Sun Pharma Advanced Research Company Ltd Management Discussions

Global Pharmaceutical Industry

The global biopharmaceutical industry operated in a paradoxical environment: strong underlying demand and scientific innovation on one side, and geopolitical fragmentation, pricing pressure, patent cliffs and capital discipline on the other. Despite macroeconomic uncertainty, the sector remained one of the most resilient innovation-driven industries globally.

One of the defining macro themes of 2025 was the return of aggressive US industrial and trade protectionism. The proposed tariff measures targeting imported pharmaceuticals and APIs created significant uncertainty for global supply chains. Tariff threats potentially increased API procurement costs, logistics expenses and capex requirements for local manufacturing. Global pharma companies accelerated US based manufacturing investments and "China+1" API sourcing models. Pressure on drug pricing also intensified through the implementation of Most Favoured Nation (MFN) deals.

The MFN pharmaceutical pricing policy represents one of the most ambitious federal efforts to address prescription drug costs in the US history. The policy has evolved into a comprehensive framework that combines voluntary manufacturer agreements with three distinct regulatory models: GENEROUS for Medicaid, GLOBE for Medicare Part B, and GUARD for Medicare Part D. Collectively, these mechanisms aim to fundamentally reset US drug pricing by benchmarking domestic prices against those paid in other developed nations.

Beyond the three MFN models, the administration has pursued voluntary agreements with pharmaceutical manufacturers. These agreements extend beyond pricing commitments to provisions supporting domestic manufacturing investments. Participating companies have collectively committed to invest at least US$150

billion in US based manufacturing in the near term¹. Notably, majority of these manufacturing commitments were secured prior to the formal rollout of the MFN policy framework.

The regulatory environment has also continued to evolve, with the US Food and Drug Administration (FDA) experiencing a period of organizational transition. Over the past year, the FDA has been impacted by workforce reductions, voluntary resignations and the departure or reassignment of several experienced personnel, alongside changes in leadership across select divisions. These developments have, at times, created operational capacity constraints and contributed to longer review timelines, reduced frequency of formal interactions and increased variability in regulatory feedback.

Despite these near-term challenges, the FDA continues to prioritize its core mandate of safeguarding public health and supporting innovation. The approval cadence remained resilient, with a notable concentration of approvals in the second half of 2025. During calendar year 2025, the FDA approved 46 novel drugs, reflecting a slight moderation compared to 50 approvals in

2024 and 55 in 2023, while remaining broadly consistent with the long-term average of ~47 approvals annually².

Cancer remains the most common therapeutic area for newly approved drugs. 16 (35%) of FDAs newly approved drugs in

2025 were for cancer, up from a rolling 5-year average of 29%. The other most active areas were cardiology, with 5 (11%) new approvals, and allergy and inflammatory diseases, with 4 (9%) new approvals². 2025 was also the biggest year yet for kinase inhibitors, which accounted for around one third of the newly approved small molecules. Novartiss remibrutinib (Rhapsido) became the 100^th kinase inhibitor to secure FDA approval, showcasing the continued expansion of this type of drug beyond oncology.

During the year, the industry witnessed unprecedented growth in artificial intelligence (AI) adoption, an intensifying "obesity war" between market leaders, and a renewed, yet selective, appetite for dealmaking.

The battle for dominance in the obesity drug market was a defining story, with Novo Nordisks Ozempic/Wegovy and Eli Lillys Mounjaro/ Zepbound driving immense growth, making obesity medications the largest contributor to the industrys pipeline value for the first time in 16 years. In November, Lilly became the first pharma company to enter the trillion-dollar club, joining the tech-dominated pantheon of companies such as NVIDIA, Apple, Microsoft and Alphabet with a market cap over US$1 trillion³. At the same time, biotech funding remained selective with investors preferring clinically validated late-stage assets over speculative early-stage platforms.

M&A and Partnering Trends

Mergers and acquisitions (M&A) and licensing deals represent a key aspect of Emerging Biopharma (EBP) fundraising and company evolution, and the number of deals has surged in 2025. In 2025, the total of 139 M&A transactions was similar to 2024s 136 aggregate, but the dollars spent on M&As rebounded by more than doubling the previous year, with a 146% increase from US$81 billion in 2024 to $199 billion in 2025⁴.

China has emerged as a key driver of biopharma innovation with Chinese biopharmaceutical companies gaining prominence in developing new therapies and securing a growing share of global licensing transactions. The overall number of international deals for China-based companies surged in 2025, with 94 M&A or licensing deals, up from 71 in 2024, and with the largest increase from North American companies⁵.

Oncology Therapy Area Momentum

The appetite for advanced molecular therapies was clear as several billion-dollar acquisitions occurred in this area, spanning multiple therapeutic areas.

Oncology was a big focus in the billion-dollar M&A group, capturing over one-third of the volume and 19% of the aggregate value⁴. The type of drug modalities involved in deals has varied relatively little over the past seven years, with more than half of all deals still involving small molecules. Deals focusing on radiopharmaceuticals, oligonucleotides and antibody drug conjugates have increased considerably.

Beyond these macroenvironmental shifts shaping the industry, the global prescription medicine market delivered strong underlying performance in 2025. At list prices, the market reached ~ US$1.7 trillion, reflecting 10% year-on-year growth⁶. This expansion was driven primarily by established medicines but also complemented by a continued flow of innovation. An estimated 73 novel active substances (NAS) were launched globally during the year, exceeding the average of the past decade.

The global pharmaceutical market reached US$1.7 Trillion in 2025 and is increasingly concentrated in the top therapy areas⁶

As 2025 unfolded, oncology continued to lead the global prescription medicine market, with sales reaching approximately US$288 billion. The majority of this value was concentrated in solid tumours, which accounted for US$194 billion, led by breast cancer, non-small cell lung cancer and prostate cancer. In contrast, hematological tumors accounted for US$75 billion, with multiple myeloma, chronic lymphocytic leukemia, and non-Hodgkins lymphoma representing the leading indications⁶.

Looking ahead, similar dynamics are expected across the wider oncology market, as several blockbuster products approach losses of exclusivity towards the end of the decade, such as pembrolizumab and nivolumab. Nonetheless, novel modalities could help to compensate for value erosion ahead of these looming patent cliffs.

ADCs have firmly established themselves as a transformative force within oncology, generating US$18.8 billion in sales in 2025 and projected to reach US$36 billion by 2030. Bispecific antibodies rapidly gained momentum and achieved US$4.9 billion in sales in 2025 and are on track to nearly triple by 2030. At the forefront of personalized oncology, CAR-T cell therapies delivered US$5.8 billion in sales in 2025, with forecasts indicating growth to US$8 billion by 20 30⁶.

While the industry faces challenges related to cost, pricing, and regulation, its future prospects are promising, with continued advancements in targeted therapies, immunotherapies, gene editing, and bio manufacturing. Companies with differentiated science are expected to experience disciplined growth with strong economics and execution.

Biopharma Trends

The biotechnology sector in 2026 is at a critical inflection point, where cutting-edge scientific breakthroughs are increasingly translating into real-world applications. The intersection of artificial intelligence (AI), precision medicine, and next-generation therapeutic platforms is unlocking significant opportunities for innovation and value creation. While these developments have been evolving over the past few years, their continued convergence is now accelerating the pace of transformation across the industry. Several key trends are poised to shape the sectors trajectory and drive sustained, high-impact growth in the coming years, some of the key ones are highlighted below.

1. Data, tech and AI moving from hype to here and now

Digital infrastructure, AI-enabled clinical tools and connected care models are reshaping how clinicians deliver care and how patients navigate the system. Hospitals, health systems and emerging health tech players are deploying AI to expand capacity, improve access and streamline workflows. The combined effect is to heighten expectations for real-time insight, personalized support and frictionless experiences across the entire care journey.

AI-powered drug discovery, decentralized clinical trials, digital-first patient engagement, hybrid omnichannel sales strategies, and data-driven operations are now mainstream priorities. AI moved from concept to necessity, with 2025 seeing >30% of new drugs developed using AI tools, reducing discovery timelines by 25-50%⁷.

In January 2025, FDA released draft guidance on sponsor use of AI to produce information or data for regulatory decision-making, providing a framework for risk-based credibility assessment of AI models in relation to drug safety, efficacy and quality.

2. The GLP-1 and obesity drug revolution

Obesity drugs solidified their position as a top-five therapy area globally, surpassing immunology in growth contribution, with significant revenue generated by

GLP-1 and related treatments. The past two years have seen unprecedented momentum: GLP-1 therapies moved from niche to mainstream, supply issues arose then abated, and asset pipelines expanded beyond weight loss to whole-body medications. Oral formulations are set to dominate headlines in 2026, offering convenience and eliminating cold-chain requirements - attributes that could make long-term obesity care more practical and unlock the maintenance opportunity.

3. Targeted therapies & precision medicine as next generation therapies

Novel therapeutic modalities, such as cell, gene, and nucleic acid therapies, are offering more effective, personalized treatment options to patients with chronic and/or rare diseases that were considered to be untreatable. ADCs have seen extraordinary progress in oncology research, and innovators are building on this success by leveraging the precise targeting mechanism of antibodies in conjugation with other therapeutic agents, specifically RNA drugs also called oligonucleotides.

The cell and gene therapy (CGT) landscape is a rapidly evolving and growing space, with a surge of clinical trials and approvals throughout 2025. Unlike traditional biologics, CGTs require highly individualised supply chains with precise logistics and close coordination across many different stakeholders. CGT portal trends are moving toward industrywide collaboration, standardisation and data interoperability, which is a prerequisite for global scalability.

4. Evolving regulatory landscape

The FDA is creating new opportunities for sponsors to accelerate R&D and reduce development costs.

In June 2025, a new pilot pathway — the Commissioners National Priority Voucher (CNPV) — was launched to offer accelerated approval timelines of one to two months for products aligned with national priorities: public health impact, breakthrough innovation, high unmet need, affordability, or U.S development/ manufacturing.

In December 2025, the FDA Commissioner revealed plans to shift the agencys default expectation from two to one well-controlled, pivotal study for most drug approvals; this change is anticipated to reduce time-to- market for some programs, although in practice it may be that additional effort and evidence generation become necessary across fewer trials, potentially requiring increased trial sizes and/or breadth where single pivotal studies are employed.

Other 2025 developments included: publication of Complete Response Letters; an ANDA prioritization pilot for US -sourced generics; draft guidance to reduce the need for biosimilar comparative efficacy trials, to streamline non-clinical safety studies for antibodies, and to support innovative CGT trial designs for rare diseases.

Indian Pharmaceutical Industry

The Indian pharmaceutical industry is one of the countrys strongest global success stories. Often called the "Pharmacy of the World," India exports affordable and high-quality generic medicines to over 175 countries, including the United States, the European Union, Japan, and many developing nations in Africa and Latin America. This vast global reach is supported by a robust network of manufacturing plants, research facilities, and regulatory expertise.

Indias pharma sector, valued at over US$ 50 billion, contributes nearly 40% of its output to exports⁸. It has strong formulation capabilities, a large generic base, and emerging expertise in biologics and vaccines. However, one major vulnerability is its dependence on imported APIs, particularly from China.

Under the Atmanirbhar Bharat initiative, the government introduced Production Linked Incentive (PLI) schemes to support domestic API production while keeping temporary exemptions for essential drugs to prevent shortages.

Firms are improving manufacturing efficiency using automation, green chemistry, and flexible continuous manufacturing processes to offset rising costs.

The collective strength of Indias pharma ecosystem is anchored in three interlinked pillars: generics and vaccines leadership, a rising Contract Research Development and Manufacturing Organization/ Contract Development and Manufacturing Organization before (CRDMO/CDMO) sector driving innovation partnerships, and the expansion of Global Capability Centers (GCCs) harnessing world-class digital, analytical and R&D talent.

Indias CRDMO/CDMO ecosystem has also undergone a profound transformation, evolving into a global innovation engine. Indian CRDMOs are investing heavily in advanced manufacturing, analytics platforms and biologics capabilities, while adopting AI- enabled tools to accelerate drug discovery and development. This convergence of scientific depth and digital sophistication has enabled India to move beyond its traditional outsourcing role toward a model of integrated, value-based partnership with global biopharma companies.

Parallelly, GCCs established by the leading global pharma companies are emerging as critical enablers of Indias innovation landscape. Of the top 50 life sciences organizations globally, around 50% already have their GCCs in India⁸. The GCC landscape continues to advance and expand rapidly, driven by continued investments by the global MNCs across the value chain.

Opportunities

1. Government support

The Indian pharmaceutical industry is no longer limited to making low-cost generic medicines; it is increasingly investing in research and developing complex, high-value products such as biopharmaceuticals and biosimilars. The country has emerged as a global hub for affordable, high- quality medicines, ranking 3^rd1 in pharmaceutical production by volume and 14^th by value⁸.

Over the past several years, the Government of India has implemented a series of policy initiatives and schemes aimed at strengthening the biopharmaceutical sector across the value chain, from research and early-stage product development to manufacturing, innovation and commercialisation. Some of the recent initiatives include:

• The Promotion of Research and Innovation in Pharma- MedTech (PRIP) scheme, launched in 2023 by the Department of Pharmaceuticals with an approved outlay of INR 5,000 crore, seeks to transform India into an innovation-driven and globally competitive Pharma- MedTech sector. The scheme supports early- and late- stage R&D in new drugs, biosimilars, complex generics, precision medicine and novel medical devices. It also encourages industry-academia collaboration through Centres of Excellence at NIPERs.

• Launch of Biopharma SHAKTI, a dedicated national initiative with an outlay of INR 10,000 crores over five years, aimed at strengthening Indias end-to-end ecosystem for biologics and biosimilars. The initiative is designed to support domestic development and manufacturing of high-value biopharmaceutical products and medicines, reduce import dependence, and enhance Indias competitiveness in global biologics supply chains.

• Expansion and strengthening of the Biopharma- focused network through the establishment of three new National Institutes of Pharmaceutical Education and Research (NIPERs) and the upgradation of seven existing NIPERs. This measure seeks to address the growing requirement for highly specialised human resources in biopharma research, development, manufacturing and regulation.p>

• Creation of a large-scale clinical research ecosystem, with a proposal to develop over 1,000 accredited clinical trial sites across the country. This is expected to significantly improve Indias capacity to conduct advanced clinical trials for biologics and biosimilars, accelerating innovation, and positioning the country as a preferred global destination for ethical, high-quality, and efficient clinical trials. ^•

• Strengthening of the regulatory framework for biologics, including enhancing the capacity of the

Central Drugs Standard Control Organisation (CDSCO) through the induction of specialised scientific and technical personnel. The focus is on improving regulatory efficiency, aligning approval timeframes with global standards, and enabling faster evaluation of complex biopharmaceutical products.

2. Digital transformation

AI and machine learning are revolutionizing drug discovery, manufacturing efficiency, and supply chain management. AI- driven molecule design, predictive diagnostics, virtual clinical trials and real-world data analytics are improving speed, precision and cost efficiency across the value chain. With its inherent tech leadership, the intersection of life sciences, data and digital offers India an unparalleled opportunity to leapfrog traditional models and establish leadership in high- science, high-value innovation.

3. Expansion of CRDMO and biologics

India is enhancing its position in complex biologics, Antibody Drug Conjugates (ADCs), and R&D for cancer and lifestyle diseases. Large and medium-sized biopharma companies have begun to see value in partnering with Indian CRDMOs who are making investments in emerging modalities like protein, peptides, ADCs, bispecific, DNA-RNA therapeutics, and mAbs, to drive the future of science and healthcare.

Challenges

1. Regulatory and Compliance

As the sector expands its global footprint, Indian pharmaceutical companies must comply with diverse and often complex regulatory standards set by markets like the FDA and European Medicines Agency (EMA). This can be costly and time-consuming for companies, especially smaller ones. Regulatory delays, both at the domestic and international levels, can slow down the approval process for new drugs, biosimilars, and generics, affecting timely market entry. Ensuring consistent quality control is a persistent challenge, especially with the rise in the prevalence of counterfeit and substandard drugs. This undermines trust in Indias pharmaceutical exports and poses serious public health risks.

2. Supply chain vulnerability

India is highly dependent on imports for key raw materials, especially from China. This exposes the sector to supply chain disruptions, particularly in the event of geopolitical tensions or trade restrictions. The reliance on imported APIs makes the industry vulnerable to global supply chain issues, as seen during the COVID-19 pandemic, which caused significant disruptions in the production of pharmaceutical products.

SPARCs Response to Global trends

Recognising the global trends, SPARC strategically evolved its business priorities by narrowing its therapeutic emphasis on oncology and immunology, two of the fastest-growing areas, driven in part by advances in treatment modalities such as ADCs, CGT, and CAR-T therapies. A significant portion of SPARCs oncology pipeline comprises of biologics. SPARC intends to use the anti MUC1 antibody as a platform technology and has initiated activities to build diverse collections of components to enable plug-and-play development tailored to specific targets and indications. SPARCs approach is now focused on three tightly defined themes:

• Targeted delivery of multi-modal cancer therapeutics— including ADCs, bi-specific targeting, bi-functional payloads, Immune-Stimulating Antibody Conjugates (ISACs), small-molecule drug conjugates (SMDCs), and T-cell engagers

• DNA Damage Response (DDR) pathway inhibitors to drive synthetic lethality—both as monotherapy and to sensitize PARP inhibitors or DNA-damage standard of care (SoC)

• Auto-immune and dermatology—focus on non-JAK pathways, rational combinations, and topical alternatives to SoCs

SPARC has made significant effort to reposition its programs around a pair of advanced assets, a differentiated ADC for select solid tumors and novel immunology pathway in the derma autoimmune segment. With both programs in active early clinical development phase, SPARC expects to receive early efficacy signals that can better direct its portfolio planning in the coming years and yield multiple promising assets. Phase 1 study in India provides an excellent opportunity to conduct early signal-seeking studies at low cost of failure.

SPARC also explored alternative business structures like asset- specific NewCos with the aim of reducing the burden of clinical risk within SPARC. A notable example is the formation of Tiller Therapeutics to advance the SCO-155 program, a Small Molecule Drug Conjugate (SMDC) as a potential treatment for metastatic Castration Resistant Prostate Cancer (mCRPC).

Key Financial Ratios

Ratio Analysis	2025-26	2024-25	Reason
Debtor Turnover Ratio *	3.2	4.5	Due to lower revenue compared to the previous year
Inventory Turnover (No. of days)	N.A.	N.A.
Current Ratio (in times)	2.5	0.1	Due to increase in current assets on account of recognition of PRV in current year
Debt Equity Ratio (in times)	0.4	(1.2)	Due to positive net worth in the current year as compared to negative net worth in the previous year
Operating Profit / (Loss) Margin (%)	85%	(468%)	Due to profit in current year as compared to loss in the previous year
Return on Net Worth	1.2	(1.6)	Due to positive net worth during the year
Net Profit / (Loss) Margin (%)	83%	(477%)	Due to profit in current year as compared to loss in the previous year

Progress on Key Programs

1. Sezaby for the treatment of Neonatal Seizures

Sezaby is a benzyl alcohol and propylene glycol free formulation of phenobarbital sodium injection approved by the FDA for the treatment of neonatal seizures.

SPARC had contested FDAs decision to deny SPARC a Paediatric Rare Disease Voucher (PRV) associated with the approval of Sezaby and had initiated litigation against the agency. The US district court for the District of Columbia granted summary judgement in favour of SPARC. Following the court ruling, the USFDA granted SPARC PRV associated with approval of Sezaby. Subsequently, SPARC entered into a definitive asset purchase agreement to sell its PRV for US$ 195 million.

SPARC is also taking significant efforts to ensure the removal of unapproved DESI phenobarbital formulations that contain

excipients that are known to cause side effects in the neonatal population.

2. SPARC-121 for the treatment of Alopecia Areata

SPARC-121 (previously SCD-153) is a novel topical agent being developed for the treatment of Alopecia Areata. SPARC completed Phase 1a Single Ascending Dose (SAD) study in healthy volunteers in India and SPARC-121 was found to be safe and well tolerated at all dose levels tested. SPARC initiated Phase 1b Multiple Ascending Dose (MAD) study of SPARC-121 in patients with Alopecia Areata and is actively recruiting patients and an interim readout is expected in the third quarter of FY2026-27. SPARC is also exploring this compound in Vitiligo, a dermatological condition that shares the immune pathogenesis with alopecia areata. SPARC recently submitted a Phase 1b proof-of-concept study protocol to the DCGI to evaluate SPARC-121 for the treatment of Vitiligo patients.

3. SPARC-122 for treatment of multiple cancer indications

SPARC-122 (previously SBO-154) is an anti-MUCl ADC being developed for treating multiple tumour types expressing MUC1. SPARC-122 targets a novel epitope on the MUC1 protein present on the cell surface of cancer cells. SPARC filed INDs for Phase 1a dose escalation study in solid tumors in the US, Australia, and India and got approvals from all three regulatory bodies. The study is actively enrolling at 11 sites across the three geographies. Once the Phase 1a part of the study is completed, SPARC expects to initiate Phase 1b dose expansion study in three specific tumor types of ER+ HER2-ve breast cancer, lung cancer and ovarian cancer.

4. PDP-716 for treatment of open-angle glaucoma

PDP-716 is a once-a-day formulation of Brimonidine which was licensed to Visiox Pharma for commercialization. Visiox was recently bought out by Ocuvex Therapeutics, and thereby Ocuvex now holds the rights to this product. Ocuvex had received a Complete Response Letter (CRL) for the New Drug Application (NDA) for PDP-716 due to inspection findings at a third-party API manufacturing facility. Ocuvex recently completed the resubmission following a change in the API vendors regulatory status. However, the finished product manufacturing site is currently facing compliance issues that require further remediation. SPARC is working with its partners and Ocuvex Therapeutics and are in the process of qualifying alternate third-party sites for the finished product manufacturing.

Outlook

SPARCs strategy is anchored on a differentiated, innovation-led

approach designed to drive long-term value creation through

focused scientific investments and disciplined capital deployment.

The key pillars of this strategy include

• Modular biologics platforms with "plug-and-play" capabilities in oncology, enabling rapid target integration, flexible combination approaches, and scalable development pathways. Importantly, the Companys pipeline is increasingly aligned with global value drivers in biopharma, including targeted biologics, precision oncology, and next- generation combination therapies—areas that continue to attract strong industry and investor interest.

• Targeting synthetic lethality strategy aimed at addressing key drivers of PARP resistance, a well-recognized and commercially relevant challenge in oncology. By targeting resistance pathways, the Company is positioning its assets within a high-demand segment that complements existing standards of care and offers expansion into resistant patient populations. ^•

• The third strategic pillar centres on dermatology and autoimmune disorders driven by CD8+ T-cells, where current treatment options are largely limited to oral or topical JAK inhibitors. Leveraging emerging biological insights, SPARC aims to develop safer topical biologics and explore

mechanistically independent combination approaches that can deliver differentiated efficacy and improved safety.

From a financial standpoint, SPARC has strengthened its position through the receipt of non-dilutive capital via the sale of its Priority Review Voucher (PRV), enhancing balance sheet flexibility while minimizing shareholder dilution. The Company remains committed to prudent financial management, with a continued focus on cost discipline, active expense monitoring, and prioritization of high- return investments.

SPARC has taken steps to optimize its cost structure. A key driver of our total fixed cost is the manpower cost. SPARC has rationalized its US footprint and streamlined operations to reduce redundancy to optimise the manpower cost. In parallel, SPARC consolidated its lab network, reducing the number of lab centres from four to two.

Overall, SPARCs strategy reflects a balanced approach, combining platform scalability, targeted innovation in globally relevant therapeutic areas, and financial discipline. With a pipeline aligned to industry priorities and a flexible partnering mindset, the Company is well positioned to enhance strategic optionality and deliver sustainable long-term returns for shareholders.

Human Resource Strategy

The cornerstone of SPARCs capabilities continues to be its highly skilled and committed workforce, underpinned by a culture of innovation, collaboration, and excellence. Over the past year, the Company has remained focused on fostering a progressive and inclusive environment that attracts, develops, and retains top- tier talent, while ensuring strong alignment between its people strategy and evolving business priorities.

The Human Resources function has actively benchmarked industry best practices in talent management, learning and development, and employee engagement to build a resilient and future-ready organization. Strategic partnerships with leading academic institutions, coupled with targeted training and development initiatives, have enabled employees to strengthen critical capabilities required to advance SPARCs scientific and research objectives.

As of March 31, 2026, SPARC had a dedicated workforce of 279 employees, with approximately 85% comprising scientists, reflecting the Companys strong research-driven foundation. Looking ahead, SPARC will continue to invest in nurturing high- potential talent, leveraging advanced digital tools to enhance talent management, and fostering a performance-driven culture that encourages creativity, agility, and sustained excellence across the organization.

Risks and Concerns

Engaging in pharmaceutical R&D involves navigating a landscape characterized by inherent uncertainty and complexity. The pursuit of breakthrough innovation requires exploring novel scientific pathways, often accompanied by significant development and execution risks. As a research-driven organization, SPARC faces challenges including variability in clinical outcomes, evolving

and increasingly stringent regulatory requirements, and the scientific intricacies involved in discovering and advancing novel therapeutic candidates.

In addition, the Company operates in a highly dynamic environment where success depends on strong intellectual property protection, the ability to keep pace with rapid technological advancements, and responsiveness to shifting global regulatory and policy frameworks. Financial sustainability remains closely linked to the progress and outcomes of research programs, which can be influenced by external macroeconomic factors such as currency movements, interest rate fluctuations, and geopolitical developments. Operational risks, including potential supply chain disruptions affecting the availability of critical materials and specialized equipment, may also impact development timelines.

To address these challenges, SPARC has implemented a robust and proactive risk management framework focused on resilience, agility, and strategic foresight. The Company emphasizes disciplined portfolio prioritization, strategic collaborations, and continuous capability building to mitigate risks while maintaining momentum across its programs. By embedding risk awareness into decision-making and equipping teams with the tools to anticipate and respond effectively, SPARC remains well positioned to navigate uncertainties while advancing its mission of delivering impactful scientific innovation.

Internal Control Systems and their Adequacy

At SPARC, we remain firmly committed to the highest standards of ethics, integrity, and transparency, reflecting our responsibility to patients, investors, and broader stakeholders. Our internal

control framework is designed to support efficient and reliable operations, while ensuring full compliance with applicable laws and regulations, particularly those governing intellectual property, asset protection, and financial integrity.

The Company places strong emphasis on accurate financial reporting and continuously refines its internal policies to align with evolving business requirements and regulatory expectations. These efforts strengthen organizational resilience and enable informed decision-making. Our control environment is further reinforced through rigorous internal audits and independent reviews, ensuring a robust, dynamic, and accountable governance structure that supports sustainable long-term growth.

Disclaimer

The MD&A contains forward-looking statements that reflect the Companys current views and expectations with respect to future events and financial performance. These statements are based on certain assumptions and are subject to risks, uncertainties, and changes in circumstances, many of which are beyond the Companys control. Actual results, performance, or achievements may differ materially from those expressed or implied due to various factors, including but not limited to economic conditions, regulatory changes, and technological developments. The Company does not undertake any obligation to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are advised to exercise caution and not place undue reliance on these statements while making investment or business decisions. The information contained herein should not be construed as professional advice and is subject to change without notice.