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

So thanks for staying with us after lunch. And as we sort of draw to the close of the presentations, it's my pleasure to be able to introduce Indivior. So some of you may be familiar with Indivior. But Mark Crossley is the CEO, and he is going to run through a presentation, just on the company opportunities in their opioid use disorder markets, and then we will open up for Q&A. So Mark, pleasure to have you here in London. The podium is all yours.

Thanks, Graham. Really appreciate it. Yes. Thanks again, Graham. And great to be here back in person. It seems like it's becoming more normal. I'll bypass the forward-looking statements, assuming everyone's read them. And let's just start with why Indivior. And I think the key here for those that don't know Indivior is we are the leaders in addiction. We're pioneering life-transforming treatments for both addiction and serious mental illness, where there's huge comorbidities, and we're uniquely positioned for 20 years as the leaders in -- globally, but also in the U.S., which is the fastest growing and largest market. Our business is quite profitable, strong cash-generating business. We have good financial flexibility. And while we've narrowed our strategic priorities over the last 2 years, we've also looked to ways to deliver value for shareholders and have put in place $200 million buybacks and have potential for business development moving forward. We've refreshed significantly the Board of Directors over the last few years because we've been a publicly facing company for 9 years, so trying to get to a good orderly refreshment, and we have 7 new board members focused on the journey ahead for the company, the journey of growth and value creation, and we have a very energized management team with pharma experience. And really, you think about the momentum in the business, and we'll get to this in more detail, but specifically across multiple growth drivers, but specially in the paradigm shifting of SUBLOCADE, where we've increased our net revenue guidance at the half year by about $25 million on the midpoint and growth at the half year is over 75% year-over-year. So very strong momentum. So let's get into a few basics for those that don't know Indivior as well. Looking at the trailing 12-month revenues, you can tell just as the opioid use disorder phenomenon and epidemic is primarily U.S.-driven, so is our revenue. We have about 80% of our revenue in the U.S. where we're experiencing 21% year-over-year growth if you compare Half 1 '22 versus Half 1 '21, and that is primarily on the backs of our paradigm-shifting treatment SUBLOCADE, a 28-day injectable. Broader, we're the global leader in addiction. We are in 40 countries. We have about 1,000 people around the globe whose focus is on helping people enter recovery and recapture a normal life. I think the key is we also have quite a bit of flexibility with $1 billion of gross cash on the balance sheet. So key products, we have 2 long-acting injectables, both leveraging the ATRIGEL delivery technology. ATRIGEL is unique in that it provides an immediate burst within the first 8 to 12 hours up to therapeutic dosages and then maintains that therapeutic dose for the full 28-day period. We've combined that with buprenorphine for a long-acting injectable for opioid use disorder. There's about 3 million patients according to SAMHSA. There are some data points that say there's as many as 7 million patients that have been identified with this. And we're the #1 market -- the #1 leader in the U.S. market, and we have guided to $1 billion plus in revenue for this paradigm shifting asset, and we'll talk about this asset in a bit more detail moving forward. The other place we've deployed the ATRIGEL is on PERSERIS, another long-acting injectable to treat schizophrenia. We have a differentiated product profile there. There's about 2.6 million patients in this very established market, and we think we can carve out a nice niche in here of about $200 million to $300 million of revenue. We have a heritage products, both the SUBOXONE film and tablets in the U.S. and rest of world, which provide a nice foundation of revenue and spin off a lot of cash. In the U.S. specifically, the film is about 19% of the market, despite generic competition for the last 3 years. So I think our vision has not changed over the last decade, very, very clear. We have kept our -- and defined and narrowed our strategic priorities. And we've been very clear on these over the last 2 years, taking advantage of SUBLOCADE in the paradigm shifting growing it to $1 billion plus is the #1 priority for Indivior. We're diversifying revenue. In the short term, it's organic. It's utilizing PERSERIS. It's driving our technologies in opioid use disorder into the rest of world with the SUBOXONE film and SUBLOCADE. We're looking to drive value through building and most importantly, progressing our pipeline. We have a cannabis use disorder asset from Aelis Farma that we brought in. It's a IIb asset that we think is coming to -- through the pipeline at about the right time, given what's going on in medicalized and legalized marijuana market in the U.S. And we have alcohol use disorder asset [ and the Nox1 ] that we'll talk about a little bit later. And lastly, it's about optimizing our operating model. We've set our strategy in place. We've reorganized behind it and are really focused on delivering with excellence moving forward and showing discipline from both the capital and P&L financial management. So first, in opioid use disorder, and it's quite tragic, there is a huge unmet need in the United States, which is the largest market. There's over 10 million people in the U.S. who have used opioids, 3 million have been diagnosed with opioid use disorder. And at any one time, only 1.2 million are actually getting treatment. So there is a huge and significant treatment gap. While at the same time, if you look at the chart to the left, there's over 82,000 people a year that are dying from opioid overdose, respiratory depression associated with. And that primary driver of that, you can see from the purple line, is synthetic opioids, which are 30% to 50% more powerful than heroin and are causing respiratory depression. So crazy, huge unmet need truly impacting families and people's ability to be outstanding members in society. SUBLOCADE is a natural sort of paradigm shift to help patients regain their lives to reenter society. It's -- first of all, it's buprenorphine, and it's the first buprenorphine-based long-acting injectable in the United States for treatment of moderate-to-severe opioid use disorder. For those that don't know buprenorphine, it's a partial agonist opioid. So the full agonist opioids are the ones that people abuse, they give the crazy euphoria, they also cause respiratory depression. Buprenorphine while partial agonist, it physically stabilizes without the euphoria, and it also is very safe from a respiratory depression. So it's a WHO essential medication for a moderate-to-severe opioid use disorder, and we put it into a 28-day injectable. I think the beauty of 28-day injectables is 1 treatment decision every 28 days, 12 choices a year instead of 365 choices a year to stay in treatment. That on its own is a huge, huge paradigm shift for folks. The other piece of it is that we have a very unique therapeutic dose, paradigm shifting in this space. Scientifically, it would be 2 nanograms per ml in the bloodstream. And if I think about what that means from a layman term, it means that the mu-receptor which the full agonist opioids act on, they create the euphoria that start people on the disease, and they create the physical addiction and the withdrawals that keep people addicted, seeking more opioids to satiate their cravings and withdrawal. When you get to 2 nanograms per ml, you fully occupy those receptors with buprenorphine, the affinity of buprenorphine is higher than the full agonist. And so SUBLOCADE itself protects people in their moment of weakness. If they were to use on top, they do not get euphoria and on top reinforcement. So this is a true paradigm shift as you look at the treatment of addiction and the fact that the therapeutic levels are maintained in the full 28 days is fabulous. I think lastly, when it comes to SUBLOCADE, we've built this as a specialty pharmacy go-to-market model. So when you think about it, it's a closed distribution system. So the product is never in the hands of our patients until it's actually injected in their body. So the ability to misuse or divert this medication has been reduced considerably versus take-home dosing. I think as you look to physicians, to patients, the reinforcement of this paradigm shift is right there to the right. And I think net revenue really speaks to this from a penetration standpoint and the growth rates year-over-year. If you look to the half year increase in guidance of $390 million to $420 million year-over-year versus $244 million last year. So very strong progress over the last 2 years. Our go-to-market model versus the heritage sort of retail therapy of the daily dosing is focused on organized health systems. Organized health systems are big, large hospital centers that have the back office and support system around the physicians to support a controlled substance specialty pharmacy product, where the administrative burden of getting prior auths of storing the product, complying with the risk management system, local and state laws is quite a burden to a very small doctor's practice where the typical retail therapy came from. These doctors' offices, they have the back office for paying, for scheduling. They typically have pharmacies on site, so they can manage that controlled substance, and the physicians are freed up from being the CEO of their practice, and they can control -- they can prescribe the best, most efficacious medication for their patients. And we've seen significant uptick in this space. It's 70% of our growth, and it's 70% of our volume on SUBLOCADE. I think the key here is you get into the hospital systems, the veterans administration and the criminal justice systems and you have the vast majority of patients and the vast majority of doctors. So it's a very exciting go-to-market model that we've put in place. Many folks say, "Listen, you've been guiding to $1 billion-plus, please help me with the building blocks of why you have so much conviction [ mark ] with regards to the $1 billion." And I think the math is really pretty simple. We talked about the fact that 10 -- over 10 million people abuse opioids, and there's been 3 million people diagnosed. If you look at the maths, we've got a mid- to high single-digit growth in the market, where we're taking kind of a mid-single-digit price increase, which on a net basis is only 2% to 3%, and if you move forward, you only need about 180,000 patients to get to $1 billion in sales. We're already at 65,000 patients at this time and continuing to grow significantly for 8 quarters in a row of double-digit growth quarter-over-quarter. So the momentum is there. In addition, the disease space around opioid use disorder continues to evolve. And I think one of the key elements, and you've probably read about it in the papers is the introduction of fentanyl into the supply chain. Drug dealers in the cartels in South America have traded out heroin and growing poppies for basically labs and creating synthetic opioids. They're cheaper to manufacture, they're easier to smuggle into the U.S, and they have become a huge part of the supply chain. And because they're 30% to 50% more powerful, they're causing those respiratory deaths. Well, what we've done is we've done a pilot study, looking at buprenorphine interaction with fentanyl, which is causing over 70,000 overdose, and its ability to reduce fentanyl respiratory distress. So very pertinent, and those levels are very similar to what we have on SUBLOCADE. So very pertinent science there. The other one is the interesting side of people with opioid use disorder as they've been abusing opioids typically for 6 years before they enter treatment, the first question they ask is, "I'm coming into treatment, but when can I get off?" Because they know we're a partial agonist opioid, they know their stigma to it, and their family would like them to be opioid-free. We've done a RECOVER Study, our Chief Scientific Officer that says, really the sweet spot for staying in treatment to have a good shot on goal for staying in recovery is about 12 months. In 12 months, your brain, which your reward system has been rewired, it can heal at the same time that you're getting psychosocial counseling, and those 2 things are the key to staying in recovery moving forward. So you know how to deal with the triggers that cause you to reach for that drug of abuse. So some really pertinent science as it relates to this travesty here in the U.S. Our second strategic pillar is diversifying revenue. We've taken ATRIGEL with risperidone into schizophrenia, and we have a drug called PERSERIS. We've just gone with a national launch on that product in January. We're guiding to $27 million to $32 million of revenue and have seen kind of our Q2 net revenue up 25% versus a year ago and are excited about what this drug can bring to the space. It's a differentiated profile, very simple. You inject it once and you're done versus the other long-actings in the space, which require on-top oral dosing, booster injections and a more complex sort of dosing scheme. So we're excited to bring PERSERIS to that space. In the rest of world business, we're bringing the technologies that have been in the U.S., the SUBOXONE film and SUBLOCADE, and we're bringing those to the rest of world to take what's been a 3% to 5% decline over the last 4, 5 years and return those markets to growth. So we're excited to bring those new technologies to the Rest of World markets that also have opioid use disorder issues. Part of being the addiction leaders is not just to have assets for opioid use disorder. There are other addictions that are building, that are growing, that are causing lots of issues across the world. If I take them in order, cannabis use disorder is becoming a very pertinent area in the United States. I think if you look to what's happening, legalization, the medicalization of this, not just a joint like you may have had earlier 20 years ago, now it's gummies, it's tinctures, it's oils that go in food, all very high concentrations in THC versus 20 years ago, where the average THC concentrations were 3% to 4%, average concentrations are 20% now. And you're seeing continued goals towards higher THC concentrations. Those higher THC concentrations are causing more addiction. They're causing cannabis-related disorders, such as psychosis, and we're seeing that starting to take more and more hold as the normalization behind cannabis use increases. Bloomberg says, you've got about a $20 billion market right now with regards to sales of cannabis that's looking to double over the next 5 years. So we've brought in this new chemical entity in a partnership with Aelis Farma that we think is the top chemical entity in advance of this. And it's in IIb, just entered in May. And we're excited to have that readout end of next year, beginning of '24 and look to go into Phase III, assuming that's successful. Our other assets are earlier stage, but also quite exciting. We have our Indivior 2000, which is an orexin-1 receptor antagonist. Now the unique part about this is most of the successful medications for opioid use disorder are partial agonist, like buprenorphine or full agonist like methadone. This asset is a non-opioid, right? So if you think about where you're going in pain, they're moving from opioids to non-opioid pain relief, we're looking to bring a non-opioid or it would be an oral daily dosing to this space to kind of normalize this and help the space. The last one is, interestingly, the largest addiction, and it's quite normalized in the world, alcohol use disorder. There's over 3 million deaths a year due to alcohol use disorder, 14 million people in the U.S. abuse alcohol every year. And there are very few good mechanisms of action here, so we've partnered with Addex in our connect and develop sort of model with R&D. We're never going to be a discovery house, but we bring in assets as they progress through the pipeline and are going through a reformulation with a lead candidate identification in Q1. And we think this GABAB receptor is the top chemical entity in alcohol use disorder. The last strategic priority is optimizing the operating model. We've talked about the strategic priorities. And so the clarity of those -- so those are listed with the first 3. We also talked about the buybacks that we've done as we've been really focused on those strategic priorities, funding those and not deploying capital in other arenas. And we are starting to turn more towards those. When I took over as CEO 2 years ago, I said, "Listen, we're 18 to 24 months before we're going to do any sort of business development. We need to prove out SUBLOCADE." But we're starting to enter that window. And as a Board and a management team, we're starting to look about potential diversification opportunities in other therapy areas. We're also pursuing a U.S. listing. We are on the FTSE but we think the exposure we can get from an additional U.S. listing to supplement that with U.S. analyst coverage, broader exposure in the press can really increase exposure for the company, increase liquidity, but also for the disease space. We think that having that out there could be quite helpful. The vote on that is at the end of the month on the 30th. And assuming it's successful, we do a share consolidation in October, and we would look to add that listing sometime in the spring next year. Lastly, when you're the leaders in addiction, obviously, the social side of what you do just plays out naturally in an underserved disease space where you only have 20% treatment penetration. So everything we're doing in a developed country is almost like being in a nondeveloped country. That said, we have a focus across the entire ESG platform. We've recently signed on to the UN Global Compact in August and are going to put out our first ESG report in fourth quarter of this year. So with that, I'll say thank you very much for your interest, and I'll go sit with Graham here for Q&A.

Great. Thanks a lot. So if you've got any questions, feel free to raise your hand and just wait for a microphone. Thanks for the presentation and the summary of everything there. So perhaps just kick off on most important product, SUBLOCADE. Just help us to understand now where the proportion of the market is on long acting versus the film, stroke tablets and the genericization of that market. So how penetrated are you? And where do you need to get to get to the $1 billion?

Sure. So let's start with SUBLOCADE. While the revenue is growing at a very fast clip, the opportunities we think are early days. We're at about a 2.5 to 3 patient share at the moment, and the growth of that has really accelerated over the last 2 years as we've shifted our strategy to Organized Health Systems from our heritage call platform in smaller retail-oriented doctors' offices. And we see the growth afforded by that Organized Health System strategy where the doctors have more flexibility, have support systems to really drive there, and we're early days there. From the overall market, the market is really divided into some heritage tablet businesses, which are heavily genericized, and both of those together are about 40%. The film is somewhere between a 50% and a 55% share of the market, of which we have a branded product called, SUBOXONE Film, which amazingly has kind of maintained about 40% of the share of the market since 3 generics have been in for almost 3 years. So that kind of breaks almost any analog you have. And it's been a very nice surprise, a great cash generator. We don't promote the film at all, since we have shifted to SUBLOCADE but it has been quite sticky and residual. Partly because of COVID we think people don't want to disrupt pricing. And partly, just because the pricing environment is such that we've maintained most of the government accounts. So we've just heard at the end of June, there's a fourth generic that's been approved. We have kind of guided to, we think, why wouldn't they be entering at the beginning of October based on 3 months to ramp up production and prepare for launch. And with that, when we upped our guidance for SUBLOCADE, we didn't take up the company guide just as a potential offset to that impact in Q4.

Got it. Okay. And then I think your $1 billion sort of implies about 15% into penetration into the addressable pool. Looking at the acceleration in trajectory that you've seen this year and the raised guidance, is that not just looking quite conservative at this point? You'll be almost halfway there by this year.

Yes, it might even be worse than that, Graham, because it's not even 15%. It's actually only 6% to 7% penetration of patient share. And so we're at -- if you take $390 million to $420 million, we're -- say, $400 million, we're 40% of the way there to the $1 billion. We've got strong momentum of 75% to 80% growth at the half year versus the prior half year. And we're extremely elated with the way the team is executionally delivering. Now we've always guided to $1 billion-plus, we'll continue to assess and decide is there an update in guidance with regards to that, but we'll just continue to focus on the execution in the short term.

Okay. And then just remind us of the competitive environment for long acting in terms of in the sort of SUBLOCADE direct comps?

Certainly. In the U.S., we don't have a competitor in the market. There's a competitor Braeburn, who utilizes the Camurus technology and -- as their partner, and they've had a couple of complete response letters from a manufacturing standpoint. I think the whys and what's going on there, I think, are great questions for Camurus and for the Braeburn team. I think I would just go at a higher picture. With such a huge unmet need in this disease space, having multiple long-actings, I think, would be in the best spot. You look at what's going on in schizophrenia, they have less overall patients than you do in opioid use disorder, and they've got a $3 billion market divided amongst multiple players, and the first mover, obviously, Janssen has the largest share. All that said, I do think we have the paradigm shift. We've developed this drug for opioid use disorder, getting to 1 therapeutic dose for the patients that provide that blockade so that if they lapse, if they use on top, they're not going to relapse into misuse and abuse, we think is something that differentiates us from any competitor that we see that could come to market.

Got it. Okay. I remember at the launch, one of the big questions was converting practices over to actual physician administration, certainly not something that the prescribing physicians were really used to and also they trying to get the product through the specialty pharmacy channel. So just perhaps an update on where you are on those conversions, how far through? Is it a done deal now? Or still more work to do there?

Yes. And some of that and those learnings led to the true shift in strategy. Now we had to launch in the retail sort of therapy area because you can't pre-market very far in advance of the launch. And so you have to launch into your heritage platforms. Now we knew a controlled substance, specialty pharma product was going to put a lot of stress and friction in the practices. And we've done a lot of market research and said, listen, this will be tough for them, and we're going to have to partner with them on that. Now what we found out was places that physicians' thought was maybe a 3 or 4 on a scale of 1 to 10, ended up being an 8 or 9, and it led to elastic limits in their practice of how many patients they move over. Because oftentimes, these are small offices where the prescriber is prescribing. He's also doing some appointment making, his wife might be doing billing and the ability to manage a specialty pharmacy product is tough. And so as the launch progress and embraces, the shift to Organized Health Systems started almost immediately. And the tough part you might say is, well, why didn't you just launch with those, but you have to go to each Organized Health System and you have to work with their C-suite, they have to sign off on bringing this product in. They have to write their SOPs, build it into protocols and set up the infrastructure internally to comply with all those rules and laws. And even as we've gotten very educated in that, it still takes 9 to 15 months from the time we engage to activate and pull a script through. And then once you get the parent, many of these big hospital centers, they've got satellite campuses geographically. So Richmond, Virginia, where I'm from, you've got a big medical school downtown. But if you go in a 60-mile radius, the VCU Medical has VCU Health Care all around. So you want to then -- once you get the parent, you want to go open up the children, so you get all the patients that are flowing through the system. So that process is the next step. Once you open the parent, you can go open the children. And so you start to -- through the efforts, start to get all the physicians, all the patients and are able to kind of do a more of a normal sort of detailing talking to doctors and initiating trial and repeat.

And then I guess the other big part of it is reimbursement. So just talk us through mechanistically how that works and where you are again in terms of coverage levels?

Yes. And I think this is -- one of the great things is payers have realized that a patient with opioid use disorder that's in treatment is much, much less costly than a patient out of treatment, and they recognize that long-acting injectables are quite valuable in this journey. And with that, we've got an 88% coverage of lives with very low step-through edits. It's just primarily kind of moderate to severe opioid use disorder and sometimes fail first on film, which is kind of normal in this space. So great coverage there by the payers, and that's both on the government and the commercial side. And then in addition, we have a co-pay card that can buy down the patient's out-of-pocket cost to $0. So from their out-of-pocket, there isn't typically a walk away at pharmacy. So that, for us, has been really good, and it helps offset the friction on the practice and the fact that the product is well reimbursed.

Got it. Again, COVID, I didn't see that one coming, of course, and it was around the time of -- or just after the initial launch and at a time when you were trying to convert practice from something that could be picked up in a retail pharmacy to self-administered -- physician-administered products. So how much do you think that's held you back on volume for launch, how much do you think the acceleration that you've seen this year is just that lifting off and that cloud going away?

Yes. Listen, COVID, I think has sort of transformed the industry. I think when you look at the disease space itself, there is a law in the U.S., called DATA 2000, which governs the use of buprenorphine for medically assisted treatment. Well, one of the requirements of that is your first prescribing meeting has to be in person. And so the government quickly intervened with the onset of COVID and started allowing telemedicine, which led to opening of access for a number of patients, right? So that's a positive thing that's happened, and that hasn't been rescinded as of yet. But when it comes to a product launch, having to be engaged with doctors' offices with practices, of course, it slowed us a bit with regards to our trajectory, our ability to engage. But one of the places I'm really proud of the team is they have fought through that. They have worked, they found digital and compliant ways to engage the practices to continue the growth. And we never slowed the growth. And then as we -- in the fall of 2020 fully aligned our go-to-market structure with our strategy of Organized Health Systems. What you've seen then is this rapid acceleration even in COVID, even while we had that there. So proud of the team for how they've responded to it. They've done it in a very compliant way and have really helped the disease space as we've continued to launch SUBLOCADE.

So the acceleration is very much more Organized Health Systems shift as opposed to...

Correct.

In terms of the SUBOXONE film market, so you're highlighting the stable share there. Is that market overall relatively stable or is there a high level of churn? So you are finding -- you see people come on to film, churn off onto either SUBLOCADE or a generic or is it just a fairly steady stream of patients that are just sitting there? And is the revenue quite stable as a result of that?

Yes. Listen, with SUBLOCADE only having a 2.5% to 3% share of the market, there is relative stability in the buprenorphine medically assisted treatment. And our brand has been relatively stable for the last 18 or so months, as the generic launch is stabilized, and we kind of have been at around 40% of the film market. And then typically, it takes a disruption event to reset that. And often, that's generics fighting over pricing or things like that, and it could be a fourth generic entrant such as [ Aviva, ] who have gotten that recent approval, which could disrupt the market. So moving forward, we think it should eventually return to analogs. The question is when and how does [ Aviva ] enter the market. Do they try and fight on price with generics, or do they fight in price in the category and try and get the government sort of share.

Got it. Okay. Just seeing at the pipeline, so the orexin-1 products, just -- can you remind us what target dosing will be [indiscernible]? I think you have got a single dose trial at the moment, what's the target dosing of that?

Yes. So they've done the single dose, and now we're in the multiple ascending dose. So we're looking for a daily dosing. I would have loved for this to have been in ATRIGEL in a long-acting. Because I think it's optimal when you think about breaking the cycle of -- people that abuse drugs tend to have to do it every day to maintain their physical stability. But because of the volume that would be required of the active, the injectable just doesn't work. So we're targeting the daily dose right now. But as the development cycle continues, we'll be able to laser in on that and the multiple ascending dose will be quite informative of what dose that is and what the impacts are.

Got it. And is the intent there to launch that as a pill, capsule, film, what's the formulation...