Indivior PLC (INDV) 2015 Q3 法說會逐字稿

Good day and welcome to the Indivior PLC Third Quarter Results 2015 Conference Call. At this time I would like to turn the conference over to Shaun Thaxter. Please go ahead.

Good morning, everyone. And welcome to Indivior's Third Quarter Conference Call. I'm Shaun Thaxter, CEO, and I have with me Cary Claiborne, who is the CFO. We'll take it that you've read the forward looking statement that came out with our release.

So, Cary and I will make a short statement on the results today. And then we will be happy to take your questions. I'll ask Cary, if you'll take us through the financials, please.

Thanks Shaun. Good morning everyone. Year to date net revenue was $766 million compared to $844 million in the prior year period. A decline of 9% versus prior year with strong U.S. market growth offset by lower market share, higher rebates versus prior year in connection with formulary access in the U.S. and by foreign exchange.

Net revenue at constant foreign exchange declined by 6%. Operating profit was $308 million compared to $458 million in the prior year period, reflected lower net revenues and the expected higher operating costs incurred as a standalone public company. Including $7 million exceptional costs arising from the establishment of Indivior PLC.

Our net income was $191 million compared to $326 million in the prior year period after net financing costs of $47 million and a tax rate of 27%. Cash and cash equivalents balance at the period end was $552 million and net debt was $176 million down from $428 million at the end of 2014.

Those are the financial highlights, and now I'll turn the call back over to Shaun.

Thank you Cary. And now for some of the operational highlights of the year-to-date. We're very pleased with our performance and we've continued to trade strongly through the first nine months of year. We continue to benefit from healthy market growth in U.S. which is continued as low double digits.

You may also have seen recently announcements from the U.S. government with respect to expanding access for treatment for patients. There's a very clear recognition that this is a public health crisis. And the government is indicating that it intends to move to make access more available for patients.

Suboxone Film market share in the U.S. remains at 59%. We're very pleased particularly as this is slightly ahead of the 2014 closing shares. So, we continue to demonstrate the resilience of the Suboxone Film franchise. Our exciting and innovative pipeline also continues to make good progress.

You will have read, of course, in previous releases that the Nasal Naloxone is currently under priority and fast track review by the FDA and we will get a response sometime this quarter. And we have announced today that, if we get that product approved, then we intend to launch it with a list price of just below $50. Of course, there will be patient and account rebates as well.

So, that's going to make that technology very affordable for public health budgets and to make sure it gets into the hands of those who need it. The phase three trials are progressing very well from our two Depot technologies; the buprenorphine once a month and those risperidone once a month products progressing well.

We also have arbaclofen placarbil for alcohol use disorders has had its first patient in the Phase 2A trial. And that started in September. The oral, swallowable tablet of the buprenorphine hemiadipate for opioid dependence also had its first patient in Phase 1 in September.

We also indicated today that we do have two projects timings that will change; the buprenorphine Monthly Depot for Europe and the oral, swallowable tablet, the buprenorphine hemiadipate. We will confirm the new findings for those in 2016.

On the under litigation, I'm sure you've got lots of questions regarding this, but all I can really tell you is that the trial and the lawsuits against Actavis and Par actually started today. We have a total of six under filers seeking FDA approval to market generic suboxone Film in the U.S.. As we've said previously, we're very confident in our IP and that's all progressing as you may have expected.

I now turn for our outlook for the full year. Our performance this year to date continues to run well ahead of our plan. Where we had anticipated a more challenging market environment beginning in the second quarter, but we are very pleased that those circumstances didn't materialize. And we don't see any imminent change in market conditions which has given us permission to raise our guidance for the full year.

This over delivery against our plan allows us to devote reward shareholders with a higher than expected profits and use a portion of the over delivery to reinvest in the long-term organic growth drivers of our business. Accordingly we're consciously stepping up our investments in R&D projects, and particularly in the prelaunch marketing and market preparation, for the expected launch of nasal naloxone and in preparation for the once a month Depot of Buprenorphine.

We look forward to giving more insight into these investments at our R&D Day for Investors on December the 9th. At the same time, we'll also give some additional insight into the impact of these investments on the financial outlook for 2016. So, we think that December the 9th R&D Day will be very, very good, informative opportunity.

So our guidance, I just want to emphasize that that assumes the current market conditions in the U.S. will continue throughout the remainder of 2015. Just as a reminder, we raised our full year guidance today for the year to net revenue of $990 million to $1,010 billion. So, somewhere in that range. And the range of net income from $215 million to $225 million net actual exchange rates.

But please note that this is a change in the faces of the guidance. Previously our guidance was at constant rates and you'll note that FX reduces our net revenues by 3% this year. So, that concludes the sort of formal update. And with that, I'd like to thank you for your interest and for attending our call today. And Cary and I will be very happy to take any Q&A.

Thank you. (Operator Instructions). We'll take the first question from Nick Nieland from Citi. Please go ahead.

Hi there. It's Nick Nieland from Citi speaking. So, it wasn't completely clear from the press release. I just wanted to clarify if the delay in the swallowable capsule, is that Europe and U.S. or just Europe? And presumably, because it's just a Phase 2 trial that delay shouldn't be more than about six months? That's the first question.

The second question is just on the litigation. Now that the trials have started, does that mean that any chance of settlement is reduced, or is there still a chance of settlement any time up to the conclusion of that litigation? Thank you.

OK. Thank you for your questions, Nick. Firstly the oral swallowable tablet is for the whole technology, not just for Europe. Secondly, the under litigation; I don't think you can read into the fact that the trial started today other than the trail started today.

I think we've said all the way along that we are open to settlement discussion. And you can conclude from the fact that the trial started today that we haven't got a settlement that works in this situation. It's perfectly reasonable to expect that technically it's possible a settlement can be reached because you can settle at any time.

So, I would say no you shouldn't assume that just because the trials have started that mechanistically that means that the settlement couldn't be reached because the dialogue is always potentially ongoing. We've also always said though that if we don't meet the right settlement then we'll go to court. So, here we are. We're very confident in the strength of the IP and that we -- this is just a sort of natural progression of the process.

Great. And just a quick follow-up. So the delay in the swallowable capsule, would I be right in saying that this shouldn't be more than around about six months or so?

Yes. We're not giving timing out today. I appreciate that you'd like that question answered. I think there will be more information at the Science Day on the 9th of December, not only on this technology but across the whole portfolio. So, if I could ask that you wait until then, then we should be able to share more information to that point.

All right, thank you.

Thanks, Nick.

We now take the next question from James Vane-Tempest from Jefferies.

Yes. Hi. Thanks for taking my question. The first one is, just wondering what's the room for price increases given the net price is quite low as to some other drugs? And then the second one is, just relates to the swallowable tablet.

Can you remind us why there was a need to do another Phase 2A trial in the first place? And the -- just related to the R&D Day, am I right that we're going to get financial targets of 2016, or are we just going to get some guidance on some of the spending related to some of the programs? Thank you.

Well, I - actually, you can recall some of the various presentations we've made this year, the number one challenge that we have is that we are in an extremely price sensitive environment.

And the business has performed very well versus the branded competitors. But we also are fortunate that the competitor tablet pricing hasn't yet progressed towards the 80% discount off the commodity price law. So I think it would be very difficult to be putting prices up in such a challenging -- such a challenging environment.

Do you want to talk about the financial question and what we'll be sharing for next year?

So, regarding the 2016 guidance we would like to give as much detail as possible. Not saying at this point whether we'll give a specific range on December 9th, but we'll provide a lot of detail in terms of what our plans and actions we're taking in 2016 are.

We may very well likely -- we need to obviously discuss this internally and review with our board, but we may provide the same level of guidance this year a little earlier by doing it December 9th. So, net income and net revenue.

Thank you. And the Phase 2A?

Yes. I don't think that there are any additional studies. There are no duplication of any studies that we've done previously; I'm not sure where your question is coming from.

Remember, it's a new chemical entity. So it's earlier stage in the development process so it doesn't go directly into a Phase 2A. It's just beginning Phase 1, actually.

OK. Thank you.

James there's a question you may need to direct more to Christian, who unfortunately is not with us today. On December the 9th.

OK. Thank you. My final question, if I can, is I just looked at the pricing of nasal naloxone if you're saying up to $50 with some rebates. I know at least in the market has been concerns more broadly about affordability for health department. Are you able to give us a sense what really the net price is going to be? I understand you commented on what the net expected list price could be. That would be extremely helpful. Thank you.

Yes. The list price we said will be below $50. And then we said then there will be rebates and things to bring the real price below $50. So, we've been very consistent; we don't share rebates and gross. I know some companies do, we have all our very concentrated sales-base, so it would be commercially too sensitive and not in shareholders' best interest for us to share that information.

So, we have priced that very deliberately and very consciously thinking about public health budgets and what prices need to be to make products affordable for those health budgets. We are sensitive to the pricing environment and we are sensitive to the fact that 25,000 people die a year from opioid overdose here in the U.S..

In fact, more people die from opioids overdose than die from car accidents. So, we're looking to price this very sensitively and appropriately. And that's what we believe that we've done because we want as many people as possible to access this technology who might need it, because then we can start bringing that 25,000 deaths a year down quite dramatically.

I would hope that we'd be progressing towards halving that if we can get the right strategies in place. Certainly the government is very concerned about this. And the White House released a statement a number of days ago highlighting their commitment and declaring an intent to help change the policy environment to help people access technologies for opiate dependence treatment as well as overdose rescue.

That's great., thank you very much.

(Operator Instructions). We'll now take our next question from Sarah Potter from Deutsche Bank.

Hi there. Thanks for taking my question. I've got three, please. So first on the monthly Buprenorphine in Europe, could you maybe provide a little bit more color on what optimization is needed? Will you still be able to use the U.S. trials to file or will additional studies be needed?

And then secondly, on the launch of nasal naloxone if you think about maybe initial sales next year, do you think that there will be like a significant bonus of sales in the first year perhaps as hospitals, and ambulances, carriers stock up, and then maybe a decline thereafter?

And then finally on the swallowable buprenorphine, could you maybe remind us what is needed to get this to be scheduled as a scheduled three drug? Thank you.

OK. So on the European Depot; I'm going to leave that for Christian on the 9th of December. The nasal naloxone we've indicated in our previous communications that that will be a $50 to $100 million peak sales in our estimation.

Clearly you would think that there would be quite a surge of interest the next year. The product has a -- we expect that it should have a two year shelf life if approved. And so, I think, however, that there are number of market segments that some will be easy to access and others will take longer to access. So I think that we will see a consistent level of sales for the foreseeable future.

The rescheduling of buprenorphine hemiadipate from schedule two to schedule three. Well, that's something that we have to do in conjunction with the DEA. And the concern there is around the potential sort of abuse liability, but that's something that we're working on.

Right, thank you.

The next question from Olivia Manser from Stifel. Please go ahead.

Hi. Sorry my question actually got answered. It was just on sort of guidance for naloxone. So that was answered. Thanks.

OK. Thanks.

(Operator Instructions). We'll now take our next question from Hasim Haderas from DST Investment Advisors. Please go ahead.

Hi. Good morning. Thanks for taking my question. My question's more on the lines of your overall capital (inaudible). I wanted to understand your rationale from maintaining such a high cash balance versus paying off your really highly priced debt.

So, right now we just think it's prudent to maintain the level of cash we have. We're also as we talk about our strategy looking at inorganic ways to grow the business. We think having some cash on hand allows us to be flexible and opportunistic as those things go along. But we are also looking into leveraging the business as well. So it all ultimately gives us flexibility to go and eat away at this debt.

(Operator Instructions). We'll now take a follow-up question from James Vane-Tempest from Jefferies.

Hi. Thanks for taking my follow-up question. I just have two if I can please. Just on the court case, again, [Par] I appreciate it started today, but you mentioned three dates, November 4 and November 17 and December 18. Just wondering if you can release a sort of outline of the timeline from here on what those dates mean, when we're likely to get some updates as we progress through the trial.

And then the second question is, at least terms I know you said you've been working towards the settlement, but how much did the -- I suppose, the delays and some of the formulations of the Depot in Europe in swallowable tablet perhaps influence why there isn't a settlement so far. Thank you.

So, in terms of how the court case will play out we've said that we start today. We have another, the third day of the hearing I think is on the 18th of December. The reason why it got moved was one of our expert witnesses had a bereavement, a very sudden bereavement. So, the court rescheduled the day so that they could actually make the trial.

So, that's why that date was moved. We don't know when the judge is going to rule on this. But it would be reasonable to think that they will rule before the loss of the expiry of the 30 days. So that will be -- 30 month day. So that will be by the middle of February. So sometime in the first half of the first quarter next year would be a very reasonable expectation. I can't guarantee that, I don't know that, but that's just what would be reasonable.

There's no reason to link the settlement to anything else in the pipeline; those things are going on quite independently. And so there's no additional insight I can offer you there.

OK. Thanks.

(Operator Instructions).

If there are no more questions?

There are no more further questions at this time.

OK. Well I'd just like to thank everyone for their interest and for joining us on the call. And hopefully we'll see you at the conference sometime soon.

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