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

Good morning, everyone. Thank you for joining this session as a Morgan Stanley Global Healthcare Conference. My name is Thibault Boutherin. I am part of the pharma equity research team based in London. Before we start, I just need to read some -- to refer to some important disclosures. Please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley [indiscernible] So for this session, I am delighted to have with me Mark Crossley, CEO of Indivior. And thank you very much for joining us today. So we will sharply start with the Q&A. But before that, Mark, do you want to maybe start with some [ commentary ] comments.

Certainly. And I'll layer on some disclosures with forward-looking statements that are available on indivior.com, if you could take a look there rather than run through them all here. For those of you who aren't as familiar with Indivior, we've been pioneered to help people suffering from substance use disorder. And we've been in place for about 20 years. We operate in about 20 -- about 39 countries, about 80% of our revenue is in the U.S., which has been so disproportionately impacted by the opioid epidemic with about 20% of our revenue offshore. Since I stepped into the CEO chair, we've laid out a very simple but effective strategy that we've been laser focused on to drive growth and to help more patients. And it starts as simply as the first pillar is about driving our top asset, which is SUBLOCADE, which we think is a paradigm-shifting treatment for people with opioid use disorder. It's a once-monthly injectable with a very unique profile. And I'm sure Thibault has a question or 2 on that, and we can get into that in more detail. The second prong of our strategy is about diversification, and this is about starting to diversify outside of opioid use disorder, which is our primary revenue source. And this is -- we have a long-acting franchise in schizophrenia with PERSERIS, which is a once-monthly risperidone asset. And then we recently bought Opiant Pharma and have brought in a product called OPVEE, which is an overdose rescue. So you're starting to get beyond moderate to severe opioid use disorder treatment and starting across the full continuum of care into rescue also, so meeting patients where they need to be. The third prong of the strategy is to start to build out and advance our pipeline. And I think the advancing part is key because for investors, if we are not able to advance the science and advance the assets and bring them to market, you don't get the value. And that we take that very seriously. And over the last few years, we've built up a good profile or good portfolio for substance use disorder from a cannabis use disorder asset, which is in Phase IIb to an alcohol use disorder that we got through Opiant, which is also Phase II to a non-opioid -- opioid use disorder medication, which is in Phase Ib and then some preclinical assets. So very excited about that part of the strategy. The fourth one and one we take very seriously is our operating model and how do we efficiently deploy capital, how do we manage our P&L, how do we match up our strategy, our structure and our culture to deliver both medications to patients to help them, but also to deliver shareholder value, and we take that very seriously. As part of that, we've just put out our second ESG report. And we're also working to resolve legacy legal matters that have been with the company for nearly a decade. And we've recently settled both the states and the end payers as part of an antitrust MDL. And we have the direct purchasers remaining who were in mediation with and have trial on October 30. So really 4 key strategies for delivering value and helping patients that we've been working on for the past 3 years. So that as an intro. Thibault to go back to you.

Yes. Thank you very much for the introduction. So obviously, let's focus on SUBLOCADE, which is the key growth driver and one of the key focus for investors. So the rollout of the drug continues to be very strong in the U.S. in particular, it's been very consistent. So could you give us some more insight into the key driver of the growth, the current focus of your sales force in terms of continuing to driving penetration of this product in the U.S. Maybe where we stand there.

Yes. I think for us, patients in treatment for opioid use disorder is advantageous for all stakeholders, both the patients themselves, their caregivers, people that are paying for the medication. So having a once-monthly, long-acting injectable is a major differentiation. And what we've focused our strategy on is within a channel called Organized Health Systems. And for those that aren't familiar with what Organized Health Systems are, it really is comprised of 3 subgroups of customers. The first is large regional medical centers and these are centers that have significant infrastructure to support the physician because of the unique product that is a controlled substance specialty pharmaceutical product. There's a significant amount of administration required in both procuring the product, setting up delivery to match up with the patient and keeping that product controlled on site. And those big systems are able to do that much more efficiently than the small independent sort of doctors' offices. So that's a big piece of where we are. And the majority of patients and majority of physicians are in these organized health systems as those have consolidated through time over the last 5 to 10 years. The second prong of the strategy is government sort of payers. And the largest one out there is the Veterans Administration hospitals. And they're the single largest provider of treatment for opioid use disorder in the country just by nature of veterans, the experiences they have. Unfortunately, they just have a higher instance of substance use disorder, including opioid use disorder in the general population. And the last arm, which we've continued to invest more behind is the criminal justice systems and the nature of this disease is before patients are in treatment, they're actually breaking the law. They're using medicine solicitly or they're using illicit drugs to get high after -- it's usually initially seeking euphoria, but then they become physically addicted and end up in a cycle where they're needing more and more medication to fulfill their physical addiction because that's what it ends up being rather than chasing the high. And so 65% of our patients end up coming in contact with the criminal justice system, which is just unprecedented. So we see that as a great place to initiate treatment. And the way we think about it is patients, when you talk to a patient, they talk about this moment that they have when they want to seek treatment and usually it disrupts their life, puts care -- put part of their family at risk, something like that. We're going to prison where they sacrifice their entire life is one of those moments. And what we're seeing is these prison systems are trying to stop the revolving door, trying to stop the people falling out of treatment when they come out of jail. And so they're starting to treat patients while they're incarcerated. And so we see that as a huge opportunity. All of those are driving the growth we have, when you look at where we are in 2023, super proud of the team. We just took up guidance on SUBLOCADE by $30 million for this year to over $600 million at the midpoint. We had 57% growth at the half year, and the guidance indicates about 50% growth on the full year. So real great momentum behind the strategy, and the team is executing exceptionally well.

That's interesting. And one of the interesting kind of new aspects of your strategy was the deal that you had with Albertsons for the food and road retailer, allowing potentially the administration of SUBLOCADE in Albertsons pharmacy across the U.S. So if you could just come back on the key features of this agreement and how it could help you to address key bottleneck for SUBLOCADE.

Sure, Thibault. I think one of the unique parts about opioid use disorder treatment with buprenorphine is it's one of the few areas for physicians that had a separate certification process that was put in place back in 2003 when all people could kind of envision was oral medications. And what they did was a mandated special training for medically-assisted treatment because it doesn't happen in med school very often and they gave patient limits for how many patients you could treat and they did that to try and make it a responsible treatment because they were prescribing a controlled substance. Even though buprenorphine is a very safe medication. It has a ceiling effect on its high and it has a respiratory [ floor ]. So it's tough to go into respiratory depression and it's on the WHO essential medications. They felt this was essential for making certain doctors are educated and appropriate treatment. Now when you look at long actings, what that did, unfortunately, as you went forward in that launch, it artificially held back the expansion of the product. And part of why we were in Organized Health Systems is these independent physicians couldn't handle the administrative burden of the prior offs, getting the patients there, getting the medications there, storing a controlled substance on-site in line with local, state, Federal rules and complying with the REMS that the product has, that we partnered with the FDA and putting in place. So what this does, as you -- the administration in a way of trying to break down barriers and normalize treatment. They eliminated Data 2000, which was that law back in 2002, to normalize this so that the medication could be prescribed by any physician. Now the other thing that happened is it could also be administered by any site that has a physician with a DEA waiver. So that opened up a whole opportunity for these independent physicians who don't want to store the medication to be able to write -- see the patient, write a script and send them to what we would call an alternate site of care. And that's where Albertsons came in. They are -- we're very thoughtful about how they could help in the opioid use disorder epidemic, what role they could serve. And they really wanted to be able to administer SUBLOCADE to help people with treatment. And so they were the first partner that we signed up. They're the second largest grocery train in the U.S. They typically have these medical facilities at the front end of their store and now a physician -- an independent physician can prescribe the medication and send them to a front end of an Albertsons to get the medication injected. So it opens up the full spectrum of physicians that are prescribing buprenorphine medically assisted treatment and another avenue to bring more patients in. So it's a great thing. We'll continue to look for additional providers moving forward to be able to get a nationwide sort of network for patients and open up that opportunity even broader.

That's a very exciting development. And I mean, one thing that we are watching as well on the market is the potential -- I mean, the emergence of new competition coming in. And Braeburn is going to launch a direct competitor to SUBLOCADE in the U.S., which is called BRIXADI probably actually this month. So it has some different characteristics from SUBLOCADE, the weekly administration, dosage is a little bit different. So just if you could tell us how you expect the market to shape going forward between you and your first competitor? And what are the key factors that could allow you to maintain your leadership of this market?

Yes. And listen, they're in the market now. I think their product became available last week. And so it is now rather than one long acting there are 2. What I would say is, if I go back to the opening statement, there's a huge unmet need in this disease space. There's over 10 million people that abuse opioids only 3 million of those have been diagnosed with moderate to severe opioid use disorder. And at any one point in time, there's only about 1.2 million that are in treatment. So there is less than 20% of the population that have used opioids that are actually in treatment for this. So there's a huge opportunity for growth for expansion in the market for normalizing treatment and taking that 20% to be 70% of people in treatment. So that's the first thing is there's plenty of opportunity to drive treatment and with that opportunity for multiple stakeholders in a long-acting environment. Now what I'm very proud of is what we've built for SUBLOCADE and the paradigm that we -- the paradigm shift in treatment that we developed, starting back in 2008, when we bought QLT and merged ATRIGEL and buprenorphine into what became SUBLOCADE. Because it has a very unique profile that we just don't see any other long-acting is getting to. And first of all, when you inject SUBLOCADE into a patient within 4 to 8 hours, they're at therapeutic levels, which you just don't see with most long-acting injectable products. And then that therapeutic level is maintained the entire 28-day cycle. So that's just a unique a flat roof profile where most [indiscernible] are almost like an A frame roof and an often require either on top orals, booster dosages to maintain people's therapeutic levels. I think the second part of why we're so proud about our profile is the therapeutic levels that we provide the entire month long. And we don't -- we just don't see any other long-acting that at our maintenance dose of 300, 300, 100 ongoing, we get to be between 2 to 3 nanograms per milliliter which is very science. From my Chief Scientific Office, it's great for me. I think about it as receptor occupancy. So if the brain has 70% to 80% of their mu receptors occupied, when the drugs of abuse come in, there's nowhere for them to adhere. And so the patient doesn't get high when they use on top and they're protected because of the receptor occupancy, and it disrupts cravings and withdrawals, which are the things that drive addiction. And so with that dose at 2 to 3 nanograms per ml with our maintenance dose of 300 between 5 to 6 nanograms per ml and we're doing a study requested by the FDA with regards to the appropriate patient population for that, potentially high injection users or synthetic -- high-power synthetic users. We think we've got a profile that we just don't see other competitors can match.

That's very clear. And thinking about the longer-term outlook. So this year, we have a very strong growth on [ giants ]. Investors are getting very comfortable with the targets you put out for this job of $1.5 billion. And so as you kind of build these revenues, and obviously, it's representing a large share of your revenues. How should we think about the long term and what could potentially -- how durable is this franchise basically. So if you could give us your view on the IP situation and the potential for generics at some point on the road and maybe potential additional branded competition for SUBLOCADE.

No, I understand completely. First of all, we do have a competitor. And again, the market is so large, there's room. I think when I think about the actual IP that we have. We have a very robust about 12 patents that are protecting the novelty of our invention from about 2031 to 2038. So I think that provides a layer of protection for shareholders for the invention that Christian and his team have put together that is SUBLOCADE is a very unique profile that we don't see other people matching. So I think that's one piece of protection. I think the other piece of protection, and you see this playing out amongst long-acting injectables is when you have these 28-day injectables to do an accelerated pathway and match PK for the full month. It's a challenging sort of barrier, I would say, for competitors to do to get their accelerated pathway with the FDA. So I think that's another is the corporate knowledge and being able to match that platform that that is just -- it's a functional barrier of drug development. So there's 2 sort of areas there, good patent [ state ] , 12 patents, 2031 to 2038 as well as just being able to match that on an accelerated pathway.

That's clear. So before we spend a bit more time on the business and lots of the portfolio. Let's talk a little bit about the antitrust litigation that you mentioned in your comments. So as you said, you already settled with the states, you settled with the undirect payers. You have obviously the litigation is ongoing with direct purchaser. So just if you could give us an update on the status of this -- anything you can tell on the mediation process with the direct purchasers. So how should the investors think about this with the upcoming trial retail purchases coming in.

Yes. Thibault you can, I think, understand it's an ongoing sort of exercise of the mediation before the court. So there's very little I can say, but I'll provide maybe just a bit of context thing. We're happy that we brought some certainty with the end payers and the states with those resolutions that happened earlier this year. I think those are important first steps. We do have the third class, which is the direct purchasers outstanding. We have a provision, which is our best estimate that we put in place again at the half year of $157.5 million and have continued to engage in a two-pronged strategy moving forward. The first is our primary strategy, which is to stay in mediation and to find certainty at the right value to bring this to resolution ahead of trial, and we think that's in the interest of both our stakeholders, but also the direct purchasers. And then the second is to prepare for trial because we are approaching October 30, and we need to be ready and prepared to go to trial to defend ourselves.

That's clear. And if you do manage to settle with a direct purchase -- can you just talk a little bit and tell us how meaningful are the potential remaining litigation at the state level. So not the multi-district litigation we talked about until now, but the kind of state level litigation.

Yes, there's -- and then just for full clarity, there's a couple of carve-outs of the end payers who we resolved for $30 million that have gone and carved out into different court systems. And I think that's what you're referring to. And so they're a subset of the entire class that decided not to be there but to take theirs to other core systems. Those are in much earlier stage. So it's -- there is no provision. There is no -- nothing on the books with regards to that because it's earlier in there, but they're also statutory limitation arguments, which are going to happen later this year in the court because of the time in which those were filed and then there's the reference back to the original kind of end payer sort of settlement as kind of references.

That's clear. Let's spend a little bit of time on Orvee. So this is a new product to acquire through Opiant, so you acquired to earlier this year. We are planning to launch this new drug for opioid over dose around the end of this year. So if you could come back on your strategy for this asset. So right now, I think what's dominating the market in terms of addressing opioid dose is Narcan, which is dominating the public interest channel, you have generics, it's available over the counter, it's a big brand in the U.S. So how do you plan to come into this market with Orvee?