Extensive experience and established track record in pharma R&D
SPARC is a Mumbai based - clinical stage bio-pharmaceutical company and is part of the SPG. It was incorporated in 2006 when the innovative product group was carved out of SPIL. Mr. Dilip Shanghvi and other individuals in the promoter Group along with Shanghvi Finance Private Limited (SFPL) own a majority stake in SPARC (69.09 percent as on June 30, 2022). Currently Mr. Dilip Shanghvi is the Chairman. He is supported by a highly qualified and experienced senior management team. Mr. Anil Raghavan is the CEO and has an experience of over two decades in the pharmaceutical industry. The rest of the senior management team also have extensive experience in the pharmaceutical industry working in past for companies such as Merck, Sanofi-Aventis, Glaxo Smith Kline and Dr. Reddy’s amongst others. The team is also supported by a scientific advisory board consisting of experienced professors from leading medical education institutions across the globe.
Acuité believes that SPARC will derive benefits from its established track record and experienced management in the pharmaceutical industry.

­Robust R&D Pipeline and synergies with SPIL
SPARC is engaged in research & development activity and generate their revenue primarily from license fee, royalty on technology and R&D services. It has undertaken research in the field of Oncology, Neuro Degeneration, Ophthalmology and Dermatology It focuses on developing new chemical entities (NCEs) as well as New Drug Delivery Systems (NDDS). It currently has 2 USFDA approved products. They also have a robust R&D pipeline with 9 products at various stages of development, these target epilepsy, glaucoma, different kinds of cancer, and Parkinson’s disease. Besides these it has more than 10 pre-clinical assets. Earlier the company relied more on NDDS. NDDS formed 81 percent of its pipeline while NCEs were just 19 percent in 2014. By 2020 the focus has shifted to NCEs which forms 62 percent of the research pipeline and rest is NDDS. Acuite believes that NCEs have higher revenue potential. As the product progresses towards the end of its development process SPARC licenses the same with various pharmaceutical companies. It regularly partners with SPIL - its Group Company which has a robust presence in the overseas market along with other pharmaceutical companies. The company in the past has licensed many of its product to SPIL such as Bevetex and Xelpros. This synergy with SPIL makes it a key entity for SPG. SPIL is one of the leading listed Pharmaceutical companies in India with consolidated revenues of was Rs. 38,654 Cr. on which it posted a net profit of Rs. 3,389 Cr. for FY2022. The company has a presence in about 100 countries (including USA, Europe, Emerging Markets, Canada, Japan and Australia & New Zealand) with product portfolio more than 2000 products. The company generates around 65 per cent of its total consolidated revenue is from overseas markets. SPIL is the 4th Largest Specialty Generic Company in USA. The market capitalization of the company is more than Rs. 2,09,000 Cr. as on September 02, 2022. Its investor base includes leading domestic and foreign institutional investors. The Promoter Group hold ~54.48 per cent as on June 2022. Out of the promoter holding, Shanghvi Finance Private Limited holds ~40.30 per cent and balance 14.18 is held by Promoter Group in individual capacity and through other entities. It has presence in specialty medications for ophthalmology, dermatology and oncology, in generic medications for psychiatry, anti-infective, neurology, cardiology, orthopedic, diabetology, gastroenterology, ophthalmology, nephrology, urology, dermatology, gynecology, respiratory, oncology.

SPARC is a clinical stage bio-pharmaceutical company which undertakes pre-clinical and clinical stage research and development. Drug development process involves long gestation periods with constant investments. Heavy costs have to be incurred to carry out research, conduct clinical trials and compensate a highly qualified work force every year. However the major payouts come when a product is near commercialization and a licensing agreement is signed. There is an inherent mismatch of cash flows in the R&D segment. SPARC has some regular revenues which it earns as royalty and fees for carrying out research activities. Although they are low compared to the cost that the company incurs for carrying out the R&D activities. On account of this SPARC has generated losses for all the three years under study. Its revenue and operating loss stood at Rs. 137.25 Cr and Rs. 186.75 Cr in FY2022, Rs. 253.40 Cr and Rs. 131.49 Cr in FY2021 and Rs. 76.85 Cr and Rs. 309.98 Cr in FY2020 respectively. This necessitates periodically capital infusion. The company also faces significant regulatory risks. Since it is engaged in new drug development it has to adhere to a stringent compliance and regulatory environment. Costs incurred on products under development for a long time may get impacted by any adverse regulatory action. However this is mitigated to some extent on account of the strong support and resource mobilization ability of the promoters. Acuité believes completion of product development without significant time overruns or regulatory setbacks will remain a key monitorable.