Indivior PLC (INDV) 2015 Q4 法說會逐字稿

Okay. Good morning, everyone. Just to say how pleased I am to welcome you all to our full year results presentation for the 2015 results. Indivior, of course, as we all know, the world leader in the development of treatments and the management of addiction medicine, and we've had a very positive year. And it is a great tragedy, of course, that 150 million people around the world are dependent on substances that we are developing technologies. The good news is that our technologies are progressing well, and our business is making good progress in expanding access to treatment. And I look forward to sharing with you the impacts of that on our business as we go through our presentation.

I'll assume everybody's read the forward-looking statements. And here's our agenda for this morning. I'm just going to make a few opening remarks; then Cary, the CFO, will take you through the financials. I know everyone's keen to get the latest litigation update on the ANDA, generic film litigation that we've been working our way through for some time. And then I will just wrap up with some comments and thoughts about the future.

So let's just look at the highlights for the year. We're very pleased, of course, financially with our performance. We did get a tailwind from the fact that generic tablet pricing did not come down as we anticipated that it might. But the real performance upside here is due to the tremendous commitment and dedication of the employees within the company that go out to work every day to make sure that they do the best that they can for patients. We have seen that our two branded competitors have really not made any traction or inroads into the market at all and that doctors and patients continue to choose the Suboxone Film in preference to anything else in the U.S. and despite the downward pressure on price around the world, that we still make good headway with our buprenorphine-based products for patients in Europe, Australia and elsewhere.

Operationally, we're very proud of the progress we've made in separating from RB. We took onboard the ownership of the fine chemical plant last year off of RB. We've separated our computer systems. Our ERP is on track and within budget. And the separation of the businesses is going very well, indeed. So everything is very much on track, building a very solid foundation for the future growth and prosperity of our company.

Our Suboxone Film share ended the year very slightly ahead of where it started, driven by a number of things. But particularly, now we've just got back onto CVS formulary, so that was a very defining moment and very important signal in terms of the commitment of the payer community to the Suboxone Film.

Our pipeline has made tremendous progress across the year, notwithstanding our disappointment on the Nasal Naloxone rejection by the FDA in November, which we talked about at our R&D Science Day. Our other projects made very good progress through the pipeline. Our biggest two projects, of course, the once-a-month buprenorphine depot is progressing very well, patient recruitment going very well. And we're very much looking forward to the top line efficacy results when they read out at the end of August.

Our oral swallowable tablet, making good progress as is the risperidone once-a-month depot, and you saw those top line results last year.

So we still are benefiting from no material change in market conditions on tablet pricing. This shows the relative share of the different generic tablet products. There was a launch of a fifth generic. As yet, we haven't seen any impact on pricing. And we think that what is most likely to happen this year is that the pricing will remain relatively stable. And it's on that basis that we've issued our guidance, and that's a different assumption to last year. But we always give our guidance based on what we think is most likely to happen, and that's our judgment.

Film share remains very resilient. In some ways, this graph looks a little bit boring because it just keeps going in a straight line. I hope it still looks boring in a year's time and it just keeps going in a straight line. And it shows the resilience of the Suboxone Film despite the many competitive pressures that are on our franchise.

I do just want to mention to you that we continue to get our market data from the same supplier. They're used to be called Wolters Kluwer. They are now called -- who are they called now? Source Analytics -- or Source Healthcare. But they have changed the methodology and the quality of their data capture. As you're, I'm sure aware, in the U.S. and other markets, they can capture a certain percentage of data and they do an algorithm to calculate the gap. They now calculate -- capture a much higher percentage of data than they used to before, so the data is more accurate. The impact is that there's a onetime change in our market share and the size of the market. So we just wanted to be transparent about that.

The impact is it gives us a slightly smaller market and a slightly greater share for the film versus generics. Sharing a slightly smaller market isn't a problem, of course, because it means the potential market is a tiny bit bigger, and so that's what we are focusing on going after. This chart just shows you that things are stable in Europe despite the very many competitive pressures.

R&D highlights. We've talked about -- again, just to be transparent. We know that the Nasal Naloxone didn't get approved. We did have a delay last year on the European buprenorphine depot, and we were asked to do an extra study by the FDA on the oral swallowable tablet. Again, this isn't new news. We've presented this before, but just to make sure that we're transparent and everyone has all the information.

The interesting thing, of course, is the progress that we made on all the priority projects. We've expanded our label for the Suboxone Film. Our Nasal Naloxone has been requested by the French authorities and granted ATU status. That stands for authorization for temporary use, and that's often granted in France for technologies that are deemed to be very, very important despite the fact that they haven't yet got regulatory approval. So we made progress across the rest of our pipeline, and we're able to publish a lot of new science in peer-reviewed publications.

So that's my overview. I'm going to welcome Cary up now to take you through the financials.

Thanks, Shaun. Good afternoon, everyone. Let's go through the financial results.

Let's start with our P&L, which you're all familiar with. This is our P&L for 2014 versus 2015 on both a reported and adjusted basis. Adjusted is where we pull out the exceptional costs, which were $31 million for the year. I'll get into a lot more detail on the line items here, but just to summarize, our net income on a reported basis was $228 million. Our net income on an adjusted basis was $246 million, and that's versus our high-end guidance of the year of $225 million. So we overperformed by $21 million, and I'll cover what those major drivers of that overperformance were shortly.

Just taking a look at our quarterly trend. Our fourth quarter net income was $37 million. The biggest increase, if you look at the trend from Q3 to Q4, was the exceptional costs that we booked in the fourth quarter of $24 million. $16 million of that were write-offs associated with the impairment we took on our Nasal Naloxone product when we did not get approval by FDA.

One thing you can make sure of is if you annualize the fourth quarter net income, you'll see that our guidance in 2016 is well above that. So we don't want anyone to try to annualize what you see in fourth quarter. Obviously, we're expecting to do much better than that in 2016 based on the guidance we've given.

Now taking a look at our net revenues. On a U.S. basis, our revenue in 2015 was down 6% year-over-year. The key drivers here were market growth continued to be strong in the low double digits, essentially on what we expected it to be. We did suffer some market share loss on the average, 62% in 2014 to 59% in 2015, so modest share loss. As Shaun said, we're very pleased with our performance given the competition in the marketplace in 2015.

We also saw the impact of tactical rebating that we made primarily in the second half of 2014. But what you see in 2015 is the full year impact of those rebates that had an impact on our net revenue in the U.S. Rest of world revenue on a reported basis or an actual FX basis was down 20%, but on a constant-dollar basis, down 8% year-over-year. And the trend in Europe continues from what we've seen in 2014, we also saw in 2015, which is continued pricing pressures as a result of government austerity measures, offset by some volume increases that we got. We're also happy with our business in Australia, which had some positive net revenue growth so that seems to be trending in the right direction. So overall, net revenue came in at $1.14 billion, slightly above our high-end guidance, down 9% year-over-year and down 6% year-over-year on a constant-dollar basis.

Taking a look at our operating expenses. Our SD&A on a -- came in at $408 million versus 2014 or up 28%. Biggest drivers in that increase year-over-year was the fact that in 2015, as we guided, we put in really the infrastructure and cost structure to be a stand-alone public company. We guided that that would be $40 million to $50 million back at the beginning of the year. It came in near the high end of that number. The other big driver in the year-over-year increase was legal expense associated with the increased ANDA litigation activity and some of the other legal matters which Javier will cover shortly. Aside from that, SG&A was essentially on trend with what we expected.

R&D increased 15% year-over-year, and that's really driven by the number of Phase III trials we have with our two key products as well as some additional trials that were in our pipeline. So essentially, right in line with our expectations for the year.

Exceptional items, as I mentioned, came in at $31 million over $24 million the year before. Half of that -- over half of that, $16 million, as I mentioned, is the impairment and write-offs associated with Nasal Naloxone. The other $15 million were expenses associated with the demerger, which were in our plans, to begin with, at the beginning of the year.

Just taking a look at our margins. For the year, gross margin was essentially flat year-over-year at 90% versus 91% in 2014. And our operating margin for 2015 was at 37% on an adjusted basis, down 13 percentage points, mainly driven by the fact that our revenue was lower year-over-year so we lose the leverage benefit of that; and then the operating expenses increase I just discussed, over half of that driven by the stand-alone costs of being a public company now. And the rest of the decrease in operating margins was really the increased R&D investment. The exceptional costs of $31 million lowered the operating margin by about 300 basis points as well.

Just taking a look at our tax rate. We inherited a tax rate of 28% when we spun out of RB. Our underlying rate in 2015 came in at 22%. The key drivers of that improvement were the way we structured our debt in the U.S., a change in U.S. tax treatment with Congress passing the R&D tax credit right at the end of December. We got some benefits in the U.K. patent box as well, and there are some other one-off items in our tax rate in 2015 which we don't expect to repeat in 2016, which is why we're guiding to a tax rate of 25% in 2016, which I'll get to shortly.

So our actual rate on a reported basis is 20% on the P&L because there were some exceptional items that are specifically tax-related in our tax results for fourth quarter. When you exclude that, the underlying rate would be 22%.

Taking a look at our earnings per share. This is just to walk you through the calculation. Our reported net income was $228 million. We have 719 million shares outstanding, and that gives you $0.32 per share on an EPS basis. On an adjusted basis, it's $0.34 a share when you exclude the $31 million of exceptionals. And then on a fully diluted basis, it's still $0.34 on an adjusted basis.

I mentioned before that our top-end net income guidance that we gave you at third quarter was $225 million. We came in at $246 million. So you might want to know what drove the overperformance and whether those things carry over into your 2016 assumptions. So the first increase was net revenue came in slightly higher, about 1% overall, than our projections. That gave us $4 million on the bottom line. The biggest change was in the tax rate, those items I just mentioned, which drove $14 million of the overperformance, most of which doesn't repeat in 2016.

And then we also had some benefits as a result of -- if you remember, we did a debt -- early debt paydown in the fourth quarter, in December, which gave us a slight gain by doing that below par, and then we saved some interest. And then FX moved a little bit in our favor versus where it was when we last issued guidance. So that was $3 million. So all total, that's the $21 million variance versus the top end of our guidance.

Our dividend policy, just to update everyone on that. For 2015, as you recall, in our prospectus, the company committed to pay a dividend equal to 40% of our net income for 2015. We did an interim dividend already of $23 million or $0.032 a share. We are proposing a second interim dividend of $0.095 a share or $68 million, which will equal a total dividend of $0.127 a share, which is 40% of our reported net income for 2015.

We also, a year ago, discussed the fact that our board will revisit our dividend policy for future dividends beyond 2015, and the board has considered a number of factors in determining what that policy is given the company's current financial position, including our debt level, the company's strategy and prospects and desire to diversify the business as well as the risk profile of the company and our risk appetite. Factoring all that in, the board has recommended and decided that we will not be paying any dividends for the foreseeable future beyond what we just announced for 2015.

Taking a look at our cash flow. We had very strong cash flow performance in 2015, if you consider the fact that the first line, our operating profit, as I just discussed, year-over-year was down substantially. Our cash generated from operations was slightly down, only down $5 million from $523 million to $518 million. And the reason we're able to do that with lower operating profits was really, if you looked at the strong working capital management at $127 million versus a negative $52 million the year before, that's why we still -- we're able to have strong cash flow performance.

We also had taxes and interest paid of $198 million. The reason that's so much higher than 2014 is when -- in 2014, most of the year, we were -- right into the last week of the year, in fact, we were part of RB. They paid the taxes so it's not a like-for-like comparison. But the way the carve-out financials work, this is how it is reported . But on a go-forward basis, we pay the full year taxes ourselves. And we also have additional interest because we didn't have debt in 2014 until the very end of the year. So that was about $44 million, and you'll see the details in our press release.

We also had CapEx of $27 million in the year, which gives us free cash flow overall of $289 million. After you exclude the dividend of $23 million that was already paid, that brings down net increase in cash of $145 million. Our total cash at the end of the year of $467 million, above the $331 million that we started the year, so solid cash flow generation for us.

Just taking a look at our cash conversion. We had very strong cash conversion in 2015 as well. If you go down to the net cash from operating activities of $320 million versus our operating profit, that's 150% conversion and then just a net cash generation of 92%, which is above the 78% a year ago. And this is -- it's difficult to do much better than 100% when your revenues are declining, so we're pretty pleased with the 92% we achieved in 2015 given the decline in our revenue.

Taking a look at our balance sheet. There's not a lot additional to add here. You see the increase in our assets as a result of the cash. Our intangible assets declined, primarily by the write-off of the Nasal Naloxone intangible that was on our balance sheet. And I'll get into our net debt in a second.

So taking a look at our net debt. Our net debt at the end of 2015 was $174 million, down significantly from $428 million the year before. Key drivers there, again, are the cash flow generation I just mentioned, giving us cash of $467 million. We also paid down a total of $121 million in debt in 2015, consistent with our strategies to lower our debt over time and reduce the cost of that 8% rate that we are overall paying on the debt. So we did that in combination with the normal amortization and then the $75 million early debt retirement that we did right in December.

And last, I just want to reaffirm our guidance for 2016 and go, again, over what the key assumptions are in that guidance. For net revenue, we're guiding to $945 million to $975 million; operating margins, above 30%; and a net income range of $155 million to $180 million. This all excludes any exceptional costs in 2016. And the key assumptions that are factored into our guidance, and Shaun touched on this a little bit at the beginning, is we're assuming no deterioration in generic pricing, a limited impact of branded competition. We do see some impact in our numbers, but limited impact, no generic film entry in 2016, and then a modest loss of share due to tactical rebating, again, on selected key accounts.

We are also including in our guidance a reinvestment of up to $35 million of our gross profit in two primary areas. About two-thirds of that is increased R&D as we continue to advance our clinical pipeline. And then SG&A is the other third, where we're doing some pre-commercialization activities to prepare for the hopeful approval of our injectable buprenorphine product and investing in having a successful launch there. This is all at constant exchange rates to 2015, and you should use an estimated tax rate of 25%.

With that, I'll turn it over to Javier Rodriguez, our General Counsel, to give you a legal update.

Thank you, Cary. Good afternoon, everyone. We've previously disclosed that we have six generic manufacturers in the U.S. who have filed abbreviated new drug applications with the FDA seeking approval of generic formulations of Suboxone Film.

We've asserted five orange -- three Orange Book patents and two process patents for a total of five patents against these generic filers from our Suboxone Film portfolio, triggering a 30-month stay of the ANDA approvals under the Hatch-Waxman statute. In the first of these trials against Actavis and Par, which asserted three Orange Book-listed patents, went to trial beginning on November 3 and 4 and concluded December 17 and 18. We expect a decision in early Q2, which is after the expiry of Actavis' 30-month stay. However, we don't believe that there is a potential for a generic launch prior to the court's decision.

The next trial against Teva, Actavis and Par is scheduled for November of 2016, and that's asserting two of our process patents. Shortly thereafter, we go to trial against Teva on the three Orange Book-listed patents. Following that trial, we go to trial against Alvogen, where we have asserted all five of the patents, in April of 2017. And finally, hopefully, we conclude that litigation run with Mylan and Sandoz in September of 2017. Now in all of these other litigations, we fully expect and anticipate that the court will issue its ruling before the expiry of the applicable 30-month stays.

In terms of a recent update, on February 8, we received a new Paragraph IV notification from Teva Pharmaceuticals indicating that they had filed a 505(b)(2) NDA with the FDA seeking approval of a 16-milligram Suboxone Film generic. As with these other Paragraph IV notifications, we intend to file patent infringement litigation asserting the five patents and thereby, triggering the 30-month stay of approval of that 505(b)(2) application.

Turning now to the FTC investigation. We now anticipate that we will receive the court-appointed special master's report and recommendation on his legal assessment of the privilege that we've asserted over a very small percentage of the documents that the FTC has subpoenaed from the company in March of 2016. Once that report and recommendation is issued, both the company and the FTC will have an opportunity to file objections. Those objections in the report then go to the judge, who will issue an opinion, accepting either all or part of the special master's recommendations. And then that final ruling by the judge is then appealable to the U.S. Court of Appeals.

In August of 2015, we were notified that a contingent of state attorney generals were joining the State of New York in a follow-on investigation of the FTC, and that is continuing and working in parallel with the FTC investigation.

Turning now to the class-action litigation. We're in the midst of discovery. And in December, we were served with a complaint from Amneal Pharmaceuticals. Amneal, if you recall, is one of the generic tablet manufacturers of Suboxone Film in the U.S. They filed a complaint essentially alleging the same allegations of antitrust violations that the class-action plaintiffs have filed, and they've also included the allegation of a violation of the Lanham Act. And we expect that, that complaint will be consolidated with the antitrust class-action litigation.

Turning now to the Department of Justice investigation, which was initiated in December of 2013. We continue to cooperate and respond to the DOJ, the Department of Justice, and relevant agencies in providing documentation and other information. I know it's been a little over two years, but we still don't have a lot of transparency into the scope and extent of the allegations that the DOJ is pressing. And so it's very difficult at this time for us to try to quantify or predict what the potential impact of that investigation may be on the company, but we'll keep you posted. And again, we continue to cooperate with the DOJ in the hopes that we can resolve this in the near future.

And finally turning to the BDSI IPR decision by the U.S. Patent and Trademarks Office, which held that claims 15 through 19 of the 832 patent were invalid. We indicated that we would file an appeal. We followed through on that and filed our opening brief on the appeal in January. Following briefing by both sides, the Court of Appeals will then schedule oral arguments, and we anticipate that a decision on this appeal will be forthcoming in about a year or so.

So with that, I want to thank you for your time and attention and to turn it back over to Shaun Thaxter.

Thank you, Javier. So I just wanted to share some information about the pipeline because it's all very well that we're running our business efficiently today. It's good news that operationally, we're very strong. It's fairly encouraging that the culture of the company is very positive and driving growth.

But why should we be excited? And of course, we should really be excited about the huge unmet opportunity there is out there to help 150 million patients around the world. We've said that we have transformational technologies within our pipeline, and those pipeline technologies are progressing very well.

We're very pleased with the once-a-month buprenorphine depot progress. We gave a lot of insight into the unmet patient needs and the science and the clinical progress around this technology at our R&D Investor Day at the tail end of last year. So I'm sure you all saw that, but if you didn't, you can still reference that on our website.

The buprenorphine hemiadipate, the oral swallowable tablet in the low-abuse formulation, is progressing well. We had our last patient out of the study in December and look forward to the final clinical study reports at the beginning of Q2.

We know about the Nasal Naloxone from last year, but we're still progressing the French ATU. We're supplying product there and providing some medical data capture support. Just to give you visibility on what an ATU involves. We're very excited, of course, and making good progress on the Arbaclofen Placarbil for the treatment of alcohol use disorder.

You saw the top line efficacy data from our once-a-month risperidone product. This is still progressing well through Phase III. We're in diligence with potential partners for this product. Of course, we have our own models of what this -- the value of this technology's worth in our hands, and we'll compare the bids that we get versus that model and make a decision to -- what to do with it at the time.

A lot of new science was published last year. For those of you who are interested in getting a more technical understanding of the science behind our technologies, there are a number of peer review articles that you can peruse at your leisure.

So there's no change to the dates of the earliest possible approvals that we issued at the R&D Science Day.

So what about the future? Well, I think, as we've heard a number of times, there are plenty of reasons to feel positive and upbeat. Yes, of course, we have the ANDA litigation to work our way through. That isn't new news, of course. Ever since we published the prospectus, we've been very clear that on the advice of our attorneys, we are confident in the success of our IP through this litigation progress -- process. Of course, parties try to settle. Sometimes they don't reach a settlement, and in that scenario, the judge will rule. You know the timing of the expected judge rulings, so I think that, that is all very clear.

So what happens either side of that? Well, either side of that, there's still a huge unmet need. We still have ability as a company to harvest that opportunity, and we will make great progress towards that. As soon as we can resolve that, we get the certainty of what the timing, shape and magnitude of that might look like, but that opportunity still exists in any event.

Our priorities remain very similar to what they were last year: continue to build on the strength of our existing franchise, continue to reinforce the resilience of our Suboxone Film share and our buprenorphine products around the world; continue to optimize investment in the pipeline. This is why we've said we're going to step up our investment in our -- invest in our own expertise. Our first priority for cash is to make sure that we're driving the organic growth of the existing business and making sure we bring those pipeline products to market for the future.

We're looking at continuing to pay down the debt to build ourselves into a stronger financial position that then gives us the ability to do more business development, to derisk our company away from the single-source revenue streams that we have today and make ourselves a much stronger platform for value creation tomorrow. And fourthly, we continue to expand getting access to treatment for patients around the world. We continue to make progress on our clinical study program in China and look forward to that.

We know around the world that the environment is changing. Politically, the problem and the curse of opioid dependence around the world is getting more attention. Awareness has been building. We've always said it's a public health crisis, but it's now inching its way to the top of the political agenda. You won't have to look very far on search engine -- searches on the Internet to find a huge number of articles about this issue and the commitment and the public statements made by senior politicians around the world to help gain access to patients and treatment. So there's a big environmental tailwind starting to blow.

So last year, we gave you a very clear view of what our agenda looked like for the year. Here is our agenda for this year. These are the key dates for the first half. Obviously, you know when the conferences are. Just to let you know that we will be there. We'll be pleased to meet you and give you updates. I'm not going to talk through all the detail of this. You can see for yourselves. But I think the big date everyone has their eye on is the resolution of the ANDA litigation, and currently, that looks like by the end -- by the beginning of quarter two.

Here's our agenda for the second half of the year. Again, like last year, we will hold an R&D Science Day, and we expect that we'll send our invitations out in September. And we will hold that in New York in December. So I got a little ahead of myself there, so that's the information on the R&D Day.

But in summary, I've never felt more confident about the future of the business. I think our track record as an independent publicly listed company is strengthening with each quarter that passes, and the progress of our pipeline is very clear. We will work our way through the ANDA litigation, and I think that you can see that we have very strong expectations for the year and confidence in our ability to deliver.

So thank you very much for your attention. And I will do my best to answer any questions you may have, along with Cary and Javier.

It's James Vane-Tempest from Jefferies. Three questions, if I can, please. Firstly, just on Europe, you mentioned volume increases. Given a 20% decline in rest of world in 2015, which markets in particular were impacted from much tougher pricing? And I was just wondering if you can give a sense of the outlook for the region and to the timing of the film in Europe. That's my first question.

Okay. We haven't yet got a final timing for the film in Europe. But we have had downward pressure on pricing across Europe, most notably in France.

The second question is, in the U.S., what's the real tangible opportunity for you, areas like the Midwest and also greater focus by the government to increase awareness for opioid addiction given a high use of generics?

Yes. I think that -- obviously, we hope that one of the big impacts of the government's policy changes will be to create a more supportive environment that enables more patients to access treatment. That may be delivered in a number of ways, and Congress is considering different options at the moment. That may mean raising the 100-patient cap limit. It may mean that nurse practitioners can prescribe if -- and there are a number of different choices. But I think the good intent behind all these ideas is to make sure that patients who need treatment can access treatment more easily wherever they may be. That, of course, provides an opportunity for ourselves wherever the geographic expansion happens to be anywhere in the States.

My final question is just on strategy and your debt burden. And given the lower net debt you had and the change in dividend policy, what are the priority areas for capital deployment? I understand you're waiting for some strategic updates to make that decision. But can you give us a sense of the areas you're looking to deploy the capital? And I'll just leave it there.

Well, our first priority, as we've already demonstrated, is to invest in our own expertise and drive the organic growth of today's business. We'll continue to support the educational efforts to educate physicians and expand access to treatment in the U.S. We'll continue to invest in geographic expansion. We'll continue to make sure that not only do we invest in optimizing the speed and quality of the development of our technologies, but we start to prepare the markets, start to do the medical education and make sure that when those technologies are approved by the FDA, that we are able to optimize those.

And of course, we look at business development and M&A opportunities on a going basis. You can see already that we are very disciplined about our approach to the FDA because, like many people, we continue to look for opportunities. We haven't yet found anything that ticks all the boxes, but we're continuing to work on this. And obviously, paying down the debt and having a different financial structure would give us more flexibility.

Hi, thank you very much for the questions. Patrick Chen from Morgan Stanley. I have two, if I can. First, on M&A, as you're talking, can you talk us through the box-ticking exercise that you go through when you look at M&A?

Well, obviously, we're looking to acquire something, either products or businesses, that really leverage the expertise and the capability we have, where can we put those two businesses together and get some synergies and add new value to those businesses rather than just if they existed separately. Clearly, the closer the fit with addiction, the more compelling that argument is. But our ability is to work with physicians who treat patients with behavioral disorders, patients with diseases that are impulse control-driven.

We have an ability to generate awareness and education in new markets because addiction, of course, was a new market when we started. So adjacencies to addiction, other sort of refractory niche areas, CNS, neurology, we've said for a very long time, these areas present very sensible areas for us to look.

Thanks. And the second one is on the pricing. You said that the fifth generic that entered the market, the tablet had no impact on generic tablet pricing. But can you expand on does this also include for Suboxone Film pricing, if there is an impact and if a 10% decline in pricing is still a valid assumption?

I wouldn't say there's no effect on generic pricing. We're saying there's no material effect that would impact our guidance. So we certainly haven't seen a major disruption in the pricing as a result of the fifth generic yet. So who knows what may happen in the future? But our estimate is that it's more likely than less likely to remain relatively stable. The assumption around generic pricing applies only to the Suboxone Tablet, and I think we've been very clear that our guidance assumes no launch of a Suboxone Film generic.

It's Sarah Potter from Deutsche. I have a few questions, please. Firstly, for Javier, what gives you the confidence there will not be an at-risk launch, either the formal court ruling or in the whole of 2016?

Certain details of the post-trial briefing schedule lead us to believe that a launch -- potential launch of a generic before a court decision is unlikely.

But if there was a negative court decision, do you believe there's a risk of an at-risk launch? Or do you believe all parties will wait for an appeal decision?

Hard for me to predict what another party would do. So the short answer is I suppose there's always a risk.

Okay. And then --

One thing that is clear, though, that we would appeal. So that this -- this isn't the end of a journey. It's just the next chapter. We turn the page and we carry on with our plans to deal with that situation. So clearly, there's a risk. How real is the risk and how probable it is, is, clearly, we can't say.

And I think there are a number of factors -- as Javier said, we can't predict what another party would do. We do know there are a number of factors they have to consider: the fact that we appeal. If they lost on appeal, they can suffer significant damages. The fact that there's another set of litigation scheduled for November of this year, they would have to consider that as well. So they're -- we can't say what they'll do, but there are a number of factors that they will be considering.

And I guess the most crucial factor in all of this is that the litigation is one hurdle. Another hurdle is they have to get FDA approval. And as of today, there have been no tentative approvals.

And then just a second litigation question. Could you just run through the logistics? If the [corporals] of your patents are valid, so kind of regard as an infringement, but then the IPR turns out that the claims 17 to 19 are invalid, does it go back to court? Or does it go to a higher court? Or how will that work?

So both of these hearings are managed or arbitrated by different bodies, right? So the IPR decision is going up to appeal to the Patent Trademark Appeal Board (sic - Patent Trial and Appeal Board), and the decision in this court ruling is by the U.S. District Court. So in the event of an inconsistent ruling, that would go to the U.S. Court of Appeals, who would weigh in and try to harmonize and make sense of the inconsistent ruling.

And then, probably for Cary, I was just interested in (technical difficulty) are you thinking. At what point could generic launch? Or how early that you would be comfortable in your cash position? If the generic were to (technical difficulty) this year, are you comfortable in your cash position? Or would there be risk to that and your covenants?

I'd be comfortable if it was 2029 or something like that. But obviously, when -- if a launch happens in the near term, we would be able to take significant actions to be able to respond to that. It would have impact on our revenues, of course, if there was a generic film competitor, which is why we're vigorously defending our IP position.

So my answer, there's no absolute answer on what the right level of cash is. We would take appropriate actions in our cost structure to make sure that we do have adequate levels of cash and can maintain our debt covenants throughout that kind of situation.

And just a final question. Could you just clarify the timing of the monthly buprenorphine data. I think you mentioned August in your opening comments, but then I think it's fourth quarter in the --

It's touch and go whether it's the end of the third quarter or the year (inaudible - microphone inaccessible).

Okay, thanks very much.

Max Herrmann from Stifel. Just a couple of questions. I'll start one at a time, if I may. Firstly, just in terms of the current market dynamics that you're seeing. It looked like last year, there was obviously some price discounting that was feeding through. I think that moderated as we went through the year. I think you're now talking in your statement about some additional rebating and couponing that's being put in place. Can you give us a feel for what you think the overall pricing effect will be during 2016? Is that something you have?

Yes. I mean, as you know, we don't give the gross to net. We know how helpful it would be to you if you -- if we did, but it would be equally helpful, of course, to our competitors and, therefore, ultimately, unhelpful to all of us. So we're not able to give any more clarity on that. Some of the adjustments have been made because some of the branded generic competitors went down to generic-level pricing, particularly in some of the most price-sensitive payers. So what we've done is we've given ourselves enough room to be able to sensibly make tactical adjustments as we go through the year, as we anticipate will be required. But what we're not expecting is like a wholesale rebasing of the rebating platform. There's always ongoing discussion with accounts. You win an account here, you lose an account there. It doesn't really change the overall picture very dramatically, but obviously, we need flexibility to make sensible decisions to optimize our position through the year.

Right. And I think just in terms of -- just trying to understand why it might be -- it's not really a question you may be able to answer, but I'll ask it anyway, with regards to why generics are clearly having difficulty in getting their products through the FDA. I mean you have some experience with this from, obviously, the Suboxone tablets. And maybe you can allude to what was the issues back in -- that took generics four years post exclusivity expiry to get product onto the market.

You're right, I can't explain it. I can tell you that when we, ourselves, were developing the Suboxone technologies, where you have buprenorphine and naloxone together, it is a very problematic formulation to get right, particularly with the tablets, because there are lots of different chemistries you are trying to work on. You want a hard tablet that will survive being traveling around the world in different temperatures and humidities. Yet, when you put it under the tongue, you want it to dissolve very quickly. You have to have something that tastes pleasant so that people will take it every day. But naloxone is a very, very bitter tasting active ingredient.

Naloxone is a very, very sensitive ingredient to oxidation, so the more chemicals you put in the tablet to solve those other two problems, the more you compromise your ability to stabilize naloxone. So we do know from our own experience that this is not simple straightforward chemistry where you take compound a and some dust and make a tablet and ship it out the door. It is very complicated.

So whether that explains why it took the tablets a long time to come to the market, I don't know. Whether that explains where the competitive films are in the process, I don't know. But I can tell you that in our early development days, those were challenges that we experienced as a company.

All right. And final question just on the once monthly buprenorphine injection and where you see time lines and competition, particularly highlighting Camurus and Braeburn's once-weekly, once-monthly approach. Just interested in, one, I think, it looks aggressive now, the 2017 launch, given the time lines for the results as well as filing and the safety data. And then secondly, just on the -- to compare your product versus Camurus and Braeburn's product.

Sure. So in terms of the timing, I think we've always been clear that the sort of late 2017 approval assumes that we will get priority review. In our discussions with the FDA, they've indicated that this is likely, but they can't commit to it until we actually get to the point where we're making the final submission. So that is a very clear assumption. We know that because of the public health crisis, we know because of diversion and misuse, there is a strong desire to see depot implantable technologies come to market. So that sort of underpins our confidence in that. But of course, I'm not in a position to guarantee it, but that is our assumption.

We know that our product has the potential to transform the way this disease space is managed. Because what the FDA have asked for is they want to see technologies that give very high level of receptor occupancy, and we've demonstrated and published the data that supports that in our technology. So we believe that, that is going to be very helpful for doctors in dosing patients in a way that improves retention and treatment. We don't know that, these are things that we hope will prove to be the case based off projecting what the science we do know about should mean in clinical practice. I don't have the insight and understanding for the science of Camurus' product, and really, for -- it's for them to speak about their time lines and what they think of that.

Clearly, they've said that they're in development at the moment. And we -- if they go all the way to approval, then they may well be a future potential competitor. We're not particularly concerned about that. We're very much focused on our own technology and optimizing the success. We know the pharmacoeconomic modeling and the demonstration of the value to payers and society is going to be an important component to all of this. And we're building all of that into our study program.

Jo Walton from Credit Suisse. A couple of questions. Firstly, a simple one, FX sensitivity. You told us that there was a 3% negative at the top line and a 2% negative at the bottom line last year. Your guidance is at constant currency. Can you give us some estimate of what currency would be if today's rates were to continue or some help in terms of sensitivity? And the reason that I'm asking this is it's clear that you must make some money overseas, outside of the U.S., to have the sensitivity at the bottom line as well as the top line. And I think most of us assume that the vast majority of your profits are in the U.S. And the European business is still very much in the development stage, so I'm surprised that there's that leverage.

And my second question really follows on from that. Are you really banging your head against a brick wall in terms of governments say all sorts of nice things. And then they say, "Yes, okay, we will accept the treatment as long as it is a cheap and generic treatment." We know that people like Lundbeck are trying to sell their addiction product in Europe because apart from in France, they just don't think that they're ever going to be able to make money from it. So I'm interested in both the foreign exchange element but also the real ability for you to grow this, to make it a genuinely global business rather than an essentially U.S. business with a bit of overseas.

Okay. So I'll take the FX side, and you take the other side. So I think in regards to the leverage ability we have with our FX, it's important to note that unlike a lot of U.S.-based companies that have sales outside of the U.S., we are a U.K.-domiciled company, and we have $200 million of revenue outside the U.S. But we also have quite a bit of infrastructure in the U.K., for instance. Our manufacturing, supply group is here. We have a number of other organizations that are here. So we have a cost structure. So when it goes against us on the revenue side, it actually helps us on the cost side, which is why you see that leverage. Now I can't predict how much rates will swing, but generally, our guidance is in line with where -- even where rates ended toward the end of 2015.

So on the question of ability to develop markets elsewhere, I think as a sweeping generalization, yes, everybody wants something new. They want it better, they want it now, and they want it free, so recognize that. And we know that where drug pricing in Europe is on a constant sort of salami slicing with government austerity measures.

What we also know around the world, though, is that addiction is a huge problem, it affects 150 million people, and that it is hugely costly to society. It's one of the most efficient areas you can invest in to get an economic return. If you read the World Health Organization, all sorts of research has been published, it's generally true, that if you invest $1, EUR1, GBP1 in treating addiction, that society will get $12 back on the downstream benefits of that, whether it's patients not turning up at emergency rooms, whether it means patients are now taking pharmaceutical medicine instead of injecting. If they are injecting, they'll be needle sharing. If they're needle sharing, they will be transmitting hepatitis, HIV and all these very, very costly long-term blood-borne illnesses and diseases.

So I think it's also true around the world that where you can demonstrate a true pharmacoeconomic value and a point of differentiation, that there is price premiums and extra value to be had. Where I think you get hammered is when you've got four or five products all do the same thing, there's no differentiation, and you're not able to demonstrate the value. That's why it's so important to build the pharmacoeconomic modeling in. It's no longer good enough just to say, "Hey, we got approved with some efficacy and safety data." You need to be able to define what are the clinical -- what is the clinical value of that efficacy, what is the economic value of that clinical value to society and, therefore, what is the return on the investment.

So health care payers are making an investment when they pay for a medical consultation and the medicine and the treatment because what they're doing is they are averting other downstream costs that they would incur if they did not treat the patient.

Now in addiction, the core downstream costs can come from many different sources. If you're paying for a medication for opioid dependence, then if you choose not to pay for that medication, you're going to be feeding that patient's habit because they're going to get multiple prescriptions of pain meds from other doctors and doctor shopping and all the downstream consequences and impact on society.

So what's different about addiction is that it is very clear that you can remove these costs. You can really minimize the negative costs that patients impact society by, and you can demonstrate that. And that's why I'm very confident that this is a long-term opportunity for our business.

Jimmy Muchechetere from Investec Wealth. A couple of questions, please. The first one is on the working capital. Can you just elucidate on what actually caused the significant improvement in working capital and what you can expect going forward.

Yes. Primarily, it's just timing of -- when we spun out last year from RB, just the timing of when some of our accounts were cut off and moved over, which had very low trade payables because of that. Going into 2015, we're back on a more normalized basis. So we typically will have negative working capital just in terms of the timing of when our rebates and discounts are paid, so it leaves higher trade payables versus our receivables. So that primarily is the biggest difference year-over-year, just managing that, having more payables, increase in payables year-over-year. You wouldn't expect to see another jump like that. When you look at 2015 -- or 2016, it will be a more normal progression in line with our revenue year-over-year change.

Thank you. The second question is on the ANDA litigation. You said you are going to appeal if there's a negative outcome. Is there a possibility of settling?

Yes. Settlement is always a possibility. We have engaged in settlement negotiations and hope to continue. But there's no certainty that we'll reach a resolution.

And then a final question, given the change in dividend policy, can we expect faster debt repayments or restructuring?

Well, as Shaun said, lowering our debt is one of our priorities for use of cash. It's dependent on also a number of factors in terms of whether there's business development opportunities to use that cash for or reinvesting in the business. So we will definitely look to lower our overall debt costs if we can opportunistically do that with the cash.

Nick Keher from RBC. Just two questions on your guidance for the year. In terms of your outlook for market growth as a whole, what are you factoring in to get to your guidance measure ?

We're expecting high single-digit, low double-digit market growth.

Okay. And secondly, in terms of brand and generic tablet launches for the year, are you factoring in none for 2016 at all?

Well, the main impact really is what will the pricing do, so it doesn't matter whether there's five new generic tablets or no more generic tablets. The entry of the tablet is really an indicator that it might impact pricing. So we're less concerned about the number of entrants. We're more focused on what impact will it have on the net price of the tablet sector. And we've been very clear that we think that, that will -- well, the basis for our guidance is that it will remain relatively stable.

And in terms of branded product launches as well then, you're not expecting any for this year?

We are anticipating the Titan rod, the implantable rod from Braeburn may well be launched. They hit on their PDUFA date. I think it's sometime this month.

Okay. Thank you.

We have time for one more question. Are we all done? Well, thank you very much, indeed, for your time and attention. Thank you.

Thank you.

Thank you.