Sun Pharma Advanced Research Company Limited (SPARC.NS) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen, and thank you for joining us today for our call on updating you all about the NDA that we filed for Taclantis with USFDA. Our CEO, Mr. Anil Raghavan, will be providing the update. Before I hand it over to him, I would like to remind you that our discussion today may include forward-looking statements that are subject to risks and uncertainties associated with our business that could cause actual results to differ from the details that we'll be sharing during the discussion today. I now hand it over to Mr. Anil Raghavan to provide an update on the NDA that we filed. Over to you, sir.

Thank you so much, Jaydeep, for the introduction. Hello, everyone, and thank you all so much for taking the time for this call today. I'm joined today by several members of the SPARC's management team, along with the Taclantis development group. We're always encouraged by the active engagement of our investor community. I'm looking forward to a productive conversation today as well. We had informed the stock exchange about the receipt of a complete response letter for Taclantis. Needless to say, we are extremely disappointed with this outcome. At the time of the announcement, we were still in the process of reviewing the complete response letter. Hence, we couldn't provide additional background information at that point. However, we think it is important to share the details of the complete response letter, its potential impact on the development path for PICS as well as our cash flows and our plans going forward. I'll keep this very brief so that we get sufficient time to answer all the questions. Let me start by providing you some more information on the development path that we pursued for Taclantis. We had alignment with the agency on registering Taclantis through a 505(b)(2) pathway using a clinical bioequivalence study against Abraxane. We completed the pivotal bioequivalence study demonstrating Taclantis to be bioequivalent to Abraxane on all parameters evaluated. That's free paclitaxel and bound paclitaxel. USFDA has acknowledged the bioequivalence. However, additional detail were sought to be included in the dossier. I'll discuss some of the important data elements requested by the FDA beginning with the details regarding CMC. On the CMC front, the main concern that FDA has centered around the variability of the particle size distribution of the nanoparticles in the PICS admixture and its likely impact on clinical functionality. We have provided additional data to address these concerns. And the second set of questions are on the clinical and statistical information. There are 2 major factors here. One, the USFDA noted that there was a difference in the activity of PICS when compared with Abraxane in a previously conducted Phase II study, and that the reason for this difference is unclear. The USFDA also noted that the additional data is required to demonstrate that the infusion admixture procedure is reliably reproducible and it can be consistently followed by health care professionals. I would also like to talk about our next steps for Taclantis. Post receipt of the CRL, the team is working diligently on the response to be provided to the USFDA. I'm pleased to share that we are sharing our plan for providing additional data to the agency soon, and we'll request a meeting with the USFDA. The meeting is likely to be scheduled during the early part of first quarter of financial year '21. And the agency's alignment on the responses during our meeting will confirm the path ahead for the program. As part of the NDA review process and prior to receipt of the CRL, we had discussed with USFDA a plan to address concerns regarding particle size distribution and variability. In this plan, which is still under review with the agency, we had proposed to conduct a confirmatory bioequivalence study in India. During the upcoming meeting with the agency, we would like to understand if the proposed study will be sufficient to address the agency's concerns. We have been working in parallel to start the study as soon as we get concurrence with the USFDA. The protocol for the proposed study is being submitted to the DCGI this week, and the study start-up activities are in progress. We expect the in-life portion of the study to be approximately of 2 months' duration and plan to be able to resubmit the PICS application by the second half of FY '21. Simultaneously, we are collecting other pieces of data that FDA has requested. We also plan to seek FDA's feedback on -- the query based on -- raised on the Phase II study during our meeting to better understand its implications and path forward. From a cash flow standpoint, an outcome like this will certainly delay the expected cash flow associated with commercialization of Taclantis. We will get a better sense of the actual impact once we get feedback from USFDA. As I mentioned, receiving the CRL is sadly a setback for all of us. While it is indeed [indiscernible], we will realize -- we also realize that this is the nature of our business. We need to stay focused and execute on our priorities. Thank you very much for your time today, and we look forward to your continued support. We will now open the call for Q&A.

[Operator Instructions] The first question is from the line of Ketan Gandhi from Gandhi Securities.

Sir, what is the risk of losing Taclantis as a product opportunity?

That's a difficult question at the moment. I mean the issue that they raised both in terms of particle size distribution and its variability and its impact on the clinical parameters, we believe, is addressable. I mean, as you know, the critical opportunity point for this program is the opening up of the pancreatic cancer indication of Abraxane, which is slated for end of financial year '21. So our hope is that we will be able to turn around the program by then. And if that happens, the opportunity stays intact. But the upcoming meeting with the FDA, which we believe can happen in the April time frame, will give us a lot more clarity in terms of specifically what is required or whether the FDA is comfortable with what we have proposed as specific next steps.

[Operator Instructions] The next question is from the line of Manish Jain from GormalOne.

Yes. Anil, just wanted to know, let's say, all goes as per plan and FDA agrees to your plan and you submit within 2 months. What is the time line of approval? And post approval, how much time for you to launch the product in the market?

Well, I think -- first of all, thank you, Manish, for the question. I think the plan that we have proposed to FDA is not executed within 2 months' time frame, and it requires the confirmatory bioequivalence study, which demonstrates that bioequivalence stays intact across a range of particle sizes of the admixture. Our hope is that we will be able to get back in queue by mid-financial year '21, which means that the [ vertical ] maximum for review is 6 months for a submission like this. So we will be able to get to an approval towards the end of the -- late second half -- or third -- fourth quarter of financial year '21. And if there is clarity in terms of specifically what needs to be done, I think the licensing interest would stay. I mean we have had multiple opportunities going into this PDUFA date. So if you have executable clarity coming out of the meeting in April, we will be able to plan ahead with a potential commercialization partner to accelerate the market entry for that. But as I said, a lot will depend on how this discussion with the FDA goes in April.

Fair enough. And second thing is, frankly, whilst going into 2023, you have authorized generics coming in. But actually, do you still believe that even if there is a risk of authorized generics coming in, this product still has significant value for you all?

That is certainly the case. I mean, if you look at a product like PICS, I mean, it is a very complex program. So the number of generic options in the market, we expect it to be limited. And we have seen this in other complex programs like [indiscernible], for example. So our sense is that there is definitely a residual opportunity. And If we go ahead with this launch as planned in end of FY '21 or first quarter of FY '22, PICS has the opportunity to be the only marketed product in the market post '22. And that's also -- can create significant [indiscernible] value. So I agree with you that post [indiscernible], we will continue to see an opportunity space for this program.

[Operator Instructions] The next question is from the line of Pinkesh Jain from Way2Wealth.

I have a question that -- so given that our annual R&D cost is increasing to the tune of INR 300 crores to INR 350 crores. So how are we planning to fund it given this unexpected setback? And also how much cash currently we have, sir, as of today?

So just let me first address the first part of the question. I mean this, clearly, forces us to rethink our funding options. I mean, at the -- we're going into the PDUFA of PICS, this was a significant cash even for us. With that taken out, if you look at our clinical pipeline, we have a significant number of early to mid-clinical opportunities. And we have been pursuing a strategy of staying with the program to the extent possible as we go towards late-stage clinical program. But this will force us to kind of exit one or any of our early-stage clinical programs. Our current cash balance is to the tune of INR 25 crores, INR 30 crores. This means that going into first half of next year, we may probably need to look at additional early licensing options or external fund institution. So that's -- we're evaluating our options at the moment, and we will have clarity about a specific path that we want to pursue towards the end of this year.

Okay. So can you throw some more light on what kind of early licensing we will be looking at and which will be the molecules or something?

Unfortunately, I won't be able to be any more specific than I did at this time. I mean if you look at -- if you're familiar with our clinical portfolio, there are 4 late-stage -- I mean, clinical-stage assets in our NCE pipeline, 7 or 6 in CML and the Parkinson's disease program. There's a fairly large program in immunology, where we have multiple indications like psoriasis, atopic dermatitis, et cetera, for a compound called SCD-044. And we have an oral selective estrogen receptor degrader, which we have IND-ed recently. And when I talk about potential early licensing options, I'm talking about compounds from this class. And we will be opportunistic, and we will also look to retain the higher-value component of the late-stage and higher-value components of this portfolio. So at the moment, it is premature for me to talk about a specific program as the licensing target.

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

Anil, what's the time frame you said you'll be meeting FDA? First quarter of fiscal '21?

Correct, yes. So we have a Type A meeting, Sameer. Type A meeting is the shortest lead time. Usually, you will get a meeting from a month of the request. And we're almost ready with the meeting request. So we expect to have this meeting sometime in the April time frame.

Okay. And you said that all going well, you should be able to resubmit the dossier by second half fiscal '21?

Yes, that's a conservative time frame. I mean, we are -- we had a proposal already under review with the FDA, and we will discuss that in-person during this Type A meeting. And if all goes well, then we will be in a position to complete that by mid-next year.

Okay. And Anil, I'm just wondering, so did the clinical trials meet the end points? But here, the issue is slightly different that whether because of variability of the particle distribution, whether that data will be supported or not? So is that what it is?

I think that is broadly correct. Let me -- I can go through that one more time. See the agreement with the agency on the pivotal study was that we will demonstrate bioequivalence with Abraxane. And that was the primary end point that we were seeking for the registration study. And we did meet the bioequivalence with Abraxane, both for free paclitaxel as well as bound paclitaxel. That is the total and free. So in that sense, the study actually did meet the agreed end points with the FDA. But there were a couple of additional points. The FDA wanted us to provide a pooled analysis of all the particle size distribution data from the life of the program, so it goes back to very early stages. So what we have done is we have improved our particle size distribution, variability over the years. So when we look at our pooled analysis, it will reflect on the larger variability early on, and then it will average out over a longer period of time, which will show a higher distribution and variability than the current distribution and variability the product has. And the FDA has read that with one of the earlier pilot studies. This pilot study was done almost in 2010 time frame. And at that time, we were looking at the clinical performance of the program. And that was an [ underprovision ] study from a sample size standpoint. And Abraxane had an exaggerated response in that study. When I say exaggerated response. Abraxane registrational studies has a response of ORR of around 30% to 35%. And in that study, we had a response of more than 45%, which is primarily because of the small sample size and also some issues in terms of the actual patients going into different arms of that study. So FDA is raising this question that has that something to do with the variability in particle size. So that means that there may be a need for a confirmatory study, and that is the conversation that we are having with the FDA.

Okay. I'm just wondering, and sorry to belabor on this, Anil, that just to save company's hardship, I mean, could -- at the time of preclinical, which is at the time of clinical design stage, could some of this not have been eliminated or thought through both by you or the FDA?

Well. So let me go back. I mean our option going into conversations about a registrational leg of this program, we had 2 options. One is doing a full clinical program and pursuing a bioequivalence pathway. I mean we do not believe that PICS opportunity actually existed. It just needed to go through a full clinical program, which is a fully powered clinical program, which could have addressed some of the issues from this 2010 study. And we believe that the bioequivalence -- clinical bioequivalence in a fully powered study do address the concern because the provision of this data from 2010 was to support the safety of the product, not efficacy. It was not designed to read into efficacy of the program. So we don't believe within the SPARC team that we are getting -- as a group, we are getting into the right -- getting into right conclusions based on that study. And we shared that data during the consultation with the FDA, and the FDA agreed to bioequivalence of the registrational strategy, knowing that this study existed. So I'm not sure what else we could have done at that point. But as they say, many of these things are actually matters of review and result in this kind of back and forth. I'm not particularly convinced that we could have avoided this by designing the bioequivalence study in any other way because the bioequivalence data, if you look at it, it's probably the cleanest possible data set that we can have in terms of its tightness of equivalence.

Okay. Great. Anil, that's very clear. Just one final one. Have you launched this product anywhere in any emerging market, India or anywhere else?

In India, we have launched this product.

Okay. And could you use some of the data to help accelerate or commence FDA? Or that is totally out of reach?

So we -- all the data from India development also is part of the submission. So both the bioequivalence studies and all the pilot studies that we have done, India registrational studies, everything is part of the submission.

If you don't mind, how many patient exposures have you had here in India over the time period?

In terms of post-marketing exposure?

I mean, since your launch, the commercial exposure, I guess?

I have to come back to you on a specific number because it has been in the market for, like, more than a couple of years now. So I need to come back to you with a specific number.

And like a few thousand patients or less or more?

Sure. For sure.

The next question is from the line of Vibha Ravi from Scrip Intelligence.

I just wanted to confirm this time line you had given that within which you expect approval. So is it the second half of FY '21 or latest by Q3?

Second half of FY '21 is our best hope at the moment. That's right.

Okay. Okay. And who are you having licensing talks with apart presumably from DRL?

Well, we don't have a licensing conversation with DRL. We have a couple of other options which we are pursuing, but we haven't disclosed these potential partners into the market at the moment. So...

[Operator Instructions] The next question is from the line of Pinkesh Jain from Way2Wealth.

Yes. So sir, just was thinking about this external funding for our R&D pipeline. So what will be our various ways to get this? And I mean, will we be looking at bank borrowings or some equity raising, something?

No, as I said, we have a process of evaluating our options and our options include early licensing of assets, particularly NCE assets and additional equity raise, and we are not looking at raising debt at the moment.

[Operator Instructions] The next question is from the line of [ Hiten Boricha ] from Sequent Investments.

Sir, you mentioned this product is already launched in India. So I just wanted to understand what would be the market size of this product?

So the -- currently, when you look at India market, there was a time when Abraxane was launched in India, and then they withdrew the product from the market. But during that time, we had several formulations of paclitaxel, which were either albumin-bound or different formulations, which were albumin-free or lipid-containing formulations. So when the Abraxane was in the market, the value of the market was very high essentially because of the pricing. That took -- when the Abraxane was taken off the market, value eroded. And then paclitaxel was also brought under the price control by the government. That has further reduced the market. So when you look at the value market today, it's relatively small. But the volume -- when you talk about the volume trends, it's amongst one of the highest prescribed chemotherapeutic agents in India.

[Operator Instructions] The next question is from the line of Damayanti Kerai from HSBC.

Sir, what is the reason for withdrawing it from the market in India?

So we don't know why Abraxane withdrew it from the market. We don't have the -- our product is still available and commercialized in India.

Okay. Your product is still available. And in near to medium term, are we looking at other markets where we can launch it?

Yes. So we have -- I'm sure you have followed the previous announcements. We have already licensed the rights of this program to one of our partners in China. So that we are pursuing. And independently, outside of these 2 territories, we are also in discussion with others for specific geography, specific licensing in the emerging markets as well.

Okay. But for regulated market, say, like U.S., obviously will be working again. But what about European opportunity? Are we looking for -- conducting some studies there?

So when you talk about these regulated markets, our expectation was the U.S. dossier that we filed would be sufficient or would largely be sufficient. We may -- would have required small bridging studies for complying with the European regulations. However, we have not taken any formal advice from the agency. Our expectation was to first launch this program in U.S. and then go to the other markets. So we haven't done an analysis or feedback from any of the regulatory agencies -- regulated countries, I would say.

The next question is from the line of Manish Jain from GormalOne.

I just wanted to know in terms of CMC issues, which you mentioned, are there any issues related to Halol plant where you all were going to make the product?

So on the CMC component, I mean there are 2 partners involved. One is South Korea-based API manufacturer, and Halol from a finished good manufacturing standpoint. And we know that FDA had preapproval audits of both facilities. We had certain communications from the Korean partner about some observations with their handling. We don't have any communication from Halol -- I mean from Sun Pharma about any potential observations related to PICN.

Perfect. And moving on to -- during the time, which you are engaging with FDA in U.S., does the application in China move ahead? Or the non-approval in U.S. will increase the requirements for filing and registration in China?

So our Chinese partner is currently in talks with the Chinese FDA. And we do not know the answer to that question at this point. We believe that a bridging study may be sufficient in China, but a conclusive response to that question would require confirmation from USFDA.

Because similarly, even Japan is a pretty nice market for you all. So my next question was on Japan as to when would you start looking at Japan, given that if the U.S. is going to take a little longer than your earlier anticipated time?

Well, we -- there are -- we are exploring the Japanese market at this point, but we do not have specific opportunities. And going into the PDUFA date, our expectation was that getting a U.S. approval would be a significant trigger. I mean this was based on conversations that we had with a potential Japanese player. So our priority would stay getting this through the USFDA, and we will continue to engage the Japanese -- potential Japanese player. And as you said, that's an interesting opportunity, and we will definitely keep that as a focus.

[Operator Instructions] The next question is from the line of Harith Ahamed from Spark Capital.

In the context of this setback and maybe also in the context of what you have seen with some of your other 505(b)(2) assets, which have been approved, are there any broader takeaways regarding the 505(b)(2) as an innovation strategy versus, let's say, NCE development from scratch?

Well, there is -- I mean, if you follow us in the last couple of years, there is definitely a rethinking of the incremental innovation space. And that's not driven by our successes or failures in the 505(b)(2) space. We had our share of success. And we also had, certainly sad, a couple of setbacks like baclofen and now the delays with the PICS program. But outside of that, I mean, the reason for re-rating 505(b)(2) opportunities or incremental innovation opportunities is largely the changing market outlook towards incremental innovation, especially the payer attitude towards incremental innovation in larger markets, especially the U.S. market. So we believe that the burden of evidence on the 505(b)(2) opportunities is becoming increasingly comparable to the burden of evidence of NCE programs. And at the same time, potential payer receptiveness of these programs are going down substantially because of the perceived value of the 505(b)(2) kind of value proposition are essentially going down. So in that sense, we consider it to be, in many cases, an opportunity cost, given the other higher value and comparable investment opportunities in the NCE space. So in that sense, if you look at the composition of SPARC's portfolio, over the last 2, 3 years, we have a significant shift towards fewer NCE programs. And that, we believe, is going to be a definitive turn for us.

[Operator Instructions] The next question is from the line of Vibha from Scrip Intelligence.

I just want to know, is there -- do you think that the size of the opportunity will diminish given that companies like Hanmi are planning to submit for their [indiscernible] drug using the same molecule in H1? And second is also, are there any safety concerns given that some research -- new research has linked its use, [indiscernible] to increase risk of lower leg amputation?

No. So I think the first part of the question was addressed by Anil where we still feel that the opportunity exists for this program and there is a lot of residual value even after the available of generics. With regards to the second part of the question that you mentioned on the safety, we haven't observed any additional safety challenges or any different safety issues with our formulation compared to what has been reported with Abraxane.

Okay. And the earlier question that I had asked, that was not DRL. I was asking if you had any kind of understanding with Sun Pharma on taking this molecule forward in commercialization?

No, we don't have an understanding with Sun Pharma.

[Operator Instructions] The next question is from the line of Vibha Ravi from Scrip Intelligence.

So I just wanted to know what is your spending on this molecule so far? Anil spoke about raising funds probably or disposing of early-stage assets. So how much more do you expect to spend on -- going forward before commercialization?

Well, our need for -- our additional fund raise is not driven by what we need to spend on PICS going forward. I do not expect it to be a substantial investment going forward because there is only a certain level of investment which makes sense in an opportunity like this. But our requirement for raising additional funds are driven by 4 clinical-stage NCE programs, which is going to consume a significant level of resources going forward. And as you may know, we have a registrational pivotal study in CML -- in refractory CML for our lead program, which is currently accruing. We have a large Phase II and an investigator-led trial for the same compound in Parkinson's disease and Lewy body dementia. And we have multiple Phase IIs planned for SCD-044, which we bought out from Bioproject last year. And now this early-stage clinical program in metastatic breast cancer with ER-120. So these programs going into financial year '21 and '22. will consume significant level of resources. So our need to raise additional money, either through really exit of some of these programs or through additional equity raise, is driven by the requirements of these programs, not incremental investments that we need to make for PICS.

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Anil Raghavan for closing comments.

Thank you so much. Thank you so much for a very engaging conversation as always. And we -- while at one level, we are disappointed by this outcome, we are still hopeful that we can have a viable path forward for this program while the opportunity is still available and feasible. We will keep you posted as we make progress with the FDA. Thank you so much for your time.