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

I'm Dominique Schorn, European Healthcare spec sales of Bank of America. On the line today, going to be asking Q&A is Graham Parry, Co-Head of our European pharma research team. And if you have any questions, of course, raise your hand and I'll go ahead and call on you. And today, we're hosting Indivior. Mark Crossley, the CEO, thank you for coming today.

Thank you.

And I think we're just going to start off with a presentation, and then we'll go into the Q&A.

Yes, I think just a quick intro to the business. And Graham, just because you're remote, and I can't see you doesn't mean you can be mean today. Appropriate questions only, please. So I think we'll take the forward-looking statements. I'll take those as read. I think we're all familiar with those. And as said, I'm Mark Crossley, the CEO of Indivior. And I think starting out first with why should you invest in Indivior. I think starting out with the fact that we are the leaders in addiction. Our company solely focus on helping these patients who so many people have left behind, helping them get recovery and regain their life and we have industry-leading products, both commercially out there helping patients today and in development across the areas of addiction. We're executing against a very, very attractive medium-term equity thesis, and I'll share that with you today. We're elevating our investor profile. We have a UK listing, part of our heritage of spinning out from Reckitt Benckiser, and we're now doing a secondary listing in the NASDAQ to increase our profile in the market most hit by the opioid epidemic in the US. And then lastly, as you've seen with the fiscal year-end and Q1 results, we do have a few legacy legal matters, which we're looking to bring certainty for shareholders moving forward. So we just wanted to highlight that for a fair balance. If you're not familiar with Indivior, we operate in 39 countries, helping people who suffer from opioid use disorder. We have over 1,000 dedicated people with a very unique patient-focused culture to help these patients. Over the last 12 months, sort of running net revenue rate is $922 million. You can see it's broken out roughly 80% in the US, 20% rest of world and our products on the right, SUBLOCADE has become the Number 1 product in our portfolio. It is the product that we think is a breakthrough paradigm shift in treatment for people suffering from opioid use disorder. We'll talk about that a little bit more. But we still have other assets out there, Suboxone, Film, Tablets, both in the US and rest of world and then PERSERIS, which is a long-acting for schizophrenia that provides a great diversification opportunity. And I'll touch a little bit on that today. We spent the last 3 years myself, Ryan, our CFO, and we really, from day 1 laid out our strategy for driving the equity thesis for Indivior and we've been laser-focused on this from the team's efforts, capital allocation all along the way, and you can see it here. The key is we have a paradigm shifting treatment, a blockbuster drug in SUBLOCADE that can really help patients moving forward and we just increased the peak net revenue guidance to greater than $1.5 billion of sales, roughly a 10% patient share and we expect to exit 2025 at a run rate of $1 billion. We're looking to diversify the revenue base, bringing products organically to the rest of world, SUBLOCADE, the Film and potentially, and we'll talk about it a little bit later, bringing inbound some assets like Opiant, which expand our ability to help patients across the continuum of care that our patients deal with. We're building and progressing a pipeline. We're continuing to add new chemical entities, different molecules that can help our patients where their needs haven't been met, and we'll continue to do that, and that's a great value opportunity. And then lastly, optimizing the operating models. This is financial discipline, capital allocation, it's share buybacks that we've done. It's also how we approach ESG in communicating how we're dealing with that. So let's start with why is there such a huge unmet need. There's areas of addiction, which people really think about, which are opioid use disorder as well as on the other side, the amphetamines and cocaine stimulant use disorder, huge needs where people really need pharmacological help. And there's the normalized areas of addiction in the middle, which most people don't think about so much. Cannabis use disorder, of which we've got over 200 million users across the globe and alcohol use disorder in which we've got confirmed diagnosis of over 100 million people around the world that suffer from alcohol use disorder. And in each of these, opioids with buprenorphine and methadone is really the only place that there are really good interventions to help patients. And so we're on the cutting edge of developing the science for those, and we'll talk about that a little bit. So we helicopter and take the numbers into the US, there's a huge unmet need in the US. There's over 10 million people who have used opioids, only 3 million have been diagnosed. And at any one point in time, there's only 1.8 that are in treatment. So you got less than 20% of the people that need treatment are actually getting treatment, really a travesty in a developed market with strong health care for that to be the case. What's happening with that lack of treatment and with the influx of high-powered synthetic opioids in the US, which are 40 to 100 times more powerful than heroin or oxycodone that started the opioid epidemic, you're seeing the death rates that you see there. Over 78,000 people a year die from opioid use disorder. Over 90% of those are coming from the synthetic opioids. That's over 200 people a day dying from opioid dose. And these are our friends, these are our family, these are our community members and this is happening to the people I talked about this, very few don't know someone that's been impacted by this. This isn't the people living under the bridges, right, this is in every [Technical Difficulty]. And we've got this great product that's out there now. It's been in the market for about 4.5 years that is really starting to transform the space. First, we have great progress with it to the right. You can see the growth rates, '22 over '21 with over 60% growth. We're with our guidance at the midpoint for this year, we're expecting over 40% growth. How are we so confident in this? It's because of what SUBLOCADE offers to patients. It's a once-monthly medication versus a daily dose for moderate to severe opioid use disorder. It really disrupts the paradigm of treatment, it stabilizes patients within 4 to 8 hours of taking the medication they're at therapeutic levels, and that therapeutic level is there all month long rather than the daily ups and downs that you get when you're on orals, 12 choices versus 365 and at a very unique therapeutic dose that if a patient slips and relapses and tries to use on top, the mu receptor is occupied, so there's no room for those illicit opioids to get there. So they don't get any reinforcement if they use on top, and they're able to stay in treatment. We protect them in their moments of weakness with SUBLOCADE. So it's a really strong treatment that's really changing the paradigm out there. PERSERIS is another one where we've taken the Atrigel platform that early release and a nice flat PK profile all month long, and we're bringing it to schizophrenia. Schizophrenia actually has less patients diagnosed than opioid use disorder, and it's well over a $3 billion market. We've got a differentiated profile that we're bringing to the market, experiencing good solid growth, '22 versus '21, and again, into '23 and we're just looking to differentiate and carve-out just under a 10% share of the market, about $200 million to $300 million. We're not looking to supplant folks. We know we're second fit to market, but we think there's a great differentiated profile there. March 2, we closed the Opiant acquisition, which really starts to take Indivior from a treatment company to a company that helps patients across the continuum of care. So we treat people with moderate to severe opioid use disorder. Opiant gives us a medication that's a rescue medication for when people are overdosing on the synthetic opioids or other opioids. So those folks are able to come back and get into treatment rather than lose their life. We go from an oral and a long-acting technology sort of company to now we have nasal technology with very quick absorbency. And it really for us, helps us with an industry-leading asset in 003 that we think has been developed specifically for the fentanyl crisis. And we'll talk about that a little bit more. We're looking as we take 003 to market, we have a PDUFA date of May 22 and we're looking -- if that is approved by the FDA, we'll launch in Q4. We're going to responsibly price this to optimize access and help as many patients as we can and we've guided on this from $150 million to $250 million in revenue. So a nice diversification play and broadening across the continuum of care. The biggest question we get on OPNT003 is, listen, there are a number of rescue drugs. Why do we think this is so differentiated. And the key thing here is it has a higher affinity at the mu opioid receptor, 5 times what you see with naloxone at 4 milligrams. It has a reduced time to Tmax and Cmax, which when you're in respiratory distress, wouldn't you want to be resuscitated sooner to limit the impacts to the brain and your body. And lastly, it has a longer half life, more suited for the synthetic opioids, which have a longer half-life between 8 to 10 hours, nalmefene is about 11, naloxone is about 2. So we think this profile really plays in the market that's out there today where the drug cartel have shifted, they had their crops of cannabis taken away from them and they've gone into the easy to manufacture synthetic opioids that are easier to smuggle into the US, but they're so potent and cause so many people to go into respiratory depression. When we stick on this growth and diversification play, we're bringing products that were previously approved only in the US and are now getting more approvals across the US and more reimbursement across the US to shift from what was a declining business of about somewhere between 1% to 5%, and now we're growing again. Last year, we had 1% growth on the top line underlying. This first quarter of this year, we had 12% growth in the rest of world, and that's because we're bringing SUBLOCADE and SUBOXONE Film to new markets, giving them better technologies. When it all comes together, the company has really transformed itself over the last 3 years. We've got a number of products that are out there, industry-leading in their markets to help people with opioid use disorder. We'll have, hopefully 003 that will get approved to help on a rescue basis and then we've got a nice pipeline that deals with both moderate to severe treatment for alcohol use disorder, cannabis use disorder and opioid use disorder as well as rescue drugs or craving drugs for alcohol use disorder. So the pipeline has really advanced over the last 2 to 3 years. In December at our Capital Markets Day, we kind of laid out a nice platform on why to invest in Indivior and made some commitments to the Street and it really is about being an attractive profile for investors. First, we have strong top line growth driven by differentiated products in strong growing markets with huge unmet needs. SUBLOCADE and PERSERIS both there for differentiation. And then you can add in 003, which we're launching and we believe is differentiated for the fentanyl crisis. We're looking as that growth comes, is to increase our positive operating leverage. This company has a great foundation and a go-to-market model that's been put in place, and we're looking to leverage that as we go forward to increase the operating margins and spin-off more cash moving forward. So that should come over the medium term in the next 5 years. So a very exciting kind of medium-term profile. How do we think about capital allocation as we start to get and talk a little bit more about the last pillar, which is optimizing our business model. We prioritize in bringing the cash into our organic growth, primarily SUBLOCADE as the top priority to make certain we're able to leverage that asset and grow that asset. And once we're done funding those business needs in the pipeline on those 4 key pillars that I talked about earlier, then we look and are open to how to drive value for shareholders and we've looked at both acquisitions as well as returns of capital. We've done both with Opiant in 2 share buybacks at $100 million plus, and we're open to it, and you can see the key examples there on the side. And I'd be remiss if, again, at the bottom, I didn't talk about ensuring we're able to meet our obligations and some of those are about bringing certainty for the antitrust overhang that's on the business that we've publicly said we're looking to resolve at the right value moving forward. So a quick run by on our Q1 results. I know many of you have probably seen this already. At the end of the day, Q1 was extremely strong, 22% top line growth with SUBLOCADE up 55%, PERSERIS up over 60% year-over-year. So very strong top line growth. The underlying business saw operating margin expansion of a couple of points on strong operating profit growth on the business. So a very good start to the year 2023. And part of that was updating our guidance for 2 things. One, we updated on the top line for the continued resiliency of our Film business, our SUBOXONE Film business in the US, where there's a fourth generic that's been approved, but hasn't entered. And so we brought the top line up by $20 million that now has the midpoint over $1 billion for 2023 and then we updated the operating expense sort of guidance to include Opiant and have brought in the cost of launching 004 in the year as well as the pipeline that we brought in that really plays for the value thesis of that acquisition. So I think with that as a very quick intro, I'll go ahead and go to Graham and Dominique for questions.

That's great, Mark. Thanks for the presentation. Pleasure to host you. First, I was just going to-kick off actually on SUBLOCADE. I think the 2023 Appropriations Act as you move the need for a waiver to administer buprenorphine and the FDA and the substance of use Mental Health Services Administration just issued a joint letter this morning to increase awareness of that increased use. So just maybe you could just talk through if that's having an impact on what you're seeing in the market already. Is it made it easier for a health care professionals to administer SUBLOCADE and have you actually seen any tangible benefit from that?

And really, I think the one probably bipartisan issue you see across the aisle across the US is addiction. If you're in any mayor, governor, federal sort of area of the very governing bodies, this is the one thing they have as this fentanyl crisis and dealing with it. And so there's a lot of tailwinds that are out there to help normalize the space, expand treatment, expand funding and break down barriers to treatment. I think this is a great example of it where Data2000 was put in place back at the start of the opioid epidemic back in 2002 and it was a well-intended law that was meant to take daily trips to dispensaries for dosing and allow people to normalize the treatment and take home buprenorphine for opioid use disorder. So it was a great law and President Biden was a senator at the time and actually was one of the drafting and sponsors of this, and we know he has a family history with addiction, right? So from then to now, very supportive. By eliminating this, what Data2000 did was it put in that you had to have special training, so a special waiver process to be able to do this prescribing, and you could only have so many patients that you were allowed to have in your practice that you were prescribing to and that level went from 30 to 100 to 275 patients. So not really enough to build a practice on, but what they were relying on is that people would be treating these patients and the abundance of prescribers would be able to cover the patients. So it's a pretty non-normalized sort of space and I think what they realized was that's now kind of an artificial barrier. Anyone can prescribe a pain pill. And so if anyone sees a patient who has opioid use disorder, they should be able to prescribe this medication. So that's the intent of it. The other positive sort of outcome of this is Data2000 was done in an era of oral medications and one of the [ inadvertent ] sort of impacts is that for long-acting injectables, which have a complex cycle for small doctors' offices, it's complex, it's burdensome to get the specialty product controlled substance in. They have to comply with state federal laws and REMS what you've done now is these small doctors' offices, you've allowed for alternate sites of injection where a doctor could prescribe it and the patient could go somewhere else to get an injection. So you're starting to see access barriers that are being chipped away at to allow any patient to get treatment anywhere. Now I wish I could say, Graham, that this was going to be like turning on a faucet or a light switch and suddenly every single prescribing -- the millions of prescribing physicians out there are going to all start treating people with opioid use disorder. But we certainly don't expect that. Now what we expect is through time, this will become more normalized. And what we'll do is we'll see the people that are prescribing today, prescribe to more patients through time and that some of the people that aren't put it into their decision set and they start helping patients on their journey to recovery. So it's nothing that's going to change the landscape overnight. But through time, we expect it will normalize and really break down some more barriers.

Got it. Okay. And then I think, could you just run through how your go-to-market strategy changed since the launch of SUBLOCADE. So I think you sort of refocused more on organized health systems just expand on that point.

Yes. And I think I started the discussion of what a complex product this is, right? It's a closed distribution system, which in some ways in this disease space where people break the law as part of the disease in getting illicit drugs. What you're doing is a closed distribution system so the patients never have the medication until it's actually injected in them. And so the ability to misuse or divert your medication is certainly, if used as directed and in the closed distribution system has certainly helped. I think the other side of this is in those small doctors' offices when we first launched, the administrative burden was really tough. And then in addition, a lot of the small doctors' offices were being bought up by large regional medical centers and they're often not for profit, but they try to become more vertically integrated and increase their scale, so they can have better treatment for their patients. And so many of the small doctors' offices are now part of organized health systems. It's where the majority of the doctors are, it's where the majority of the patients are, and if you're not in those systems, you're not able to get to the patients. And so you couldn't launch into organized health systems because the compliance sort of obligations on the organization don't allow you to call on them the 9 to 15 months ahead of time to prelaunch to have the product ready to launch in those markets. Because each organized health system, you have to start with the C-suite, you have to activate that C-suite, get conviction, have them put in place the SOPs, procedures in place to appropriately manage the medication, and it's 9 to 15 months. But once you do, I think the key piece here is these are big hospital systems that have folks that do scheduling of patients, folks that can order the medication, folks that get the authorization from the payers. And so the doctor's responsibility goes from being a CEO with a very complex product to all I have to think about is what's the most efficacious medication that I give my patient. And that's where SUBLOCADE, we believe the paradigm of SUBLOCADE really differentiates itself. And that's why things have really taken off in these organized health systems, and we've enjoyed such great growth since we shifted our go-to-market strategy and [ org ] structure in the fall of 2020.

Okay. And then you just recently increased the guidance, the SUBLOCADE to $1.5 billion from $1 billion. I think you just said that's roughly 10% [Technical Difficulty] organized health systems. [ Is it prescribed, is it reimbursed? ]

Yes. So we did up our guidance last December to greater than $1.5 billion. Now basic math on that is it's about a 10% share of the market. So it's relatively small and modest. If you look in schizophrenia, which is also a very chaotic sort of patient, they're at just about 20%. If you look at the research that we had at launch, physicians kind of say about 30% of my patient base should be long-acting. So 10% seems like a very achievable sort of way point in the launch. Now why do we have the conviction to do this now as we go first, we have great momentum, right? This organized health system strategy has really played out. We've had strong growth now for 3 years in a row behind the strategy. We talked a lot about the tailwinds in some of the increasing access and breaking down barriers and funding I think the other side is, as you look at organized health systems, you've got these regional systems, which are driving a lot of growth. But now we're starting to try and meet patients more where they are. And a big piece of our organized health system strategy is treating when people are engaged with the justice system. About 60 -- over 65% of our patient base because of the nature of the disease, which starts out euphoria base and becoming addicted to the thrill and then becomes physical addiction base. And people tend to abuse for about 6 years before they enter treatment. Their brain and reward system have rewired and they have sacrificed and lost their normal life, and they often come in contact because they have to steal to fund their habit. And so meeting people that with 65% of people coming in contact and treating them while they're incarcerated to initiate their recovery and give them a good jump start is a really key part of the thesis. If you rewind the clock 4 to 5 years ago, there was like 2% of the patients were actually getting treatment while incarcerated. The administrative burden of an oral medication when you're incarcerated, having to shuttle them to the dispensary each day, the liability of the extra effort is really tough. SUBLOCADE takes that all the way. It's just one injection per month, so you can get these patients treatment while they are incarcerated. And what we're seeing is that being recognized all over, we put in place about a 30 -- now a 30%. We just expanded a dedicated sales team to this channel. We've activated upwards of about 300 jail systems that are now actively prescribing SUBLOCADE. And you're seeing legislation coming in to support this. New York put in place an act where you have to fund people while they're incarcerated. Now they're mobilizing and activating that as we speak, putting out RFPs. California has just gotten exceptions to the Medicaid policy to be able to use Medicaid funds to fund opioid use disorder treatment when people are incarcerated, which is breakthrough because normally, you get a certain dollar [ per inmate ]. So the funding, the resources and the barriers are all being broken down to help these people. It's a major, major building blocks. So lots of conviction behind the continued momentum here Graham because the journey, we're in the very, very early stages of this. There's -- in these regional health centers, there's over 14,000 individual facilities, and we're in the very early stages of getting into those and in the criminal justice system, there's over 5,000 of these that will eventually go to -- we're targeting the top 1,000 now, and we're in about 300.