It’s a cheerless irony that a specialist in flattening out transient highs and crashing lows has long delivered to its shareholders the opposite experience.
Indivior, the maker of drug dependence treatments, is by market value back where it was in late 2018. A trading update on Wednesday revealed that the worsening US opioid epidemic would boost annual revenue by even more than expected. Sublocade, Indivior’s once-a-month injectable, has found demand in the US criminal justice system while sales of its blockbuster once-a-day Suboxone Film have held steady despite its loss of patent protection two years ago.
In light of the starting point, one good quarter is not a redemption arc. Indivior stock dropped more than 90 per cent from its June 2018 record high to its April 2019 record low after US regulators zeroed in on safety statements made about Suboxone. Settling criminal and civil investigations last year came at a cost of $600m for Indivior and $1.4bn for its estranged parent Reckitt Benckiser. Reckitt’s attempt to stick Indivior with the total bill required another $50m to make it go away.
Chief executive Mark Crossley has since been working to establish Sublocade as a go-to treatment for the big US healthcare providers, which are being swamped with requests for help as coronavirus restrictions ease. There is evidence of progress — Wednesday’s unscheduled hiking of targets was the company’s second of the year — but it’s a job that demands considerable tact. Shaun Thaxter, Crossley’s long-serving predecessor, departed late in 2020 having pleaded guilty to the misdemeanour of causing Indivior to supply Suboxone using false and misleading information.
Investors who joined or stayed the course during the turmoil years appear circumspect about present challenges. They voted last month by a margin of more than three-to-two for Thaxter to retain his bonus; a few days later he was released from federal prison having served a six-month sentence.
It helps that Crossley has shown willingness to keep key backers onside. His reshuffle of non-executives in March gave a seat in the boardroom to Jerome Lande, head of special situations at US asset manager Scopia Capital Management, Indivior’s biggest shareholder.
Yet the common view of Indivior persists that it is a single-product company with a black box of potential liabilities, a vulnerability to generic competition and a toxic image. Valued at less than 2 times full-year revenue, the stock is a lowly rated outlier among global pharmaceuticals and trails well behind direct rivals such as Camurus of Sweden, maker of opioid injectable Brixadi, which trades at more than 12 times current-year sales.
Given all the negativity it is worth asking what might go right.
First up, state funding provides a cushion for when more Suboxone clones hit the market, probably in 2024. US President Joe Biden this month requested $10.7bn for the Department of Health and Human Services to combat opioid overdoses and has passed laws giving nearly $4bn of new funds to tackle substance abuse.
Crisis management could justify a lowering of administrative rules limiting the use of injections including Sublocade. That hope helps explain why Indivior has been spending more of its legacy drug revenue on marketing the new one.
Second comes the potential for Indivior to look beyond opioids. Expansion could take the form of moonshot investments similar to its licensing deal this month with Aelis Farma of France, which has a treatment for cannabis-use disorders in development, or it might require acquisitions that loyal backers including Scopia would help fund. Whichever way, it makes some sense for Indivior to tackle a broader spectrum of addictions where the best available drugs are blunt-instrument generics.
Indivior’s slump over the past two years was a culmination of failings long in the making. Although rebuilding trust might take even longer, America’s newfound urgency presents a rare opportunity for the company to recast itself as one of the good guys.