination of scientific information, such as, say, the use of thymosin for treating sepsis. What gets murky and questionable is if salespeople are 'pushing' the information. Along with other reforms, off-label promotion is an area where the Chinese are looking to tighten up to be more like the U.S. and Europe.
In today's Shanghai Daily, the sales person claiming that her employer Novartis instructed her to bribe doctors "said she was also asked to persuade doctors to prescribe the drug to patients with off-label diseases, or illnesses not included in the list of those targeted by the medicine." Heck, that's how SciClone gets the majority of its Zadaxin sales in China. Blobel on the last conference call even gave the outline for a new plan to promote Zadaxin for sepsis in China. Off-label promotion is illegal in the U.S. and in Europe but such rules and regs are not so well defined in China, so I guess its okay with SciClone's new and improved, iron-clad compliance effort.
Friedhelm Blobel, Ph.D., SciClone President and Chief Executive Officer, commented: "We are pleased with SciClone's continued strong financial performance, most notably, the increase in ZADAXIN revenue by 19% and 27% for the quarter and year-to-date, and our ability to deliver an impressive rate of growth that continues to exceed that of the China pharmaceuticals market." Ooops. That was what Friedhelm said exactly one year ago. Zadaxin so-called sales for 2Q last year were $30 million. Now Blobel is saying, this time for sure, Zadaxin quarterly sales are running at $30 million (what's needed to grow Zadaxin sales by 50% in the second half). We now know that Blobel and Titus were stuffing the channel like mad a year ago which allowed them to cash in $1+ million of options in June 2012 at $7. But now things are different. Trust him.
Who knows? It probably depends on the accounting treatment for NovaMed sales. I'm sure this was resolved weeks ago and could have had a direct effect on Q1 and subsequent earnings. Blobel just decided that shareholders shouldn't know about it yet. We'll see on Wednesday. But it won't be a big deal. Bigger issue is how to grow sales with the same old, same old product and management's inability to stay out of trouble.
No mention of what happened to the Q1 earnings. The "technical accounting issue" was to determine whether or not there would be any earnings. Since they decided to blend it in with Q2 my guess is that the answer to the accounting treatment was unfavorable. Bigger and longer term issue is what effect if any the hunting for bribery in China will have on Zadaxin sales. Will docs be less willing to prescribe very high priced foreign drugs (compared to far less expensive generics) in order to avoid suspicion and questioning of why by authorities?
But that was a year ago after they inflated revenue by millions $s of go-nowhere sales to the distributors and pumped the story in the Q1 and Q2 press releases. Too bad the #$%$ hit the fan in Nov, but Fried and Gary did okay. Blobel is probably off to see the Wizard of Oz to get the answer to the "technical accounting issue" that has delayed the release of this year's Q1 results for six weeks already. Funny, Blobel had no problem getting the fake numbers out on time last year.
Check out the Wall Street Journal, Bloomberg and other recent articles. The Chinese are going after more pharma companies than just GSK,and SciClone would be an easy whipping candidate.
Depends on 1. how disgruntled, and 2. what evidence they might supply. The only firing that could give this stock a boost is Blobel's.
SciClone, unlike GSK, never claimed since the FCPA investigations started that they have no knowledge about bribing Chinese officials. Bloomberg and other media sources say that the Chinese investigations are widening to other pharmaceutical companies. With all of the firings and shakeups in SciClone's China operations there could be stories to be told by disgruntled ex-employees. Could take a while to unfold, but another unnecessary risk management must answer to.
No biopharma background, but instead good amount of compliance work. Won't necessarily protect the company from the next NovaMed-type blunder. Shows the company's problems and intentions. Forget about strategy for growing the business, just keep Blobel out of more trouble with FCPA, channel stuffing, misleading statements, and stock price manipulation. I love Cheung's statement in the press release "to maintain timely and high quality financial reporting". Please, Mr. Cheung, don't "maintain" what SciClone has done. Please give us on time and accurate and objective financial reporting, not the nonsense that Blobel and Titus sloughed off over especially the past year.
The bribery and tax-evasion scandal unfolding in China has enveloped at least 30 GlaxoSmithKline employees, including as many as six executives who are under house arrest, according to The Telegraph. Among them is the drugmaker's legal counsel in China and one UK national, although Reuters reports no UK nationals have been detained. The details are emerging one day after China's Ministry of Public Security issued a statement accusing Glaxo of involvement in a "huge" scheme and 'serious economic crimes' to raise drug prices by bribing doctors and government officials in three cities - Changsha, Shanghai and Zhengzhou. The Telegraph adds that Glaxo offices in the central city of Chongqing were also raided by the police. The drugmaker is also suspected of being involved in a form of tax evasion, by falsely issuing exclusive value-added tax invoices and colluding with travel agencies to issue false invoices for 'project sponsorships.'
GSK is being investigated by the Chinese authorities for bribery. Speculation in the press is that the Chinese are beginning to piggyback on SEC and DOJ investigations. U.S. investigations typically never were followed up for possible prosecution by Chinese authorities, casting the blind eye was the usual way in China. Now things are changing. GSK has poured a lot of money and R&D efforts into China, training scores of scientists and helping the Chinese develop their own pharmaceutical base. SciClone just imports product and takes money out of China, contributing essentially zip to what matters to the government's plans. If the Chinese pick up SciClone's bribery issue following the SEC's lead they could make big problems for this mismanaged company. SciClone settling for $$ with the SEC may not get them out of the woods with the Chinese who could hand over the thymasin (Zadaxin) business to the eager local generic manufacturers who may be urging the authorities to go after SciClone.
Sore point the 52 week price drop. Blobel and Titus sold chunks of stock at $7 in mid-June 2012 just before the end of Q2. Then in November the stockholders are told that the company had been stuffing the distributors with product and inflating sales. Maybe we'll get 1Q2013 figures this week now that the shareholders' meeting is past.
The CURRENT leading product in the China market has sales of $200 million. So SciClone first has to wait for the product to be approved in China (TLC says they may need to do clinical trials in China), then SciClone can gear up to compete in the market. We see how well they do with the NovaMed stuff so far. Let's face it, Zadaxin is a unique brand and has been a great product that has run out of gas, but is still generating a lot of cash. Just hope that Blobel doesn't blow another $60+ million of it on another NovaMed-like deal.