Indivior plc (lon:indv)
Indivior – Correctly Priced Or Oversold?


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Title: Indivior – Correctly Priced Or Oversold?
Company: INDV - Indivior plc
Share Price Then: 31p
Author: Ian Smith
Date: Sun 14 Apr 2019
Comments: Indivior are mostly a supplier of a single product Suboxone (buprenorphine and naloxone) Film a drug used to treat people with opiate addiction and which accounts for about 80% of their revenue.

Its share price has been tumbling for a while now and there are two very clear reasons for this.

Suboxone was granted an Orphan Drug approval (a drug for a condition with a small number of sufferers) in the USA 2002 meaning that no rival drug would be approved for 7 years after which generic and cheaper versions would be allowed.

The first and longer term reason is that they have a patent in the USA for Suboxone Film which is a Suboxone supplied as a small patch that is placed in the mouth rather than as a tablet. The patent for this patch is being challenged and if the challenge succeeds a product that is pretty much a cash cow could be wiped out.

The drug iteself is not Indivior's advantage, it is the "little bit of 'plastic'" soaked in the drugs. Its big selling point is that film is safer than tablets and as the film was patented it gave Invidior an advantage over tablet providers.

The second problem announced a few days ago is that Invidior have been charged in the USA as being part of a longer term problem that covers the whole medical industry.

Basically the general allegations are that since 2002 pharmaceutical companies started selling opioid based pain medication and promised that the recipients would not become addicted and misuse them, but a lot have. Added to this there are questions about incentives being offered to doctors to prescribe certain products.

More specifically The government makes two main claims against the company: that it aided the careless and clinically unwarranted prescribing by doctors of SUBOXONE® products to too many people or in too high doses; and that it misled doctors and patients by claiming that SUBOXONE® film was safer than tablets at reducing accidental exposure to children.

As an outsider it is impossible to predict the future of the US legal action and intially I was considering the possibility that the legal action may be in part about being seen to do something.

Then I read the suit and in 2014 Medicare spent $147,704,000 and Medicaid $386,685,000 on Suboxone film, how will a jury see that regardless of the facts?

The charges are complicated further as Reckitt spun off Indivior as a separate company in Dec 2014 but started selling Suboxone in the USA in 2002 .So even if there are actions that someone is liable for the question is it is RB Group or Indivior?

It appears to me that if the prosecution succeeds substantially then Indivior will be wiped out without actually paying the fine, so why not alter the suit and go after RB Group which could survive a fine of a $2.3billion?

Added to this risk is the predicted massive drop in sales which leads me to consider that Indivior could be a great day trading share until the price settles but not something to buy today for a long term hold expecting a 100% share price rise in a year or two.
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Previous Commentaries On Indivior plc
Date Share Price Author Commentary
Fri 08 Sep 2017299pIan Smith

Indivior plc - Buying Without Understanding?

Indivior dropped from 414p to 253p at the start of business on the 1st of September and has recovered to 300p by the 8th.

This sounds great, it is a 20% profit but I don't get why anyone was buying!

Sometimes it is easy to see the market over reacting and it is reasonable to take a view based on that.

Indivior has enjoyed a protected status in the market in the US with a product called Suboxone a very profitable anti opiate addiction treatment.

There is a competitor, Activis, with a generic version, for generic read much cheaper, which is currently banned from production on the basis of possible patent violation, these patents have been found not to be applicable.

Apparently the competing product is not yet approved but it is expected to be, otherwise why bother?

Assuming approval Indivor's own analysis is that 80% of their income comes from Suboxone and they are likely to lose 80% of their sales to the competitor's product.

It seems very risky to be buying shares on the hope of a bounce when the reason for the drop is not a bad management decision but a legal decision that may effectively wipe out most of a business’s revenue.

Of course it is possible that many people understand the case better than I do, but I can't imagie that many smaller investors have been following Indivior and are able to make such a quick decision on the subject.

I look at today's big losers and see them as a possible buy, but I have seen so many go on to be even bigger losers that I try and understand why they are likely to recover.

I can't see beyond the many possible futures for Indivior especially as the 400p share price may easily have been a blip due to good results. So we are looking at a possible 30% return over a complete wipe out.