SPRC: Clinical-stage pharma company using cannabinoids to address serious health issues.

By Brad Sorensen, CFA

SciSparc Ltd. (NASDAQ:SPRC) ("SciSparc") is a specialty clinical-stage pharmaceutical company focusing on creating and enhancing a portfolio of technologies and assets based on cannabinoid pharmaceuticals. Millions of people around the world are suffering from conditions that have no known cure. These people suffer with the knowledge that their conditions can't be cured, but also have to endure the debilitating symptoms that come along with these conditions. SciSparc is endeavoring to address this issue by developing unique cannabinoid technologies for the treatment of central nervous system disorders—and by combining cannabinoids with already approved treatments, the company has found that effective dosing can be lower, thus resulting in fewer adverse side effects.

Central Nervous System

The central nervous system ("CNS") is the complex collection of nerve tissues that controls the activities of the body, comprising the brain and spinal cord. Disorders of the CNS include a broad category of conditions in which the brain does not function as it should, limiting health and the ability to function. These disorders may be the result of damage from an infection, inherited metabolic disorders, a degenerative condition, stroke, brain tumor, or arise from multiple unknown factors. Most CNS disorders cannot be cured, and many have associated comorbidities. Symptoms can put a severe strain on the quality of life, interfering with everyday activities and functioning; they can be embarrassing, and in more extreme cases, debilitating. The best option for most patients is to control or limit the impact of the disease through a range of therapies from medical to surgical treatment.

The Endocannabinoid System

SciSparc is focusing its therapies on the human endocannabinoid system ("ECS") using cannabinoids, which can either originate from the cannabis plant or innovative synthetic compounds that can interact with the ECS. The following image depicts.

The ECS is a neurotransmitter network tasked with maintaining homeostasis throughout the body. Essentially a biochemical communication system, the ECS comprises endogenous cannabinoids and receptors. These endogenous cannabinoids, or endocannabinoids, are produced by multiple cell types within the CNS.

The main ECS receptors — CB1 and CB2 — are located throughout the body; CB1 primarily within brain cells and CB2 across the CNS. These receptors have been implicated in the modulation of neuroinflammatory, neurodegenerative and psychiatric conditions, including Alzheimer's disease, Parkinson's disease, Huntington's disease, multiple sclerosis, amyotrophic lateral sclerosis, stroke, epilepsy, anxiety and depression.

Because the ECS acts with such precision, its interconnection with the CNS makes modulation of the ECS a therapeutic target for treating disorders of the CNS. And because cannabinoids, whether endogenous, plant based, or synthetic, impact the ECS equally, they are an obvious target for continuing research and drug development efforts.

The Process

SciSparc's research and development efforts are focused on creating a proprietary and unique combination of products, products in the U.S. Food and Drug Administration's Section 505(b)(2) accelerated regulatory pathway, and products that constitute a new chemical entity—all potentially providing effectiveness with fewer adverse side effects.

Section 505(b)(2) is a New Drug Application ("NDA") mechanism which allows an applicant to seek approval for a drug product based on full safety and efficacy documentation, some of which may be from literature or conducted by others and for which the applicant does not have the right of reference. It offers a quicker path to potential approval than the normal FDA process.

One of the chemicals that SciSparc is using in the drug candidates described below is known as Palmitoylethanolamide ("PEA"), which is an endogenous biologically active lipid, belonging to the endocannabinoid family, and which is naturally occurring in the human body. PEA is thought to bind to cells in the body and reduce pain and swelling but scientific research is ongoing with companies such as SciSparc.

The Pipeline

The following image depicts the status of SciSparc's pharmaceutical pipeline as of June 8, 2022:

Drug candidates:

SCI-110—proprietary drug candidate containing Dronabinol (FDA approved synthetic form of THC), with PEA.

• Designed to stimulate cannabinoid receptors across the Central Nervous System and inhibit the metabolic degradation of endocannabinoids and improve the uptake of THC.

• Expected benefits are an increase in efficiency of oral administration, and in turn a decrease in dosage requirements, side effects and adverse events.

• Being tested for treatment of Tourette Syndrome ("TS")- phase IIb, and Alzheimer's Disease and Agitation- phase IIa.

• Results from Phase IIa clinical trial in TS, conducted at Yale University, showed average tic reduction of 21% across the entire sample with almost 40% experiencing a greater than 25% reduction in tics.

SCI-210—proprietary drug candidate containing CBD and PEA.

• Initially being developed under the regulation of the Israeli Medical Cannabis Agency and Ministry of Health.

• SciSparc intends to further develop the product for markets outside of Israel.

• Being investigated for Autism Spectrum Disorder (in clinical trials) and Status Epilepticus, which is a form of seizures that are severe and sometimes fatal (preclinical trials).

SCI-160—proprietary synthetic CB2 receptor agonist created for the treatment of pain and currently in pre-clinical studies.

• The CB2 receptor agonist used in this formulation (HU-433) was invented and synthesized by the Chairman of the SciSparc Scientific Advisory Board and is under a patent granted in the U.S. and Europe.

The Market

The potential market for the relief that these treatments have includes millions around the world suffering from conditions that would benefit from CNS symptom relief. The company reports that the global pain management drugs market was valued at $71.4 billion in 2019 and is projected to reach $91.6 billion by 2027, and we believe that is likely underestimating the actual demand due to some patients being unable to find treatments that impact their symptoms.

More specifically, the global TS market is expected to reach $98.7 million by 2023, while the Status Epilepticus market is estimated to be $9.5 billion in the same time frame. Other conditions currently being targeted by SciSparc include Alzheimer's, with the global therapeutic market expected to reach $13.7 billion by 2027, and Autism Spectrum Disorder, estimated to be a $4.6 billion global market by 2026.

The Company

As mentioned above, SciSparc is a specialty clinical-stage pharmaceutical company whose focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid therapies. Incorporated under the laws of the State of Israel, the company began developing cannabinoid-based pharmaceuticals for the CNS-related disorders around 2015 and its shares are listed on the Nasdaq in the United States under the symbol SPRC. In August 2020, new management took control of SciSparc for the purpose of rehabilitating the company. As a result, in December 2021, the company's shares were re-listed on the Nasdaq under the symbol SPRC.

One of the most important issues for a clinical-stage company to address is cash on hand in order to continue operating until revenues can be generated. At this point, SciSparc has no revenue. The company had $6.9 million in cash as of December 31, 2021 and completed a private placement in June 2022 that raised an additional $10 million in gross proceeds, and the company has no long term debt to speak of, while the board recently authorized a $1 million buyback program. In 2021, the company had research and development expenses of $2.0 million and general and administrative expenses of $3.8 million. With this run rate, management estimates the company has the cash needed for the Phase IIb study for SCI-110 for the treatment of TS and for operations for at least the next 18 months.

It's also important to note the extensive intellectual property portfolio SciSparc has, which is valuable to the company itself but also potentially valuable to a potential future partner. The company has nine patent families, with eight granted patents (five of which are in the U.S.), and several other patent applications pending.

Additionally, the company has an impressive list of science advisors, including Professor Raphael Mechoulam, who is a Professor Emeritus of the Department of Natural Products of the School of Pharmacy at the Faculty of Medicine of the Hebrew University of Jerusalem, and Dr. Yossi Tam, who became a staff scientist at the National Institutes of Health in 2011, among others with impressive credentials.

Risks

As with many clinical-stage companies, the major risks largely involve two issues—funding and approvals—and they go hand in hand. There is a risk that the company will be unable to get the funding it needs to shepherd the technologies to commercialization, while the longer the approval takes, or if approval never comes, the funding needs are expanded. There are other risk factors that potential investors should be aware of, including those discussed under the heading "Risk Factors" in SciSparc's Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission ("SEC") on April 28, 2022, and in subsequent filings with the SEC.

Conclusion

SciSparc is a clinical-stage pharmaceutical company pursuing solution for chronic pain impacting millions of people worldwide. With good leadership and solid scientific advisors in place and several treatments in the pipeline, sufferers can have legitimate hope that relief may be on the way.

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