Indivior PLC (INDV) 2015 Q1 法說會逐字稿

Good day. And welcome to the Indivior PLC first-quarter results. At this time, I would like to turn the conference over to Mr. Shaun Thaxter. Please go ahead, sir.

Good afternoon, if you're in the UK or good morning, if you're in the U.S. Welcome to Indivior's Q1 results call. I'm Shaun Thaxter, CEO of Indivior. And I have with me Cary Claiborne, CFO and Christian Heidbreder, the Chief Scientific Officer.

Before I start, I'm going to assume that you've read the forward-looking statement disclosure and the press release that also covers this call. So I will now make a short statement about the results and then we will be happy to take your questions.

Net revenue for the quarter was $251 million. Operating core profits for the quarter was $115 million after higher costs reflecting with stand-alone costs expected. The exceptional costs in the quarter related to the demerger and the establishment of Indivior PLC and these were $2 million.

We have finance expenses of $13 million in the quarter reflecting the cost about $750 million syndicated debt facility. Syndication has now been completed and the all-in cost of the debt will be 8%.

The tax rate in quarter one rose 25%. Efforts to optimize the company's tax position continue, and we will update the market on the tax rate assumptions for the year at the half-year results.

Net income for the quarter was $77 million and earnings per share for the quarter were $0.11. These results are modestly ahead of our plan. For quarter one, we had anticipated that there would be no rapid deterioration in the trading environment.

In the U.S. generic tablet pricing has not yet disrupted our market share, while branded competitors have had a very limited impact. Although as in the second half of last year, we continue to offer tactical rebates in connection with the [formulary] access to the Suboxone film.

In Europe, government austerity measures and price constraints have continued as expected. So overall, the environment was in line with our plan for quarter one. However, if it continues in the same factor pattern in subsequent periods, we may have room to reassess our folio guidance at the half year.

So just to pull out a few key highlights for the quarter for you, first of all, market growth in the U.S. continues in low double digits. This is helped, in part, by the impact of the Affordable Care Act. But key drivers remain. The certification of new doctors to practice addiction treatment. And the fact that more patients are coming into treatment.

Suboxone film market share was 59%, marginally above the share at the end of 2014. This reinforces our confidence in the resilience of the Suboxone film and the fact that is preferred by physicians and patients.

Our sales volume in quarter one were ahead of the equivalent period last year, but this was offset by continued tactical rebates and mix. With lower margin Medicaid growing faster than the commercial managed care. We're successfully continuing with the operational separation. In April, we took over the operation of our fine chemical plant where we manufacture all our buprenorphinee. It was a very smooth transition and there were no disruptions at all to the supply chain.

On the pipeline, we are today announcing the compelling topline results of the Phase 3 study for our monthly depot of risperidone. There is a separate press release for this. But in summary, both doses met all primary and secondary endpoints with statistically and clinically significant improvements in outcome.

Also Phase III trials of the monthly buprenorphinee are progressing and we're preparing to set our -- submit our nasal Naloxone product for approval.

On litigation, we have successfully separated out the infringement part of the ANDA trial for Par to a separate trial date now set for December 2015. So we've had a very successful quarter and the business is in excellent shape to meet our objectives for the year. So before I close, I'd just like to come back to our guidance.

We still believe that the likelihood is that the industry analogs on generic pricing will apply. But the key issue here is one of timing and severity.

To the extent that these are delayed, financial guidance for the full year may be too cautious. We benefited from a relatively benign environment in quarter one, both in respect of generic tablet pricing and of the impact of competitors.

Very much I've anticipated in drawing up the financial plan for the year. However, if this more positive environment continues in subsequent periods, there may be room to re-assess our guidance at the half year. We will reassess the full-year guidance and the assumptions underpinning at the half-year results on the 29th of July.

So that's the sort of formal part of the announcement over. And Cary and I are now happy to take questions, along with Christian.

Thank you. (Operator Instructions).

We will now take our first question from Nicola Guyon-Gellin at Morgan Stanley. Please ahead. Your line is open.

Yeah, hi. Good afternoon. Thanks for taking my question. I have three, actually. They are all about the pricing environments. You put a very interesting chart about how generics negatively impact price. So question number one is where are we on this chart right now? Question number two, why does it take so long to get with the 80% [community] price flow you regularly mention, despite poor generics already on the market.

And finally, any update on the Medicaid segment, i.e. how much of that market have you lost already and how you expect it to evolve going forward would be great. Thank you very much.

Okay. It's very difficult to say exactly where we are with the generic pricing, because we're not privy to hard data. However, obviously, we hear things and people tell us stuff. So we believe that generic pricing is in the sort of 50% to 60% discount off of list price range. So we have seen the generic price come down, as we believe it to be. We don't have the hard facts. But that's what we believe that the price is coming down. So that's the answer to question one.

Why is it taking so long? I'm unable to explain that, because I don't know. Clearly, as you have alluded to, if you look at industry analogs, you would have expected the price to come down more quickly, once there are four generic players in the market. So the current situation is going a little bit against received wisdom and industry analogs. But I'm not able to explain why that is the case.

Third is on the managed Medicaid segment. At the moment, this segment is holding up relatively well. And you know, we will wait to see how quarter two plays out and that'll be driven by, you know, how quickly the price starts to move in the generic tablet sector.

Thank you.

Thank you. We will now take our next question from Mark Clark at Deutsche Bank. Please go ahead. Your line is open.

Yes. Hi, gentlemen. Just a quick question on the rebating on Suboxone. Just a quick bit of math. The market share reduction year-on-year is about sort of -- it would imply an 8% drag, but you've got double-digit market growth, so you've got kind of low single-digit volumes, I assume, increase. But you got a 9% sales decline in the U.S. So that to me, sort of kind of roughly assumes something like 12%-ish year-on-year rebating/discounting on Suboxone. Is that math about right?

We're not really wanting to get too much in the detail of the math. I think that, you know, we've indicated that across last year, we've made tactical rebate adjustments in line with, you know, what we've said about maintaining share in the commercial sector. And you know, doing our best to maintain share in the managed Medicaid sector for as long as we're able to do. So we have made tactical adjustments. But I don't really want to comment on a specific number.

But, as you know, we're not really wanting to give the gross-to-net numbers out, because that's not in anyone's interest for us to do that, other than our competitors.

And the other thing you would be seeing in the way you're looking at that, Mark, would be the mix, the channel mix, year-over-year difference would fall into the bucket the way you've split that out.

Oh, okay. Sure thing. Can I just ask a follow-up question? I mean, one of the things that looks surprising in the IMS data is the lack of any impact from Teva in the marketplace. Is there any sort of whisper in the marketplace as to why they've had such a low-key start? Is it supply constraints or, you know, applying their efforts to other sort of bigger molecules? I don't know. It seems like an important part in the relatively benign environment you talk about.

I agree with everything you've said there in terms of, yes, it's surprising, yes, it's an important part. Yes, you would have expected Teva to have been more aggressive. No -- no, we haven't heard any rumors or any whispers. So I haven't got anything more to add, but I do agree with your characterization that you would have expected that we would be in a different position to where we are, but we're very grateful to be here and long may it continue.

Okay. Thanks.

Thank you. We will now take our next question from Nick Nieland at Citi. Please go ahead. Your line is open.

Hi. Nick Nieland from Citi. So two questions, please. You've talked about licensing products to boost your pipeline in medicines for addiction. Would it be fair to assume that this may not happen until you know the result of litigation on Suboxone film and therefore have visibility on your cashflows?

And my second question is, is there any read across from these results on the risperidone depot across two the buprenorphinee depot, i.e. in the way the product works pharmacokinetically. And do these results change your view of that product's profile at all? Thank you.

Okay. Well, I'll take the first question, in terms of timing of M&A. You asked specifically about sort of licensing -- in licensing deals, relative to our core addiction pipeline. I think we've said previously that, you know, you could expect that a licensing-type deal of the magnitude and nature of something like the baclofen or nasal Naloxone deals that we did middle of last year. Those could occur at any time.

And there's nothing to read into that, other than they could occur at any time, and we're not changing our position on that. So I think that's very clear. I'll invite Christian to comment now on what you might be able to project on to buprenorphinee from the risperidone results.

Certainly. If anything, these results with risperidone are just very supportive of the [atra-gel] platform and -- but as you know, we already knew from a buprenorphinee perspective what we might expect, based on the very compelling evidence that we gathered from the two Phase II studies. Yet again, nice confirmation about the strength of the atra-gel platform.

Okay. Thank you.

Thank you. We will now take our next question from Stuart Goldberg at Litespeed Partners. Please go ahead. Your line is open.

Yes. Thank you. Good morning, good afternoon. A couple questions. On --when we look at your R&D and your SG&A, can you give us an -- the way the first quarter went, it looked like R&D was a little lower than previous quarters. And SG&A, obviously, was a little higher. Is there any kind of steady state that you want to -- you can guide to or you can talk about?

Well, let's start with R&D. R&D is going to have inflow with our trials, so you know, R&D, you know, in first quarter, we had two Phase III trials going. The risperidone trial is coming toward an end. So you will see that -- you know, the cost in that trial decline. The buprenorphinee is ramping up, so you'll see that increase. So I don't think you can go from a quarter-to-quarter standpoint.

We've guided in the past that over the next few years, our R&D overall will be in the, you know, $100 million range, give or take. And that's as far as we'll go, in terms of giving guidance there. SG&A is simply up, because of the cost of being a stand-alone public company, versus prior year. And we don't anticipate much change going forward beyond the step-up we've seen in 2015, versus what you've seen in the prior years.

And then finally, on the -- on schizophrenia, can you give us a timeline on what's next and what you anticipate will be that timeline for the drug to be commercial?

Yes, certainly. So the first part of the Phase III trial is now completed. You may remember that there were two parts in the Phase III. The second part is an open label long-term safety study. So they're basically patients or some patients that had the options to roll over to the open label long-term safety study that is currently ongoing. And we are anticipating to complete that part of the study some time next year.

Pre-NDA meeting, we said the FDA will probably be scheduled first quarter.

I'm sorry?

Overall, we're on track, with the timelines that we've put out previously on the risperidone product. So if you're looking to sort of get some confidence around that, then we're still very much on track for that.

OK. Great. Thank you.

Thank you. We will now take our next question from Max Herrmann at Stifel. Please go ahead. Your line is open.

Thanks, gentleman. Just a follow-up question on RBP 7,000, in terms of commercialization, what strategy you have there. I mean, obviously in terms of your sales force, it's very different to the sales force that might be necessary for RBP 7000. And sort of, maybe you can give us a view, a feeling on whether you're looking to partner that or timings of anything regarding that?

And then, secondly, just on the debt. It seems obviously certain transactions. The debt level seems quite expensive. So I just wondered, particularly given the cash generation that this business can deliver, I just wondered whether there are ways that you could refinance at some point. I know, you've only just put it in place, but it just seems like a very expensive debt facility. Thank you.

Yeah. okay. The -- with respect to the commercialization of risperidone, we're in the process of evaluating all the options that we have there. So obviously, licensing it out is an option. And you know, we're considering that, along with other options of what might it look like, you know, within our portfolio. The final decision or -- hasn't been made on that. But we are working diligently on that at the moment.

Cary, do you want to speak to the debt question?

Sure. And I think we've said this before that we will look to lower our finance expense through refinancing the debt when we're able to. You know, we'll have a strategy in place in looking at being able to do that. But as you said, we just really -- it's just indicated at this quarter. So it's a little early for that. But we will also use our, you know, excess cash. I think when it makes sense, to pay down the debt sooner, if that makes sense for us. And there are excess cash sweet features built into the debt starting next year as well. So we agree with you that it's a high cost of financing, and we'll look to lower that over time.

Thank you.

Thank you. We will now take our next question from Sarah Potter at Bank of America, Merrill Lynch. Please go ahead. Your line is open.

Hi, there. It's Sarah Potter from Bank of America. Just a follow-up question on Suboxone film. I read the no-competitor terms, because they said they'd -- you'd launched a new copay program in the U.S. in the first quarter. I wonder if you could just provide a little bit more color around this copay program and how it differs from the standard $50 copay that you offered before.

And then just a second question around the Suboxone film litigation. How should we think about this, heading into trial in August and your comments that you'd be looking to renegotiate your finances and debt? How far into the litigation process do you have to be before you would consider that a settlement might actually be a better route for you, in terms of refinancing your debt and giving greater visibility on the top line? Thank you.

Okay. I'll speak, first of all, to the copay. So we haven't relaunched a new copay program. We've had a copay program in place since the launch of the Suboxone film. From time to time, we have made adjustments to the shape of that program, to appropriately reflect market conditions. An adjustment was made in the first quarter for cash patients and we increased the level of the potential rebate from the coupon to be more competitive with the very, very deep discounting that was going on from the competitors.

I think they're struggling to get share at the physician and patient level, so they're trying to make a sort of out-and-out generic level pricing play. So we made an adjustment to our rebates to help offset some of that pressure. And we actually gained some share back as a result. So you know, that's a fairly measured and balanced adjustment which has -- you know, which has given us an improvement.

Thank you.

Sorry. There was another. I meant to also say...

All right.

... just remind myself that from an insured patient point of view, it's still the $50 copay, although we did get a lot of feedback that on an induction script sometimes the doctors will write, you know, a small script for the induction and then the patient will go back for maintenance scripts. So we enabled the insured patients to get -- re-use the coupon for induction, as well as the maintenance phase in the first month. But the values of that remain unchanged.

And the question on litigation was that we -- as we've said previously, you know, there are a number of outcomes that could be positive from the litigation. You know, you can go to court or there are a whole range of settlement options, you know, that could be a good outcome for us. So you know, we will wait till we've completed the discovery phase, which should have happened by the end of June and then we'll be in a position to, you know, decide on our best course of action.

In terms of refinancing the debt, obviously, the sort of -- and the litigation and the single products is a factor in the rating agency's evaluation. And realistically, I think we would need to have -- we need to have a tangible outcome there before you know, the credit rating is likely to change. And that's what drives the refinancing.

Great. Thank you very much.

Thank you. As a reminder to ask a question at this time, please press star one on your telephone. We do not appear to have any further questions. I'll pass the conference back over.

OK. Well, thank you very much, everybody, for your interest and for attending our call. That's it. Thank you.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.