Indivior PLC (INDV) 2017 Q3 法說會逐字稿

Good day, and welcome to the Third Quarter Results 2017 Conference Call. Today's conference is being recorded.

At this time I would like to turn the conference over to Shaun Thaxter, CEO of Indivior. Please go ahead.

Good morning to everybody if you're in the U.S., and good afternoon in the U.K. Well, we're delighted that you're able to join us today to review our third quarter and year-to-date results, particularly after our 18-to-1 vote recommending the approval of RBP-6000 in this week's advisory committee. I'm Shaun Thaxter, CEO, and I'm joined today by Mark Crossley, the CFO; Javier Rodriguez, our Chief Legal Officer; and Christian Heidbreder, our Chief Scientific Officer. I will make some opening remarks, and then we will open it up to your questions.

I'm pleased to report that in the third quarter we continued to make good progress against our key strategic priorities. First, we executed well in our business and maintained a clear position of leadership in our core market. Second, we made very strong progress with our pipeline and now await FDA regulatory decisions on both of our key late-stage assets. Thirdly, we continue to fortify our financial position to secure Indivior's long-term future.

I'll touch on each of these, but let me first quickly review our financial performance. Our results published today were in line with our expectations, and we are reconfirming our full-year guidance of net revenue between $1.90 billion and $1.120 billion, and net income between $265 million to $285 million. You will remember that we significantly raised guidance with our H1 results back in July.

As you've seen in our release, each of our key financial metrics improved year-to-date over the prior year. In brief, the results were as follows. Net revenues have increased by 4% in the first 9 months of 2017, to $828 million. Our growth continues to mainly reflect the strong market conditions in the U.S.

Year-to-date operating profit reached $333 million, up 6% versus the prior year on an adjusted basis, largely reflecting higher sales and lower R&D expenditures. You'll notice that the SD&A, excluding exceptional items, was up versus the year-ago. This reflects the expected prelaunch investments of our key Phase 3 assets, together with the increased legal expenses, primarily for the ANDA cases and asserting our IP.

In terms of the full-year cost outlook, we continue to plan for the incremental investments of $40 million to $60 million related to key pipeline assets, and we also expect legal expenses to remain elevated in the final quarter as we continue to assert our IP.

Year-to-date net income was $216 million, an increase of 5%, again on a like-for-like basis.

Finally, our cash position increased to $806 million, leading to a healthy net cash position at the end of the 9-month period of $322 million.

As I mentioned, the market dynamics in our principal U.S. market remained positive and consistent with the double-digit pace of growth we saw in the first half of 2017. This pace reflects both the growing scale of the opioid crisis in the U.S. and the increased treatment capacity coming from waivered physicians and from nurse practitioners and physicians assistants. In fact, in the first 9 months of the year, the number of newly waivered physicians has continued to grow to over 40,000, and there are now over 3,400 prescribing nurse practitioners and physicians assistants.

Against this backdrop, our Suboxone Film business has remained resilient, ending the year-to-date period with an average share of 58%. Although this was down 3 percentage points from the previous year, I remind you that this was achieved in the face of intense competition from generic and branded competitors.

Where we have lost this share has been largely concentrated in the most price-sensitive payers, and for us less profitable payers, that prioritize generic offerings. Our Q3 exit share was 56%, but the fact that we still hold over half the buprenorphine opioid use disorder market speaks to the strength and depth of our relationships across the whole treatment community, from patients to physicians to payers. So overall we are very pleased with the strength of execution in our core business.

During the quarter we also aggressively responded with and took additional legal actions to secure Indivior's future. First, in the light of Dr. Reddy's outcome in late August, we commenced the appeals process against the District Court decision and believe that our intellectual property should have been found to have been infringed.

Also, we are pleased to reach an agreeable supplement with ANDA filer Mylan, and we remain open to settling with other ANDA filers on terms that reflect our strong IP position. Mylan terminated their IPR on the 514 patent as part of the settlement. Par and Dr. Reddy's had filed motions to join the Mylan IPR. However, the court has since denied their motions on the ground that there is now no IPR to join.

These court decisions essentially end the 514 IPR challenges. The companies could seek rehearings, but our understanding is that they are very rarely granted. Further, the other ANDA filers are now time-barred from pursuing IPR challenges to the 514 patent. In addition, you will have already seen that we asserted a new Orange Book-listed patent for the Suboxone Film, the 454 patent, against each of the ANDA filers.

We are aware that on the 24th of October the FDA tentatively approved Actavis's proposed generic version of the buprenorphine/naloxone film. However, nothing has changed in the marketplace, as Actavis were found by the Delaware court ruling of 2016 to have infringed our valid 514 patent. They are therefore enjoined and cannot enter the market until 2024 unless they prevail on appeal.

Clearly we cannot predict with any certainty when a generic version of the film may be approved and enter the market, but we are pursuing all available legal avenues to assert our intellectual property rights. And, as you would expect, we are refining contingency plans so that in the event of a generic entrant we are well positioned to ensure the successful launch of RBP-6000, if approved by the FDA.

We are delighted with the outcome of this week's advisory committee, at which the panel voted 18 to 1 to recommend approval of RBP-6000 for the treatment of opioid use disorder. We will continue to work with the FDA to complete the review of our new drug application.

We will also continue to work on finalizing all of our launch plans, including partnering closely with our third-party manufacturing supplier to ensure appropriate delivery of product to enable our target launch in Q1 next year.

We're looking forward to the PDUFA date of November 30.

As a company, we've been motivated from Day 1 to innovate and make available the best possible treatment for patients with opioid use disorder. In RBP-6000, we believe that, if approved, we have a unique product which may be able to offer patients and physicians greater convenience, privacy and adherence, together with sustained efficacy over the entire dosing interval of 1 month. And, of course, as an injectable, RBP-6000's delivery system is intended to make abuse and diversion difficult.

Turning now to our other key Phase 3 asset, we are pleased to have submitted the new drug application ahead of schedule for RBP-7000, our monthly risperidone depot for schizophrenia. We are doing the pre-commercialization work, and we have earmarked prelaunch investment to ensure that we are prepared to launch late next year, assuming FDA approval.

Although schizophrenia is a highly competitive marketplace, we strongly believe in the science behind RBP-7000, and, along with the IP we recently acquired from DURECT, we have grown more confident in both the opportunity and in our ability to address the unmet need we see to help patients in this treatment area.

To close my summary, we are continuing to execute well against all the controllables of our business and to help increase long-term certainty for Indivior. Our leadership position in medication-assisted treatment for opioid use disorder remains strong and is providing us the means to bridge to our future in RBP-6000 with great confidence and enthusiasm. We look forward to the next major milestone for our company, the FDA's PDUFA decision on RBP-6000, by the end of the month.

So that concludes my opening remarks, and we will now be pleased to take any questions.

Thank you. (Operator Instructions) We will now take our first question from Graham Parry, from Bank of America Merrill Lynch.

I've got four. So, firstly, on the RBP-6000 panel and the REMS recommendations from the panel versus your own, could you just give us your thoughts on whether you view that as being potentially more restricted than you had initially anticipated and the potential impact on speed of uptake of RBP-6000?

Secondly, on Camurus they also got a recommendation from the panel, but perhaps slightly less clear on dosing. So could you just give us your thoughts on how you see competitive positioning of that product based on the recommendation there? Thirdly, on your settlement with Mylan on Suboxone Film, could you just clarify the date that keeps Mylan out of the market until?

And then fourthly and finally, on your settlement with Alvogen, why do you feel the need for a settlement here for no launch until March next year? Does that suggest that you think that Alvogen would have launched ahead of

District Court ruling if that settlement hadn't been in place, or is it just a precursor, potentially, to a longer term settlement? Thank you.

Okay, well, I'll just answer a couple of those, and then I'll hand over to Javier. We don't see any issues coming out of the REMS. With respect to Camurus, we're not going to comment on anything that happened at the advisory committee with respect to Camurus. Clearly, it's their day, it's their data, and it's not really fair for us to comment on that.

So we're very pleased with the fact that we've got the 18-to-1 recommendation. Clearly, we feel we had a very good day and we're very encouraged. And it's also true to say that the FDA still have work to do between now and the end of November, and they will make their decision on the approval or not of this product. So we don't really want to get into speculating what that might look like, either, albeit it that we are very, very positive, and we are very encouraged.

There were two questions relative to generics companies, Mylan and Alvogen, and I will just hand over to Javier to comment on those, please.

Sure. So, thank you, Shaun. So the first question as I understood it was what is the early entry date agreed with with Mylan. As you know, these settlement agreements are confidential. But what I can say is that they've been granted an early entry license of January 1, 2023, and there could be triggers that would allow them to come in earlier under certain circumstances. With respect to your question about Alvogen, if you don't mind, could you repeat what the question was?

Yes, your settlement with Alvogen, just I guess I'm trying to understand the motivation behind that. So, their 30-month stay expired. You just pushed out the potential for launch until March next year. And I'm just wondering is that because you thought they were going to launch ahead of a District Court ruling, or is this just it's all part and parcel of a settlement discussion that could be a precursor to a longer term settlement, so, i.e., much longer dated than March next year.

Okay. So, the stipulation that Alvogen agreed to to extend their no-launch period is not tied to any settlement discussions. If you look back at the history of this lawsuit, we were supposed to go to trial in April, and there were circumstances that came up that resulted in the trial getting pushed back to September, and with the trial going to September and their 30-month stay expiring in October, obviously there would've been a prejudicial effect to us of a decision not coming prior to the expiry of the 30-month stay.

And so what was agreed was that Alvogen would extend, essentially, their 30-month stay bar from launch, assuming they get FDA approval, until March of 2018 or if they get an earlier favorable District Court ruling. The subsequent development in this case is that the posttrial briefing has been pushed back by 3 weeks and there's been a subsequent adjustment to that no-launch period. But the terms of that have been filed under seal, and I'm not at liberty to discuss what the impact of that might be.

Thanks. Javier, I think that was a very clear answer, but I would just like to emphasize just for the avoidance of doubt there is no settlement with Alvogen at the moment and that the date referred to in our press release was all to do between Alvogen and the court. There's no settlement deal with Indivior. The only settlement that exists is with Mylan. But clearly we are open to settle with all parties on terms that reflect the strength of our IP. So let's take the next question, please.

We will now take our next question from Paul Cuddon, from Numis.

Congratulations, firstly, on the very strong recommendation earlier this week. I have three questions. Firstly, on the impact of the wholesaler destocking, do you have an estimate for that in Q3, and do you expect Q4 to pick up? Secondly, on the very strong rest-of-the-world performance of the business and your intentions for filing RBP-6000 internationally.

And thirdly, just some thoughts over the general discussion over the lower dose/higher dose. I think in the trials you had previously kind of started on the higher dose and dropped down to the lower. The panel seemed to prefer the lower dose moving up to the higher on the more severe patients. So does that change any of your expectations? Thank you.

Okay, I'll ask Mark to take the first 2 questions, please.

Sure, Paul. The wholesaler stocking that we referred to with regards to Q3 is more to do with the base period. If you recall, the discussions that went on in the Q3 earnings a year ago, there was stocking up with regards to a new distributor, CVS, and some stock-up ahead of the year end by one of the 3 major wholesalers. And so what's done is created an artificially high base which reflects in the flat growth in the quarter for the U.S. So I think that's pretty clear with regards to that. And then what you'd see after that is a growth rate that appropriately reflects the share, average share in the quarter of 56%.

With regards to the rest-of-world performance, I think the 12% growth rate is a bit artificial, given some one-time events, and the underlying growth is significantly lower than the 12%. And the dynamics that have occurred is we have had some transitory shipments. The biggest impact of those is a country which had out-of-stocks with generic suppliers, and so we had a major one-off shipment in there that was 5 points of growth off a very kind of small number in the rest-of-world net revenue.

And then I think the way to think about is is Australasia continues to grow at high-single digits as they open up access and grow the buprenorphine market there and Europe continues to be at a very low single-digit sort of growth. With that I'll kind of hand it back to Shaun to talk about the rest-of-world launch on RBP-6000.

Yes, once we've got our arms around what happens on the 30th of November, obviously we'll be in a position to see how the regulators view our data package and the labeling claims, and then that will inform our timing on the rest-of-the-world market. So we'll be able to communicate that in February. But our intention is still to progress that with great enthusiasm. Could you just remind me of the third question, please, the lower dose/higher dose question?

Yes, so in the trials I think the 300/300 was generally the kind of the first dose to which some people dropped down to 300/100. And I got a sense from the panel that the lower dose was generally the preferred one to start off with. So, I mean, how does that influence your thinking?

So, this is Christian. It doesn't change at all our thinking. You may remember that we always said that during the highest vulnerability period of patients we would start the treatment with 300 mg. As far as the maintenance dose of either 300 or 100, we made it very clear, and actually we have very strong evidence to support that statement that it is at the discretion of the physician to either keep the patient, depending on his or her medical condition, on a maintenance dose of 300 mg or to lower the dose to 100 mg. So this is completely in line with the way we designed the clinical trial and the recommendations that we are making in our label.

Okay. Thank you.

We will now take our next question from Max Herrmann, from Stifel.

Congratulations on the ad com hearing this week. Just a couple of questions. Firstly, just on RBP-6000, I wondered if you could update us on whether you have gone through and had the CMC review and where you are in terms of manufacturing of the product, and also just in terms of your previously stated launch timelines, given the changes in the market subsequent to that statement about an early '18 launch.

And then secondly just in terms of the additional expenditure in the third quarter, I wondered if you could split that incremental spend into between litigation costs and preparation for launch costs and give us a little bit more color on that. Thank you.

Yes, in terms of our sort of launch timing for next year, we've always been very consistent and said that we will launch sometime in quarter 1. We want to make sure that we get this right, so, as you've said, we want to focus on getting our supplier chain, getting the right launch volumes ready for launch. We certainly don't want to launch and then run out of stock and have any embarrassment there.

We have a new distribution architecture that we need to educate our physicians on in terms of how to order this technology and have it delivered to their practice by specialty pharmacy. We're going to have our FDA to preapprove our materials to make sure that our salespeople go out with the strongest possible message within the most compliant way and make sure that we get all that right.

We've seen other companies sort of rush things to sort of try and get to market a week or two before they're really ready. Our commitment is that we want to make sure that we're best to market and that we do this once and we get it right. So we're still on track for quarter 1, probably the middle of quarter 1. We think that we want to get this right, and we are very confident about that. Mark, do you want to pick up the costs?

Of course. Thanks, Shaun. Max, what we've seen with regards to the expenditures is as we've talked through at the fiscal year-end results and gave guidance is that we'd have $40 million to $60 million of incremental expenditure and investment primarily weighted to the back half of the year behind RBP-6000 and RBP-7000. Now what I can confirm is that $40 million to $60 million is on track and continues to be spent to help reinforce and prepare for the new go-to-market model associated with RBP-6000.

We don't break out the legal and the investment spend. I can understand why you'd like to have that for your modeling, but it's not something we do. What I can confirm is that we expect R&D in Q4 to be very similar to what the kind of average spend has been in the first 3 quarters, and then the balance of the spend in Q4 on the SG&A line is comprised appropriately, kind of within our confirmed guidance that we've talked about today.

Thank you.

Next question?

We will now take our next question from Patrick Chen, from Morgan Stanley.

I have one more question. We've continued to see some market share erosion, down to 56% end of Q3. Can you comment on your expectations for this going forward, and should we continue to see pressure here? And what portion of U.S. sales is now cash and managed Medicaid? Thanks.

Well, it's very hard to predict exactly what's going to happen in the future. I mean, we've consistently said that we are going to be at risk of losing share in the most price-sensitive payers. So this is clearly the managed Medicaid sector. I think we've actually fared very well here, and we've outperformed even our own expectation, and we're very pleased with how this whole thing has gone. So the erosion is much slower than we had anticipated, and we're very grateful for every quarter that that continues.

And I think what's one addition, Shaun, just Patrick, is I think the key here is that you've seen where the share is and where it's exited on the quarter at 56%. We've built in our share expectations into the guidance for the rest of the year into the net revenue guidance that we've given you. So that's all comprised in there with regards to where we think that share is. And then we'll update with regards to 2018. It's a bit premature to start talking guidance for that now. We'll talk that with the fiscal year-end results.

But what we are pleased about, we think we've got an incredibly strong franchise to stand on the shoulders of to launch RBP-6000, so a point of share here, a point of share there. In the grand scheme of things we're in a very strong position to have a very good year next year.

Thanks very much.

We will now take our next question from Nick Nieland, from Citi.

I've got two, please. Is there anything you can say about your thoughts on the pricing of the depot in comparison to the film in the U.S., given the competitive situation with Camurus? And, secondly, can you talk about the potential commercial plans for RBP-7000, how much synergy there is with the current organizational setup or how much investment you'll need to launch this product? Thank you.

Okay. In terms of the pricing, we certainly intend to share our pricing sometime in this quarter. We can't do that really until we've got the label, because we're taking a very thoughtful approach, looking at what is the value that we bring to patients, and a lot of that is guided by the label. We've got some very compelling health economic data that I think is getting presented over the next week or two.

November 2.

November the 2nd, today, in fact, at a conference in Washington. So we believe that the right price for this technology lies somewhere in the range of the pricing that is already established and accepted for injectable depot technologies. So if we look to the schizophrenia category and indeed our own addiction category, where there's already a monthly depot, you would say, well, if I look around, surely you guys must be thinking somewhere in the $1,000 to $2,000 a month range, and we would say yes, we are. But where we're going to land precisely within that we have yet to make a final decision on, but that's the range.

With regards to the RBP-7000 launch, obviously we've had some pre-commercialization spend there. We would expect that to ramp up in '18. We've talked consistently that this won't be a full-scale launch, typical large pharma throwing hundreds and hundreds of reps. This will be a small, tactical launch with a standalone business unit so we don't distract from RBP-6000, which we're the leaders in. We'll go in with a small tactical to leverage our technology and our differentiation in the market, and as the uptick comes, then we'd invest more.

Yes, I would really emphasize that the sort of small team to start is sort of all about optimizing the return on investment. We put a team in. We get it right. And then we will not be shy about accelerating the commercial model and scaling it up very rapidly, which we've done before. That's exactly how we built the Suboxone market.

But we're not going to throw ridiculous money in the hope that it all comes good in year 5. We're going to go out with a very clear focus, strong plan, with critical mass to get it done. And then once we've figured out, okay, this is exactly how we do this, we will aggressively scale up and harvest the opportunity. But we have no doubt about our capability and confidence and ability to do that, and we will talk more about it as we get into next year.

So, just for a clarification, your range that you've quoted on the depot is -- that is multiple times the list price of the film. Is that correct?

Well, we haven't determined the final price, so it's hard to comment on the price relative to the film. But is it more than the film? Yes. Would you expect that to be the case? Yes. Is that reasonable to do? Of course it is, because pharmaceutical pricing, the new sort of environment and the future environment is likely to be if you're more of the same you need to charge less. If you have something new and innovative that creates new value that you can demonstrate that value through health economics studies, then the pricing should reflect the value.

So it's very important to look at this from a value perspective, because the payers are going to say if I invest the money in your technology, what's in it for me? What do I get back in return? If you're selling me the same old stuff as I've already got in a different box or a different flavor, I ain't paying for that. And we're saying no, we're not asking you to do that. We're going to bring you a new value that you haven't been able to get anywhere else, and we believe when all is said and done and in the financial analysis you won't be able to get anywhere else. Here's the economic value that this technology brings, and here's the price we're going to charge for it. So I think that's the right sort of thinking architecture.

Now, we will, of course, be called to explain why is it different to the prices that are charged for today's technology, and that's a wonderful thing, because we'll jump straight through the door and explain all the new value that we bring and we're very confident on and is robustly supported by the data that we have. So in many ways this intensity on pricing plays in our favor, because we have the strong card to play that fits the new environment. So we're not deterred by that.

That's helpful. Thank you.

We will now take our next question from Harry Sephton, from Jefferies.

I just have one. So, it's in relation to RBP-6000. At the FDA panel review it was mentioned that because the clinical study was done against placebo the company potentially won't be able to claim that RBP-6000 was in any way an improved product. Can you comment on that and clarify if there is any substance behind the statement and whether it impacts the marketing of the product in any way? I assume you'll still be able to claim the practical benefits, but you might not be able to claim improved efficacy.

Yes, I think if we get into discussing that we are going to be speculating about what's in the final label, and we don't have that yet. So, as much as I understand you're interested, and it would be great to have a good conversation about it, I'm not sure actually helpful in any way, because the FDA will make their decision on the label and then we will determine.

So we want to make sure that we've got the strongest possible claims that we can get, and we are therefore going to ask the FDA to review our promotional materials and approve those claims before we go out into the market and make them. And we think that that's a very strong, confident position to take, and it's certainly the right thing to do in a scenario where there is so much value to be created.

That's great. Thank you.

We will now take our next question from Nick Keher, from RBC.

I just have two. Just on your data on pricing, so you're talking about a $1,000 to $2,000 a month list price for the drug. Obviously you'd have completed some discussions with payers around reimbursement around that level, so you must have some confidence on it. Could you give us any sort of guidance in terms of what kind of reimbursement level coverage you're expecting to have over the first year, 2 and 3 years for the product?

And then second question is just on wholesaler stocking. So obviously we've seen a bit of a destocking effect here, but if there's a potential generic threat and there's a new product coming to launch, or potentially 2 products coming to launch next year, do you think we should actually be starting to think about some destocking on the film and more aggressively in Q4 and Q1 for next year? Thank you.

Well, I'll take the first question, then Mark will take the second. I'm glad you asked about how payers think about this, because, to your point, we have done market research and given great thought to the sort of sensitivities and the considerations of all of our stakeholders, including payers. And the feedback that we're getting from payers is a very high degree of comfort within this range. So I think we feel very good and very sure about the pricing. And just to remind you that it will be tied to the value that the product creates. So, Mark, do you want to take the second question, please?

Of course. Nick, with regards to the destocking, just a reminder that within the period it's not a destocking in Q3. It's a stocking in the base period. So we haven't seen that destocking. Now, as you know, there's normally some stocking at the beginning -- at the end of a fiscal year in anticipation of potential pricing and there's some destocking in the beginning of the year as they destock those, so there's some normal phasing.

As we look into next year and give our guidance with regards to net revenue, we'll take into account share, and, as with any sort of share loss you might expect some destocking of pipeline in parallel or in proportion to that. But with any new product launch you're going to expect stocking up also that would offset that. And we'll deal with the net of those two as we talk through our guidance for 2018.

Thank you very much. Thanks for clarifying, as well.

As there are no more questions in the queue, I will now turn the call back to Shaun Thaxter to close.

Well, I'd just like to thank everybody for their participation today and their confidence in our future, and we look forward to seeing you soon.

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