Indivior PLC (INDV) 2014 Q4 法說會逐字稿

Well, a very good morning, everybody. I'd like to welcome you to the first-ever full-year results presentation from Indivior PLC. I'm very proud to be here, very pleased with the results of last year, and very excited about sharing with you the future opportunity within our business. So, very pleased to see so many people here in the room, and very pleased also that so many people are able to join us online around the world. I am sure you've all read the forward-looking statements, but I would encourage you to do so if you haven't done so already.

So, clearly, we've made a successful transition from a division of Reckitt Benckiser to be independently listed as Indivior PLC. We've had a very smooth transition process, and we are up and running, and we are very pleased with where we are.

The agenda for today is that Cary is going to share with you the financial review, and the results and performance of last year. And then we're also very pleased to have the opportunity to give you our first guidance on some of the numbers. Of course, we weren't able to give you guidance during the prospectus process, then we entered a closed period; so we are very pleased that the numbers we're going to share with you today give us an opportunity to give you an understanding of where we are at.

Of course, there is much uncertainty about the revenue line for the 12, 18 months ahead, about the timing intensity and full impact of the generic discounting that will take place in the market, but we are going to give you more insight about that through the morning. However, offsetting that, there are so many things that are far more certain than they have ever been before in our business.

I think it's very clear our business is very resilient; we've got a very strong pipeline. That pipeline continues to do well and meet expectation. And it's closer now than it's ever been before. So, very exciting medium to long-term growth story.

After Cary has shown the financials, I will give you a strategic update. I'm going to try and be helpful, then point you to some information sources that will help you track our business, and maintain a dialogue with us as we move through the year.

So I'll invite Cary to the stage now, our Chief Financial Officer, to take you through the financials.

Thanks, Shaun. Good afternoon, everyone. Let's start by taking a look at our P&L for 2014.

We are showing you two views of 2014 here reported per IFSR standards, and then adjusted. And the only difference here in the adjusted results is that we are excluding the exceptional costs or nonrecurring costs associated with the demerger, and that was $24 million.

So taking a look at our P&L, our net revenues for 2014 came in at $1.115 billion. That's down 8% from 2013. Our gross profit was at 91%, and that was flat versus 2013, which was also at 91%. Our selling -- SG&A expenses were down 6% year-over-year 2013 versus 2014. It's important to note, though, in 2013, we had about $23 million of legal provisions; comparable number in 2014 was zero. So when you adjust for that, SG&A was essentially flat year-over-year, up $1 million.

Our R&D expenses came in at $115 million in 2014 versus $76 million in 2013. That's up 51%. And that's driven by the continued advancement of our clinical pipeline, as we had two drugs in Phase III and the third drug about to enter Phase III. In fact, you'd expect to randomize that patient in the first quarter of this year. So we made solid progress with our pipeline, and we are very happy with that. It's the key to our long-term value that we are driving the Company.

Going all the way down to our net income, our net income on an adjusted basis was $420 million in 2014 versus $489 million in 2013. Taking a closer look at our net revenues -- and this is how we report in two segments -- USA and rest of world, our revenue in the US was $855 million. The key drivers there were, we continue to see solid double-digit market growth in the US. And you know we measure market growth in terms of units, milligrams of buprenorphine.

The market was up 13% in 2014, so we -- very happy with how the market was going. We -- as we've guided before, continue to have pricing pressures as a result of generic tablets being on the market, and branded competition coming into the market as well. So we lost market share in the US, ending the year at 58% market share versus 67% at the end of 2013. On the average, market share for the year was down, the difference was about 11% overall, average 2013 versus average for 2014.

Our volume actually was essentially about flat year-over-year. So, the real decrease in revenue was really driven by two things. Mix, and what happens there with mix is in 2013, especially in the first half of the year, we still had some Suboxone tablets on the market. They were at a higher price, and they had no rebates. So, the fact that we had that in 2013, and all film revenue in 2014, drives some of the mix difference you see in our revenue decline.

The rest of the decrease was really driven by price, as we saw that competition from the generic tablets coming into the market, and led to higher rebates and discounts for us. So, overall, down 10%.

Our rest of world revenue was down 2%. We solid volume growth in rest of world, but we are continuing to see pressures, especially in Europe, as we are seeing austerity measures really driving more generic product use. Even though patients and physicians still prefer our branded product, the government issues are driving more generic use. And we are seeing some effect of that. But we are still pretty pleased with the 2% decline versus some of the measures the governments are taking. We had good progress in France and Australia, where we saw revenue growth despite some of those factors driving us.

Taking a deeper dive at our expenses here, you see the major components of our expense. SG&A again was $319 million, that's excluding the $24 million in exceptionals, which you see in the third row there. Our SG&A -- again, when you make that adjustment for 2013, you're having those legal provisions of $23 million, it was essentially flat year-over-year.

I also want to point out the major components of our SG&A, which you see in the pie chart over on the side. It's important to note that if you look at sales, medical and regulatory, that accounts for about 68% of our SG&A expenses. Amortization is another 10%. So, there are many -- some things we have in SG&A that other peer companies may have in R&D or have up in their cost of goods line. So we wanted to give you a little more visibility to what's in our SG&A.

R&D, as I mentioned, is up 51% to $115 million, in line with where we expected it to be, as we are advancing our clinical pipeline. And you see depreciation and amortization be another component of our expense, and that $26 million is associated with some of the pipeline products we brought in to build out our pipeline.

It's also notable that our SG&A came in at about 29% of revenues. We take a close look at our SG&A and compare it to our peers. You see a peer group there on the list, and that median average was 31%. So we are pretty happy that we are below the median, even given what's going on in our Company with some of the compression we are seeing in revenue. But we continue to keep a tight eye on our expenses as we go forward.

Taking a look at some of the profitability measures, our gross margin, again, unchanged year-over-year at 91%. Even despite the decline of revenue, our -- holding our margin at 91% is very important for us. On an operating profit basis, that's where we lose the leverage ability in our fixed cost, is we have lower revenues in 2014.

So our operating margins did decline by about 400 basis points to 53% on an adjusted basis, which is still in line with our expectations and how we forecast the business. And on a reported basis, when you include the cost of those nonrecurring costs, we are still at 50% operating margin.

Our tax rate came in at 28% in 2014, slightly below the 29% we had guided. And actually a lot of it was driven by rounding, which -- the difference was about 60 basis points from where we had forecast. And the other difference was really just a mix of earnings by tax jurisdiction with it coming in slightly different.

We believe the best thing to do is still guide you to use the 29% rate in your models going forward with 2015 and beyond. But I will say that we will always be taking a hard look at optimizing our tax rate, and looking at things we can do to lower that. It's just a little early in the process. I've now been there two months, so it was 10 days, I think, the last time we all met.

So -- but we need a little more time as we look at opportunities to optimize our taxes as well, as I've said. We just look at all our cost elements, because they are all opportunities for us to continuously look at improvements.

This slide is just walking you through from net income to earnings-per-share on a full -- a basic basis and on a fully diluted basis. There isn't a lot of difference in terms of share count for the two. Our basic shares are about $719 million. And when you factor in options that were converted from RB, then employee share save schemes of $3.5 million, our fully diluted shares are $723.9 million. So that walks you from our adjusted net income of $420 million down to $0.58 earnings-per-share on a fully diluted basis, comparable to $0.68 in 2013, or down 14%.

Taking a look at our cash flow statement, in 2014, we still continued to generate solid cash in the business. Our cash generated from operations was $523 million. Our cash taxes, you see on here of $83 million, were adjusted US taxes. RB paid the other taxes in 2014, so there you're seeing just really the US cash taxes on this cash flow statement. But netting that, our net cash inflow was $440 million. And our free cash flow was $414 million.

So we are very pleased with our cash generation in the business, given the competitive pressures we are facing. We expect to continue to generate solid cash flows in our business.

We also see on here that we sent $849 million of cash to RB prior to the actual demerger date. $500 million of that was from the proceeds of our loan that we took out in December -- $750 million; I'll get into more details on that in a minute. But of that $750 million, $500 million went to RB. And then the business generated about $349 million prior to the actual demerger.

And of course, as I remind you in the past and will remind you today, we get to keep all the cash we generate now. So we are really happy with that, and that's going to help us fund our pipeline and diversification in the business.

Taking a closer look at our cash conversion, our cash conversion continued to be strong in 2014. You see that in terms of our operating profit of $562 million, we generated cash from operations of $523 million. So that's a 93% conversion rate. And that was down from prior years, which were over 100%. But that's a factor that's difficult with -- when your revenues are in a decline, to do better than 100%. But we expect our cash conversion to still be high on a go-forward basis.

Taking a look at our balance sheet, primary difference year-over-year is that our total assets are up. And you can see the driver there is in 2013, we had $7 million in cash, because the majority of our cash was swept RB versus 2014. We ended the year with $331 million in cash on our balance sheet. And that's the significant driver of why our assets are up.

If you look at the liabilities, the primary difference there is the debt we've taken on in December of 2014, with total borrowings and long-term of $719 million. Just taking a closer look at how WE get to net debt -- we talk a lot about what our net debt position is -- essentially, you see our cash position of $331 million; the total borrowings, both current and long-term, of $726 million, which is the net debt proceeds at the end of the year, which leaves net debt with cash factored in of $405 million.

As you know, we did a new borrowing facility at $750 million in December. And we are in a process of syndicating that. That's still ongoing. We would expect and hope that that's closed out by the end of the first quarter. Just to update you on current thinking of what that is, is we are expecting all-in costs of borrowing of 7% to 8%. And that's consistent with our guidance that I'll get into shortly.

Our credit ratings from Moody's and S&P came in at B3 and B, respectively. And that's also a factor in our current interest guidance and status of where we are with that.

Speaking of guidance, as Shaun mentioned, we're proud to really get out and give you specific earnings and revenue guidance in 2015. I want to point out this level of specificity doesn't mean we are always going to be this specific, but we thought it was important, given the rules of the -- during the perspective and demerger, we want to be more specific here and help you build your models, and understand where we are coming from in terms of our internal forecasts.

So we are guiding net revenue to be $850 million to $880 million in 2015. And that would be down 21% to 24% versus 2014. And net income on an adjusted basis -- adjusted because we do forecast some exceptionals, which I'll get into in a minute, in 2015. But excluding those exceptionals, we are forecasting or guiding to a net income of $130 million to $155 million.

Some of the key assumptions here in the 2015 guidance is that we have a full year in 2015 of standalone costs. On an incremental basis to 2014, that's about $40 million or $50 million higher. I mentioned the interest charges -- again, we are guiding to all-in costs of 7% to 8%. That's factored in. Effective tax rate of 29% is factored in. And it does exclude those exceptional costs associated with the demerger of anywhere from $10 million to $15 million.

Now, this is our current assumption. We do want to point out that the outcome could be higher in a more positive environment, or lower in a very adverse situation. But this is our current assessment. We'll continue to keep you updated, as we need to throughout the year, on our progress.

And then, lastly, I just want to -- because of the way the demerger worked, and carveout accounting and so forth, we want to put you on what we feel is a comparable basis or a pro forma basis on 2014 for your models, and how you want to compare 2015 against those numbers. And really there are only two adjustments here.

So the first column is the adjusted numbers that we reported today for 2014. And the first adjustment is in this SG&A line about adding about $45 million of incremental standalone costs of being a public company, which would take our SG&A for 2014 from $319 million to $364 million. And then the only other adjustment is in the interest line. Because we only had debt in December, putting that debt on a full-year basis would increase our interest expense by $55 million to a total of $56 million.

So the number to compare the way we think about it for net income for 2014 would be $363 million. Hopefully, that helps you as you think about how to compare our results going forward in 2015.

And with that, I will turn it over to Shaun for his update on the strategy.

Okay. Thank you very much, Cary. That's a very clear picture. So we take accountability very seriously in Indivior. And with the guidance that we've just given you, we wanted to make sure that we all understand that that's very consistent with the information that we've shared previously.

We've said before that the market will continue to grow in volume. That's something we will continue to invest in. And to ensure that happens, we expect that that will happen at a rate of low double-digit. But we are likely to lose market share for the film and the most price-sensitive pails, but we will be resilient in the rest of our business. That may come at a slightly higher rebate on an account-by-account basis, as we progress through the year. And we have now sort of quantified that to where we think that that comes out financially.

That, of course, is not our ambition. Our ambition is to do much better than that. But we feel that on the -- after very careful consideration of all the factors, that that is more likely to be the reality than not, because there is a lot of uncertainty in the year ahead.

Beyond that, looking towards 2017, of course, we're still giving out those same statements, but more confident that we will get there, simply because we've actually achieved some important milestones on our journey towards 2017. And I look forward to sharing with -- those with you now.

So our understanding and our expectation of the market hasn't changed. So what has changed? Well, some of the new events that we had modeled in have played out as we thought that they might. And the first of those is to give you an update on the generic competition.

We've known for a while that we had two generic competitors in the market. I think last time we met, we said a third had just entered and the fourth has been approved. So this is the market share date at the end of the year for the four generic players.

And what's interesting is that we see, in the last quarter, that Roxane took a lot of share away from Actavis. And therefore, that this tells us that price discounting in the market is intensifying, but there weren't any supply issues. So the only reason we've changed share is because someone is coming out at a lower price.

So the market dynamics we expect have already started to impact the market. What we don't know, of course, is what the sort of timing, the intensity, and the full impact of that will be in the year ahead. And it's those three factors really that affect the net revenue line. But we do know that these competitors are all here.

So I thought it would be helpful, thinking beyond the generic competitors, to look at the branded competitors. Because, of course, we know that Orexo had a very disappointing first year on the market. And we also know that Bunavail have recently launched their film. So it's hard to see, if you look at the X access there, but the purple line here is Orexo. And what we've done is we've said, look at week-one of launch, week-three of launch. So we've taken each week-one of launch for each of the products to see how they compare.

So Orexo have slowly sort of gained very, very small amounts of market share. They currently have 4.5% share of the market. A little uptick at the end of the year was caused by some deep discounting. And they picked up some of the managed Medicaid accounts that we have advised you would be vulnerable when competitive pricing got very low.

We can see that Bunavail, which is the blue line here, is currently tracking at about 50% of the performance of Orexo. If you then said, well, how does that compare to weeks-one, three, five, of when you launched the Suboxone film? You can see here the tremendous uptake that we had of the film. So if you compare week-12, Bunavail had 0.3%, Orexo had 0.8%, Suboxone film had 23.2%.

You will say to me, but Shaun, surely, this is because of the outstanding talent you have within your sales team. You've got a team of clinical liaisons that are very passionate. They are very committed to the patients. They have outstanding relationships with the physicians that they call on. They really focus on bringing quality patient care and to develop the disease space. Surely that's why you have the penetration success, and why you've outperformed the competition.

And I would have to say, guys, you're right. Yes, that is absolutely the case. And on top of that, not only that, but the actual -- the technology within the product also has a very high level of performance. The satisfaction with the patient is very high. Therefore, the compliance rates in treatment are high. Therefore, the payors got a better pharmacoeconomic return on investment that they are making in [lease to] purchase.

So it's little surprise then that as we go through the year ahead, and you ask the question, well, revenues are coming down, what are we thinking about our SG&A costs? So what we are thinking about is the investment in this equity, to make sure that we protect the revenue line as best we are able to by leveraging that equity; to make sure that we continue to generate the cash, to fund the development of our outstanding breakthrough technology pipeline; and to make sure that once we've got FDA approval, we try and replicate these levels of success of market penetration.

So that equity is very important, not only to preserve, but to continue to strengthen and develop within our organization. Our clinical liaisons are so passionate and committed to this disease space, two-thirds of them have been with the Company for five years or longer than five years. They are a fantastic team of people, and very proud of what they have achieved.

So we can see that the competition continues to intensify. We are not intimidated by that; we know how to deal with that, I think this chart shows very clearly. And although there has been some compression and further erosion of our film share, that the actual performance versus industry analogs of expectation is extremely compelling indeed.

So, beyond the next 12 to 18 months, let's think to the pipeline. We are very pleased with the progress of our pipeline. In less than 12 months from now, the first of these technologies will already be on the market. It's our nasal Naloxone. I know I told you before about how this little simple technology, that can be used by non-medically qualified people, can save people's lives.

Over 20,000 people die every year in the states because they overdosed on opioids. This little device will take the opportunity to save a life out of the emergency room and into the pockets of laypeople -- police officers, fire crews, first responders at the scene -- all of these groups will now be empowered to save a life at the scene of an overdose.

Our once-a-month injectable DEPO. We were expecting to dose our first patient in March of this year. As you would expect, we pushed and pushed ourselves, and have outperformed that; actually we dosed a round of Mycin the first patient last week. So we are very pleased that we can now confirm that the once-a-month DEPO is into Phase III.

Our risperidone once-a-month DEPO continues to progress well. We've got breakthrough therapy designation for our cocaine cholinesterase, our other overdose rescue medication, in quarter-three last year. And we've just had a very positive meeting with the FDA on our baclofen product.

So if you roll up the good news on all of these technologies, you start to get more certain about the probability that these -- our products will be launched on the dates that we expect. And if you look across the years, we've seen a very nice cadence. And once that nasal Naloxone comes out, there will be sustained new opportunities to generate growth every year moving forwards. So here, I've just written down some of the specific details of the points we've just covered.

Continued progress on our litigation. We had two patents approved, process patents, since we last all met. So we have now asserted a second round of litigation against Watson and Par, the first two generic film filers. Teva filed their Paragraph IV Certification. We have now filed suit against them. The trial date is set for August. We're trying to separate the Watson and Par trials. And we are progressing through the discovery phase with our IP at the moment.

We believe that we've got a very strong position here. And as you know very well, there are a wide range of outcomes that could be a positive result for us.

We had very positive progress, albeit expected, on the class action antitrust litigation as well. The Motion to Dismiss the claims that the companies have made about our failure to -- alleged failure to comply with the RIMS process, that was approved. And we've gone back to ask the court to reconsider on the other two matters. So, very pleased with how we are progressing there.

I said at the beginning that we've transitioned well to independence. It's early days, of course, but we are very, very sure of our footing. We are very confident about the future. The management team, I believe, is a well-proven management team. They've demonstrated their ability to innovate. They continue to work tirelessly to find new and innovative ways to drive the development of the addiction disease space around the world.

Our scientific expertise is second to none in the area of addiction. We are starting to see this be recognized and rewarded by the regulatory agencies as they look at our technologies, as they consider the development pathways, and start to signal their interest in fast-tracking the technologies, as we've seen with the nasal Naloxone, and giving breakthrough therapy designation to the cocaine technology.

We've got a really good understanding of the regulatory agencies and how they think in addiction, and what they value in addiction. So we know how to design our clinical studies to make sure that we are able to deliver on the provable endpoints. We have proven that we know how to create and define markets. We talked earlier about the unparalleled intimacy and the quality of the relationships that we have with the treatment community. And we now have to extend a franchise through lifecycle management.

We've also integrated other technologies and other businesses over the years. So we have a capability that we are very confident can be leveraged to drive M&A and integration of other new opportunities.

So we like to be as helpful as we can in guiding you on how to have a good ongoing relationship and dialogue with our progress as a Company. Here's the first-half sort of agenda with some of the milestones that we expect that we will either achieve or overachieve against, together with an indication of the conferences that we will be present at and attending. So, we would be very pleased to see you wherever and however you would like to connect with this agenda.

Here's the second-half of the same. I'd also like to point out, in quarter three, that we intend to have a one-day scientific roundtable with Christian Heidbreder, who is the Head of our R&D. And that will be a very good opportunity for you to take a deep dive into the science with Christian. And we will share the dates of those as we move forward.

So what data can you access to track our progress? Well, of course, everyone has their own choices to make in how they want to view the model. But we thought we were least transparent in how we choose to model the world; you can at least understand how we think and what we value, as you decide how to build your own models.

So we take the IMS data and we take unit data, and we convert that unit data into milligrams of buprenorphine. Because of the wide range of daily doses and duration of treatment, if you look at patient counsel and numbers of descriptions, it can be quite misleading. So our good intent here is how can we calculate everything to the lowest common denominator to minimize the potential for the data to perhaps send some wrong signals?

So we convert unit volume into milligrams of buprenorphine. We even look at competitive products, like Zubsolv, for example -- 1.4 milligrams of Zubsolv is equal to 2 milligrams of Suboxone. So we've retracted that out to make that -- to correct that, so that we are looking at a consistent measure across all the products.

In Europe, methadone is much more of the direct competitor than it is in the US. So the conversion, when we are looking at market volume size in Europe, is 60 milligrams of methadone equals 8 milligrams of buprenorphine. We've decided we're going to put this methodology on the Investor section of our website, so if you are interested in trying to re-create the model, that you will be able to do that, to see how we look at things.

In terms of data on addiction, where should you go to look at size of problems and trends within the sort of disease space? We've listed out here some very helpful data points that we use in our own work. You can also track the science. We've been asked when are you publishing on this? And when will the data will be available on that? We will, on our website, under the Investor section, keep you updated of publications.

Here's the most recent three publications on the slide that if you have in your handbook. And you can see the main Addiction Conferences. So if you're interested in attending any of those or following the abstracts, that you can keep in touch with the disease space overall.

So our priorities are very, very clear for the year ahead. We will continue to make sure that we do everything that we can to optimize the resilience of the Suboxone film. This is a sustainable platform, and it is going to create good cash generation moving forward. Yes, there is some uncertainty into exactly what will the level of that be over the next 12 to 18 months, and we should expect there will be some compression. And we know that there is going to be this sort of rebasing effect.

But I think our ambition, our capability, and our track record, and expanding access to treatment globally, is going to really fuel an exciting investment thesis in the medium to long-term. Our pipeline clearly continues to progress and meet those milestones and expectations. And we have the opportunity to continue to develop our business, not only in acquiring new addiction assets to add to our core, but also to think beyond that, to adjacencies in comorbidities to diversify the risk.

So in summary, confidence should be increasing in the medium-term. We continue to make excellent progress. The outlook financially for 2015 is exactly as we expected. We couldn't give you the financial guidance earlier; we would've liked to have done. We know that there is a range of analysts' views at the moment. They're all very understandable. They're all sensible. But as we try to guide things to what's the consensus we'd like you to understand where we see the world.

We have enjoyed our first two months as a public company. So we are very pleased to be here, and look forward to maintaining a good relationship with you as we move forwards.

So, that's it for today, but Cary will join me on the stage. We are very pleased to take any questions that you may have.

It's Mark from Deutsche Bank. A couple of questions. Firstly on expense trends, going back to the presentations you gave prior to the merger, we were looking at underlying high single-digit growth in SG&A in the current financial year. Is that still the case, based on the figure on the adjusted slide you gave, Cary, where you add back the $45 million?

Secondly, the R&D expense and SG&A mix was slightly more skewed to R&D than I think most of us had expected. There were some one-time items in the R&D or can we look to it growing further?

So I think I'll start with SG&A. I think, generally, it's still in line with what we talked about in the prospectus; now just putting some details around and helping you make the adjustments, so you think about on a go-forward basis. So, really no major changes there.

R&D, we've talked publicly about $90 million to $100 million, but that's project expense. What you're seeing on our P&L is not just the project expense, but also the people costs associated with the employees in the R&D group. So, that's why it's probably a little higher than the $90 million to $100 million that you may have been thinking of. But there aren't any real one-time items in there. I mean, we expected to be at that level over the next two to three years.

The second question is -- I appreciate that we haven't sort of equivalized all the data, but the IMS data for the first month of this year, if anything, shows Suboxone's share rising. So I wonder if you could talk to that? Because it seems intuitively a bit odd, given the competitive dynamics.

Well, we do see that the share fluctuates, it goes up and down by half-a-point from data point to data point. So, we tend to look at the longer-term trend rather than get bogged down in any one point. Because otherwise, we are all excited one week because it's up half-a-point, and then the next week, it's down 0.4. So there is sort a fluctuation range, which is a normal ebb and flow.

You are right that the full intensity of the price competition obviously hasn't impacted share yet. We believe that that intensity is about to start very soon. We are seeing that Teva already has shipped product into the market. They've made an investment, they've manufactured a lot of product, and they clearly expect to ship it and sell it -- end of story.

So the only way that they will be able to achieve that is to offer better pricing, better price discounts that exist within the market today. So we acknowledge that we haven't yet seen that phenomenon, but we believe that we are about to. Whether it will be next week or the week after or three weeks after that, we don't know. But certainly, I would imagine that we are on borrowed time in terms of not seeing any share erosion.

Sarah Potter from Bank of America. I've got three questions, please. Firstly on litigation, I'd be interested in any color you could give us on the Markman hearing, which happened in December? As a non-legal expert, I think, to get your take on how that affects your stance going into the trial.

Okay. Well, I'd be pleased to give you a non-legal expert answer to your question. Yes, the Markman hearing -- the claims construction hearing went very positively. We got the interpretation of the claims that we were hoping for in all but one of the claims. And in the one that we didn't get exactly as we'd wished for, we got a sort of halfway compromise between ours and the generics position.

So we were very pleased with that. It was as expected, so it's not a big surprise or celebration; it's just good to say, yes, what we expected, happened. And we can now tick that box and move forwards.

Thank you. And then on the debt, is there a chance in the future that you will be able to renegotiate that debt? 7% to 8% obviously seems very high. Do you think you'd be able to negotiate? And over what timeframe maybe could we be thinking about that?

Yes. I think our plans would be to have some flexibility built in. And there are flexibility built into the indicative terms that were given by the underwriters on the debt. So we would look forward to being able to do that. I can't give you a specific timeframe, but obviously we would like to have it. We think, as we improve the business and continue, as Shaun said, to re-base, we see a rebasing in the business, and diversify the business as well, because that is also a factor in credit ratings, that we would be able to refinance it into better terms.

And then finally on the monthly buprenorphine, your flat launch is still expected in 2017? Given your guidance for the last patient to be in the fourth quarter, when can we expect the data from this first study? And will that be sufficient for filing? Or do you need a second study?

No. The FDA have indicated to us that the first study will be sufficient. But of course, when you do any study, whether it's efficient or not, it is very dependent on actually getting the outcomes that you anticipated. So, we believe that that study will be sufficient, based on all the conversations we've had with the FDA.

We are also hopeful that we'll get an accelerated six-month review for this technology. Although the FDA have signaled an interest in that, they are unable to commit until we actually have the data and go to the meeting, before they're able to make a firm commitment.

Thank you.

Nicolas Guyon-Gellin, Morgan Stanley. Thanks for taking my question. I have two, actually. The first one is a financial one. You put a very interesting chart about the breakdown of SG&A costs in the presentation. Could you elaborate on how you expect the respective parts to evolve in the future, notably the sales and the end parts? And do you see any rooms for cost savings?

And the second question is about the generic litigation. Could you elaborate on the additional patent infringements you filed against Par and Watson? I mean, what to expect from that? And what are the next steps? And do you have any timelines for an eventual court case? Thank you.

Yes, I'll start with the mix and I think Shawn can probably comment on sales and marketing efforts. We have -- we are only guiding to 2015 specifically, but -- and we don't see much of a change in the mix within SG&A in 2015 versus 2014, even with the standalone costs coming in for a full year. The mix of sales marketing and regulatory, again, being about that 58% of the total SG&A, we don't really see that shifting all that much.

So, in terms of our mindset, yes, we always see opportunity to be more efficient and more productive, and to cut and to save costs. So, that's something we always look at the world through that lens.

And in terms of the sort of investment in the sales force, we think that we've got the right level of investment there, as we had in R&D, to launch our future technologies. So there's not going to need to be, in the near-term, a big step-up. If everything went brilliantly well and you were overperforming all your expectations, and then, at that time, you might take another view at how do we optimize our commercial footprint?

Because we do this every 18 months to two years. We work with CS Associates, the best sales force modelers in the industry. We look at the market environment, the anticipated trends; our objectives, what we are willing to work with. And then we model our sales force to optimize it, given all those things.

So we are not living in the legacy area where we used to have this number of people. So we've still got them. We're constantly evaluating and appraising. I think it's very clear that tremendous equity lies within the talent within our sales force. So, we think that's a very important differentiator versus the competition. And we are very proud to continue to develop and leverage that.

I think you had another question, which has escaped me, on the generics. Do you want to ask again?

Patent --.

Patent -- yes. We've got two new -- two patents approved, two process patents. And we have now filed those against Watson and Par. So that's the second round of litigation beyond the Orange Book patents. So I don't have the timing on that; that's only just been filed. But obviously, that's a further complication as far as the generic companies are concerned, and another challenge and another set of hurdles that have to overcome.

What I think it demonstrates is that we have the capability internally to create new IP. We've got the tenacity and the skill set to drive that IP, not only to create it and file it, but actually push it through to approval. And so we are creating new equity all the time to help strengthen our franchise.

It's James Vane-Tempest from Jefferies. Just two financial questions, please. Firstly, given the changes in market share dynamics over the last year, gross margins remain relatively resilient. So I was just wondering how we should think about the gross margin profile over the next couple of years, with changes in market shares?

Now you're looking for more guidance. We can't give you specific beyond what we've already done. I think we do see the pressures in that 25% to 30% of the market. And then we will strategically be more aggressive with rebates and discounts where it makes sense in the other segments of the market. So you could see some compression in gross margin, but I can't give you the specifics.

Thank you. Then my second question on SG&A is more a clarification question than anything else. The -- I suppose, the high-single digit growth rate, I think, Mark alluded to earlier, was that based off the $319 million adjusted number last year, how we should think about it? And then you add on what you're expecting for exceptionals in the $45 million?

Yes.

Is that the way to think of it? Okay. Thank you.

It's Max Herrmann from Oriel Securities. Just a couple of questions. Firstly, just in terms of -- you've got quite a large amount of cash, if you're keeping your debt as is, and I wonder what opportunities you're looking for to use that cash?

And then, secondly, just on RBP-6000, what's the competitive -- or how do you see the competitive profile of that -- of your once-monthly buprenorphine formulation compared with Camrus's formulation? And also timelines in terms of seeming to be neck-and-neck in terms of development? Thank you.

Okay. So, in terms of the buprenorphine DEPO, obviously, they may seem to be neck-and-neck. Our belief is that they are not neck-and-neck. We believe that we are further ahead. We are very confident that this is going to have a very high level of attractiveness and acceptability to the patient.

We've seen in our Phase II studies that we have a very high level of resect occupancy. So I can't speak to the Camrus technology, but I can be very confident that the quality of our own technology is not only very high scientifically, it's going to be very compelling from a patient's point of view, in terms of willingness and enthusiasm to want to take the medication.

And I'm sorry, could you repeat --?

Cash.

Our cash uses. Well, very clearly, we're going to -- first priority for cash is to drive the performance of our existing operations today. We'll drive the market growth; we'll make sure we optimize our position from film share. We will invest in developing the European market towards opioid painkiller dependence, and starting to get some traction and penetrating that segment, and progressing our geographic expansion.

And I think that you are aware that our phase -- that are studies in China are progressing well. We will continue to fund the pipeline. We are very confident about our ability to do that. We've given an indication of what that is going to cost us.

And then beyond that, of course, we'll look for M&A opportunities; opportunities that fit well with our skill set, our ability to look for underserved markets, and to develop those markets, things that are closely -- as closely allied to addiction as possible.

If we go out and we acquire new technologies, obviously, we would prefer to be getting -- buying in net revenues that would help us mitigate some of the short-term challenges and uncertainty. But we would look to get something that was a good strategic fit for our capabilities; something we could add value to, and sustain medium to long-term growth with.

Thank you for taking my questions, it's Jimmy from Investor Corp. with an investment. I've got three questions, please. The first one relates to dividends. So just following on from what you were talking about just now, if you have to invest in all -- in the pipeline and then into M&A, does that mean then that 2016 dividends are unlikely to be carried over?

Well, what we've said is that our Board will make a decision at the end of 2015 what our policy will be beyond the first year dividend that we've talked about, which is 40% of 2015 earnings. Most dated policy add on 2016.

I think we've been very clear about the dividend for this year as a blend of a number of factors, one of which is the consideration and recognition and long-term support we filed from existing shareholders who invest in RB. This is a little bit of a transition year, so we wanted to support them with a dividend for next year. We will have to look at where we are and decide what the right thing to do is moving forwards.

Other uses of cash.

Yes.

You mentioned -- Shaun mentioned there's quite a number of things we could do with our cash. And that will be part of the analysis that goes into that decision.

Fair enough. Thank you. The second question is relating to guidance again. So if you look at the Suboxone film shares, it's been quite resilient. But that seems incongruous with the sort of guidance that you gave today, which seems very conservative. Is it just a question of being less -- not being too aggressive with our guidance?

I think what it's a case of is to recognize -- as we have said for a number of years now, but now being a bit more specific qualification of -- that our franchise will be vulnerable in the most price-sensitive to payors. So what we mean by that? We mean by the people who are not worried about the quality of the product and the technology, and all the rest of it, and say, my budgets are nearly bankrupt; I'll need the cheapest stuff I can get, and therefore, I'll take it.

We can still compete in that segment. But once the pricing starts to reach what I've referenced as the commodity floor price, which is about 80% discount off of list, then clearly, we start to undermine our own position if we start competing at those types of price points. So it's a little bit of a mathematical thing. But at some point of market discounting, we will lose share, because we simply won't be able to compete at the levels of discount that the competitors are willing to go to.

We've already seen a little bit of it happening with Orexo, where they've gone in with certain Medicaid -- managed Medicaid accounts. We've been very clear, I think, for some time now, that the cash pay sector and the managed Medicaid sector comprise about 25% to 30% of our business, and that we would expect to lose the majority of film share in that sector. So I think if you sort of do the math, and we've tried to build the model a couple of different ways, to make sure that our guidance is very consistent with what we've said before. And we are very confident that we will end up in the range.

Okay. Thank you. Final question is, I know it's early days, but have you had any benefit so far with the separation at all?

Well, I think that one thing that's a big benefit for us, that we've benefited through from the second-half of last year, is of getting some certainty about the future of the business is a tremendous benefit, in terms of the quality of the M&A conversations we are able to have.

If you imagine 12 to 18 months ago, there was a lot of uncertainty about, while this is not a core business, is it for sale? Is it going to be spun? into going to be kept? And in that sort of environment, people are very hesitant to want to do business, because they don't really know where things are going to shake out. So we found that's been a very positive benefit.

In terms of who we are and our identity, of course, it's a very exciting challenge and we've been delighted with that. We are also very proud of our Reckitt Benckiser heritage. As you know, Reckitt Benckiser is a wonderful company, and we've all benefited enormously from growing up within its culture. And so we hold very dear many of the values and skills that we've learned over the years to take to Indivior.

Thank you.

Just following up on the sort of volume growth in the US market. I mean, IMS is showing about 10% in their first months of the year, and your expectation is low-double digits. Obviously, one of the things that people have been talking about that might swing that number is the potential removal of the cap on waivered physician prescribing, the 100 Patient rule.

Is there any move that you can sort of point to? Because I know some of your competitors are saying it's just a matter of if not -- of when, rather; not if. So that's the first question.

And sort of related to that, I saw some headlines, but I confess I didn't chase them up -- Obama and politicians taking a look at opioid deaths, over those deaths, and want to put more money that way. Does that have any implications for your business? Or is that more a sort of general education for the marketplace and so on?

Well, I think you've made two very important points. First of all, we are not holding our breath on legislation to change the 100 Patient limit. Whilst this is undoubtedly true in certain pockets of certain geographies, it would be helpful to have broader distribution, it's not really holding the market back at the national level, we don't believe.

So I think our competitors probably need to believe in the 100 Patient rule and its impact on the market, because they're not really doing anything else to make it happen. We, as the leader, of course, continue to invest in expanding the market through having more physicians. And we would prefer to see more physicians who are qualified to treat this.

Because this is an everyday disease. There are millions of Americans who are affected by this problem, and it's right and it's proper that those patients should be able to just go to their local physician to get treatment, without having to travel a great distance to go to a specialist clinic that may be far away.

In terms of the opioid overdose, I think that you're right. There is a great shift in the social understanding and the perception that addiction is not about social disorder, of bad people doing bad things that deserve to be punished. It's a recognition that this is a legitimate disease, that these are patients and they do require an appropriate framework of medical care. So as part of that, they're looking in all areas, and they're saying, well, if we're getting a lot of opioid overdose deaths, what can we actually do?

So there is dialogue at a national legislative and mobile policy level where the environment is moving towards wanting to make nasal Naloxone -- not nasal Naloxone specifically -- Naloxone overdose rescue technologies more readily available. We are accelerating and making it easier to do that. Because, of course, wherever you have technologies that involve needles, they require medical training.

And then there's only so far you can go. With our technology, you need no medical expertise. And therefore, you can give it to laypeople. And therefore, there's permission and the motivation to want to free up the regulations, because there is now a technology that can be used.

So, thank you for raising that.

I think we can take one more question.

Nick Nieland from Citi. I just wondered with the existence of current Naloxone products on the market, whether you -- what you're thinking about pricing for your intranasal Naloxone products?

And secondly, can you quantify the risk for the US antitrust litigation?

We can conceptualize the pricing. I mean, sometimes when you have a life-saving technology, you go, well, what's the price of a life? And you try and price to that. And that's clearly not what we are doing here.

The opportunity here is to distribute this technology far and wide. It's a little bit like a fire extinguisher model. You hope that everyone who needs one will have one standing by. But in reality, you hope it never needs to be used. But, of course, it will need to be used. So we're going to price it at a price point that enables that level of affordability by payors to get the broader distribution.

In terms of -- what was the second question?

Antitrust. Can we quantify the antitrust?

Yes, we can't really speak to that because it's just an ongoing matter. We haven't heard anything more specific. And the case just needs resorting.

Well, thank you very much.

Thank you.