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Indivior PLC (INVVY) CEO Mark Crossley on Q2 2020 Results – Earnings Call Transcript

Indivior PLC (OTCPK:INVVY) Q2 2020 Earnings Conference Call July 30, 2020 7:00 AM ET

Company Participants

Mark Crossley – Chief Executive Officer

Ryan Preblick – Interim Chief Financial Officer

Christian Heidbreder – Chief Scientific Officer

Conference Call Participants

Max Herrmann – Stifel

Harry Sephton – Jefferies

Nick Nieland – Citi

Paul Cuddon – Numis

Eric Fischer – Scopia Capital


Ladies and gentlemen, thank you for standing by and welcome to the Indivior PLC’s Half Year Results 2020. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today.

And I would now like to turn the conference to your speaker Mark Crossley, Chief Executive Officer. Please go ahead.

Mark Crossley

Good morning and good afternoon everyone. Thank you for joining us today. I’m Mark Crossley, CEO and I’m joined today by my colleagues Ryan Preblick, Interim Chief Financial Officer; Javier Rodriguez, Chief Legal Officer; and Christian Heidbreder, Chief Scientific Officer.

I’ll make some opening remarks and then Ryan will provide a rundown of our first half and Q2 financials as well as fiscal year 2020 planning assumptions. Finally, Christian will update you on R&D activities before we close and take your questions.

Turning to slide five, before I get into the detail of our performance and progress, I would like to say a few words in my new role as CEO. I want to leave you with no doubt that I believe Indivior has a great future based on its compelling vision its people and its unique capabilities.

In the face of the challenging backdrop over the past several years from generic film entry to the various legal matters and now COVID-19, we have persevered and continued to make strong strategic progress in establishing a durable growth platform with our two differentiated depot technologies SUBLOCADE and PERSERIS.

The evidence of our future success has been building. As you’ll recall, we were seeing tangible results of our SUBLOCADE strategy in the first part of 2020 as KPIs and net revenue started to accelerate. As such my near-term strategic priorities are to manage through COVID-19 and to recapture the previous strong momentum with SUBLOCADE and PERSERIS; to maintain our financial flexibility as we remain in a transition period with film erosion expected to continue and the need to invest behind our depot technologies in the U.S.; and three, to resolve remaining litigation having put the important DOJ matter behind us.

With increased financial flexibility and visibility, we have the opportunity in due course to be more active in business and pipeline development and to look more closely at our overall capital structure. These form central elements of our core long-term aspirations. However, for the time being you should not expect an immediate change in our capital allocation priorities.

I’m also pleased that despite the inevitable uncertainty that surrounds any leadership change, the transition following Shaun stepping down has gone very smoothly. Shaun played a key role at Indivior as a founder CEO and made a significant contribution in advancing addiction treatment across communities globally for which we are grateful. I am proud and humbled to have been appointed as CEO of Indivior and privileged to work with such a talented team.

And as many of you know in my previous roles, I helped develop the strategy we are executing. I believe that the continuity I bring to the CEO role will continue to be important in keeping our employees focused on our vision in elevating the leadership role that Indivior will continue to play in helping patients, doctors, and communities fight the human crisis of opioid addiction.

As you see on slide six, the message when looking at our financial performance is that we’re navigating well through the challenging conditions brought about by the COVID-19 pandemic.

When we last spoke in May we set out a clear plan on how we intended to manage and progress our business, while at the same time, protecting our employees and securing consistent medicine supply for our patients. I believe we have delivered solidly against these objectives.

Ryan will provide additional details in a moment, but I would call out that our first half net revenues and adjusted net income were ahead of expectations, especially considering the impacts of COVID-19 across our business.

Gross cash at period end of over $900 million was also strong. These results principally reflect the continued resilience in SUBOXONE Film the acceleration of the BMAT market to low-teens levels and increasing year-over-year contribution from SUBLOCADE.

Looking more closely at the performance of our depot technologies. As expected the good momentum that SUBLOCADE and PERSERIS were experiencing in the first part of the year was adversely impacted by COVID distancing restrictions, which took effect from the second half of March.

Considering that the field force was working remotely the entire second quarter, we’re very pleased with SUBLOCADE’s Q2 net revenue performance of $29 million, which brings the half one net revenue to $58 million, up 100% versus a year ago.

Looking to the back half of 2020, the ongoing impacts of the pandemic remain unpredictable. However, having exited the first half of 2020 and effectively managed through one quarter of COVID impacts, we have seen some level of comfort on the key drivers of the business.

Ryan will share more detail on our overall planning assumptions for the remainder of 2020, but I want to stress that our assumptions are based on current market conditions which may change with any new government measures to restrict population movement.

Turning now to the DOJ agreement. As you saw from the statement we published on July 24 we have agreed to settle all outstanding legal matters together with the associated FTC and State Attorney Generals for a total cash fine of $600 million. The amount is payable over seven years to 2027. The immediate payment is $100 million with the next payment of $50 million not due until January 2022.

An important element of the settlement is that it leaves the group free to continue doing business with government programs such as Medicaid and Medicare. We will also operate under a corporate integrity agreement for five years.

Overall, we are pleased to have achieved the resolution so that we can move forward in a way that provides greater certainty for our business, our communities, and our stakeholders.

I want to move now to a more detailed update on SUBLOCADE starting on slide eight. As I mentioned earlier, up to March, we were seeing positive impacts from our growth strategies. In terms of the commercial elements of the strategy, our penetration of organized health systems combined with the SUBLOCADE direct-to-consumer campaign resulted in enrollments accelerating from Q4 2019 into January and February.

However, as stay-at-home orders were issued at the second half of March, we experienced an abrupt change in market conditions. In line with industry trends, we also started to see a material drop-off in enrollments for SUBLOCADE. And this trend extended through the second quarter with our sales force out of the field for the entire period.

However, we’re pleased to see that the base of existing SUBLOCADE and PERSERIS patients was significantly less affected than the enrollment activity, which relies more heavily on new patient and HCP generation. And we are very encouraged to see relatively stable repeat injection activity in line with our prior retention curves.

The relative resiliency amongst existing SUBLOCADE HCPs in patients clearly demonstrates what we have always observed which is that experience with the treatment once gained is extremely positive.

Additionally, while we’ve been unable to visit new HCPs, we have remained able to work productively with organized health system partners to contract and access new systems and remain on track with our internal KPIs for 2020.

Looking more closely at the foundational elements of the strategy. We are pleased to see that all key metrics associated with the prescription journey, most importantly the dispense yield continued to hold up in the face of COVID. This speaks to the hard work we undertook to establish a robust distribution system to achieve prescription dispense yields and journey times at or ahead of analogues.

Turning to slide nine. We have seen a modest pickup in new patient enrollments from the Q2 levels. Consequently, our current expectation is that SUBLOCADE units and net revenues have troughed. As we speak today about 80% of our U.S. salesforce are back in the field, but activity is tempered by the fact that still only approximately 50% of our target HCPs report seeing patients at pre-COVID levels. And that fewer than 25% report allowing pharmaceutical reps into their offices. This is resulting in a reduction of total call volume as well as much lower than — lower in-person call volume which is currently running in the 20% to 25% pre-pandemic levels.

This said, as displayed in the first quarter acceleration of KPIs and net revenue we do remain confident we have the right product as well as the strategy people and culture with which to achieve our target net revenue of $1 billion. We’ve executed well on the controllable elements and in line with our strong operational discipline, we continue to advance our SUBLOCADE strategy strategic focus areas.

Namely in the commercial element, we have fully converted all promotional materials to digital and have invested in and greatly improved our overall digital and remote sales capabilities. This will be an important differentiator if the COVID pandemic proves to be an enduring factor. We have also relaunched to provide a more user-friendly interface aligned with our new messaging. At the same time, we have continued our robust compliance training for the field team.

Continuing to expand into the OHS channels is critical to achieving our long-term ambitions for SUBLOCADE. And in a moment, I will provide more color on our progress and strategy for this increasingly important growth lever. As we’ve indicated before, we’re continuing to focus our field efforts on organized health systems because they have infrastructure and capabilities to better handle specialty products like SUBLOCADE. And with foundational elements continuing to perform well before and during COVID, we feel more confident about our ability to increase health care provider and patient throughput.

Finally, Christian will provide an update momentarily, but I want to applaud our R&D and medical teams. They have worked tirelessly to keep our disease treatment awareness and scientific strategies on track as much as possible through COVID.

Turning to slide 10. Recall, we began piloting our organized health systems strategy in 2019, initially targeting around 320 organizations principally across IDNs, Federal systems and the criminal justice System. Over the course of the last 1.5 years, we’ve established strong capabilities in this area with increasing levels of commercial resources dedicated to these efforts.

This channel now accounts for one-third of SUBLOCADE’s net revenue versus 15% a year ago and is disproportionately driving treatment growth. Perhaps most important the quality and depth of interactions has convinced us that further prioritization of organized health systems is the correct channel strategy for SUBLOCADE.

The additional underlying dynamics in this channel include underutilization of buprenorphine medically assisted treatment more patients per HCP and generally greater resources which create a major opportunity for continued penetration and upside.

As such, we expect to continue to increase the weight of our commercial efforts in this area going forward. And with our strengthened team, we are now targeting 500-plus organizations across the organized health system spectrum. These organizations include around 25,000 wavered HCPs and around one million patients representing a substantial and growing part of the overall Opioid Use Disorder patient funnel. Based on strong progress to-date and our investment in the space, we expect the organized health system channel to continue to grow in importance as a source of business moving forward.

Turning to PERSERIS on slide 12. As with SUBLOCADE the first half for PERSERIS was a tale of two quarters. In the first quarter, we had already built a solid foundation with parity payer access and traditional sampling activities. Despite competitive response from some of the incumbents, we continue to receive positive feedback from HCPs especially on the simplicity of the treatment initiation where I remind you there is no need for loading or supplemental doses of oral risperidone. This led to increasing sales in the first quarter that confirmed the potential for PERSERIS.

In the second quarter, however, the pause in face-to-face physician consultations impacted the upward trajectory. As a new treatment option among established participants, PERSERIS has a particularly high sensitivity to active promotion. The net result was we delivered first half net revenue of $7 million. Through COVID, the field leadership team has continued to motivate our relatively small field force with continued coaching and training.

Our immediate priorities are reengaging in face-to-face meetings with psychiatrists who treat extensively in the schizophrenia space and resuming peer-to-peer educational programs. We will also further leverage our organized health system team and pursue targeted opportunities in state hospital systems the VA and assertive community treatment programs.

On my final slide, just a reminder, that as the global leader in addiction it is not just about the United States. We’ve had some exciting developments outside the U.S. as SUBLOCADE is now available in Canada and Australia. Most recently, it has also been approved in Finland and Sweden. In other key EU markets, we are continuing to respond to normal course regulatory authority inquiries.

Staying with European developments. We’re pleased to note in our press release the approval of SUBOXONE Film. This includes the 27 member states. We’re working through the listing and pricing process across the key countries and expect film to start becoming available in the first quarter of ’21.

SUBOXONE has also just approved in Canada and we expect availability there on similar timing. Putting it all together, we would expect a more meaningful net revenue contribution from these new opportunities outside the U.S. beginning in 2021 as pricing and subsequent launches become more visible. We will of course remain disciplined in allocating appropriate levels of investment expenditure to these ex-U.S. markets depending on the external environment and the scope of the opportunities.

With that I’d like to hand over to Ryan to take you through the details of the financials.

Ryan Preblick

Thank you, Mark. Good morning and good afternoon everyone. Let me now take you through the financials for the second quarter and first half 2020. On slide 15, starting with total net revenue of $150 million in Q2 declined 30% versus the comparable period and the $303 million in first half was 33% lower. The overall decline in the half year period mainly reflects the increasing effect of the entry of generic film competition in the first quarter of last year along with termination of our authorized generic program towards the end of 2019.

Second quarter U.S. net revenue declined by 34%, primarily due to the factors that I just outlined for the half year despite the acceleration in BMAT market growth to the low teens. SUBOXONE Film share declined a modest 1 percentage point from 22% at the end of the first quarter.

The rate of share decline continues to be significantly slower than historical industry analogs would suggest. As we have consistently maintained, we do not have a strong basis to explain this outperformance and you will see from our planning assumptions that we do not expect to sustain this in the second half.

The decline in the U.S. Film business was partially offset by SUBLOCADE net revenue of $29 million in the second quarter, a 71% increase versus the prior year. This was unchanged versus the $29 million we reported in Q1 despite the sharp reduction in new patient starts that Mark described as the pandemic lockdowns took effect.

Looking at the rest of the world, sales decreased by 17% in the second quarter, leaving first half sales unchanged on the prior year. This reflected a continuation of the underlying trends we have previously highlighted of competitive pressures in the EU region set against solid performance in Australia and Canada. As a reminder, rest of world growth in Q1 was expanded by our prior year net revenue adjustment in Canada.

If we turn now to margins and start with the gross margins, the rates on an adjusted basis in the second quarter of 87% and 88% for the half year reflect the shift in product mix following the termination of the authorized generic program. Looking at the operating line, again on an adjusted basis, we reported a profit in the second quarter of $24 million taking the half year to $26 million.

The impact of COVID-19 played out in a number of ways in our operating expense lines in the second quarter. SG&A expenses benefited from reduced T&E cost as the majority of our employees work from home. On the other hand, we incurred slightly higher expenses from the initiatives we put in place to protect and support our employees.

Finally, legal costs were relatively heavy in Q2 as we progressed towards the settlement with the DOJ. As a reminder, in the first quarter, we incurred significant expense associated with our national DTC campaign in the U.S.

In the second half, we expect the SG&A run rate to be slightly lower than in the first half as we will not repeat the high level of DTC expense incurred in the first half and the business continues to seek out cost efficiencies.

However, we will continue to invest behind our long-acting injectables, including flexing sales and marketing strategies in line with the easing of lockdowns. And we will have increased expenses related to the CIA compliance that is part of our DOJ settlement. R&D expenses will also increase in the back half as certain studies that were delayed by COVID, pick up again.

Moving down the income statement on page 15, we reported a modest adjusted net profit for both the second quarter and the half year as a whole after net finance expense and taxes.

Turning to cash and borrowing on slide 16, you will see a snapshot of our cash and borrowing positions as of June 30. Our liquidity remained strong in the first six months of 2020 with cash at the period end of $908 million and net cash was $671 million.

The minimal decrease of cash versus Q1 was driven by continued resilience of U.S. SUBOXONE Film gross sales nearly offsetting the changes in working capital. As previously stated as the film share continues to erode, we will expect to see the unwinding of the film trade payables, primarily from the government channel, which drives the cash outflow.

I want to be clear about the effect of the DOJ settlement. In line with our provisioning, we put $100 million into escrow as part of the settlement with the DOJ in July. This payment is not reflected in our June 30 cash balance, as it is a post-period event. The remaining annual payments of $50 million begin in January 2022 and continue through 2027 with the final installment of $200 million in December 2027.

Except for interest, there is no foreseen further P&L impact resulting from the DOJ settlement. You will see additional details are provided in Note nine of the financial release. This payment schedule allows us to plan ahead with much greater certainty. As a reminder our term loan borrowings of $232 million are due to be repaid by December 2022.

On slide 17, we are sharing our planning assumptions for the remainder of 2020. At this point, we believe it would not be appropriate to provide full year guidance given continuing uncertainty around the impact of COVID, especially in the U.S. These assumptions are based on the expectation that the impact of COVID will last for several more months. The extent of any adverse impact on the group’s operations will depend on the unforeseeable duration extent and severity of the pandemic.

Taking these in turn, we expect the buprenorphine market to continue to grow at a low-teens rate. For SUBLOCADE, we expect to see modest growth in new patient starts relative to the Q2 exit rate as in-person physician visits remain below pre-COVID levels.

Meanwhile, we expect an accelerated decline in SUBOXONE Film share towards industry analogues, resulting in a significant reduction in second half 2020 net revenue versus first half 2020.

In the third quarter we lost formulary coverage at Express Scripts as of July 1. This book of business represents about 2.5 share points or about 10% of our film business. The impact of this share will be more than average since it is primarily from the more profitable commercial business.

Lastly, the majority of the market growth is coming from the less profitable government channels as patients are losing commercial insurance as a result of COVID and seeking enrollment in government-sponsored programs. In rest of world, we expect continued competitive pressures, especially in Europe.

On OpEx, as I noted earlier, this is expected to be slightly lower than — slightly lower in the second half than in first half in part due to the absence of the DTC investment. And finally, we expect the tax rate in the mid to high teens.

And just to finish on this slide, we will continue to assess the impact of COVID-19 on our business and will provide quantitative guidance when market conditions allow.

With that, I would like to hand over to Christian for an update on R&D.

Christian Heidbreder

Thank you very much, Ryan. This R&D update is four-fold. First, I will take you through progress with our Opioid Use Disorder treatment franchise with activities to support SUBLOCADE in the U.S., as well as SUBLOCADE and SUBOXONE Film outside of the U.S.; second, activities to support PERSERIS in the U.S. and our regulatory filing in Canada in partnership with HLS Therapeutics; third, early stage assets development with a focus on our selective orexin one receptor antagonist and GABAB positive allosteric modulator programs; and fourth, peer-reviewed publications and conference presentations.

So let me start with treatment of Opioid Use Disorder with first SUBLOCADE in the U.S. You may remember that, at the time of SUBLOCADE approval, we had a series of post-marketing commitment and post-marketing requirement stories. The commitments are now all approved by the FDA and are considered closed.

With respect to post-marketing requirement studies, we had a series of non-clinical studies all of those have been submitted to the FDA and are currently under review. We also have two clinical post-marketing requirement studies. The first one was dedicated to the rapid induction with SUBLOCADE. This is now completed and will be submitted to the FDA.

The last clinical post-marketing requirement study is dedicated to a better understanding and characterization of those patients, who may benefit from the highest maintenance dose of SUBLOCADE of 300 milligram. That is a study that is currently under a feasibility assessment and protocol finalization and has been slightly delayed, because of the COVID-19 pandemic. We also initiated a series of life cycle management studies and there are really five main pillars in our strategy here to generate more real-world evidence to support SUBLOCADE.

First, we investigated how high plasma concentrations of buprenorphine that are consistent with those delivered by the two approved dosing regimens of SUBLOCADE, can reduce the effects of respiratory depression produced by fentanyl. This is what we typically call the fentanyl interaction or fentanyl blockade study. That study is now completed. We already submitted two papers for peer review, as well as a third paper is currently in preparation.

Second, we are assessing how to induce SUBLOCADE treatment in the emergency department environment. This is our VOTIVE study in collaboration with Virginia Commonwealth University here in Richmond.

Third, we are analyzing U.S. payer databases to understand the better – the behavior of SUBLOCADE in real world.

Fourth, understanding better the root causes of buprenorphine abuse diversion and misuse, as you remember this is an initiative we started a couple of years ago.

And last but not least, the fifth pillar in our strategy here is the RECOVER study. And here again, I would say that, there are three main milestones. First, the one-year outcome of the RECOVER study was published earlier this year in the Journal of Addiction Medicine. Second, the two-year outcomes were already presented at the CPDD meeting in June this year, and a peer-review publication has been submitted. And then as you know, the third component here to support RECOVER is that the scope and duration of the RECOVER study which we call the RECOVER long term is currently being pursued through a partnership with the Virginia Polytechnic Institute and State University also known as Virginia Tech.

With respect to SUBLOCADE outside of the U.S., which is now called Subutex prolonged-release solution for injection. We secured regulatory approvals in Israel Sweden and Finland. We are currently handling advanced responses to questions with local regulatory authorities in Denmark, Germany, U.K. and Italy. We are anticipating delays due to the COVID-19 pandemic in France, and a few associated decentralized countries as well as Norway. And our review is currently ongoing in New Zealand.

And then the third component of the treatment for Opioid Use Disorder is the SUBOXONE Film. Some great news there in terms of regulatory approvals, we secured approvals now in Israel, Canada and Europe. In Europe, this is according to a centralized procedure that secures approval in the 27 European member states plus the United Kingdom Norway Iceland and Liechtenstein.

Our file is currently under review by local regulatory authorities in New Zealand and Kuwait, and we have some pending regulatory submissions in other Middle Eastern countries.

Moving to the second part of this presentation dedicated to the treatment of schizophrenia with PERSERIS. We completed now a clinical post-marketing commitment study. The final clinical study report is expected towards the end of this year. As a reminder, this is a study that was designed to support labeling for both a 180-milligram in the form of two times 90-milligram dosage strength as well as alternative body injection sites. So we are expecting to submit it – to submitting all these data to the FDA before the end of the year, with anticipated approval in the third quarter next year.

And in Canada, our partnership with HLS Therapeutics you may remember that the NDS was actually submitted to Health Canada in November last year. It was accepted into formal review in January this year, and we are anticipating a notice of compliance in November this year.

Third component then is the early stage asset development, some great news with our selective orexin one receptor antagonist program, although, the start of our first dose in man was delayed due to the COVID-19 situation. I’m very pleased to announce that, we dosed our selective orexin one receptor antagonist into men on July 28. So great progress there, we also pursued in the meantime all the non-clinical pivotal toxicokinetics and embryofetal studies to support that program. We are also pursuing our collaboration with Addex Therapeutics to move the lead optimization program in support of our GABAB positive allosteric modulator program.

And last, but not least, a quick update on the peer-reviewed publications and conference presentations. So far in 2020, we submitted six peer-reviewed publications. We have nine publications that have been submitted and a few in preparation, between now and the end of the year. We also presented at mainly three or four conferences, focusing essentially on the CPDD meeting and the ASAM meeting earlier this year. And we presented 11 pieces of work to mainly support SUBLOCADE and PERSERIS.

And on that note, I’ll hand it over back to you Mark.

Mark Crossley

Thank you, Christian. So to quickly summarize our first half results. We delivered a solid first half performance, while focusing on our patients and safety of our employees through the pandemic. We resolved our most important outstanding legal matter, which allows us to plan for the future with much greater certainty. We’re making great strategic progress with SUBLOCADE and PERSERIS, which have the power to drive a new era of growth for the company. Our immediate job is to recapture the strong momentum we had in the first quarter as we exit the COVID-19 lockdowns. Finally, as the new CEO of Indivior, I want to reassure you that the group’s vision and overall strategy remain unchanged. I’m committed to building our long-term success, sustaining our global leadership in addiction for the benefit of our patients, our employees and our shareholders.

With that, I’d like to turn the call over to your questions.

Question-and-Answer Session


[Operator Instructions] And our first question comes from the line of Max Herrmann from Stifel. Please go ahead.

Max Herrmann

Afternoon, good morning. Thanks. Three questions if I may. Firstly, just on your anticipation or your expectations for SUBLOCADE longer term. Obviously, in the past you’ve talked about a peak sales potential of — in excess of $1 billion. I wondered whether you were still comfortable with that expectation given the impact of COVID-19 perhaps in the near term. And just your attitude to it longer term. That’s question one.

Then just on the competition for SUBLOCADE, potentially coming later this year from Camurus, Braeburn, Brixadi. What are your sort of attitudes towards the impact that that may have on the growth of SUBLOCADE? And also how do you read the launches of that product in Europe and rest of world markets, where I think certainly the revenues we’re seeing are ahead of certainly where some estimates have had the product. Maybe giving you some hope for SUBLOCADE in Europe as well.

And then a final question is more on finance. And how do you view managing the profitability of Indivior going forward balancing the investment behind SUBLOCADE and PERSERIS with the actual P&L opportunity to drive earnings? Thank you.

Mark Crossley

Thanks, Max. I’ll take the first couple and then hand over to Ryan with regards to the balancing of the — our strategic focus with the current P&L. So with regards to the $1 billion, I’m fully confident in the $1 billion-plus net revenue target. We have novel product which transforms the treatment paradigm. This product is in a market with strong low-teen market growth under-penetration of medically assisted treatment. So I still confirm that. I think portions of that answer also carry over to when we talk about the competitive landscape with Brixadi, potentially coming out in December. This market is in double-digit growth. There is an unmet need in the disease space with a low penetration in treatment of patients, plenty of room for multiple sort of players in the injectable market.

With regards to us, we think if we could get to similar access across all treatment areas, similar to what happens in the schizophrenia arena, then we can leave it to the doctor’s offices with regards to which product they believe is the most efficacious. And we’ve spoken in the past obviously with why we believe that the benefits of SUBLOCADE are superior. So that’s kind of our thoughts there. I’ll hand it over to Ryan with regards to your discussion on balancing the investment versus the P&L.

Ryan Preblick

Yes. Hey, Max good morning. And it’s nice to finally meet you on the phone. In regards to your question look, we just closed out the biggest risk that this company had to deal with over the last couple of years. And to be honest with you we’re not back to a full steady state just yet. We still have to work through the crisis of COVID. We do not know how long that’s going to be and how severe it’s going to be. And we also have to work through our transition period that we’ve talked about over the last couple of quarters, which is where we have our film business coming down and then the uptick of both SUBLOCADE and PERSERIS. So at this point, our priority is to make sure that we’re putting our resources behind the growth of SUBLOCADE and PERSERIS. And also what’s key is our cash flexibility during the next couple of months. So…

Max Herrmann

Thanks, Ryan.

Ryan Preblick

Thank you.


Our following question comes from the line of Harry Sephton from Jefferies. Please go ahead.

Harry Sephton

Hi, there. Thanks for taking my questions. So firstly, just to start on SUBLOCADE, you mentioned the first quarter call that you were seeing the patient enrollment is down sort of in line with industry analogues at around 40%. Just curious as to how that’s changed as we exit the second quarter. My second question is on SUBOXONE Film. And do you have an indication as to how much of that remaining market share you have is in the cash pay market and whether there’s a possibility of any sustained brand value in that portion of sales? And then my third question is on the rest of the world business. I’m just curious as to — so you said that SUBLOCADE is available in Canada and Australia. Just curious as to whether your marketing SUBLOCADE in those geographies currently? Thank you.

Mark Crossley

Thanks for the questions, Harry. I’ll handle the SUBLOCADE and the rest of world business and then I’ll hand it over to Ryan on the film. I could confirm during the second quarter when the sales force was out of the field. We were in line with the IQVIA sort of industry metrics that we saw with overall patient enrollments down about 40% to 45%. As we’ve started to enter the second quarter and started to have our sales force out in the field starting to do face to face as we discussed there’s a modest amount of growth starting to claw back some of that erosion in enrollment. So we’re encouraged that as the social restrictions start to ease, we can return to the quarter one levels of growth that we are experiencing where they were starting to accelerate moving forward that we were all so excited about before the COVID pandemic hit.

On the rest of world business, we are out in the field with regards to SUBLOCADE in both Australia and Canada. It is early days, but the teams there are working vigorously and doing detailing, as well as some web advertising with regards to that. We look forward to seeing the results of that throughout the balance of the year and moving forward. So, Ryan, on the film?

Ryan Preblick

Yes. Good morning, Harry. So, yes, our share profile looks like the following. The majority of our business is in the state Medicaid programs, with no doubt. And then, after that, it’s your — a pure commercial business, but as we noted in our release, we did lose formulary status on ESI, which is about 10% of our business.

So that portion of our channel will become smaller. What we have left there are some Part D plans. And then, to your question around the cash percentage of our business, that at this point is a very small amount of our business after the share erosion since last year.

Harry Sephton

Okay, great. That’s very helpful. Thank you.

Ryan Preblick

Thank you.


And our following question comes from the line of Nick Nieland from Citi. Please go ahead.

Nick Nieland

Hi, guys. Thanks for taking the questions. So can you just talk about how your plans now change with the clarity of the DOJ settlement? So particularly regarding your promotional spend on SUBLOCADE, are you planning to step up DTC advertising in 2021?

And secondly, perhaps more importantly, your ability to now participate in M&A to augment your pipeline. Is this a priority for you? Will you stick to assets in the addiction space, or would you go outside of that area if you think it’s appropriate? Quick question, if I can probably, again, on your ongoing OpEx.

Can we expect similar levels as to what you’ve guided in the — to the second half in the medium term, or will this structurally increase [indiscernible] corporate [indiscernible] actually change the way you can operate day to day and will it pivot you in any way? Thank you.

Mark Crossley

Thanks, Nick, for the questions. I think, I got them all, you broke up a little bit in the last one, but I took it to be how we can operate within the CIA. So let me maybe go through those.

With regards to our plans, with clarity of the DOJ, what will that do with our near-term strategy? It doesn’t change our near-term strategy. We’re in this transition period, where the film revenues are coming down, because of the competitive pressures. And we’re solely focused on the launch of our two transformational technologies of SUBLOCADE and PERSERIS. We’re really excited about those. We were seeing great results in Q1.

As it pertains to direct-to-consumer sort of advertising, I mean, putting that in place during a time where you don’t have your sales force out in full stead with these, sort of, overriding pressures from COVID wouldn’t seem appropriate and we’ll reassess that as we look into the medium term.

On the ability of the M&A, I think, the clear focus here for us is we are in this transition period. And we’re truly laser-focused on delivering on these two depots, getting to the $1 billion-plus on SUBLOCADE and the $200 million to $300 million that we’ve guided on PERSERIS.

Like most of the world with the onset of COVID, despite the resolution of the DOJ, we are in this transition period with the net revenue loss in the film and the launch of the products. So we’re going to focus our allocation of resources on those and delivering those with excellence.

Then we can turn at some point in the medium to long term, where we start to think about M&A and broadening out our leadership position in addiction and its comorbidities. And we can become a bit more creative in our allocation of capital, as we try and build out the pipeline and diversify our net revenue profile.

With regards to the ongoing OpEx, maybe I’ll just hit that. Obviously, I think, Ryan has provided clear guidance or business planning guidance with regards to the back half of the year. And, obviously, we haven’t guided to beyond that and we’ll deal with 2021 as we get to the full year results.

Lastly, with regards to the CIA, obviously, I think, any time that you’re dealing with government agencies and these sort of resolutions, you anticipate having a corporate integrity agreement and other compliance measures. And we’ve been planning for these for a number of years, increasing our investment, increasing the talent of our integrity and compliance team.

18 months ago we brought in Cindy Cetani as our Head of Integrity and Compliance, who has significant experience operating with corporate integrity agreements. And continuing to broaden the training and DNA of the organization with regards to compliance. So we feel we’re in a good spot with regards to that. And now we’re in the formal sort of implementation phases of that with the DOJ. We don’t anticipate it impacting our business moving forward.

Nick Nieland

Thanks very much.

Mark Crossley

Thank you, Nick.


Our following question comes from the line of Paul Cuddon from Numis. Please go ahead.

Paul Cuddon

Hi, guys. Firstly, just congratulations on settling the DOJ and look forward to seeing those results in October. And the first question for me would be on the Organized Health System strategy and to what extent it changes the pricing dynamic and your OpEx requirement? Is this incrementally [indiscernible] coming from the OHS? And do you need to drive up the number of ways as healthcare professionals? And you can start with that and I’ve got a couple more to follow.

Mark Crossley

Paul, again, I think you were breaking up a little bit. Let me — I know you were talking and asking a question on Organized Health strategy. I think the first part of it was on pricing. We don’t see a real impact on pricing with regards to organized health systems.

What you’re doing is, you’re focusing your efforts on institutions that have the infrastructure to support specialty products versus the small doctors’ offices where even though we’re at or better than most analogues on specialty pharmacy products, it is an increased burden on those.

So these institutions have pharmacies on site, back offices to take care payments and the doctors can truly focus on making the right decision on behalf of patients. On the OpEx side, with regards to organized health systems, what we’ve been doing is continuing to shift our resource allocation, within the current sort of budgets that we have towards those organized health systems. So we think we have the right mix at this time, with regards to those. In the future, we could allocate more resources and we first look internally to reallocate before adding incremental OpEx.

Paul Cuddon

Okay. So just to be clear the organized health system is where the vast majority of the 100 and 275 waivered HCPs would be?

Mark Crossley

I’m not familiar with the number you have there. We have talked about our top 500 targets where there’s, one million patients and about 25,000 waivered physicians there. Which we think is a dense population that we’re targeting and are seeing considerable amounts of growth there. And that was what was really driving, the first quarter results where we started to see the accelerated growth on both the KPIs, but also the net revenue.

Paul Cuddon

Okay. Thank you. And secondly, for the rest of the world business, which has proven pretty resilient over the years to competition. And now you’ve got SUBOXONE Film and SUBLOCADE or SUBUTEX prolonged-release coming, so I’m just wondering to what extent that’s got potential to either cannibalize the existing business, or do you see it actually helping grow the rest of the world now?

Mark Crossley

Yeah. Great, question Paul, I think, we’re super-proud of our rest of world team and what they’ve been able to do. They’ve continued to really stem off the erosion associated with both, the branded and generic competition that they’ve had, over the last five to seven years, and are excited that they’re starting to get the new technologies that we’ve had in the U.S.

We think that, they are the best people in the globe to have those and bring those to market with their experience with the HCPs and partners across the globe. And we think this is an opportunity for that business to not just trade out, potential business on a sublingual basis, but also return to growth with the new technology. So we’re extremely excited for, our team-mates that are in the rest of world business.

Paul Cuddon

Fantastic and last one if I may. The capital allocation decisions, I presume, we need to wait through October. But could there be anything between October and February, or should we be waiting for kind of final results in the sort of February time to get a clearer picture there?

Mark Crossley

I think we’re in this transition period Paul, which I think we need to get more certainty on. And if I had an answer to that, I’d be in really good shape. But I think what we’ll have to do is, wait out what is the length and the depth of the impact of the disease. And that’s truly in the disease’s hands not in mine. So we’ll continue to assess that. The impacts to our business and at the right time make those decisions.

Paul Cuddon

Okay. Thank you very much and again congratulations.

Mark Crossley

Thank you, Paul.


Our following question comes from the line of Eric Fischer from Scopia Capital. Please go ahead.

Eric Fischer

Hi guys. Thanks for taking my questions. Two questions from me. One, now that the DOJ issues are behind you, can you talk a little bit about whether now or when might be the right time to revisit a U.S. listing? And secondly, it’s great to hear, your continued commitment to reinvesting in the sales force and driving SUBLOCADE volumes.

But given the depressed stock price the cash on the balance sheet and improved visibility with the DOJ resolution, it seems there’s sufficient capital to take advantage of the current share price and potentially repurchase a meaningful amount of shares. So can you talk about, how stock buybacks might fit into your capital allocation strategy from here?

Mark Crossley

Sure, Eric. Thanks for the questions. I think with regards to the U.S. listing, as well as your discussions with regards to capital allocation and potential usage of cash, I think that falls similar to the answer that I spoke, with Paul. I mean we are in the midst of a transition period, with regards to the pandemic.

We do have the impacts of the loss of film, while we’re launching these transformative products. And I think it’s best to remain conservative in the short-term, before we start to turn to our medium- and long-term aspirations, which would — the first priorities would be to start to diversify the business. So really, really appreciate the question. But I think probably now is not the time, to come to conclusions on those.

Eric Fischer

Great. Thank you.


There are no further questions, at this time. Please go ahead.

Mark Crossley

With no more questions, I want to thank you for attending, the half one results. Thank you for your continued interest, in Indivior. Look forward to, the continued engagement in one-to-ones and the virtual conferences that are happening. And I hope you all have a great day. Thank you very much.

A – Ryan Preblick

Thank you everyone.


That does conclude our conference for today. Thank you for participating. You may all disconnect.

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