Indivior fights to prevent loss of 80% of Suboxone market share

A day after a US appeals court judge lifted restrictions on a copycat version of its biggest-selling drug, Indivior said it could lose up to 80% of its market share for the anti-opioid addiction treatment.

The FTSE 250 company, which saw its shares crash 47% on Tuesday, said on Wednesday that the exact timing was unknown for the generic drugmaker Dr Reddy's Laboratories to re-enter the market with its generic version of Indivior's Suboxone Film, but that it would keep up efforts to delay and prevent this. Dr Reddy's confirmed on Wednesday morning that it "will resume its launch activities as soon as permitted".

Suboxone Film made up the majority of the company's $245m revenue in the most recent quarterly results, even despite a dip in market share to 50% after Dr Reddy's quickly distributed a fairly large quantity of its generic film in the second quarter before the injunction was granted.

After the federal appeals court on Tuesday overturned an earlier district court ruling to uphold an injunction preventing Dr Reddy's from selling and marketing its copycat version of the film, Dr Reddy's filed a motion requesting that the appeals court either issue a mandate to direct the district court to immediately lift the injunction or, alternatively, suspend the injunction until such a mandate is issued.

Indivior noted that Dr Reddy's will be launching its generic product on an "at-risk" basis, as there are still appeals going through the courts over patents aimed to protect Suboxone and ongoing litigation against Dr Reddy's in the district of New Jersey asserting recently-granted Orange Book-listed patents. Indivior said it will oppose Reddy's motion and file a petition for both "panel rehearing" and rehearing "en banc", with a full array of judges, of the ruling annulling the injunction.

If these efforts fail and the generic film enters the market in 2018, Indivior said "the result would most likely be a rapid and material loss of market share for Suboxone", with industry data suggesting it could losing "up to 80% of its market share within a matter of months", which the company said "would have a significant adverse impact on the company's revenues, profitability and cash flows". As per previous indications, it would also freeze the company's launch of its new injectable treatment for schizophrenia, which was approved by regulators earlier this week.

"We are surprised and disappointed that the court has vacated the preliminary injunction," said Indivior chief executive Shaun Thaxter.

"We will continue to vigorously pursue our infringement cases against DRL to protect our Suboxone Film patent portfolio, including filing a petition with the [appeals court] for both panel rehearing and rehearing en banc of the ruling vacating the PI, as well as opposing DRL's motion to immediately issue a mandate or stay the current PI until the mandate is issued.

"We are continuing to pursue the appeal of the US District Court for the District of Delaware's non-infringement decision related to US patents 8,603,514 and 8,017,150, as well as litigating our recently listed Orange Book patents for Suboxone Film."

As part of the third-quarter results, Thaxter reaffirmed 2018 guidance of $990-1020m and net income of $230-255m, which in September was cut from the $290-320m given at the start of the year. Last year Suboxone Film generated $877m of revenues, with $216m coming from outside the US, which will not be impacted by the Reddy's ruling.

The company's net cash stood at $569m at the end of September, up $193m since the start of 2018, but also with more than $300m of gross debt.

Indivior remains in "advanced" discussions with the US Department of Justice, which has been investigating

Shares in Indivior were down at least another 10% on Wednesday to a new all-time lows below 96p.

Analysts said the company is likely to take significant action to reduce the cost base but that attention is likely to move onto the debt covenants.

Broker Numis kept its 'buy' rating on the shares felt the current enterprise value of around $500m is "largely supported" by the non-US film business and so heavily discounts the recently launched Sublocade monthly depot treatment and not-yet-launched Perseris.

Numis cautioned clients that the settlement with the DoJ remains outstanding "and the shares will remain volatile with highly binary events ahead and balance sheet concerns becoming more pressing".

Similarly, RBC Capital Markets estimated there would be $625m of net cash by year-end, but that this will be needed for potential fines so investors "will no doubt be looking for a refinancing of the debt facility to avoid any concerns here".

RBC, which downgraded its rating to 'sector perform' from 'outperform', slashed its revenue estimates around 43% in the coming 2019 and 2020 financial years but predicted management will step up cost saving measures ahead of those already guided, with an "extra $75m not impossible...which keeps the business at a broadly breakeven level in FY19E".

With an RBC had foreseen a "window" for Indivior to convert Suboxone Film users to its recently launched monthly treatment, Sublocade, but only if the Film market remained closed to generics for a while longer.

"This window now appears to be closing and think we should be looking to more prudent scenarios. Whilst our forecasts suggest the company should emerge, in time, to a growth asset this is based upon the Sublocade improving, which we would suggest some caution with as the forecast risk remains high."