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

Good evening, dear members. I, Dinesh Lahoti, Company Secretary and Compliance Officer, welcome all the members, Mr. Dilip Shanghvi, Chairman; and other Board members of the company at the 16th Annual General Meeting of Sun Pharma Advanced Research Company Limited. In compliance with circulars issued by the Ministry of Corporate Affairs and Securities and Exchange Board of India, from time to time, this meeting is being conducted through video conferencing and other audio visual means. For the benefit of all, let me introduce to you to the directors who have joined this meeting. Mr. Dilip Sanghvi, Chairman of the company, he's attending this meeting from [indiscernible]; Mr. Sudhir Valia, Non-Executive Director, he is attending this meeting from Mumbai; Ms. Bhavna Doshi, Independent Director and Chairperson of Audit Committee, she is attending this meeting from [indiscernible]; Dr. T. Rajamannar, Non-Executive Director and Chairman of Stakeholders Relationship Committee of the company, he is attending this meeting from Vadodara; Dr. Ferzaan Engineer, Independent Director and Chairman of the Nomination and Remuneration Committee, he is attending this meeting from Bengaluru; Dr. Robert Spiegel, Independent Director, he is attending this meeting from New Jersey. So all the directors of the company are present at this area. Apart from the directors, Mr. Anil Raghavan, Chief Executive Officer; and Mr. Chetan Rajpara, Chief Financial Officer, have also joined this meeting. Mr. Anil has joined from Vadodara and Mr. Chetan has joined from Mumbai. Representatives from SRBC & Co LLP, statutory auditors of the company; and from KJP & Company LLP, secretary auditors of the company have also joined this meeting. All the members attending this meeting to video conferencing are being placed on mute by default to avoid any background noise. Those members who have registered to speak at the meeting will be given an opportunity to speak and express their views after all the resolution as per the notice of AGM has been placed. In case the shareholders [indiscernible] chance to speak. The members who speak are requested to express their views within a time limit of 3 minutes. Members who have not registered themselves as speakers, but have any queries may write to the company, and we all stably reply to them in due goals. With that, I now hand over to our Chairman, Mr. Dilip Shanghvi. Dilip sir, over to you.

Dear members, good evening. I hope you all are safe and doing well. I welcome you all to the 16th Annual General Meeting of the company, which is being conducted through video conferencing or other audio/video means. I also welcome my colleagues on the Board. The requisite quorum being present, I call this meeting to the order. The company has taken adequate and feasible steps to enable members to participate in the meeting through video conferencing and to cast their vote by electronic means. The company has appointed Central Depository Services India Limited to provide the facility of videoconferencing and e-voting. All the books, registers and records required under the Companies Act, 2013 and other applicable laws and documents referred to in the notice of the 16th Annual General Meeting are available for inspection electronically during the meeting. I would like to inform the members that if at any time during the meeting due to technical issue, the connection from my side is interrupted, Mrs. Bhavna Doshi, Director, will chair the meeting until my connection is restored. In case Mrs. Doshi's connection is also interrupted at that time. Dr. Rajamannar, Director, will chair the meeting. The notice of the meeting, along with the annual report of the company for the financial year 2021, has already been e-mailed to the members whose e-mail ID were available. And with your permission, I shall take the notice of the 16th Annual General Meeting as read. Since there are no qualifications, observations or comments on financial transactions or matters which have any adverse effect on the functioning of the company mentioned in the auditor's report and the secretary audit of the report as specified under Section 145 of the Companies Act, 2013. The same are not required to be read at the meeting. Dear shareholders. On behalf of the Board of Directors, I welcome you all to the 16th AGM of our company. I thank you all for taking the time for attending the AGM today. Similar to last time, this meeting is hosted virtually due to COVID-19-related restrictions. I sincerely hope you and your family are safe and healthy in these difficult times. I would like to begin by taking a moment to recognize the tremendous global effort in responding to this unprecedented challenge. Although we've not fully recovered from the pandemic, the availability of vaccines may allow gradual restoration of normalcy. The global pharma industry faced significant operational disruption as a result of lockdowns imposed by the governments across the world. The major impact was due to the stoppage of manufacturing activity, supply chain disruption and slow patient recruitment in ongoing clinical trials. The industry responded with great resilience and ensured that the operations are not impacted for long. This is evident by the fact that the year 2020 saw second highest number of drug approvals in the last 2 decades. While the increases was on COVID-19 vaccines and therapeutics, the U.S. FDA kept up its intense pace of new drug approvals in 2020 and approved 93 new products. Your company was also impacted by the interruptions caused by the pandemic. During lockdowns, the lab operations were affected. The patient recruitment in ongoing trials was slowed down. However, SPARC quickly adopted to the changing environment and took measures to ensure smooth functioning of our labs and offices once the lockdown measures were eased. Our industry's fundamentals remain strong and exciting. We saw continued acceleration of scientific innovation, [indiscernible] activity and robust funding across geographies in the biopharma sector. This trajectory driven by deeper understanding of disease processes in major therapeutic areas and resolution of drug development challenges related to several promising new modalities, like RNA therapeutics, gene and cell therapies, antibody drug conjugates, et cetera, promises significant improvements in the standard of care in many difficult-to-treat diseases. The macro trend, offering important backdrop to this transformation, is the accelerated digitization of the broader health care space, which is expected to shape the future of our industry. While digitization is changing commercial models and health care delivery in significant ways, its impact on research and development is deep and far reaching. Application of novel gene editing technologies, high resolution microscopy and artificial intelligence is revolutionizing drug discovery, asset development and translation. New types of clinical trial designs and execution, collaborations are reshaping later stages of drug development. Novel strategies and technologies, including real-world dividends, platform trials, virtualization of clinical tax testing and advanced analytics can help organizations succeed in the new regulatory environment, compressed timelines and offer new clinical and commercial insights. In a nutshell, the research-based pharmaceutical industry is entering into an exciting new era in therapeutics development, changing the old models of drug development to take advantage of a new wave of scientific breakthroughs will be the way forward for the industry to sustain its growth curve. SPARC has taken significant steps to take note of the forces reshaping our industry to be competitive in the emerging new health landscape. As a result, our portfolio is emerging as a balanced multi-model mix of novel and validated biology with several first-in-class opportunities. Let me now move on to reviewing the performance of SPARC during the previous year. The year 2021 started with a lot of uncertainty due to COVID-19. However, SPARC was quick to announce a hybrid model several steps were taken to ensure that 2 modest -- 2 most important aspects of our businesses. That is the lab operation and patient recruitment in ongoing clinical studies were not compromised. Let me share updates of the assets under clinical development stage, starting with the NDDS programs. SPARC out licensed the U.S. commercialization rights of Elepsia XR to Tripoint Therapeutics, and the product is now commercialized by Tripoint team. The pivotal study of both our ophthalmology assets, that is once-a-day formulation of Brimonidine and twice a day difluprednate formulations, laid out positively, providing validation to the underlying proprietary technology used for developing these programs. SPARC is in the process of filing NDAs of both the products and also in discussion with potential partners for out-licensing the commercialization rights. During the year, SPARC consulted and agreed with U.S. FDA for path forward for the NDA filing of its novel formulation of[indiscernible]. We are working towards completing the studies necessary to support the filing. While all the late-stage pipeline assets had positive outcomes, the feedback on Taclantis from U.S. FDA under formal dispute resolution process was not in favor of SPARC. U.S. FDA acknowledged that the data generated from the BE study, however, it maintains that SPARC should conduct a Phase III study in metastatic breast cancer patients in order to obtain regulatory approvals for Taclantis. SPARC believes that conducting a new Phase III study would make the program commercially unviable. Hence, SPARC has prioritized the development of for the U.S. market. Our clinical NCE assets also made progress in one of the key milestones achieved during the year was out-licensing the global rates of SCD-044 to some Pharmaceutical Industries Limited. The transaction is of importance as this was the first NCE licensed by Spark since inception. The pivotal study of SCO-088, a chronic myelogenous leukemia, PROS study in early-stage Parkinson's disease and the Lewy-body dementia, POC study, for SCC-138 and Phase I study SCO -- 120 continue to actively recruit patients. The recruitment rate was impacted due to COVID-19 associated lockdowns imposed in most of the part of the world last year. After the lockdown measures were is the recruitment rate has picked up for the ongoing studies. Over 30% of the planned patients are randomized under PRO 6 study, and patient enrollment is expected to be completed by 2022. Similarly, for SCO-088, the remedial steps have been taken to increase the patient recruitment on the pivotal study, the SPARC expects to complete the study by FY '24. Single ascending dose portion in healthy volume in SCO-120 was completed in the previous year. Currently, the study is enrolling healthy volumes in multiple ascending dose study portion of the study. We are looking forward to SFT accelerating patient accrual in these important trials this year as health care systems slowly move towards a new post-COVID normal. Let me briefly touch upon SPARC's continued portfolio evaluation and near-term objective. Spark has completed its pipeline transition from a 505(b)2 focused R&D portfolio to a significantly more innovative and balanced mix of NCEs and NDEs. During this evolution, SPARC validated its operating model with several successful market authorizations and commercial partnerships in multiple geographies. In near term, we will remain focused on achieving clinical milestones for our important NCE assets while advancing additional high-value assets to clinical testing. Successful readouts from these studies will establish human proof of concept and can generate important value inflection points for SPARC. As you know, your company recently completed a fund raise of USD 150 million by way of fresh equity issuance to meet the expenses over the next 2, 3 years. As we continue our transition towards developing novel treatment modalities, we need to build our capabilities to successfully prosecute more complex and innovative programs. Costs associated with development of such novel treatments will also be higher compared to our historical costs to meet the cash requirements for funding the development of our future programs, we will continue to evaluate our options to raise additional capital. Finally, before we close, I would like to reaffirm our commitment to maintaining highest standards of corporate governance, compliance and sustainability practices. We have come a long way in a business with long gestation periods and high failure risk. We wouldn't have reached here without your banking at every step of the way. We look forward to your continued support as we pursue our vision to build a purposeful institution developing truly innovative therapeutics to move the standards of care for patients across the world. Let me also thank our employees who have ensured business continuity despite the multiple disruptions resulting from COVID-19 pandemic and our Board of Directors for their guidance and support in these uncertain times. On behalf of the Board, I thank you all for joining today. As the members are aware that as per the requirement of the [indiscernible] listing regulation 2015 and Companies Act, 2013, remote e-voting facility was made available from 26 September till 2021 till 28th September 2021 to the members to cast their vote on each of the resolution as set out in the notice for this meeting. Mr. Alpeshkumar Panja, partner of KGB & Company LLP; and failing him, Mr. Chintan Goswami, partner of KJB & Company LLP, practicing company secretaries Mumbai, has been appointed as the scrutinizer for e-voting process. I shall now read the resolutions for the item set out as ordinary business in the notice of this Annual General Meeting. Item #1 is to receive consider and adopt the audited financial statements of the company for the financial year ended March 31, 2021, and the reports of the Board of Directors and auditors thereon. Resolved that the audited financial statements of the company for the year ended March 31, 2021, along with reports of the Board of Directors and auditors thereon be and are hereby received, considered and adopted. The safe resolution is put before the members of the company for their approval in accordance with the requirement under Section 129 of the Companies Act, 2013. Since the resolution #2 pertains to business in which I may deem to be interested I request Mrs. Bhawana Doshi to kindly chair the meeting for the said item.

Thank you, Dilip. Item #2 is to appoint Mr. Sudhir V. Valia, who retires by rotation and being eligible has offered himself for her appointment as Director. The resolution is to resolve that Mr. Sudhir V. Valia having Director identification number, 00005561, who retires by rotation under Section 152 of the Companies Act, 2013 and being eligible offers himself for reappointment, is hereby reappointed as a Director of the company liable to retire by rotation. In terms of Section 152 of the Companies Act, 2013, Mr. Sudhir V. Valia retires by rotation by virtue of being longest in office and being eligible offers himself for reappointment. In view of his immense contribution during the past 10 years, as Director of the company, the Board recommends his reappointment for your approval. I now hand over the proceedings back to our Chairman, Mr. Dilip Shanghvi.

Thank you, Bhavna [Foreign Language]. I now proceed to the special business item. The items listed under special businesses are Item #3, to approve the appointment and remuneration of Mr. Anilkumar Raghavan, as the Manager and whole time managerial personnel of the company designated as Chief Executive Officer has a special resolution. Since the resolution number 4 to 7 pertains to businesses in which I may deem to be interested, I again request Mrs. Bhawana Doshi to kindly chair the meeting for these items.

Thank you, Dilip. Item #4 relates -- requires is for ratification and approval of line of credit of [indiscernible] from Sandeep Private Limited as an ordinary resolution. Item #5 is to approve continuation of transactions with Sun Pharmaceutical industries in U.S.A. and the master license agreement as an ordinary resolution. Item #6 is to approve continuation of transactions with Sun Pharma Global FZE UAE under master service agreement as an ordinary desertion. Item #7 is to approve continuation of transactions with Taro Pharmaceutical Industries Limited, Israel, under master support service agreement as an ordinary resolution. I now hand over the proceedings back to our Chairman, Mr. Dilip Shanghvi.

Thank you, Bhavna [Foreign Language]. Item #8, to approve raising of funds through equity shares, convertible warrants, reference shares, bonds, debentures, any other instruments, whether convertible into equity or not, American depositary receipts, global depository receipts, foreign currency convertible bonds, et cetera, is enabling special resolution. Item #9, to approve increase the authorized share capital of the company as an ordinary resolution. Since the resolution for all the special business items, along with explanatory statements are already provided in the notice of the 16th Annual General Meeting, they are not being down. Now we will take up questions from shareholders who have registered to speak. We will answer the questions put before the meeting. After all speakers have asked their questions. We shall now call out the names of the members who have registered themselves as the speakers one by one.

Moderator, if you can unmute Mr. Yusuf Rangwala, who is the speaker #1 for this meeting.

I'm speaking from Mumbai. Sir, my name is so Yusuf Rangwala. I am -- Dilip Shanghvi [Foreign Language] respected dynamic Chairman, [Foreign Language] young, handsome [Foreign Language], now presently, it is open. Sir, I pray to God, and coming here, [Foreign Language] possibility [Foreign Language] main competitor [Foreign Language]? [Foreign Language], sir. Nothing more to add.

Thank you, Rangwala Jee. Second speaker for the meeting is Mr. Hardik Jain, request moderator to unmute Mr. Hardik Jain. Okay. Thank you. So we can move on to the next speaker, which is Ms. Swechha Jain, who is representing ANS Wealth. If she is present, can you unmute her?

Yes. This is Sushil Jain here. I'm partnered to the ANS Wealth. Just 2, 3 questions. Firstly, on Page #13 of the annual report, it was mentioned that we are in the process to raise $150 million by way of fresh equity. So just a clarification. Is it over and above the recent INR 1,200 crore QIP or it's just the same amount? My second question is regarding the Elepsia XR. So by when the TRY Pointe will do the commercial launch? And what is the current mid-case potential of this drug? And who will be doing the manufacturing, whether SPARC will do the manufacturing, or it will be outsourced and we will only get the royalty? My second question -- the third question was other than Elepsia LXR, there are two programs, SDN-037 and PDP-716. Both of them are in the Phase III. So if you can elaborate on those two that what is the market size of these two drugs? And if all goes well from here on, by when, let's say, in how many years or how many months this too can reach the commercialization stage. And here also, we will be doing the license to someone that at some point of time and we'll be earning only the royalty part. And my last question is, what will be the per annum requirement of the fund for all this R&D over the next 2, 3 years? That's it from my side.

Thank you, ANS -- Mr. Sushil from ANS Wealth. So we are -- I think we are done with the speakers. So I request our Chairman, Dilip sir, to respond to the queries.

I think if Anil is able to speak, it is better than he responds. So there are certain operational issues that he will [indiscernible].

Can you hear me?

Yes, we can.

So let me go directly to the third set of questions from Mr. Jain. There are quite a bit to unpack in those questions. One is the $150 million raise that we mentioned in the annual report is the $150 million warrants that we have issued. So that is not on top of what we have mentioned in the chairman speech. Then there are two questions on questions on Elepsia XR, and the two ophthalmology programs that we are currently prosecuting. On the Elepsia XR, we have commercialized the product with Tripoint. They are, as of September, in the market, and they're in the process of scaling that up. The manufacturing of the Elepsia is done by ton through tri-party arrangements. So it's not external, and we ought to continue that arrangement. On these two ophthalmology products that you have referred, we had successful Phase III readouts of those programs. And currently, we are in the process of completing the filtration for NDA submission. And our hope is to complete that process by end of this year as in 2021 calendar or latest by January of 2022. And in terms of guidance from a timeline standpoint, if the review goes well, we expect to have an approval by last quarter of 2022. Again, I'm referring to calendar 2022, not financial year 2020. And we are in the process of having commercialization discussions with potential partners, and our hope is that we will be able to close out a commercialization arrangement in the next quarter or so. And the last question was essentially about the spending expected on the R&D for Spark. So if you look at the last couple of years, our spending was in the range of 400 to -- around INR 400 crore or INR 400 crore plus. And we expect to maintain that trajectory at least in that in the next 2 years, both in terms of fixed costs and clinical trial costs. And I have to apologize, I couldn't gather Mr. Yusuf''s question from the first questionnaire. So I probably need help from you in terms of our understanding specifically what was the questions.

I think the key question that he asked is about the competitors. Who are the major competitors for SPARC?

For -- in India or internationally?

Globally.

I think that's a very difficult to answer question because in each of these products, we have a different set of competition. So if you look at our clinical stage portfolio, they have programs in leukemia, where we are competing with companies like Novartis. And in Parkinson's disease, you have a different feel. So unlike many traditional industries, it's not easy to say who are we competing across the portfolio because you're competing with different players and different products. I know that it is not a straightforward answer, but that's the closest I can get in terms of how we operate our [indiscernible]. Thank you.

Thank you. Dilip, sir, over to you.

We have answered the questions and queries put before the meeting. However, if be advertently have missed any response to any questions. Please get in touch with us, and we will address them separately. Now I would request Dinesh Lahoti to make an announcement with respect to the working facility, which has been provided for voting at the AGM.

Thank you, sir. Dear members, the company had provided the facility to the members to excite their right to vote on the businesses proposed to be transacted at this AGM through remote voting for a period commencing from 26th September 2021 to 28th September 2021. in order to facilitate voting to those members who could not excite their right to vote through remote voting, the company has also provided facility to vote at this AGM through e-voting platform of CDSL. Mr. Alpesh Kumar Panchal, partner of KJB and LLP Practicing Company Secretaries, will be scrutinizing the board's cast through remote e-voting as well as devoting at this AGM. The scrutinizers report and the e-voting results will be submitted to the stock exchanges within 2 working days from the conclusion of this meeting and will also be placed on the company's and CDA website. The results will also be displayed on the notice board of the company at its registered office and corporate office. Since this meeting is being held through video conferencing, and the resolution mentioned in the notice convening this meeting has already put through the board through remote voting. There is no proposing and seconding of the resolutions. I now request our Chairman, Mr. Dilip Shanghvi, to please continue with the proceedings.

Thank you, Dinesh. The e-voting will remain open until 15 minutes from conclusion of this meeting to enable shareholders to vote who have not cast their vote during the remote voting. I authorize Company Secretary to receive the combined voting results from the scrutinizer and submit the same to the stock exchanges. Before I conclude, I would like to express my gratitude to all the employees, the Board, all stakeholders and shareholders for their continued support, guidance and cooperation. I thank one and all for attending this meeting. We can now conclude this 16th Annual General Meeting of the company. Thank you.

Thank you, sir. I propose a vote of thanks to the Chair. And with the permission of the Chair, I declare this meeting as concluded. Thank you all.

Thank you.

Thank you.

Thank you very much.