Sun Pharma Advanced Research Company Limited — Q2 FY25 earnings call

Call held 19 Dec 2024

Management summary

SPARC held a general business update call, outlining a strategic pivot following the negative full results of its PROSEEK study. The company is now focusing its resources on two anchor assets, SCD-153 for autoimmune conditions and SBO-154, a novel MUC-1 ADC for oncology, with several clinical milestones targeted for FY26-FY27. Facing resource constraints, SPARC is actively pursuing short-term cash catalysts, including a potential Pediatric Rare Disease Voucher for Sezaby valued over 150 million USD and a CML program partnership, while also adjusting its operational structure with significant headcount reductions.

Highlights

  • PROSEEK study closed at 491 patients; full analysis confirmed interim negative trends.

  • Strategic pivot to an optimized portfolio focusing on SCD-153 (Alopecia Areata) and SBO-154 (MUC-1 ADC) as anchor assets.

  • SCD-153 Phase 1 completed successfully, with a Phase 1B study in Alopecia Areata patients to initiate in Q1 FY26.

  • SBO-154 pre-IND meeting with FDA showed broad agreement; IND filing anticipated by end of Q4 FY2025.

  • Company started the year with 15.2 million USD opening cash, relying on operating cash flow and debt, which may last until mid-Q1 next year.

  • Actively pursuing monetization opportunities including a potential Pediatric Rare Disease Voucher for Sezaby, valued over 150 million USD, with a court opinion expected Q4 FY25.

  • Headcount reduced from a planned FY2025 headcount of 400+ to 324 currently, with US headcount dropping from 37 to 7, reflecting a down-sizing of clinical development capability.

Concerns

  • Resource constraints and limited funding runway post-PROSEEK setback.

Key financials

  1. Opening Cash 15.2 mn USD

What they filed

Q1 FY27: revenue up 300.0%, net profit up 59.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue13 15 27 10 8 −38%8 −47%1,853 +6763%40 +300%
EBITDA-103 -74 -53 -52 -66 +36%-57 +23%1,773 +3445%-34 +35%
Net profit-107 -80 -60 -52 -76 +29%-80 +0%1,761 +3035%-21 +60%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Clinical Program

  • SCD-153 Phase IB Study Initiation Clinical Program · Q1 FY26 · High confidence Q1 FY26
    The Phase IB study in Alopecia Areata patients will be initiated in the Q1 of FY26.

    — Mudgal Kothekar

  • SCD-153 Phase IB Interim Readout Clinical Program · Q1 FY27 · High confidence Q1 FY27
    We will get interim readout from this study in Q1 of FY27

    — Mudgal Kothekar

  • SBO-154 Phase I Study Initiation Clinical Program · Q1 FY26 · High confidence Q1 FY26
    followed by initiation of the Phase I study in the subsequent quarter.

    — Sandeep Inamdar

  • Vibozilimod Atopic Dermatitis Topline Readout Clinical Program · Q4 FY25 · High confidence Q4 FY25
    Atopic dermatitis 16 week topline is expected in Q4 of FY25

    — Anil Raghavan

  • Vibozilimod Psoriasis Topline Readout Clinical Program · Q1 FY26 · High confidence Q1 FY26
    while Psoriasis is expected to reach topline readout in Q1, FY26.

    — Anil Raghavan

Regulatory

  • SBO-154 IND Filing Regulatory · Q4 FY25 · High confidence end of Q4 FY2025
    We anticipate an IND filing by the end of Q4 FY2025

    — Sandeep Inamdar

  • PDP-716 CRL Response Completion Regulatory · Q2 FY26 · Medium confidence 2nd quarter of the next financial year
    We are working very closely with the current management of Ocuvex, that's their new name, to complete the CRL response by 2nd quarter of the next financial year

    — Anil Raghavan

  • PDP-716 Approval Regulatory · FY26 · Medium confidence before the turn of FY26
    and ensuring a successful launch once we get the approval which we hope to get before the turn of FY26.

    — Anil Raghavan

  • Sezaby PRV Court Opinion Regulatory · Q4 FY25 · Medium confidence last quarter of this financial year
    we expect the courts initial opinion on this matter in the last quarter of this financial year.

    — Anil Raghavan

  • Sezaby Orphan Drug Exclusivity Enforcement Regulatory · Q3 FY25 · Medium confidence by the third quarter of this coming financial year
    And we are hopeful as we have indicated, by the third quarter of this coming financial year, we hope to have exclusivity.

    — Anil Raghavan

Partnership

  • Vodobatinib CML Partner Identification Partnership · FY25 · Medium confidence end of this financial year
    We are working towards identifying a partner by the end of this financial year.

    — Anil Raghavan

Headcount

  • Current Headcount Headcount · current · High confidence 324

    Previously 400+ → 324

    As you can see here on these charts, we are currently at 324 against a planned FY 2025 headcount of 400+.

    — Anil Raghavan

  • US Headcount Headcount · current · High confidence 7

    Previously 37 → 7

    Our US headcount dropped from 37 at the beginning of this year to 7 currently.

    — Anil Raghavan

Cash Flow

  • Cash Runway Cash Flow · Q1 FY26 · Medium confidence mid Q1 next year
    This may take us to mid of Q1 next year.

    — Anil Raghavan

Market context

  • SCD-153 Global Phase IIB Study Initiation Clinical Program · Q4 FY27 · High confidence Q4 FY27
    and we target to initiate a global Phase IIB study in Q4 of FY27.

    — Mudgal Kothekar

Risks & concerns

  • Resource constraints and limited funding runway post-PROSEEK setback.

    high

    The company started the year with 15.2 million USD in cash and is relying on operating cash flow and debt, which may only last until mid-Q1 next year, necessitating a focus on cash-generating catalysts.

    Management acknowledged

  • Regulatory uncertainty regarding the Pediatric Rare Disease Voucher (PRV) for Sezaby and enforcement of its orphan drug exclusivity.

    medium

    The PRV denial is under active litigation with a court opinion expected in Q4 FY25, and the enforcement of Sezaby's 7-year orphan drug exclusivity by the FDA is an ongoing process with some uncertainty.

    Management acknowledged

  • Challenges in developing neurodegenerative disease programs, leading to a strategic shift away from this area.

    medium

    The reliability of animal models and viability of appropriate clinical trial designs were identified as key challenges that impacted the Vodobatinib program in Parkinson's disease, leading to most neurodegenerative programs being parked.

    Management acknowledged

  • Regulatory issues with the API partner for PDP-716, causing a Complete Response Letter (CRL) and delaying approval.

    low

    An external API manufacturer for PDP-716 had regulatory issues, resulting in a CRL; SPARC has since replaced the API source and made manufacturing changes to address this.

    Management acknowledged

Q&A highlights

2 direct
Cash levels and funding operations given potential delays in monetization opportunities. Direct
But if you come back to where we are in terms of operating cash flows and access to debt that we have, it will probably take us to the early part of next year. And then depending on where we reach with the short-term cash-generating opportunities, which we will have visibility by the end of this year. We will have to take a position in terms of how we plan to resource the continuing development of these programs, which we are committed to do.

This question directly addresses investor concerns about the company's financial runway and future funding strategy following the PROSEEK setback and potential delays in cash-generating milestones.

Asked by Vishal M

Efficacy expectations for Vibozilimod in Psoriasis and Atopic Dermatitis compared to other oral options. Partial
Vishal, we are in a blinded study at the moment. We have no visibility in terms of early signals of efficacy and the studies that we have done earlier were phase 1 trials. The only human trials that we had were multiple phase 1 trials.

The response clarifies the current stage of data availability for a key pipeline asset, managing expectations regarding immediate efficacy insights due to the blinded nature of the ongoing Phase 2 studies.

Asked by Vishal M

Background and status of ophthalmic products PDP-716 and SDN-037, including regulatory hurdles and market potential. Direct
Yep. PDP-716 is a reformulation of brimonidine, which is a widely used second-line drug in glaucoma. And we give a significant dosing benefit for this product... And the second product in this group was a steroidal reformulation. And there also, we have very good clinical results.

This Q&A provides an update on previously less discussed assets, detailing regulatory challenges (CRL for PDP-716 due to API issues) and future filing plans, indicating potential near-term value generation from these programs.

Asked by Bino Pathiparampil

3 min read 7 chapters

Detailed narrative

PROSEEK Study Outcomes and Strategic Re-evaluation

SPARC announced the full results of its PROSEEK study, which involved 491 patients, confirming the negative trends observed in the interim analysis. The long-term extension study with approximately 100 patients was also discontinued. This outcome prompted a significant strategic re-evaluation, leading the company to pivot its focus and optimize its portfolio towards more promising assets and a flexible business model.

Portfolio Optimization: Anchor Assets SCD-153 and SBO-154

The company is narrowing its therapeutic area focus, designating SCD-153 and SBO-154 as anchor assets. Neurodegenerative disease programs, except for a few early platforms, have been parked due to challenges with animal models and clinical trial designs. The new focus areas are Oncology, emphasizing smart drug delivery and synthetic lethality, and Immunology, targeting safe topical alternatives for autoimmune conditions.

SCD-153 Program for Alopecia Areata Advances

SCD-153, a topical pro-drug for autoimmune disorders like Alopecia Areata, has successfully completed its 'first in human' single ascending dose study, showing good tolerability up to the highest dose with no dose-limiting toxicities. Preclinical data demonstrated hair growth and reduction of CD8+ T cells in animal models. A Phase 1B study in Alopecia Areata patients in India is slated to begin in Q1 FY26, with an interim readout expected in Q1 FY27 and a global Phase IIB study targeted for Q4 FY27.

SBO-154: A Novel MUC-1 ADC in Oncology

SBO-154 is a first-in-class humanized IgG1 antibody drug conjugate targeting the novel SEA domain of MUC-1, designed for advanced solid tumors. Preclinical studies showed high potency in MUC1-expressing cell lines and significant tumor reduction in xenograft models. Preliminary toxicology studies in cynomolgus monkeys demonstrated good tolerability up to 6 mg/Kg. SPARC anticipates filing the IND by the end of Q4 FY2025, with Phase I study initiation in Q1 FY26, targeting ER+ breast, lung, and ovarian cancers.

Pursuit of Short-Term Cash Catalysts

To address resource constraints, SPARC is aggressively pursuing several short-term cash-generating opportunities. This includes seeking a Pediatric Rare Disease Voucher for Sezaby, potentially valued over 150 million USD, with a court opinion expected in Q4 FY25. The company is also working to enforce Sezaby's 7-year orphan drug exclusivity by Q3 FY25 and aims to identify a development and commercialization partner for Vodobatinib's CML program by the end of FY25.

Resource Management and Operational Adjustments

SPARC initiated the year with 15.2 million USD in opening cash and is currently relying on operating cash flow and approved debt limits, which are projected to sustain operations until mid-Q1 next year. The company has undertaken significant headcount reductions, with current staff at 324 against a planned FY2025 headcount of over 400, and US headcount decreasing from 37 to 7, reflecting a strategic down-sizing of clinical development capabilities.

SCO-155 Partnership and New Business Model

SPARC has adopted a more flexible business model, exemplified by the formation of Tiller Therapeutics, a NewCo with UCSF, for the SCO-155 program. SPARC will receive 55% of Tiller's initial shares. SCO-155, a PSMA-targeted small molecule drug conjugate, demonstrated strong in vitro efficacy and complete tumor regression in an in vivo xenograft model, paving the way for IND-enabling studies. This partnership model allows SPARC to advance promising programs without committing extensive internal resources.

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