Sun Pharma Advanced Research Company Ltd Management Discussions

Global Pharmaceutical Industry

Looking back on 2023, the word that stands out for the pharmaceutical industry is resilience. Despite the inconsistent macroeconomic factors including global turmoil, economic challenges, a tough biotech funding landscape, and unpredictable legislative and policy changes, 2023 was marked by notable achievements in Cell and Gene Therapies (CAGT), the introduction of effective medications for obesity, and growing enthusiasm for Artificial Intelligences (AIs) potential in drug discovery and clinical trials. Despite the instabilities, the industry has demonstrated its strength by introducing radical innovations that instill renewed dedication in people for their well-being.

The pharmaceutical industry is bracing for various external pressures and challenges expected to drive transformation. A significant obstacle is the growing consolidation in healthcare delivery, marked by a rise in Mergers and Acquisitions (M&A), resulting in fewer yet bigger, more powerful, and more intricate healthcare systems. Such circumstances will foster growth in the upcoming times through cutting-edge science and innovation in patient engagement approaches. Meeting these challenges demands a swift transition to a new market-oriented model. The pharma landscape has an unstable operating environment which adds dynamism to strategy building. Being exposed to risks stemming from geopolitical stress, national political unrest, and heightened regulatory scrutiny across the globe, certain realities like increased competition vying for the same space are factors that impact strategizing alongside the macro dynamics.

Despite facing challenges, 2024 could herald the beginning of a pharmaceutical renaissance, where the industry emerges as the true catalyst for a healthier world beyond simply providing medicines. The challenging circumstances today are projected to redefine the industry that has been in a constant state of transformation.

The evolution of science presents both opportunities and challenges, leading to intensified competition amongst existing drugs within specific therapeutic areas, greater spending on the treatment of niche patient populations, and heightened Research & Development (R&D) spending targeting identical biological targets. The future direction of the pharmaceutical industry and the development trends are reflected in the approval of new drugs; both in the number and modality of drugs being approved.

The industrys evolution is evident with the remarkable achievement of 55 new drug approvals by the United States Food and Drug Administration (USFDA) in 2023.¹ Furthermore, the ten-year rolling average for new Centre for Drug Evaluation and Research (CDER) approvals now stands at 46 per year, at its peak in over two decades.¹ Meanwhile, the USFDAs Centre for Biologic Evaluation and Research (CBER) has sustained its momentum, granting approvals for an expanding array of products throughout the year.

By modality, the medical toolbox continues to get more diverse. The notable milestones of 2023 include the introduction of the first CRISPR-Cas9-based gene editing product, alongside the release of two vaccines targeting Respiratory Syncytial Virus (RSV), accompanied by a surge in gene therapies.

Notably, oncology emerges as the frontrunner in therapy approvals, with CDER approving 13 (24%) new cancer treatments in 2023.¹ In the past ten years, there has been a growing emphasis on developing targeted medications with innovative mechanisms for treating cancer. Additionally, theres a rising interest in exploring next-generation biotherapeutics for cancers where the number of trials initiated globally was up by five times than a decade ago, comprising a quarter of the hemato-oncology pipeline today. Some novel modalities that are being explored include multi-specific antibodies, Antibody Drug Conjugates (ADCs), and T-cell engager therapies. Multi-specific antibodies can target multiple pathways or employ different mechanisms simultaneously. Although multi-specific antibody development for cancer treatment had limited progress ten years ago, it has since experienced substantial growth constituting 5% of both the hemato-oncology and solid tumor pipelines.² Similarly, there has been notable progress in the development of new ADCs in oncology, making up 9% of the oncology pipeline in 2023.² ADCs assist in delivering cytotoxic agents directly to cancer cells improving the precision of already established oncology medications, and are also expected to minimize the adverse effects due to their cancer cell targeting ability. The year witnessed introduction of a second RNA-aptamer product, and approval of four new T-cell-engaging bispecific antibodies.

Neurology followed closely behind oncology with 9 (16%) approvals.² The USFDA continues to flesh out its use of regulatory flexibility in neurology, approving several new drugs based on surrogate biomarkers, even with limited evidence of clinically significant benefit.

Sharing the third spot are infectious diseases and hematology, each garnering 5 (9%) approvals.²

The increased number of new drug approvals over the years is directly proportional to the number of drugs under development and increased R&D spending by companies. Large pharmaceutical firms collectively spent a record $161 billion on R&D in 2023, marking a nearly 50% surge over 2018.² The increased R&D spend by the companies reflects the industrys confidence and positive sentiment for innovation and drug development.

An important factor determining the growth of the industry is the usage of new drugs and the spending on the drugs. The global biotech spending is projected to surpass $890 billion by 2028, with growth rates moderating to 9.5–12.5% due to the influence of biosimilar products.³ The availability of new medications is anticipated to influence worldwide biotech expenditure. The stakes of specialty drugs are predicted to constitute 43% of global expenditure by 2028, and over 55% of total expenditure in major developed markets.³

Growth in developed economies is accelerating driven by new products and wider use of existing branded medicines, however offset by patent expiries upto a certain extent. Latin America, Eastern Europe, and parts of Asia are expected to grow strongly driven by volume growth and adoption of novel medicines. The spending on the top two therapy areas globally that is, oncology and immunology is expected to experience Compound Annual Growth Rates (CAGR) of 14–17% and 2–5%, respectively, until 2028.³

Over the next five years, oncology therapy is expected to have around 100 new therapies, resulting in a rise in expenditure by $224 billion.³ Despite encountering confined new losses on exclusivity, the oncology spend is expected to go over $440 billion by 2028.³ Meanwhile, spending on treatments for autoimmune diseases is predicted to reach $192 billion globally by 2028.³ This growth is expected to be propelled by a growing fraction of treated individuals and innovative offerings, although the emergence of biosimilars is expected to negatively impact growth on overall spending in immunology.

Large-cap pharma companies will continue to face patent cliffs and gaps in their pipelines in the latter half of this decade and will look for M&A opportunities to achieve their growth plans. In 2023, the M&A arena saw a significant growth in value with the total surging to $160 billion which marked an 84% increase from 2022.⁴ Though the number of M&A deals dropped from 171 last year to 144 this year, the per-deal value was significantly higher.⁴

M&A Transactions 2023⁴

In the realm of pharmaceutical and biotech deals, precision medicine remained at the forefront in oncology and immunology. Yet, there was a discernible surge in interest towards treatments for weight loss and cardiovascular health during 2023.

In 2023, oncology made up for about more than half, that is 55% of the total deal value in the pharma and biotech sector.² The total deal market worth up to $200 billion had the biggest deal across all therapy areas coming from Pfizers acquisition of Seagen for $43 billion, largely influenced by its ADC assets.² With a deal average of over $2 billion in the sector, the majority of deal activity was concentrated in ADCs.² The ADC deals comprised 6 out of the 12 oncology deals and contributed $94 billion to the $109.6 billion value of oncology deals.²

4. Nature Reviews Drug Discovery 23, 101-102 (2024)

Therapy wise M&A transactions 2023

Neurology had four transactions totalling to $34 billion accounting for 17% of the deal-making.² The standout was BMS acquisition of Karuna, a company specializing in neurological and psychiatric treatments, for $14 billion.²

SPARC has been prudent in identifying the key growth areas early on and has developed a R&D pipeline of assets in oncology, neurodegeneration and immunology. Recognizing the growing focus on ADCs and biologics, as witnessed by recent M&A trends, SPARC has also started investing in building capabilities to pursue such novel modalities in the long run. SPARC expects to file the Investigational New Drug (IND) of its first ADC (SBO-154) in the coming year, and also develop other ADCs with different payloads using MUC-1 (Mucin-1) targeting antibodies as the platform approach for building ADCs and other biological entities. Similarly, for neurology/neurodegeneration, SPARC had prioritized the development of Vodobatinib for the treatment of neurodegenerative disorders i.e. Parkinsons Disease and Lewy Body Dementia. Neurodegeneration as a whole and specifically Parkinsons Disease has been an active area of development for many companies since there are no approved disease-modifying agents for the treatment of neurodegenerative disorders.

Lastly, in the immunology space, SPARC has been focussing on dermatological autoimmune disorders. SPARC has deliberately identified dermatological immune-driven disorders as the space lacks safer oral or topical treatment options for the patients. Both Vibozilimod and SCD-153 program are under clinical development and data from the ongoing studies is expected to be available in the coming months for both the assets. SPARCs therapeutic focus is aligned with the current and the evolving interest of the pharmaceutical industry, and the modality mix of the current pipeline presents interesting opportunities for SPARC, which upon successful development are expected to add meaningful benefit to the treatment paradigms.

Biopharma Trends

As always, the start of a new year brings a sense of hope and opportunity – and this sentiment seems particularly strong for 2024. In a world increasingly reliant on data, safeguarding patient privacy is essential for progress, and achieving this seems feasible through the rapid emergence of Generative Artificial Intelligence (GenAI). The advancements in treatment methods offer promising prospects for enhancing patient outcomes. The market conditions will remain challenging with the implementation of the Inflation Reduction Act (IRA) which is influencing investment decisions impacting portfolios. Alongside this, the industry is surrounded by the uncertainty of the election outcomes. Nevertheless, theres a positive outlook for 2024 with key trends paving the way for areas of growth and transformation that will impact the pharmaceutical industry and the healthcare sector.

1. Preventive healthcare may become a reality

Preventive care is a lucrative option because it delays progression and eliminates serious illnesses in some cases. It might see a revival as patients, healthcare providers, and insurers seek to enhance overall well-being. Effective weight loss medications are transforming the landscape of the obesity market, positioning it to become one of the most significant markets in the years ahead. As it has the potential to delay the onset of severe, advancing illnesses like diabetes and cardiovascular diseases, the expense of obesity treatments seems justified. The advent of Glucagon-like peptide 1s (GLP-1s) mark a new phase in medicine as the treatment not only addresses weight loss but also offer cardioprotective benefits. This shift signifies a departure from the past notion of preventive care being overshadowed, reminiscent of the era when statins became generic in the markets. However, the challenge lies in meeting the increasingly stringent criteria for demonstrating positive results, which is now higher in healthcare.

2. Orphan disease treatments are on the brink of achieving widespread commercial feasibility

Despite several hurdles associated with introducing CAGTs to the market, they are entering the US healthcare arena, providing novel remedies for individuals with limited or non-existent treatment alternatives. Utilizing predictive analytics and other AI algorithms enhance the efficiency and precision of identifying at-risk patients. This reduces the interval between diagnosis and commencement of treatment. Thus, challenges in recognizing small patient groups and expanding manufacturing capabilities are starting to diminish. More robust commercial performance is anticipated in 2024 as companies operating in the CAGT sector are either bolstering their in-house manufacturing capacities or forming enduring collaborations with Contract Development and Manufacturing Organizations (CDMOs). This solves one front of the problem, however, commercialization challenges of coverage and reimbursement models for these expensive treatments are still a concern. The warranty-based model has come to the rescue of the CAGT companies where the performance of their product over time serves as a basis for reimbursement. This is still under evaluation by payers regarding pricing, but it reflects a commitment to making transformative treatments accessible.

3. Promising growth prospects with disease-modifying treatments for Central Nervous System (CNS) disorders

Neurodegenerative disease presents a significant challenge with high levels of unmet needs, compounded by a staggering 99% failure rate in clinical trials over the last twenty years.⁵ The emergence of disease-modifying treatments like Eisais lecanemab and Eli Lillys donanemab aim to alleviate symptoms and slow down the progression of the disease, and are forecasted to achieve blockbuster status by 2028. Investment in CNS therapies is expected to persist and diversify, extending beyond anti-amyloid approaches to include vaccines, stem-cell therapies, and treatments targeting tau aggregates.

4. The effects of the Inflation Reduction Act on portfolio and pipeline strategies persist

The effects of the IRA are materializing. Penalties based on the Consumer Price Index (CPI) were imposed on 27 products that saw list price hikes surpassing inflation rates, with manufacturers slated to settle these penalties by 2025.⁶ The eagerly awaited roster of the ten medications included in the Medicare Drug Price Negotiation Program has been unveiled. As the IRA rollout progresses, its ramifications and subsequent outcomes are becoming clearer. The interconnection among profit margins, gross-to-net figures, and product launches is more intertwined than before, necessitating meticulous financial strategizing. Therefore, 2024 is expected to remain focussed on refining pipelines, making astute deal negotiations, evaluating market entry prioritization, and assessing market viability. The potential consequences of Medicare Part D liabilities and pricing constraints stemming from the IRA are likely to influence markets across various therapy domains and patient demographics. However, there could be substantial advantages for patients, such as reduced out-of-pocket expenses. This crucial aspect of accessibility may contribute to enhanced treatment adherence, a primary objective for manufacturers. Although the ongoing effects are still unfolding, scenario analysis can provide clearer insights and help with strategic choices.

5. Biosimilars in chronic specialty pharmacy: A forthcoming reality

In 2023, paradigm shifts occurred in the biosimilar market. It was marked by intense competition with globally established drugs, the introduction of innovative pricing strategies, and bringing in the most refined inventory management practices. These changes have furthered the promise of biosimilars in enhancing savings and patient accessibility, driven by evolving payer dynamics, and provider perceptions. However, challenges persist in the adoption of biosimilars, notably due to the absence of interchangeability designation, which many providers deem crucial for prescribing specific treatments to their patients. While certain makers opt out of pursuing an interchangeability designation, many healthcare professionals consider this designation as essential for prescribing specific treatments. Additionally, some providers exhibit reluctance to alter therapies for patients, particularly when the reference product proves effective, notwithstanding the potential for financial benefits. However, there is a possibility that these ideas are evolving.

Productivity Enablers

Productivity is affected by multiple factors worldwide. This global impact calls for innovations in clinic to push productivity enablement at the front seat. Key productivity enablers include biomarker utilization, strategic site selection, novel trial designs, decentralized methodologies, and AI and Machine Learning (ML) in drug discovery.

The pharma domain has witnessed changes in regulatory landscapes in major markets such as the United States (US), European Union (EU), United Kingdom (UK) and China. There were key initiatives such as the implementation of the Clinical Trial Regulation (CTR) in the EU, the Medicines and Healthcare products Regulatory Agency (MHRA) restructuring post-Brexit, Chinas alignment with International Council for Harmonisation of Technical Requirements of Pharmaceuticals for Human Use (ICH) guidelines, and ongoing updates to clinical trial guidelines. China and the EU have impressively made efforts to improve transparency in the regulatory process. Regulatory agencies like the USFDA, National Medical Products Administration (NMPA), MHRA and the European Medicines Agency (EMA) are increasingly open to innovative approaches, with varying degrees of guidance, and fast-track programs. These changes will play a role in R&Ds focus and choice of specific geographies while designing trials.

Clinical development programs are harnessing the power of AI and ML, making the process more agile and productive. The programs using these technologies in discovery are maturing and are resulting in a higher number of late-stage programs. However, they are still to deliver a novel active substance to the market. Start-ups and established healthcare companies are applying AI/ML technology to leverage growing chemical, biological, and patient datasets to accelerate and improve drug target and drug selection across the entire drug discovery continuum and perform trial simulations. AI aided target selection by interrogating clinical, experimental, and ‘omics data to better characterize disease states and identify novel ‘druggable targets has been used and analyzed.

Clinical trials have become complex, wherein factors such as the number of countries and sites play a paramount role. Emerging biopharma are running more single-country trials, with smaller subject size, site, than large pharma. Another key element of productivity is trial duration, and while the trial durations have declined, the white space which is the inter-stage duration between clinical trial phases before starting a subsequent research phase, has increased. This has resulted in an overall increase in the development timelines. Faster trials with expedited regulatory pathways were used for biologics, orphan, and specialty drugs, an important feature as these pathways and drug types have an increasing share of new drug launches. Impressive clinical program design strategies such as the use of predictive biomarkers, single-arm trials, and combined phases contribute to shorter development durations and have positively impacted expense structures as well. Notably, biomarker use has led to significant time reductions in the patent approval process. The shift towards fewer subjects, sites, and countries per trial, with shorter timelines and cost savings is likely contributing to productivity gains in the industry.

Indian Pharmaceutical Industry

The Indian pharmaceutical industry presents significant opportunities for growth and innovation. With the industry currently valued at $50 billion, there is immense potential for expansion.⁷

The industrys evolution is being sculpted by several pivotal trends, including robust regulatory support, the adoption of digital technologies, heightened cybersecurity measures, and a rise in partnerships between academia and industry. These developments are propelling the sector towards an innovation-driven future, underpinned by government initiatives such as the Production Linked Incentive (PLI) scheme, MedTech Policy, and the draft National Pharma Policy, aiming to encourage research and development and self-sufficiency.

India is recognized as a global frontrunner in numerous pharmaceutical sectors, including the production of generic drugs. The nation plays a critical role in the global healthcare ecosystem, particularly in vaccine production, the supply of generic medicines, and providing affordable Human Immunodeficiency Virus (HIV) treatments.

The next frontier for India is to focus on disruptive innovation. The country is building a robust innovation ecosystem aimed at fostering collaboration among key stakeholders such as major pharmaceutical and biopharmaceutical companies, startups, biotechs, academic institutions, and clinical researchers. This collaborative effort is pivotal in driving innovation that focuses on creating substantial value. The success and sustainability of this ecosystem hinge on critical facilitators such as funding, infrastructure development, and supportive policies and regulations.

Biopharmaceutical firms play a crucial role not only in advancing drug research and development but also in leveraging innovation originating from academia and startups, transforming these innovations into tangible advancements in the market. Additionally, Global Capability Centers (GCCs) significantly contribute to Indias innovation landscape by nurturing talent and enhancing skills across the entire value chain. They streamline processes, particularly in complex and strategic areas, enabling India to compete effectively on a global scale.

Harnessing its prowess in Information Technology (IT), India is using digital tools and data analytics to lead global advancements in R&D, taking innovation to new heights within the pharmaceutical industry. As many Indian enterprises venture into next-generation therapeutics, the country is on the brink of a transformative phase, moving steadily toward its discovery phase.

The Indian pharmaceutical industry is on a trajectory to achieve a market value of $65 billion by 2024, with projections indicating a continued growth momentum at a CAGR of 10.7% up until 2030, positioning India as a key player in the global pharmaceutical landscape.⁷

Opportunities

Recent policy changes and government reforms have strategically positioned India in a favorable position. In September 2023, the government introduced the National Policy on R&D and Innovation in the Pharma-MedTech Sector in India, alongside the Scheme for Promotion of Research and Innovation in the Pharma-MedTech Sector (PRIP). These initiatives aim to enhance the skill and capacity ecosystem, involving academia and the private sector, and stimulate new entrepreneurial talent among the youth through startups.

India is highly regarded for global investments and the establishment of local manufacturing units. The government allows 100% FDI for greenfield projects and 74% FDI for brownfield projects under the automatic route.⁸ Additionally, plans are underway to create three bulk drug parks in Gujarat, Himachal Pradesh, and Andhra Pradesh, aimed at bolstering Indias drug security. The Production Linked Incentive (PLI) scheme has also been introduced to boost domestic manufacturing of critical Key Starting Materials (KSMs), Drug Intermediates (DIs), and Active Pharmaceutical Ingredients (APIs) in India. This initiative is expected to foster the production of high-value products within the country, enhance value addition in exports, and create significant employment opportunities.

India is recognized for its robust drug manufacturing capabilities, specializing in producing affordable generic drugs and providing complete end-to-end manufacturing solutions. Collaborations with global partners for contract manufacturing are further strengthening Indias role in the worldwide pharmaceutical supply network. Outsourcing has emerged as a prevalent industry practice, encompassing various corporate functions—from initial screening and lead identification to toxicology, as well as extensive processes such as preclinical studies, clinical trials, manufacturing, and marketing across all levels.

The adoption of innovative production techniques and a focus on securing patents for novel drugs are opening new avenues for growth and competitiveness in the global market. Alongside this, the launch of the worlds largest National Health Protection Scheme ensures strong domestic demand in India. This also contributes significantly to the industrys growth and market expansion.

Challenges

The key challenge faced by the companies is the pricing pressures owing to strict government regulations on drug pricing, affecting their revenue and profitability. The pricing regulations create financial constraints and impact investment returns, posing challenges to sustainable growth. Consolidation in the US pharmaceutical market has led to lower bargaining power for Indian players thereby exerting pricing pressures. Further, faster Abbreviated New Drug Application (ANDA) approvals due to the implementation of Generic Drug User Fee Amendments (GDUFA) have led to more players entering the US generic pharmaceutical market, thereby putting pressure on realizations.

In terms of innovation, Indian pharmaceutical companies face a significant challenge related to the shortage of skilled professionals. There is a noticeable talent gap throughout the entire lifecycle of pharmaceutical product development, indicating a gap between academia, and industry needs. Increased government funding for research and innovation in academic institutions could play a crucial role in addressing this issue.

A more recent challenge not just for the Indian sector but globally is the emergence of cybersecurity risk with potential threats including data breaches and external attacks.

The evolving landscape of the industry and the recent trends driving the change, will have its impact on the industry, including SPARC. Some trends like the preventive healthcare, and increased spend on treatment of orphan diseases are expected to drive the demand, and growth for the industry. At the same time, industry will have to deal with the challenges of IRA, and the increasing use of biosimilars which are expected to deaccelerate the projected growth in the coming years.

In the grand scheme of things, the landscape grows even more complex as advanced therapeutics like CAGT emerge from research pipelines. Regenerative medicine and genetic tools introduce new scientific complexities, and risk factors for the long-term perspective.

This shakeout will however, create opportunities, and reshape the landscape, shifting away from short-term strategies towards sustainable approaches.

SPARC may be better positioned than its peers to mitigate the effects of some of the challenges. The therapeutic focus of current portfolio is aligned to therapy segments that are anticipated to have highest growth in spending in the coming years. Additionally, an important aspect of SPARCs portfolio is the development of assets in areas that have limited competitive intensity viz. developing oral agent for treatment of dermatological disease driven by autoimmunity (SCD-044), wherein the therapeutics space is dominated by injectables. Not just the portfolio, the capability set at SPARC has also evolved to discover and develop novel modalities like biologics and ADCs which can provide longer period of exclusivity under IRA.

SPARCs Response to Global Trends

With the changing landscape, SPARC remains dedicated to innovation, focusing on developing therapies that could meet unmet medical needs while emphasizing strong pipeline management to minimize any potential setbacks. SPARC realized early that incremental change wont be enough to deliver the results that the market and patients demand. Real change will be paramount to achieving meaningful growth in the short and long term.

While investing in validated pathways and known mechanisms may seem to present lower risk, this is the same strategy thats producing more head-to-head competition and driving down returns in the commercial markets. It helps to explain why the upward trend in drug approvals is not translating into outperformance for the sector. Similarly, the shift of the last decade to concentrate R&D investment increasingly in specialty care categories means smaller patient populations on average. This may drive outperformance in areas with limited competition and/or strong pricing power. Developments in the markets with white spaces may prove to be good strategies — higher risk but less crowded commercial markets with large patient populations.

Aligned with the global trends and enablers SPARC has identified key areas to focus on i.e. oncology, neurodegeneration, and immunology. SPARC changed the modality mix, and focussed on areas that are expected to drive the future growth of the industry, some examples of the shift by SPARC include development of ADCs in oncology, use of biomarkers in clinical studies, and use of technology for drug development and clinical trial execution.

SPARCs measured response to the industry trends over the years has helped in building a pipeline of assets that can develop drugs of the future to address the treatment gaps and provide better therapeutic options for patients.

Key Financial Ratios (Consolidated basis)

Key Financial Ratios	FY 2023 - 2024	FY 2022 - 2023	Reason
Debtors Turnover	3.13	7.90	Due to decrease in revenue and receivables from customer during current year
Inventory Turnover (no. of days)	N.A.	N.A.	Due to nil inventory
Interest Coverage Ratio (in times)	N.A.	N.A.	Due to higher losses
Current Ratio (in times)	1.02	2.54	Due to cash losses in current year
Debt Equity Ratio (in times)	0.49	0.03	Due to cash losses in current year
Operating Profit Margin (in %)	(509.81)	(90.02)	Due to decrease in revenue during current year
Return on Net Worth (in %)	(307.91)	(43.41)	Net worth during the year has reduced due to losses during the year
Net Profit / Loss Margin (%)	(513.74)	(93.22)	Due to decrease in revenue during current year

SPARCs Performance Overview

During 2023-24 SPARC continued its focus on execution of ongoing clinical studies of assets by capitalising on its internal expertise and infrastructure.

The activities under the PROSEEK study for Vodobatinib and the Phase 1 study of SCD-153 progressed as planned and the development of preclinical programs continued to ensure the assets are getting ready for clinical evaluation in the coming months and years, including SBO-154 which is expected to enter clinical evaluation next year. SPARC also worked with an alternate API vendor for batch manufacturing of PDP-716, and aims to refile the New Drug Application (NDA) with USFDA during FY25.

Strategic partnerships remained a priority for SPARC during the year, and multiple collaborations were initiated for drug discovery, and research.

This company is committed to innovation, and meeting diverse healthcare needs through ground-breaking therapeutic advancements.

Progress on Key Programs

Elepsia XR for the treatment of Epilepsy

Elepsia XR experienced a robust uptake in sales following its launch but faced commercial challenges due to an import alert at the partners manufacturing site. This unexpected setback prompted the identification of an alternate manufacturing site. SPARC is working with the management of the alternate site, and the Tripoint team to initiate the process of tech transfer.

PDP-716 for the treatment of Open-Angle Glaucoma

PDP-716 is a novel, once-a-day formulation of brimonidine developed using SPARCs proprietary TearAct technology. The USFDA issued a Complete Response Letter (CRL) to the NDA for PDP-716, citing inspection findings at a third-party API manufacturing facility. The regulatory agency did not request additional clinical data or trials. SPARC and Visiox team identified an alternate API partner, and plan to refile the NDA during FY25.

Sezaby for the treatment of Neonatal Seizures

Sezaby is the only approved formulation of phenobarbital by the USFDA. SPARC filed a Public Interest Litigation (PIL) with the USFDA, and issued cease and desist letters to curb the commercialization of unapproved formulations currently available in the market. Additionally, the Company is focused on developing a robust supply chain to ensure reliable product availability, and reduce any challenges that may arise due to supply from a single site. SPARC filed an additional manufacturing facility for Sezaby, and is working closely with the USFDA for approval of the new site. SPARC also engaged the USFDA to grant pediatric rare disease review voucher associated with the approval of Sezaby.

Vodobatinib for the treatment of Neurodegenerative Diseases (SCC-138)

SPARC completed the recruitment of 513 patients on the PROSEEK study, and announced the results from the interim analysis of data from 442 patients who completed 40 weeks of treatment on the PROSEEK study. The study failed to demonstrate the superiority of Vodobatinib in the pre-specified primary endpoint of change in Movement Disorder Society sponsored revision of the Unified Parkinsons Disease Rating Scale (MDS-UPDRS) Part III total score as compared to placebo. SPARC determined that the study has not shown evidence of treatment benefit in patients receiving Vodobatinib, and consequently decided to close the study. SPARC plans to complete the full analysis of clinical outcomes, and correlative biomarker data in the coming months. Basis the analysis of the data SPARC will decide on the next steps for Vodobatinib in neurodegenerative disorders.

Vodobatinib for the treatment of Chronic Myelogenous Leukemia (CML) (SCO-088)

SPARC had considered Vodobatinib for the treatment of CML as a hedge to the neurodegenerative disorders, and since the PROSEEK study did not meet the primary endpoint SPARC reinitiated the development of Vodobatinib for the treatment of CML.

SPARC plans to develop Vodobatinib for the treatment of CML in collaboration with a partner, and has initiated the process for licensing the asset.

Vibozilimod for the treatment of Autoimmune Disorders (SCD-044)

Vibozilimod (SCD-044) is a selective sphingosine-1-phosphate receptor 1 (S1PR1) agonist targeting autoimmune disorders. Sun Pharmaceutical Industries Limited (SPIL) is conducting 2 separate clinical studies of Vibozilimod in patients with Atopic Dermatitis (SOLARES AD), and Psoriasis (SOLARES Pso).

The top-line data from the interim analysis of the SOLARES AD study are expected during Q3 FY25.

SCD-153 for the treatment of Alopecia Areata

SCD-153 is a novel topical agent being developed for the treatment of alopecia areata. In preclinical studies, SCD-153 has demonstrated the potential for regrowth of hair in animal models. SPARC filed the IND for SCD-153 with Drug Controller General of India (DCGI) and started Phase 1 study in India. Currently Single Ascending Dose (SAD) study is ongoing, and SPARC plans to start the Multiple Ascending Dose (MAD) study soon for SCD-153.

SBO-154 for multiple cancer indications

SBO-154 is an ADC being developed for multiple tumor types expressing MUC-1. SBO-154 targets a novel epitope on the MUC-1 protein present on the cell surface of cancer cells.

Validation and preclinical evidence confirm the effectiveness of SBO-154, and SPARC plans to file the IND for SBO-154 by Q4 FY25.

Outlook

SPARC executed the operational plans well during FY24, however, it also saw a setback in PROSEEK study with Vodobatinib missing the primary endpoint in the study. The negative outcome of the PROSEEK study has an impact on the potential cash flows for SPARC, and SPARC plans to be prudent in spending the available resources, and also reassess the portfolio, and portfolio strategy once the full data is available.

Vodobatinib will now be developed for the treatment of CML, and SPARC plans to develop the asset in collaboration with a partner. The key objectives for SPARC in the short-term include executing transaction with potential partner for CML, completing the SAD & MAD study of SCD-153, and filing IND for SBO-154.

For the licensed programs SPARC in collaboration with partners will drive the execution of ongoing priorities i.e. resubmission of PDP-716 NDA with the USFDA, completion of ongoing studies of Vibozilimod in Atopic Dermatitis, and Psoriasis, and complete tech transfer of Elepsia to identified contract manufacturing organization (CMO).

An immediate priority for SPARC will be to raise funds for managing the operations, and execution of programs under development, and also build the preclinical pipeline. The pipeline build will be driven by collaborations based on our model with academia.

SPARC will continue the development of ongoing programs however, it will assess the capabilities, and resources required to execute the programs, and align the organizational structure in line with the portfolio.

Human Resource Strategy

We at SPARC have a team of talented, dynamic, multicultural, and multilingual individuals who work towards SPARCs business plan. There is a constant effort to inculcate a culture based on the values of Sunology which are Innovation, Integrity Passion, and Humility.

Human Resource Management with a focus on change management is essential for any company to thrive in todays competitive landscape. The Company regularly collaborates with some of the top Indian universities, and training institutes to upgrade our knowledge, and industry practices, and align them with our changing business strategies.

In line with our business strategy, the HR team is in constant pursuit to foster a culture of excellence, and innovation, by attracting top talent, nurturing employee development, and ensuring a supportive work environment where every individual has the opportunity to showcase their talent, and grow with SPARC.

Through proactive talent management, robust training programs, and employee engagement initiatives, SPARCs HR strategy is solely focused on driving organizational growth, performance, and sustainability in the pharmaceutical industry. The team has integrated technology into HR practices to be more agile, analytical, and streamline some of the old HR processes which were not equipped to meet the demands of the changing business requirements, and talent expectations. Effective communication platforms are used to foster transparency, and create open forums for discussions to address concerns, and keep the workforce informed of all developments within the organization on a real-time basis.

As of 31st March 2024, the Company has a dedicated team of 409 employees (across India, and the US), of which 85% are scientists.

Risks and Concerns

Pharmaceutical R&D carries significant risk as it explores unchartered paths and evaluates untested ideas. Our focus has been on developing programs that have manageable risks. The Company is subjected to certain risks and uncertainties related to, among other things, product development, clinical trial failures, regulatory approval, market acceptance, scope of patent and proprietary rights, competition and technological advancements. Our revenue and earnings, cash flows can be impacted by fluctuations in foreign exchange rates and interest rates. We undertake a thorough risk management process, identifying the main risks to our business, their possible impact and take necessary actions to mitigate the same.

Internal Control Systems and their Adequacy

We have well-defined and adequate internal controls for efficient operations. We are cognizant of applicable laws and regulations, particularly those related to the protection of intellectual properties, resources, and assets, accurate reporting of the financial transactions and our internal policies adequately cover the evolving needs. The internal control systems are supplemented by extensive internal audits, conducted by an independent audit firm.

Disclaimer

Certain information set forth in this MD&A, including managements assessment of the Companys future plans and operations, contains forward-looking statements which are based on the Companys current internal expectations, estimates, projections, assumptions and beliefs, and which may prove to be incorrect. These statements do not guarantee future performance. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Companys actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. The forward-looking statements represent the Companys intentions, beliefs or expectations and it speaks of assumptions which are made as of the date hereof. The Company assumes no obligation to update or revise such statements to reflect new events or circumstances unless otherwise required to by applicable securities laws.