SPARC Management Discussions


Global Pharmaceutical Industry

2022 witnessed the global pharmaceutical industry standing at an interesting cross road, characterized by a disruptive marketplace and greater patient empowerment. Operating against the backdrop of a looming global recession, the global pharma players witnessed challenges such as high inflation, talent shortages, rising capital costs, challenging foreign exchange impacts, and pressures on consumer spending.

The biopharmaceutical industry showed signs of entering a period of operational stability in the post-pandemic era after the disruptions of the previous 3 years. The outlook for global spending on medicines has become clearer as the uncertainties during COVID give way to more predictable challenges. The life sciences sector, encompassing pharmaceutical, biotech, and med-tech industries, is experiencing robust growth and to sustain this growth trajectory, companies are reorienting their portfolio strategies by engaging in acquisitions, shedding non-core assets, increasing Research & Development (R&D) investments, and adopting digital and data technologies. However, several challenges remain, including intense competition, evolving regulatory frameworks, pricing pressures, and rising expectations from patients and healthcare providers for improved treatments and experiences. Moreover, these challenges must be navigated amidst broader geopolitical and economic uncertainties.

Pharmaceutical developers faced a challenging year in 2022 as the public markets continued to decline, and investors shifted to safer investments. This had a more severe impact on smaller companies than larger ones, and the biotech venture world also su_ered due to the precipitous decline in the initial public offering (IPO) market (Fig. 1) resulting in significantly lower overall investments compared to 2020 and 20211. The prevailing economic uncertainty and geopolitical concerns do not bode well for a recovery in either private or public financing in 2023. In this context, acquirers are expected to take advantage of the depressed valuations and make opportunistic moves. Many hope for a surge in mergers and acquisitions in the coming months, as the prolonged slump in valuations forces sellers to consider offers. However, buyers are likely to face concerns about economic growth and the evolving regulatory environment. The changes announced for the accelerated approval pathway are likely to restrict approvals in 2023.

In 2023, the biopharma industry must demonstrate clinical successes to reassure investors about the sectors potential, despite its inherent risks. Additionally, investors will be closely

1. Floating biotechs prompt tiny sparks of hope, Evaluate Vantage; April 06, 2023 monitoring the gene therapy and gene editing fields to assess their maturity and regulatory acceptance. The cancer field, which has received significant funding in the last five years, needs to showcase its ability to deliver new mechanisms to maintain its momentum.

Fig. 1: Biotech IPOs by quarter on western exchanges1

Life sciences companies are investing in various platforms such as gene and cell therapies, new messenger ribonucleic acid (mRNA) platforms, expanding the indications of existing biologics platforms, developing novel medicines such as antibody drug conjugates (ADCs), and enhancing the effectiveness of existing medications by exploring different routes of administration, or improving diagnostics. Companies increasingly realize that they cannot work in isolation and are more open to collaborating with other stakeholders in the healthcare ecosystem to share knowledge, expertise, and resources.

Meanwhile, governments worldwide are tightening regulations and seeking greater transparency in drug reviews, approvals, pricing, and reimbursement. This pressure extends not only to pharmaceutical and biotech manufacturers but also to other stakeholders, such as pharmacy benefit managers (PBMs) in the US. To comply with these regulations, while meeting patient needs and generating shareholder returns, life sciences organizations are seeking new strategies and approaches. They are exploring innovative pricing models, improving their clinical trial designs, and partnering with PBMs and other payers to improve patient access and a_ordability. Through collaboration and innovation, life sciences companies are striving to create value for all stakeholders while navigating a complex regulatory and pricing environment.

Medicine usage and global spending are expected to rebound by 2024 to pre-pandemic growth rates, but uncertainties are expected to persist for couple of years. These uncertainties include the emergence of new viral variants of COVID-19, the rollout of COVID-19 booster shots, and economic pressures due to inflation and geopolitical conflicts.

The volume of drug usage is projected to increase by 1.6% until 2027, driven by Asia-Pacific, India, Latin America, Africa/Middle East, and China, which are expected to exceed global volume growth. Meanwhile, higher-income countries in Western Europe, North America, Japan, and Eastern Europe are projected to have slower growth rates of 0.1% to 0.5% until 20272 (Fig. 2).

Fig. 2: Historical and projected use of medicine by region, 2012-2027, Defined Daily Doses (DDD) in $Bn2

The global medicine market — using invoice price levels — is expected to grow at 3-6% CAGR (Compound Annual Growth Rate) through 2027, reaching about $1.9Tn in total market size (Fig. 3). The U.S. market, on a net price basis, is forecast to range from a shrinkage by 1% to growth by a modest 2% CAGR over the next five years, down from 4% CAGR for the past five years. Spending in Europe is expected to increase by $59Bn through 2027, and spending growth in China is expected to slow down2.

The projected reduction in the growth of spending for medicines can be attributed to the historic global shifts in drug pricing. Pharmaceutical reimbursement policies are colliding with intensifying competition to boost market access. Life sciences companies are responding to these commercial pressures through dynamic pricing techniques. In the US, life sciences leaders are developing new commercial strategies to address the pricing impact from the 2022 Inflation Reduction Act (IRA), which includes provisions aimed at lowering out-of-pocket costs for patients. These developments are reshaping tactics in the life science sector as companies reposition pricing in an increasingly competitive landscape. Across non-US markets, there is also a recognition of the increasing pressure on pricing and equitable access to treatments.

Fig. 3: The global medicine market size and growth2

2022 saw a growing share of first-in-class medicines and continued growth in number of specialty medicine launches. While the value and volume of the market grew, 2022 saw fewer approvals of new drugs by the U.S. Food and Drug Administration (USFDA). A total of 37 new drugs were approved in 2022, compared to 50 in 2021. When compared to the approvals during the previous five years, 2022 marked one of the lowest numbers of new drug approvals by USFDA3 (Fig. 4).

Fig. 4: USFDA approvals of new drugs3

The trend of expedited reviews for newly approved drugs continued in 2022, with 77% of the launches designated as priority, fast track, breakthrough, or granted accelerated approvals. Priority review and breakthrough designations increased, while fast track and accelerated approvals decreased. Over the past five years, there has been a 15% increase in the use of any expedited development or review mechanism. Out of the 37 newly approved drugs, 22 were small molecules and 15 were biologics, with oncology drugs and autoimmune therapies leading with 11 and 7 approvals respectively. Twenty-three of the approved drugs are considered first-in-class therapies3.

Fig. 5: 2022 USFDA approvals by drug class3

Drug developers are rapidly shifting towards the development of drugs with complex modalities. As a result, global regulatory agencies are re-evaluating their procedures, protocols, and requirements to accommodate system-wide scientific, technical, and policy changes.

Some of the notable changes observed in the regulations by USFDA include

1. Project Optimus: Initiative driven by the USFDA Oncology Center of Excellence to reform dose selection and optimization in oncology trials prior to initial regulatory approval with the goal of minimizing patient exposure to supra-therapeutic doses.

2. ScrutinyofAcceleratedApproval(AA)pathway:Confirmatory trials following AA face significant delays and their failure to confirm benefit in larger randomized clinical trials (RCTs) led to Congress enacting the Consolidated Appropriations Act 2023 for AA pathway reform. Under the regulation, USFDA mandates that the confirmatory trial should be ‘Well under way if not fully enrolled by the time of accelerated approval action.

3. Biomarker led approvals: USFDA approved aducanumab and lecanemab as disease modifying agents for treatment of Alzheimers disease based on biomarkers used in the study. The USFDA has published guidance, which suggests that USFDA may approve drugs for serious conditions where there is an unmet medical need and a drug is shown to have an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit to patients.

Biopharma Industry Trends

Despite the challenges, the industrys research and development pipeline continues to expand, with 6,147 products in active development from Phase 1 to regulatory submission. This represents a 49% growth since 2017 and a 2% increase in the last two years4.

Emerging biopharma companies (EBPs) i.e., companies, which have R&D spending of less than $200Mn per year and less than $500Mn in annual sales, are responsible for two-thirds of the molecules in the R&D pipeline. This is a considerable increase from little over half in 2017 and one-third in 2002. The rise of EBPs is particularly pronounced in China, whose share now exceeds that of Europe. Meanwhile, U.S. headquartered companies account for nearly half of EBP development, while Europe and Japan have seen declining shares of the EBP pipeline over the last decade4.

Oncology comprises 38% or 2,331 products in the pipeline, growing at 10.5% CAGR over the last five years. Non-rare cancer clinical development pipeline grew 7% in 2022, whereas rare cancer development has plateaued or slightly declined, indicating a potential shift in the near future away from rare cancers. Next-generation biotherapeutics are being investigated for hematological cancers, accounting for 28% of the pipeline. Immuno-oncologics are tapering off, potentially indicating a switch to newer targeted molecules. Bispecific antibody development for cancer treatment has grown significantly and represents 7% of both hemato-oncology and solid tumor pipelines.4

Neurology remains a critical area in drug development, with 699 products currently under investigation to address neurodegenerative, neuromuscular, and psychiatric disorders. Alzheimers and Parkinsons diseases have been the primary focus of ongoing research, with 127 and 96 products under investigation, respectively. Small molecule products dominate the neurology pipeline, accounting for 72% of the pipeline, while next-generation biotherapeutics such as cell and gene therapies comprise 11% and show potential to revolutionize treatment for these debilitating diseases4.

Fig. 7: Number of neurology pipeline products in 2022 by disease and therapy type4

Productivity Enablers of Biopharma Industry

While technological advancements and data improvements have increased scientific productivity, there are also trade-o_ effects that impact complexity, timing, and the likelihood of success.

On the clinical front, novel trial designs, such as umbrella, basket, master, and adaptive protocols, are becoming more prevalent in the industry trial pipeline. In 2022, they accounted for 17% of new and planned trial starts, with 1,068 trials incorporating at least one aspect of a novel trial design. In infectious disease trials, there has been a notable surge in the use of these designs over the last three years, with COVID-19 trials utilizing master protocols and adaptive structures for improved e_iciency and decision-making4.

Biomarkers, and decentralized methods are delivering initial productivity gains, with long-term innovations such as Real-World Evidence (RWE), Artificial Intelligence/Machine Learning (AI/ML), and trial simulations promising significant future gains as they mature in the pipeline.

In recent years, every industry including pharma, has realized the power of data and how it can help the industry grow and get closer to the end-users. The increasing usage of real-time data, artificial intelligence (AI), and machine learning (ML) in drug development is accelerating the discovery and development of new drugs, improving patient outcomes, as well as reducing costs.

AI has the potential to transform drug discovery by extracting concepts and relationships from data. It can also cross-reference published scientific literature with alternative information sources, such as clinical trials information, conference abstracts, public data and unpublished datasets. Real-time data and AI offer significant benefits to the pharmaceutical industry.

Biopharmaceutical companies are applying AI/ML technology leveraging the growing chemical, biological and patient datasets to accelerate and improve target and drug selection across the entire drug discovery continuum. AI target selection by interrogating clinical, experimental, and ‘omics data to better characterize disease states and identify novel ‘druggable targets has been used in several compounds under development.

Products optimizing drug design by analyzing complex datasets, including molecule structure, molecular dynamics, genome, and combinatorial drug screening databases forms the largest area utilizing AI/ML. The use of AI/ML to deliver insight from a range of patient ‘omics, biometrics and previous trial data to specifically optimize drug discovery through precision patient targeting is a focus for several sponsor companies. Finally, trial simulation using AI/ML technologies on deep target, drug, and patient datasets is enabling optimized clinical trial design.

In sum, the global innovative pharmaceutical market remains an attractive opportunity, while remaining resilient by responding to rapidly changing drivers of productivity.

Indian Pharmaceutical Industry

The Indian pharma industry has been rightfully recognised as ‘the pharmacy of the world, as it consistently supplied medicines to over 200 nations worldwide during the pandemic. However, the overall growth of the industry was restricted as other chronic diseases got side-lined due to the pandemic. While the Indian pharma industry leads in volume globally, it is still on the margins in creating value through innovative technologies such as new molecular or biological entities, cell and gene therapy, and precision medicines. The industry has shown unwavering commitment to support the countrys healthcare needs, while focusing on opportunities to enhance its footprint across the world.

The Indian pharmaceutical industry is estimated to reach $65 Bn by 2024 and touch $130 Bn in value by the end of 2030 – growing at around 11-12% till 20305.

As India strives to reach a higher level of advancement and gain international recognition in the pharmaceutical industry, the government policies and actions will likely be the fundamental growth drivers of this sector.

The Union Budget for FY23 announced some important priority proposals that include:

• The total allocation for health in the budget stood at 2.1% of the gross domestic product (GDP) in FY23 compared to 1.4% of the GDP in FY19. The Government increased its allocation to the health sector by INR 2,954 crore ($387.1 Mn), from INR 86,200.65 crore ($11.3 Bn) in the last fiscal year to INR 89,155 crore ($11.7 Bn) in the current fiscal year, i.e., 2023-24.

• The announcement of 157 new nursing colleges being set up in core locations, to complement the existing 157 medical colleges that have been established since 2014.

• INR 3,201 crore ($419.2 Mn) has been set aside for research and INR 83,000 crore ($10.86 Bn) has been allocated for the Ministry of Health and Family Welfare.

• INR 37,000 crore ($4.83 Bn) has been allocated to the National Health Mission.

To achieve value leadership and overcome global pricing pressures and inflation, the Indian pharmaceutical sector must prioritizeinnovationandreinvention.Itistransitioningfromvolume to value leadership, becoming a technology- and innovation-driven powerhouse. The countrys changing epidemiological profile and growing economy make it a promising candidate for future R&D and manufacturing in the pharmaceutical industry.

Opportunities

1. The Central Government has been extending legislative support as well as rolling out several initiatives, in the form of the Production Linked Incentive (PLI) scheme and bulk drugs park scheme, to reduce the domestic pharma sectors reliance on China and encourage local production. With the successful implementation of these schemes, it is likely that the Indian pharma industry will capitalise on the enhanced Government impetus going forward. These schemes are projected to boost the API industrys growth and lower the domestic pharma industrys reliance on China by 25-30% over the next 4–5 years.

2. The Indian pharma industry is already an established player in the manufacturing of generic drugs. However, in recent years, the industrys focus on the research-based formulations is anticipated to drive growth and generate new revenue streams.

Challenges

1. For a nation that seeks to retain the mantle of ‘pharmacy of the world, India lacks regulatory framework compared to global standards. The current Indian regulatory framework is traditionally geared towards safety and e_icacy. However, it should also differentiate in favour of innovation. The Drug Controller General of India in the Central Drug Standard Control Organization (CDSCO) is the licensing authority, but there are multiple agencies with different mandates and expertise that a pharma innovator must navigate within India to obtain approval. A revamp of the countrys pharmaceutical regulatory norms is expected to not only expedite the drug approval process but also promote innovation.

2. With evolving automation technologies it is likely that the conventional, stringent chain of processes will be disrupted, and the operations are going to become even more streamlined. However, the lack of private investment in the Indian pharma industry has led to the slow adoption of advanced technologies in this sector.

3. Cyberthreats and data security are areas of concern for the Indian pharma industry. The potential risks of data breaches may make the industry vulnerable to external threats.

4. India may not have the talent to cover the whole range of pharmaceutical products, from the inception of the drug to its release onto the market. A disconnect between academia and industry may result in students missing out on market-relevant skills and knowledge. The Government may support this by funding research and innovation activities at the academic institutes.

In sum, India is shifting from a traditional generic powerhouse to a potential innovative drug developer. Whereas there are green shoots that show promise of growth in the right direction, there remain several structural and environmental impediments for this growth to truly flourish. As more changes are rolled out, companies need to actively adapt to take advantage and not be blindsided.

Key Financial Ratios

Key Financial Ratios FY 2022 - 2023 FY 2021 - 2022 Reason
Debtors Turnover 7.90 6.06 Due to higher out-licensing revenue 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) 2.54 0.42 Due to increase in investment in mutual funds, certificate of deposits and fixed deposits.
Debt Equity Ratio (in times) 0.03 2.54 Due to repayment of borrowings during the year
Operating Profit Margin (in %) (90.02) (138.48) Due to higher revenue during current year
Return on Net Worth (in %) (43.41) (651.37) Increase in capital due to allotment of shares in preferential issue
Net Profit / Loss Margin (%) (93.22) (148.19) Due to higher out-licensing revenue during current year

SPARCs Response to Global Trends

SPARC has taken a deliberate and measured response to the changing external environment driving the growth trajectory of the biopharmaceutical industry. SPARC has narrowed its focus on select therapeutic areas i.e., oncology & neurodegeneration, which together make the majority of pipeline assets. As discussed above, both these areas are expected to drive the value growth for the industry in coming years.

In line with the global trends and productivity enablers, SPARC continues to evolve its competencies and is adopting new technologies and treatment modalities to develop novel drugs. A key area of SPARCs focus for last couple of years has been biologics and the ability to create modular immune-fusions and ADCs. The platform has seen some early success during evaluation of anti-MUC-1 ADC (SBO-154) in the preclinical animal models. These newer platforms for drug development help to expand the operating field for SPARC beyond small molecules.

Similarly, in small molecule development, SPARC has advanced SCC-138 in Phase 2 study for treatment of Parkinsons Disease (PD) with multiple exploratory biomarkers being evaluated to understand the effect of drug on delaying or halting the progression of disease.

SPARC has also collaborated with external partners for use of technology for drug development process, not just to speed up the development process but also to identify right candidates for development. SPARC will continue to cautiously invest in critical competency areas aligned with the evolved portfolio of programs under development.

SPARCs Performance Overview

During the year 2022-23 the Company focused primarily on execution of operational objectives to ensure that the projects reach the stipulated milestones as per the plan.

Key milestones for late-stage assets were achieved during the year. Some notable achievements include NDA approval by the USFDA and licensing of SezabyTM (phenobarbital sodium for injection), and NDA filing of PDP-716 (brimonidine OD) in collaboration with Visiox Pharma.

The clinical programs continue to recruit patients across various sites in multiple geographies. SCC-138 is expected to complete patient recruitment during FY24. Part B study of SCO-088 was completed during the current year. SPARC will begin a comparator trial during FY24 to support registration of SCO-088.

SPARCs preclinical programs are on track and SPARC expects to file Investigational New Drug (IND) application for SCD-153 in FY24. In parallel, the team is also working on completing the required activities with expected IND filing for SBO-154 in FY25.

The revenue from the approved 505(b)(2) programs is expected to be affected due to supply disruptions caused due to the compliance challenges of the CMO partner. SPARC is working with the partners to ensure supplies are normalized as soon as possible.

During the year, the warrants issued in 2021 were fully converted and SPARC received ~INR 703 Cr ($86 Mn). The available cash from conversion of warrants will be su_icient to cover the cost of ongoing clinical studies. The funds will be utilized to advance the programs under development and to meet the expenses associated with the operations. The Company also has a line of credit of INR 475 crores (~$63 Mn) to meet any interim funding requirements.

Overall, with licensing of SezabyTM, SPARCs pipeline is completely transitioned to New Chemical Entities (NCEs) and New Biological Entities (NBEs). SPARC will utilize the learnings from the initial programs to build a sustainable R&D organization with capabilities across the value chain, and an attractive portfolio with multiple high-value assets.

Progress on Key Programs

1. ElepsiaTM XR

Tripoint continued to successfully commercialize ElepsiaTM

XR tablets in the United States. The supply has been disrupted due to compliance challenges at the partners manufacturing site. SPARC & Tripoint are working on finalizing alternate site for restoring the supply and to ensure availability of ElepsiaTM XR tablets.

2. PDP-716 for the treatment of open-angle glaucoma

PDP-716 is a novel, once-a-day formulation of brimonidine developed using SPARCs proprietary TearActTM technology.

During FY23, SPARC along with Visiox completed the NDA submission to the USFDA; the NDA was accepted for review by the USFDA with a PDUFA goal date in early August 2023. SPARC & Visiox are working together to plan for the launch of PDP-716 upon approval by the USFDA.

3. SDN-037 for the treatment of pain and inflammation following ocular surgery

SDN-037 is a novel, twice-a-day formulation of difluprednate developed using SPARCs proprietary technology. Visiox Pharma has decided to file the NDA with the USFDA after the outcome of NDA filed for PDP-716.

4. SezabyTM (Phenobarbital Sodium) for the treatment of neonatal seizures

SPARCs NDA for SezabyTM was approved by the USFDA.

Recently, the USFDA granted orphan drug exclusivity to SPARCs SezabyTM.

SPARC licensed the US commercialization rights of SezabyTM to Sun Pharmaceutical Industries Inc. Under the terms of the license agreement, Sun Pharma paid SPARC an upfront payment of $10 Mn. SPARC will also be eligible to receive milestone payments contingent upon the achievement of regulatory and sales milestones, as well as tiered royalties on sales.

Commercialization of SezabyTM was initiated by Sun Pharma in Jan 2023 and it expects to build the sales for SezabyTM over coming quarters.

5. Vodobatinib for the treatment of CML (SCO-088)

Vodobatinib is a novel, highly-selective c-Abl inhibitor for treatment of refractory CML. Part C of the study is recruiting patients who have failed three lines of treatment including ponatinib. The patient recruitment for this study has been slow as the available patients eligible for the study is limited. SPARC continues to take steps to improve recruitment rates.

SPARC presented the results of the ongoing study at the 2022 ESH and ASH Annual Meetings as an oral presentation. This was the third consecutive year of SPARC being selected for an oral presentation, demonstrating the hematology-oncology communitys belief in the promise of vodobatinib.

6. Vodobatinib for the treatment of neurodegenerative diseases (SCC-138)

Vodobatinib is being investigated for multiple neurodegenerative diseases and is a potentially first-in-class disease modifying treatment targeting cAbl.

The Phase 2 study in Parkinsons disease (PROSEEK) is currently recruiting patients and over 80% patients are randomized. SPARC aims to complete the patient recruitment in coming quarters and the topline readout from this study is expected in FY24.

Another Phase 2 investigator-initiated study is recruiting patients with Lewy Body Dementia at Georgetown University, Washington D.C.

7. Vibozilimod for the treatment of autoimmune disorders (SCD-044)

Vibozilimod (SCD-044) is a selective S1PR1 agonist in development for autoimmune disorders.

SPARC previously licensed the global rights of vibozilimod to SPIL, which is recruiting patients for Phase 2 studies in Psoriasis and Atopic Dermatitis.

8. Bexirestrant (SCO-120) for the treatment of HR+, HER2- metastatic breast cancer

Bexirestrant is a novel, orally bioavailable, SERD for the treatment of Hormone Receptor positive (HR+), Human Epidermal Growth Factor Receptor 2 negative (HER2-), metastatic breast cancer. During FY23, SPARC completed a Single Ascending Dose (SAD) study and a Multiple Ascending Dose (MAD) study in metastatic breast cancer patients. The company paused the development of bexirestrant due to changing clinical landscape.

Outlook

SPARC has transitioned its portfolio to focus on developing NCEs and NBEs. With multiple assets under clinical development the focus for SPARC in the coming year will be to build on execution to ensure that the next milestones for the programs are achieved as per the objectives set.

The immediate priority for SPARC is to work with partners to ensure that the supply of approved products is restored and the patient recruitment in ongoing clinical studies is completed as per the plan. Additionally, SPARC will work with Visiox Pharma for securing NDA approval of PDP-716 and to prepare for successful launch of PDP-716. SPARC will work with Sun Pharma to drive the uptake of SezabyTM.

SPARC is aiming to initiate first-in-human Phase 1 studies for SCD-153 in FY24 and for SBO-154 during FY25. Our collaboration model with academia is expected to add new preclinical programs to SPARCs pipeline.

In the medium term, SPARCs pipeline has several inflexion points that can drive significant value for the company. SPARC will continue to build new competencies that are aligned with the broader portfolio strategy. SPARC is well positioned to leverage the ‘still very attractive" global opportunity and has the potential to be a big catalyst success story for the emerging Indian innovation industry.

Human Resource Strategy

Strategic human resource (HR) management is the foundation of a strong business. At SPARC, a young dynamic team of promising and talented employees, work relentlessly to pursue SPARCs business plans. With high focus on the Sunology values of Innovation, Initiative, Passion and Humility, the HR of the Company is aligned towards hiring, developing and retaining highly proficient talent and works to provide an inclusive environment that is welcoming to all diversities. The HR department continuously benchmarks best practices across the industry - in the areas of Talent Management, Learning & Development, Performance Management System and Employee Care. This is done with the objective to provide highest levels of employee experience and keep its workforce motivated, knowledgeable and progressive, aligning employees with business goals. The team continuously works towards improving processes and takes initiatives to align our people and processes with the changing business requirements to create a culture of continuous learning and innovation. To enhance its R&D capabilities, the Company regularly collaborates with some of the top Indian universities and training institutes and imparts skill development trainings to its employees and prepares them according to the change in business strategies. Effective communication platforms are used to foster transparency and create open forums for discussions to address concerns.

As on 31st March 2023, the Company has a dedicated team of 407 employees (across India and the US), of which 85% are scientists.

Risks and Concerns

SPARCs R&D activities/initiatives offer both new possibilities as well as challenges but the core focus is to adhere to risk tolerance thresholds. The Company may be affected by risks and uncertainties related to product development, regulatory approval, patent and proprietary rights scope, market competition, and technological advancements. Foreign exchange rate variations can also affect sales, profitability, and cash flows. As a result, SPARC works hard to identify important risks and adopt mitigation strategies to lessen the impact on its operations.

Internal Control Systems and their Adequacy

SPARC maintains adequate internal control systems commensurate with the size, nature and complexity of its business operations. These controls are regularly tested for their adequacy and effectiveness by internal as well as external auditors of the Company. Further, the Audit Committee reviews the audit reports for each quarter and monitors the implementation of auditors recommendations.

Disclaimer

Certain statements in the management discussion and analysis, related to the future prospects of the Company may be forward looking statements which involve a number of underlying identified / non identified risks and uncertainties that may materially alter actual results. The assumptions hereby made are based on available internal and external information and certain facts and figures stated in the report. The factors underlying such assumptions may change over time along with the estimates on which they are based. The forward-looking statements represent the Companys intentions, beliefs or expectations and it speaks of assumptions made on the date when the facts were made available. The Company assumes no obligation to revise or update forward-looking statements on account of new information, future events, or otherwise.