The stock has been hit by the continued threat of Indian outfit Dr Reddy producing a generic version of Suboxone, Indivior’s treatment for opioid addiction, and disappointing uptake levels for Sublocade, its injectable treatment of moderate-to-severe opioid use disorder.
Sublocade was launched in February and although management has spoken of “some friction in the new distribution and reimbursement model” in the US, Numis was encouraged by the level at which sales were running at the end of the second quarter.
“We do not believe the company is completely through legal volatility with Dr Reddy's appeal of the injunction ongoing and Alvogen poised to gain FDA approval at some point,” Numis admitted, but nevertheless it thinks the reaction to the Sublocade launch, at least, has been overdone.
“We still forecast generic film in H2 and significant loss of share in FY19 and see any additional US cash flow from film as an upside surprise,” it said, as it upgraded the stock to ‘buy’ from ‘add’.
The broker says its 380p price target, based on a discounted cash flow model, is well supported.
Shares in Indivior currently trade at around 309p, having recovered from 266.5p on Wednesday, July 11, when it lowered full-year guidance.
FDA decision on RBP-7000 schizophrenia treatment due this weekend
Indivior has an injunction on Dr Reddy, preventing the Indian company from selling a generic version of Suboxone in the US, and Numis does not think the generic drugs maker will succeed in removing the injunction, although a long legal fight looks likely.
Another potential bull catalyst for the shares is approval by the US Food and Drugs Administration (FDA) of RBP-7000, its schizophrenia treatment; Numis said a decision from the FDA is expected this weekend.
As for the bear case, Numis now sees Alvogen as the biggest threat to Indivior’s future.
So far as Indivior is aware, the FDA has not yet granted tentative or final marketing authorisation to Alvogen's generic buprenorphine/naloxone film product; were it to do so, Alvogen, would be able to market its generic buprenorphine/naloxone film product in the US, but any market launch by Alvogen before a ruling on appeal would be on an "at risk" basis because Indivior would have a claim for damages against Alvogen if Indivior ultimately prevails on appeal.
“In light of the published opinion from the District Court of New Jersey, we might expect Alvogen to be better prepared than Dr Reddy’s and to be able to provide a more compelling case on the reason(s) why a potential "at-risk" launch should be allowed and why an injunction should not be granted,” Numis cautioned.