Indivior warns of 'material' revenue risk after US court ruling on Suboxone

Indivior intends to launch an appeal over a US court ruling that could allow the marketing of a rival, generic version of its Suboxone film to treat opioid addiction.

Generic versions have not yet been approved by the US drug regulator but with a Delaware court ruling that rivals proposed versions were not infringing its patents this may not be far away, with the FTSE 250 company saying it believed this "could potentially result in a rapid and material loss of market share" within months of a successful launch of a generic film alternative.

Last year Suboxone film, which represented approximately 80% of Indivior's calendar year revenue, had an average market share of 61% and the 60% the year before that.

It has been calculated that a launch in the US of a generic product that can be directly substituted by a pharmacist for the branded product without consultation with the patient would result in the branded incumbent losing up to 80% of its market share within a matter of months.

"A material loss in market share in the US would have a significant adverse impact on the company's revenues, profitability and cash flows," Indivior said.

The Delaware district court on Thursday found that rival Dr Reddy's has not infringed any asserted claims of a group of patents pertaining to Suboxone, and in a separate decision that Watson (Actavis) and Par do not infringe the asserted claim of another relevant patent.

It is thought that approval from the Food & Drug Administration for Dr Reddy’s generic alternative could be given in the first quarter of 2018, with the company needing to overcome a previous FDA complete response letter to secure approval and then decide whether to launch 'at risk' of Indivior's appeal.

On the upside for Indivior, the court denied Watson's and Par's motions to reopen a previous judgment that found their proposed generic products infringed the UK company's patents, though Watson and Par are now able to now able to pursue their respective appeals at the US Court of Appeals for the Federal Circuit.

Indivior said it "intends to continue vigorously defending its intellectual property and believes that it has grounds to appeal the ruling" but it will not be able to rely on patents 8,017,150; 8,603,514 or 8,900,497 to prevent Dr. Reddy's from manufacturing and marketing a generic film alternative in the US.

"Further, the company may have increased difficulty successfully defending its intellectual property against future ANDA [abbreviated new drug application] filers."

Indivior shares crashed 38% to 259.8p in the first few minutes of trading in London on Friday.

Analysts at RBC Capital Markets said Indivior's appeal process could put any generic launch out by 12-18 months arguably, unless Dr Reddy's is willing to launch at risk, while also wondering if Indivior might reach some form of settlement with Dr Reddy’s and suggesting that Dr Reddy's version might not be perfectly substituteable.

"The one positive from this news is that Indivior’s patents were upheld, and Dr Reddy’s was found to not be infringing on said patents.

"This could potentially help offset any future generic challenges, as must also show to not be infringing. This could limit the number of competitors and hence the market share loss of Subuxone Film."

Broker Numis saw little chance of Dr Reddy's launching in 2017 and, subject to being able to manufacture the complex
film, is likely launch in 2018.

Numis, which likes the stock based on the imminent approval and launch of RBP-6000, in light of Donald Trump's recently declared US national emergency over the 'opioid crisis'.

"The over-reaction this morning (-38%) presents an excellent entry point with approval of the monthly depot the near term catalyst," analysts said, with the shares trading at nine times 2018 earnings or 12 times if Dr Reddy's do secure FDA approval and launch "at risk" or resolve Indivior's appeal.

On the assumption of one new generic launch in 2018, Numis estimated around 25% downside to 2018 EPS forecasts to 28 cents per share and said the increased costs associated with appeal will likely temper the chance of a further upgrade to current year forecasts of 37 cents EPS.