Indivior Pharmaceuticals, Inc. (INDV) Earnings Call Transcript & Summary

Good morning, and good afternoon, everyone. Thank you for joining this session at the Morgan Stanley Global Healthcare Conference. My name is Thibault Boutherin. I'm part of pharmaceutical's equity research team based in London. Before we start, I need to refer to important disclosures. [Audio Gap] Morgan Stanley research. Would you like to start with some introductory comments on the current situation and the outlook for Indivior?

Thanks, Thibault and thanks for having us here today. And how poignant that this is a national recovery month here in the U.S. for us to get together and talk about Indivior. I think Indivior is at a great spot with regards to its development and its future, just the strategic sort of options we have in front of us. We've come out of material overhangs on the business in a very good spot. And for us, the way forward is extremely clear. We basically have a 4-pronged strategy as we move forward that we're relentlessly focused on executing. The first one is growing SUBLOCADE to $1 billion plus in net revenue, and I'm sure we'll talk about that a bit more. The second is on diversifying our revenue base. Initially, that is on the organic side, bringing our film technology SUBLOCADE to our rest of world sort of countries and launching those, and those have started with vigor in 2021. Also, we have another long-acting injectable, PERSERIS, in schizophrenia that we're launching, very tight focus there on trying to expand our revenue base. The third is looking to rebuild our pipeline, and we're starting to bolster that out and taking it from opioid use disorder product into true substance use disorder. We're the leaders in addiction and getting those assets to bolster our pipeline have been key. You noticed that recently, we closed a deal with Aelis on a cannabis use disorder, and we also have assets in the pipeline, a GABAB receptor with alcohol and an Ox1, which is a nonopioid, opioid use. I think the last pillar that we have is our continued operational excellence. One is delivering on what we say we're going to do. That's key to us, key to our heritage. And then the second is maintaining our flexibility. We had net cash at the half year of about $700 million. And we have a very disciplined capital allocation strategy moving forward. So we're in an exciting place in the strategy, relentlessly focused in the near term on delivering on SUBLOCADE and a bit of revenue diversification.

Thank you very much. Maybe I would like to start with a kind of big-picture question. Thank you for outlining the strategy. So obviously, right now, the SUBOXONE franchise is eroding in the U.S. You are progressing on the rollout of your injectable product, SUBLOCADE, that you're seeing good growth and diversifying revenues ex-U.S. So how should we think about the shape of Indivior growth in the mid- and long term? And what are your plans to, obviously, make this growth more sustainable beyond the next few years? So just maybe another look at the kind of major opportunities and challenges that you see in the years ahead for the business.

Yes. I think it's a great question, Thibault. And listen, I think, in the short term, it's all about getting SUBLOCADE on to that trajectory to $1 billion. Obviously, that will be the biggest engine of growth in the short term because we're sitting here with guidance for this year at $210 million to $230 million. We've had 5 success -- 5 sequential quarters of double-digit quarter-over-quarter growth, which is just a fabulous result despite the headwinds that COVID have put on the business. In addition, we are continuing to launch those new products in rest of world, which will take the -- from a kind of a mid-single-digit contraction due to heavy competition. And we expect to ease that and get into growth in the out years. So we look -- as we have those -- as we have PERSERIS in the U.S. providing growth with a bit of contraction as we revert to analog on the film, we see this as a net growth opportunity in the medium to long term to deliver really strong value to shareholders. And it's an exciting thesis organically there.

Thank you, Mark. Maybe before we start to kind of dig a little bit more in the business. I just wanted to have your kind of view and overview on the opioid crisis in the U.S. because, obviously, your business is quite interfering with what's happening in terms of the opioid epidemic. So if you could give us a kind of high-level overview on the situation and how it is evolving now that we are exiting the pandemic.

Yes. Thank you, Thibault. Listen, I don't think any of us have ever lived through a time period like we've all gone through in the last 18 months. And we aren't suffering from a chronic relapsing brain disease such as opioid abuse. And what you've seen in that disease space, which really has to do with getting stabilized and dealing with your triggers is the pressures associated with the isolation that we've all felt. Some of the financial pressures that people have felt through COVID as job security has been lessened, is people are tending to reach for their drug of choice to cope with this added stress, and it's caused both opioid use disorder diagnosis to be up. But if you look at really the catastrophic measures of this, which is opioid overdoses and where the trends have been on there, since the pandemic started, substance use disorders are up 30% to over 90,000. Opioid overdose deaths are up 30% also and up to over 70,000 deaths a year due to overdose. Now much of this is coming through the introduction of fentanyl into the supply chain, which is 30 to 50x more powerful than the typical oxycodones or heroin that are usually the subject of abuse. And it's that -- those synthetics that are driving 75% of the overdoses in the U.S. So the pandemic merging with the epidemic is like a match to gasoline in what we've seen. And really, I think, what we have to do in a disease space where we only have about 20% penetration of treatment, we need to turn that on its side, and we need to normalize the disease space and get to 80% to 90% treatment rates similar to other normalized disease spaces.

That's very clear. Thank you, Mark. And I just want to maybe touch on the COVID-19 impact and on your business, in particular. Just kind of if you could tell us how it's impacted your business over the past 18 months and how the kind of exit of the pandemic is going to shape your business over the next few quarters in terms of, obviously, we just talked about the opportunities, but also in terms of your ability to market your drug portfolio and also potential reversal from saving -- from the OpEx savings you could have made during the period.

Certainly, Thibault, thanks. And listen, I think, COVID-19, as I said earlier, it's probably one of the most unique situations. And early on in the pandemic, we had our sales force out for an entire quarter, right? Because we just from a safety standpoint, didn't feel it was right. And then as we understood the disease more, they reentered the field. And we ended up in this mixed call pattern of some digital call patterns and some in person, but really, really limited access. Which as the world has learned to deal with it, including getting vaccines, we started to see that open up, right, and started to get more access to physicians, started to see more patients being able to have in-person visits with physicians, or having some unique interventions from policymakers like the DEA and SAMHSA coming together and allowing for telehealth for initial visits for people suffering from opioid use disorder, which previously wasn't allowed. All of these things together have allowed us to get more access, more see-ability from zero almost in that first quarter where we were working from home and going to digital, to today, we're getting about 65% of our visits in person. So we're starting to see the easing. Delta is out there. So you don't know where that's going. It, obviously, is -- seems to be a bit more of a contagious version of the COVID virus. So we don't know where that will go. But what we have seen is the health care facilities are dealing with COVID right now and really helping their patients in such a tough time.

Great. Thank you. Just maybe you want to start spending a bit more time on SUBLOCADE. So you're, obviously, currently in the rollout for this product. So can you tell us where you stand in the life cycle? And what are the key drivers and blocks in the rollout that you are facing right now?

Yes, Thibault. I mean I think this is where we have really been breaking new paradigms in the treatment for opioid addiction. First of all, SUBLOCADE it is a new paradigm of treatment. It is instead of taking daily sublinguals where the patients choose their dose because they tell the doctor how they feel. We have gotten to one dose that helps people deal and disrupt with the 3 primary drivers of addiction, which are cravings, withdrawals and on-top euphoria when they use. So SUBLOCADE uniquely disturbs those 3 and gives the patient a nice chance to get into and stay on recovery. Now where that journey is happening versus the sublingual side is where there's been a bit of a strategic pivot throughout the launch. We could, at one point, only launch in our heritage call platform in doctors' offices. But having a controlled substance that is an injectable that has to be managed in these small doctors' offices is a burden on those. And what we've done is strategically pivot into organized health systems. These are what I would call big hospital systems. Typically, there's a hub in the middle and then they've got satellite sort of facilities, and they're able to see a lot of patients. Over 25,000 waivered physicians are in these facilities and well over 1 million opioid use disorder sufferers. Now critically important, it's these facilities who, once you get through the initial SOPs, the initial administrative burden of allowing the controlled injectable specialty pharmacy drug on site, they have the services to be able to manage the journey to allow the physician to be free to make his choice on medications based on what is efficacious. And what we see as we launch in these spaces, is physicians not only add more patients per HCP but they do it faster than you would see in a normal platform. So organized health systems are a key element there, a key element of our 5 quarter-over-quarter growth. Another key element of the strategy is criminal justice system channel. And this is one where we've been putting in a lot of work. But what you have is you have a channel where 60% to 65% of your patients, because of the nature of this disease, they pass through the criminal justice system at one time or another. Only when they're in jail, typically patient -- only about 5% of patients actually get medically assisted treatment. Once they come out of jail, 75% of those patients end up reusing and reintroducing opioids within the first 3 months they're out. So this is a critical area where you've got a significant turnover of patients going through because of the nature of the disease, and we're just now starting to see quite a bit of momentum in this area. So it's quite exciting with regards to where we are there. And then I would say, lastly, with regards to the strategy on SUBLOCADE, I think, if you pivot to evidence generation, this is a disease space where there hasn't been a lot of new science that has come into the market since buprenorphine medically assisted treatment came in 2003. What we're doing is create a bolus of information. We did our RECOVER study, which showed that patients on SUBLOCADE, if they're on for a year or more, they have a 75% higher chance of staying in recovery. I mean that's great science, it's breakthrough. It's a longitudinal study. And then the other piece that's out there is the fentanyl study that the team has done, which has affected a buprenorphine element into the label that talks about buprenorphine's role and interaction with fentanyl and how it can suppress the impacts of fentanyl on individuals when they get it. And you'll recall, 75% of the overdoses that we're talking about of those 70,000 people are because of fentanyl and synthetic opioids. So it's an exciting time for us on SUBLOCADE as we're moving forward. And you can see why we've enjoyed those 5 quarters in a row of double-digit growth.

Thank you very much. And I want to spend maybe a little bit more time on -- you just mentioned the criminal justice system in the U.S. as the probably increasingly important channel. So just if you could give us an indication of the size. As this channel is also related to government, does this imply maybe a lower margin than the rest of the SUBLOCADE business. And just as, if you could comment on the recurrence of these revenues.

Yes. No, it's a good one, Thibault. And listen, again, for us, we're very excited about the progress here. While there is a low treatment rate in prisons, we're seeing quite a bolus of movement here, a lot of inbound traffic of some people looking to use SUBLOCADE, and we showed some of that strategic progress in the second quarter, where we had a one-off $7 million order from one system -- one prison system, which is going to -- they're going to treat their patients while they're incarcerated not just upon release. So I think that's a key initiative of where we get. You're getting a patient when they're open to treatment because they want to transform their lives, they don't want to keep cycling in and out of prisons. And you can help get them on that road to recovery and then bridge them in their return to society via a continuity of care in a handoff. I think another key element that you see where there's quite a bit of positive momentum here is the administration, the Congress are trying to put forward sort of efforts to help in this area. There's been a bit of funding that's been coming out from the President's budgets, from CARE or Cures and some of the new initiatives. And then, there is also a piece of legislation that is in Congress today called the Medicaid Reentry Act. That, if and when it's passed, will allow for patients to get treatment for addiction and mental health upon release from jail. So that continuity of care where they're most vulnerable that we're going to be able to help them with that as they reenter society. Now when it comes to revenue, I think, the key here is people that enter prison, the normal people that enter prison because of substance use disorder in a related crime, they're in there for a relatively short duration. Call it, 3, call it, 6 months, somewhere in that range. So it's quite a turnover sort of population. So I think the key here is starting them on their journey and allowing them to reenter society. So the revenue itself during that 3 to 6 months that people are actually in the criminal justice system is probably the least strategic for helping this disease space. It's really the reentry and what that means for keeping them on the journey. So it's a very crucial, very strategic channel. We're getting lots of inbound traffic, and we're excited about the early steps. But it will be in chunks as we go. As we talked about the $7 million, that will be a few quarters' worth of revenue for that prison system. And we'll continue to work with partners to have SUBLOCADE be a choice. It is such a perfect vehicle in a prison where if the previous barriers are when it's a daily dosing of a sublingual, you have to logistically get the patient or in this case, the prisoner to the dispensary. There's resource constraints, there are safety constraints, liability constraints. If you can do that just once every 28 days, with a paradigm shifting medication, it is the perfect vehicle for this channel to get these patients off to a fair start. So we're excited about the opportunities, Thibault.

Okay. Thank you. And maybe if you could spend some time on the ex-U.S. situation. So if you could tell us kind of explain to us the size of the opportunity for SUBLOCADE outside of the U.S., the stages of the rollout and where you see the most opportunities for growth. And maybe some color on kind of access and reimbursement topic in key geographies outside of the U.S.

Certainly. And listen, I think, we spend a lot of time in the U.S. because of the prodigious sort of statistics with the deaths, but this is a global problem, and it's nondiscriminatory, hits across all social classes, all ethnic sort of folks. So when we think about the rest of world, what we've had historically is we have had a heritage business of tablets, SUBLOCADE and Subutex. And what we have now for the first time is we're able to bring 2 new technologies to a highly competitive market. It's both genericized and there are other branded competitors in the market. So what you've seen over the last 3 to 4 years is a mid-single-digit decline on the business. But wow, that's pretty good given the competition, given it's genericized. I mean the business has held up well and that's a testament to that rest of world team. Moving forward, new technologies can change paradigms. And I think the film technology, which we've seen in the U.S., is preferred by patients because it dissolves faster, it tastes better. And SUBLOCADE, which changes the paradigm, we think can stem that decline and get us headed back towards growth. With regards to the film, the film went through a central approval process. So it's in the midst of launch all across Europe, but it's early days with regards to that, right? So that takes time, and that will move and where we'll see the majority of that momentum is as it starts to take in 2022. SUBLOCADE is a country-by-country filing. We're in Australia. We're in Canada. We're in Israel, and we're in the Nordics. But we're still working through both approval, which we're getting in more, but then also reimbursement and pricing. And that's the piece that has to come before we can start with Zeal getting into those markets. But we're excited at the opportunity. We think we've got a game-changing paradigm, one we don't see in other long-actings that are available.