Indivior Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 22, 2024

There are 7 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Indivior 2023 Full Year Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Jason Thompson. Please go ahead.

Speaker 1

Thanks, Evan, and good morning, everyone. Before we begin, I need to remind everyone that on today's call, we may make forward looking statements that are subject to risks and uncertainties and that actual results may differ materially. We list the factors that may cause our results to be materially different here on Slide 2. We also may refer to non GAAP measures, the reconciliations for which may be found in the appendix to our presentation that is now posted on our website atindivior.com. I'll now turn the call over to Mark Crossley, our CEO.

Speaker 2

Thank you, Jason, and good morning and good afternoon, everyone. Thanks for joining us to discuss Indivior's Q4 and full year results. I'll begin with some opening remarks and a review of our growth strategy. Christian will then provide an update on our R and D priorities, following which Ryan will detail our financial performance and our 2024 guidance. Lastly, I'll provide some preliminary thoughts on the process we're initiating to consult on a potential primary U.

Speaker 2

S. Listing in the summer of 2024. 2023 was another year of strong execution and performance by our team. Led by SUBLOCADE, our total net revenue increased 21% to approximately 1,100,000,000 dollars and adjusted operating profit increased 27 percent to $269,000,000 This was our 3rd consecutive year of double digit top line performance and even after absorbing the incremental costs of the opioid of the Opiant business and strategic growth investments behind SUBLOCADE, adjusted operating margins increased for the full year. We also made excellent progress against our strategic priorities to create a durable addiction focused franchise capable of delivering consistent value creation for shareholders.

Speaker 2

I'll highlight the key milestones we achieved in 2023 in a moment. Looking ahead to 2024, we expect another year of strong net revenue growth led by SUBLOCADE. Taking the midpoint of our guidance, dollars 850,000,000 of SUBLOCADE net revenue implies 35% year over year growth, marking another major step towards our target of greater than $1,500,000,000 in peak net revenue. This in turn supports the group's expectations of fiscal year 2024 of delivering 18% overall net revenue growth and approximately 300 basis points of operating margin expansion, again both taken from the midpoints of our guidance range. Importantly, both our performance in 2023 and our outlook for 2024 are in line with the medium term profitable growth framework that we committed to at our Capital Markets Day in December 2022.

Speaker 2

Lastly, I wanted to take a moment on the earnings call to provide my perspective on the apparent disconnect between the market data available via IQVIA and our results for SUBLOCADE. This phenomenon has occupied a significant amount of investor mind space and has been further reinforced with our Q4 and fiscal year results shared today. As I mentioned last year and not dissimilar to some other specialty pharmacy products, it appears as though IQVIA data does not capture our Justice Systems business, products fulfilled via specialty distributor via buy and bill and based on our estimates appears to capture about 25% to 30% of the OHS business excluding Justice Systems. For that reason and has been the case since launch, I can only endorse that you measure SUBLOCADE's performance via results data that we provide at our quarterly earnings. Turning to Slide 6, expanding on our strategic priorities, we delivered on a number of important milestones in 2023.

Speaker 2

These included growing SUBLOCADE approximately 54% year over year to 630,000,000 with the total number of SUBLOCADE patients reaching nearly 137,000 on a 12 month rolling basis. This is an increase of 66% year over year. We diversified our revenue base and expanded treatment across the continuum of care through the acquisition of Opiant Pharmaceuticals and subsequently launched Opvii, our differentiated overdose rescue treatment. Our ex U. S.

Speaker 2

Business continued to contribute to our growth through new products including over a 50% increase in net revenue from SUBLOCADE. We expanded our pipeline with 2 important opportunities targeting opioid use disorder. We took steps to secure our supply chain with the acquisition of a sterile manufacturing facility in the U. S. To support SUBLOCADE's greater than $1,500,000,000 net revenue goal.

Speaker 2

And also in terms of securing our future, we settled the antitrust multi district litigation and continue to believe that the remaining legal matters are manageable. Our confidence in our future was reinforced by the initiation of $100,000,000 share repurchase program last November. And finally, today's announcement that following our successful listing on NASDAQ last June, we'll be formally exploring making the U. S. The primary trading venue for Indivior shares while maintaining a standard listing in London.

Speaker 2

As we enter our 10th year as a public company, I want to briefly highlight the compelling fundamentals that support our business and how our team has successfully executed against this backdrop. First, the market in which we participate broadly defined as substance use disorders is a terrible global crisis that shows no signs of abating. Looking at our highest value at stake market, the U. S. Continues to offer a substantial opportunity for growth and treatment penetration driven by increased funding and access.

Speaker 2

Drilling down to Indivior, our business is demonstrating attractive levels of growth and profitability. We've built a stronger addiction focused franchise with tremendous growth potential. The Indivior of today is an attractive growth platform based on new and proprietary growth products with an expanded pipeline of exciting potential medicines. Consequently, we're confident in our ability to sustain and build on our position for the benefit of our patients and stakeholders over the long term. The tragic reality is that the needs of our patients have never been greater.

Speaker 2

Given the evolution of the opioid epidemic and the incidence of substance use disorders more generally, Overdose deaths are continuing to reach new record levels. The U. S. Is now in the middle of the deadliest phase of the epidemic fueled by the rise to prominent powerful synthetic opioids such as Fentanyl. The latest data from the CDC suggests the annual overdose deaths in the U.

Speaker 2

S. Are now provisionally reaching over 112,000 lives. On a daily basis, this is equivalent to over 300 deaths a day. What's also important to recognize is there continues to be a significant treatment gap with only a minority of patients diagnosed with OUD receiving medically assisted treatment. As shown on this slide, the estimates for the number of those affected and treated vary by source, but our view is that the higher end of these estimates is more reflective of the terrible reality.

Speaker 2

Indivior's OUD and overdose rescue treatment SUBLOCADE and now OPVI place us uniquely at the forefront of this complex and evolving disease space. We think efficacy is the critical treatment attribute for patients, particularly given the high potency of synthetic opioids. And we strongly believe that the unique scientific evidence base for our products makes them true paradigm shifts in treatment. Turning to Slide 9, to execute against this backdrop and reach more patients, we reconfigured our go to market strategy in 2020 to focus on organized health systems. This strategy has driven strong double digit growth over the past 3 years and the channel now accounts for 80% of SUBLOCADE volume.

Speaker 2

We continue to make excellent progress against our 3 phase growth strategy for SUBLOCADE in this channel, comprised of facility activation, HCP adoption and ultimately treatment of more patients. Furthermore, we're continuously refining and improving our ecosystem model to help prescribers and patients navigate the complexities and fragmented nature of the OUD treatment landscape. These efforts include building out our regional specialty pharmacy network in order to deliver better customer service to treatment providers as well as deploying new tools for prescribers and patients. As a result, we expect the organized health system channel will continue to be SUBLOCADE's primary growth driver. A second important refinement to our go to market strategy was built was to build out dedicated capabilities to target the OHS sub channel U.

Speaker 2

S. Justice Systems. This is critical as it's estimated that over 60% of OUD patients pass through the justice system at some point in their journey. Furthermore, with the recognition that justice system patients are an underserved and high risk patient group, the environment is improving with increasing access to treatment as well as increased funding availability. Following our investments since 2022, the Justice system has become our fastest growing sub channel and now accounts for approximately 20% of SUBLOCADE's net revenue.

Speaker 2

With over 600 activated facilities out of 8,000 to 12,000, we believe this channel will continue to grow in importance in fighting the opioid and substance use disorder epidemic well into the future. Taken together, we believe we've created an unrivaled continuum of care that will continue to meet and evolve with the needs of the majority of patients and treatment providers. As we look to 2024 and beyond, we've chosen to strategically resource SUBLOCADE in the U. S. With our Q3 results last year, we announced the decision to extend SUBLOCADE's reach into the retail channel, which represents an incremental revenue opportunity.

Speaker 2

This followed the removal of the DADA 2000 waiver in December 2022, which is an important step to open up the potential alternate sites of care. We successfully trialed this approach through our relationship with Albertsons, the 2nd largest supermarket chain in North America. The pilot clearly indicated the value to smaller prescribers for alternate sites of care and our network now operates approximately 11 60 locations across 20 states. We look forward to creating a nationwide network with additional partners in the future. We've also made the decision to invest further in Justice System team building up on a strong performance and access achieved to date.

Speaker 2

And lastly, we see a clear opportunity to provide additional medical and scientific inquiry support to help advance OUD disease state awareness and to engage key opinion leaders and clinicians with the differentiated science behind SUBLOCADE. To do this, we increased the size of our medical science liaison team. I'm confident that these strategic growth investments are scalable and will help us accelerate our progress towards our peak net revenue aspiration of greater than 1,500,000,000 dollars Moving from SUBLOCADE to our other proprietary growth opportunities, let me start with OPVI, where I'm pleased to say that our launch is fully on track. We continue to believe that this product has the ideal profile to address the epidemic of overdoses caused by both natural and synthetic opioids. Have a multifaceted commercial strategy, which includes an approved experience program for states that are allowed to trial OTVI within their populations.

Speaker 2

We're also leveraging our government affairs team to ensure that these state standing orders, grants and emergency medical service protocols are updated to include Opdiv as an overdose rescue treatment. And we were pleased to have secured a 10 year contract with BARDA that is potentially worth approximately $110,000,000 including funding for Phase 4 clinical studies, a year one order of $8,000,000 in revenue for 100,000 units and options for similar orders over an additional 9 years. Our 2024 guidance includes $20,000,000 of net revenue from Opdiv at the midpoint reflecting the early establishment phase for this important life saving medicine and we continue to expect peak net revenue in the range of $150,000,000 to $250,000,000 Moving now to PERSERIS, it's fair to say that we did face some significant challenges in the last couple of quarters of 2023 as a result of competitive pressures from a well funded new market entrant. We nevertheless continue to believe in the potential of the important medicine for schizophrenia based on its differentiated clinical profile and strong feedback we get from clinicians. Furthermore, since we expanded the field force nationally in 2022, we've seen increases in market coverage and penetration.

Speaker 2

Entering 2024, we believe the team is regaining share of voice across targeted prescribers and volumes at the start of the year are building on the growth achieved in the Q4. As a consequence, our guidance for 2024 is for strong double digit net revenue growth as Ryan will detail later. On my final slide, I just wanted to remind you of the key elements of the medium term profitable growth framework that we provided in December 2022. As you've seen today, we delivered against this in fiscal year 2023 with 21% net revenue growth and over 100 basis points of adjusted operating margin expansion. And as we achieve this operating leverage while also acquiring and integrating the Opiant acquisition, which is both strategically and financially attractive, albeit with dilution of $40,000,000 in OpEx or 400 basis points in 2023.

Speaker 2

Our fiscal year 2024 guidance indicates another year of significant progress towards meeting these medium term goals. With that, I'll hand over to Christian for his R and D review.

Speaker 3

Thank you, Marc, and good morning, good afternoon, everyone. As you can see over the last year, our pipeline has expanded with several projects expected to reach development milestones in 2024. You may also note that INDV 4,002, the intranasal naltrexone product for alcohol use disorder that came with our acquisition of Opiant Pharmaceuticals last year no longer appears in our pipeline. INDV4002 failed to meet its primary endpoint in a clinical Phase 2 study that had been initiated by Opiant. We have therefore decided to discontinue its development and prioritize our most promising project.

Speaker 3

Let me start with an update on our activities in the opioid use disorder and opioid overdose rescue. Our support to SUBLOCADE is fourfold. 1st, label updates with a focus on rapid induction and alternate injection body sites. We are currently planning for pre approval submissions to the FDA in the Q3 of this year with estimated approval in the Q1 of 2025 if priority review is granted or Q3 2025 under standard review. 2nd, evidence generation and peer reviewed publications, including additional Phase 4 studies, externally sponsored studies and real world evidence studies.

Speaker 3

3rd, product optimization with the implementation of our oxygen absorber desiccant for room temperature and shelf life extension in the U. S, Australia and Canada as well as additional regulatory submissions and 4th access expansion in most of the world. Unfortunately, fentanyl use continues to rise across the U. S. With now more than 90 percent of opioid overdose deaths involving fentanyl and other synthetic opioids.

Speaker 3

Synthetic opioids have a more rapid onset of action than for example morphine and heroin and delayed intervention can produce diffuse brain damage and cardiac arrest. Therefore, the ability to rapidly restore normal breathing has become essential for a successful overdose reversal. We are currently supporting our intranasal nalmefene rescue medication, OBVI, through a series of initiatives as follows. First, as we have previously disclosed, we have started our contract with the Biomedical Advanced Research and Development Authority, BARDA. The overall objective and scope of this contract is to further support the efficacy and safety of OBVI in real world and to expand access as a medical countermeasure in the event of a synthetic opioid mass casualty event.

Speaker 3

2nd, we started post marketing requirement studies, including pediatric studies as well as studies further characterizing the safety profile of DDM, which is the nasal absorption enhancer in our base formulation. 3rd, we are committed to conduct real world evidence to help understand the clinical real world utilization of Ocwen compared to naloxone. 4th, we are conducting study to see FDA approval of a shelf life extension from 28 to 36 months. 5th, we have expanded our externally sponsored studies program and independent medical education grants to cover opioid overdose rescue as we believe encouraging the scientific and clinical review and use of these medications will help with this crisis. And finally, we are preparing a series of peer reviewed publications that are covering the pharmacokinetics and pharmacodynamics characteristics of Opvii.

Speaker 3

There are also 2 projects that are currently in clinical development for opioid use disorder. First is INDV2000, our selective orexin 1 receptor antagonist. On November 3, last year, we had a successful end of Phase I meeting with the FDA and agreed upon major aspects of clinical and non clinical safety, enabling progression to a Phase II clinical proof of concept. Therefore, our key objectives in 2024 are fourfold. First, release the final clinical study report for the multiple ascending dose study that we finished last year.

Speaker 3

2, make sure the drug product is available to initiate the clinical Phase II proof of concept study 3, initiate drug substance manufacturing campaign to supply future clinical Phase III studies and 4, select the contract development and manufacturing organization for manufacturing the commercial drug product. The second project, INGV-six thousand and one, is the outcome of our acquisition of the exclusive global rights to develop, manufacture and commercialize Alar Pharmaceuticals portfolio of long acting injectable formulations of buprenorphine, which includes its lead 3 month injectable candidate ALA thousand, now INDV-six thousand and one. Our key objectives for 2024 are equally 4 fold. 1st, complete the technical transfer from ALAR to INDEVIOR 2, optimize the drug substance and drug product manufacturing to support future clinical Phase III studies 3, initiate multiple dose pharmacokinetics study to support future clinical Phase III studies and 4, initiated developmental and reproductive toxicology studies. Let me now talk briefly about our contribution to alcohol use disorder treatment.

Speaker 3

And as you can see among the 137,400,000 current alcohol users aged 12 or older in the U. S, Almost 30,000,000 people had a past year alcohol use disorder. And unfortunately, only 2.1% or a little bit more than 600,000 people received the medication assistant treatment in the past year. Although several medications have been approved for the treatment of alcohol use disorder, they have limitations in terms of efficacy and safety. Previous research, however, consistently indicated that GABA B receptor agonists can significantly attenuate alcohol intake.

Speaker 3

Unfortunately, the use of full agonists is limited due to the Afranco kinetics profile and unfavorable safety. In contrast, positive allosteric modulators at the GABA B receptor have the potential to achieve mechanistic and therapeutic effects similar to GABA B receptor agonists, while avoiding their tolerance and toxicity issues. To date, all preclinical behavior results have invariably shown the efficacy of GABA B positive allosteroid modulators for alcohol abuse disorder treatment. Our collaboration with Addex Therapeutics for the lead optimization of INDV1000 has now resulted in the selection of 2 lead compounds for comprehensive in vitro and in vivo characterization. Extensive formulation work has also been initiated to optimize drug formulation over the anticipated dose range.

Speaker 3

We are aiming at a clinical candidate selection in the Q3 of this year and the selection will then be followed by starting investigational new drug application enabling studies as well as the manufacture of the drug substance for Phase 1 studies currently planned in 2025. Let me conclude this presentation with an update on our activities to support cannabis use disorder. As you can see from the map, as of January 1 this year, about 38 states have legalized cannabis for either medical or recreational use. In the U. S, the latest data estimated that almost 62,000,000 people aged 12 or older were past year cannabis users and 19,000,000 were diagnosed with cannabis use disorder in the past year.

Speaker 3

And we now know that a quadruple of factors is leading to cannabis use disorder. 1st, increasing prevalence of use 2, increasing intensity of use in both frequency and quantity 3, increasing THC content of cannabis product and 4, the age of cannabis use initiation. Our partnership with AALIS Pharma includes, as you know, an exclusive option and license agreement for the global rights to AEF-eleven seventeen, which is ALAE's 1st in class synthetic signaling specific inhibitor engineered to modulate the cannabinoid the cannabinoid receptor. In clinical Phase 1 and Phase 2a studies, AEF-one hundred and seventeen showed promising safety, tolerability and efficacy signals in subjects with cannabis use disorder. These data were actually published in the journal Nature Medicine in June last year.

Speaker 3

Our objective this year is to continue to carry out major collaborative work with AALIS aimed at completing the Phase 2b trial and supporting additional clinical and non clinical studies in preparation of late stage clinical development. AILIS is expected to have the clinical Phase 2b last patient last in the Q2 of this year with an end of Phase 2 meeting with the FDA that we are trying to plan for Q4 this year. And finally, the development of INDV-five thousand and four, which is Drinabant, the cannabinoid receptor antagonist for acute cannabinoid overdose is being pursued and funded by the National Center For Advancing Translational Sciences, and Katz, which is one of the NIH institutes to progress IND enabling studies, including the optimization of a drug product formulation and completion of

Speaker 4

Thanks, Christian. Good morning and good afternoon to everyone. I'm pleased to report that we delivered a strong financial performance for Q4 and full year 2023. I plan to touch on some of the highlights before spending most of my time on our outlook for full year 2024. At a high level, we reported total net revenue growth of 21% in full year 2023, driven primarily by the 54% increase in SUBLOCADE net revenue.

Speaker 4

Adjusted operating profit grew by 27% faster than our top line despite the absorption of close to $40,000,000 of Opiant operating expenses and OpV launch expenses. From a liquidity standpoint, we exited the year with $451,000,000 in gross cash and investments. Looking at our financial performance in more detail, starting with the top line. 4th quarter SUBLOCADE net revenue of 176,000,000 dollars increased 49% versus the prior year and 5% versus the prior quarter. U.

Speaker 4

S. SUBLOCADE net revenue also increased 5% versus the prior quarter with expenses growing slightly higher at 7%. During the quarter, there were modest increases in trade spend related to a higher mix of the Medicaid business. For the full year, SUBLOCADE net revenue reached $630,000,000 putting us at the top of our range that we increased with our half one results. Moving to PERSERIS.

Speaker 4

Full year 2023 and Q4 net revenue of $42,000,000 $12,000,000 respectively, both increased by 50% versus the comparable year ago periods, although full year results did come in below our guidance. Overall growth in PERSERIS was primarily driven by the expansion of the sales team completed in late 2022. Turning to SUBOXONE Film. Average share in the 4th quarter was approximately 18%, down roughly 2 points from full year 2022 average. As a reminder, we do not promote SUBOXONE Film in the U.

Speaker 4

S. Net revenue outside the U. S. Increased by 6% versus full year 2022 at actual and constant FX rates. We continue to see good growth in Subutec's Prolonged Release, the brand name for SUBLOCADE outside the U.

Speaker 4

S, which increased 52% in full year 2023 to $41,000,000 while SUBOXONE Film also grew. These benefits were partially offset by pricing and volume pressure in the legacy tablet business. Moving down to P and L. Our full year 2023 adjusted gross margin was 84%, up from 82% in the prior year. This increase reflects a mixed benefit from SUBLOCADE, which was partially offset by less profitable government channels for SUBOXONE Film in the U.

Speaker 4

S. And some inflationary impacts. Adjusted operating expenses were $649,000,000 in full year 2023, up 22% year over year. Adjusted SG and A increased 18% and was driven by Opiant and Opdiv launch expenses, targeted commercial growth investments behind SUBLOCADE and higher legal expenses. R and D expenses increased 47% in full year 2023.

Speaker 4

The significant step up in R and D was driven by our ongoing Phase 4 SUBLOCADE studies and the progression of our early stage pipeline. Moving to adjusted operating profit. Full year 2023 adjusted operating profit of $269,000,000 was up 27%, reflecting the strong top line growth partially offset by commercial growth investments and the incremental expenses from Opiant, including the OpV launch costs. Adjusted net income also improved in full year 2023, reflecting similar dynamics as well as lower net finance expense partially offset by a slightly higher effective tax rate. Quickly touching on the balance sheet and our capital position.

Speaker 4

We ended full year 2023 with gross cash and investments of 451,000,000 dollars versus $991,000,000 at the end of full year 2022. Strong cash flow from operations for the year was more than offset by legacy legal settlements legal settlement related items. I would note that $415,000,000 in settlement payments for the direct purchasers and end payers is in escrow and reflected in other current assets pending final court approval. This is not included in the year end $451,000,000 figure. We have maintained our balanced approach to capital allocation with investment against each of our strategic priorities, including our 3rd share repurchase program.

Speaker 4

As of February 16, as part of this repurchase program, we have purchased canceled 2,600,000 shares for approximately $42,000,000 Now turning to 2024 and guidance for the full year. As Mark noted, our overall financial guidance aligns to the attractive medium term growth profile that we laid out in our Capital Markets Day in December of 2022. Starting with total net revenue, we expect to deliver total net revenue in full year 2024 of 1,240,000,000 dollars to $1,330,000,000 primarily driven by SUBLOCADE and at the midpoint this would represent growth of 18% versus the prior year. Our full year 2024 net revenue expectations for SUBLOCADE are 820,000,000 dollars to $880,000,000 The midpoint of this range suggests 35% year over year growth. Similar to last year, SUBLOCADE's growth is expected to be driven by deepening penetration in the OHS channel and continued growth in adjusted system.

Speaker 4

We are still early in the retail channel expansion with a relationship with Albertsons, but do expect to gain momentum there. Our SUBLOCADE guidance range contemplates a modest impact from the Medicaid reenrollment similar to full year 2023 and we will continue to monitor this dynamic during the year. Overall, we remain confident in meeting our next revenue target of $1,000,000,000 run rate exiting 2025 and our longer term net revenue target of greater than 1,500,000,000 dollars Our guidance for OpVie is $15,000,000 to $25,000,000 inclusive of approximately $8,000,000 for 100,000 units as part of a multi year agreement with BARDA. We expect sales to be back half weighted due to heavy policy work continuing in the first half. For Braceres, our full year 2024 net revenue expectations are $55,000,000 to 65,000,000 dollars which represents 43% growth at the midpoint.

Speaker 4

As Mark mentioned, we remain confident that PERSERIS' differentiated profile supports our peak net revenue expectations of $200,000,000 to $300,000,000 With regards to U. S. Film, we continue to take a prudent stance on guidance. Our underlying assumption for full year 2024 reflects our overall observed historical share erosion of approximately 1 to 2 share points together with some incremental share erosion from the recently launched 4th generic. I would remind you that we did come to an agreement with Teva, which allows them to enter the market after January 31, 2025.

Speaker 4

To round out total net revenue for the rest of the world business, we are anticipating modest growth in full year 2024 net revenue based on new product contributions more than offsetting legacy tablet competition and pricing actions. Looking at gross margin, we plan to deliver in the low to mid-eighty percent range. This reflects the expected mix benefits from SUBLOCADE, partially offset by continued cost inflation. In the medium term, we remain confident that SUBLOCADE will support higher gross margins overall. Turning to operating expenses.

Speaker 4

We continue to break out R and D and SG and A to provide greater transparency in our guidance. Breaking down the components of operating expenses, we expect full year 2024 SG and A to be $575,000,000 to 590,000,000 dollars and full year 2024 R and D to be between $120,000,000 to 130,000,000 dollars Our full year 2024 SG and A range at the midpoint reflects a 7% increase versus full year 2023's adjusted SG and A. This increase is expected to be driven by the annualized impact of the targeted commercial investments we have discussed as well as a full year of Opiant and OpV launch expenses. I would also note that the rate of increase is expected to be significantly below the growth in our top line, supporting our planned margin expansion. Turning to R and D.

Speaker 4

The midpoint of our guidance suggests an 18% increase, which reflects investments to advance early stage assets as well as our Phase 4 studies for SUBLOCADE. In the medium term, we expect R and D to align more closely with the industry benchmarks of low double digits as a percentage of net revenue. Taking these elements together, we arrived at adjusted operating profit in the range of $330,000,000 to $380,000,000 with material positive operating leverage at the midpoint of our guidance amounting to approximately 300 basis points. I would note that we expect our tax rate to be in the low 20% range for full year 2024 due to the prior year's legal provisions. We do expect it will begin to return to the historical range of mid to high teens in early full year 2025.

Speaker 4

Closing with our capital allocation framework, there is no change to our established approach. We continue to balance financial flexibility with investing for growth either organically or inorganically and returning capital to shareholders. We regularly evaluate these priorities together with the Board and have maintained close adherence to this framework. I will now turn the call back over to Mark.

Speaker 2

Thank you, Ryan. In closing, we announced today that the group is exploring the potential to transition to a primary listing of its shares in the U. S. Consultations with shareholders will begin over the coming weeks. If these discussions are supportive, the Board intends to put forward a formal resolution to shareholders in the spring that would affect a U.

Speaker 2

S. Primary listing in the summer of 2024. We along with the Board believe that the U. S. Is Indivior's most logical primary trading venue based on our current and future business complexion and opportunities.

Speaker 2

As you see, the vast majority of our total net revenue is generated in the U. S. Further, the U. S. Is expected to increase as a proportion of the group's total net revenue driven by our proprietary products SUBLOCADE, OPBI and PERSERIS.

Speaker 2

The U. S. Opioid epidemic unfortunately only continues to worsen and we believe indiviorous treatments are a huge part of the solution. We believe a primary listing in the U. S.

Speaker 2

Will further elevate awareness of the group's profile in the U. S. Capital markets and will attract more U. S. Investors and U.

Speaker 2

S. Analyst coverage. Also, we believe there is value in U. S. Index inclusion over time.

Speaker 2

Finally, our U. S. Shareholder base continues to grow. We currently estimate that cumulatively almost 50% of Indivior shares are owned by U. S.

Speaker 2

Shareholders versus over 30% for UK shareholders. That said, I do want to be clear that our intention is not to leave the London market. We think it's important for our UK shareholders to have a liquid trading venue that is convenient to them. Our organization is prepared to take this next step. We have investments in place for the required capabilities including reporting, controls and legal to make the transition successful.

Speaker 2

There will be no material incremental costs in affecting and maintaining a primary U. S. Listing. So in summary, the teams delivered strong underlying financial and operating results in fiscal year 2023 with significant progress against each of our strategic priorities. Fiscal year 2024 is shaping up to be an exciting year with our pipeline initiatives and our listing evaluation.

Speaker 2

Our overall 2024 financial guidance is strong and supports our plans to deliver material operating leverage. We look forward to communicating our progress as we go through the year. With that, I'll go ahead and open up the call to questions and answers.

Operator

Thank you.

Speaker 5

Thank you very much. First question on OBSI, please. So $15,000,000 to $25,000,000 guided of which $8,000,000 from the BARDA contracts. Just wanted to know if you could comment on the initial kind of launch dynamic outside of BARDA. Any commercial challenge you're facing and you're seeing on the market?

Speaker 5

And if you could give us more color on the strategy to work on that and just generally more color on the situation on the ground would be helpful. The second question on business development. So you reached a point where you probably are well advanced in the integration of Opiant. Just wanted to kind of assess your appetite for digital now and the kind of specific therapeutic areas you're looking at, if your thinking has changed at all here. And maybe just last one on the asset protection facility, if you could remind us the kind of impact on K and L and cash flow this year in the next couple of years.

Speaker 5

When will it breakeven and then be margin accretive would be helpful? Thank you.

Speaker 2

Thanks, Thibault. I appreciate the questions. I think I'll answer the question on OPVE and business development, then I'll hand off to Ryan to talk through our new manufacturing site sort of implications. So let's talk about OpVie. First off, I think we're exactly where we thought we'd be in this launch.

Speaker 2

As we talked last year, the initial stages are much more on the policy side to prep the market for a new rescue medication with a new active because most of the laws, the funding are all constructed based on the existing paradigm of treatment, which is naloxone. So the work's been going there. We have standing orders in place in 31 countries. We've been working with those that provide grants and funding to enable all FDA approved medications to be available for grants and we're working on protocols at the local level. So those efforts are in line with our expectations.

Speaker 2

I would also say that we've had some early adopters and have been very pleased with how the medication has performed in actual market versus the theoretical science that drove the actual acquisition. So it's good to see those starting to really lined up that the hypothesis is coming true in early adoption. So very excited for Opdiv's potential not only in 2024, but as a paradigm shift for helping those who've been subject to opioid overdose. On the business development side, listen, I think 2024 or 2023 excuse me was a major step for us acquiring Opiant, acquiring a plant and bringing in a couple of new or a couple of assets into our pipeline. As we look forward for our capital allocation, we have a consistent framework moving forward.

Speaker 2

But from material M and A, we see 2024 more digesting what we have. So we don't anticipate material M and A in 2024, but we could at any time look to tuck in any early stage assets of addiction that Christian finds to be good mechanisms of action. So we'll look to further sort of business development end of 2024 into 2025. Ryan, could you speak to the manufacturing facility and this impacts?

Speaker 4

So first, it is really exciting to bring this new facility under the Indivior umbrella. We consider that a low risk capital investment for $5,000,000 to secure long term product supply. The plant is already operational. We have assumed some of the contracts they had. If the contracts are at a loss due to the way that we've structured the deal, that goes on the balance sheet.

Speaker 4

So what we're dealing with is, we've communicated we're going to have to invest about $40,000,000 of CapEx over the next 2 or 3 years to get that facility prepared for SUBLOCADE. But then we've also communicated we may incur some modest margin impact over the next year or so. But the plan is to become productive and profitable within 2 years by the end of 2026, 2027, which at that point we would see significant savings to the margins at that point. So overall, very excited about this and all of these costs and investments aren't built into our guidance that we provided.

Speaker 2

Thanks, Ryan.

Operator

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Max Herrmann of Stifel. Please go ahead.

Operator

Your line is open.

Speaker 6

Great. Thanks for taking my questions and congratulations on a strong end to 2023. I've got a number of questions, so please bear with me. Firstly, just in terms of SUBLOCADE and the potential longer term in terms of market penetration, Clearly, you've now got another competing product, long acting injectable on the market. I guess, where do you see the impediments now to that market share expanding, maybe beyond the sort of likes that we see with the analogs in the schizophrenia market and closer to where we see in markets like Australia and Finland.

Speaker 6

I wondered how in specifically prior authorization is being used by the insurers as an impediment for its uptake. We've been speaking to a number of clinicians and that seems to be one of the best practices that we can use a SUBLOCADE or BRXARDI? That's the first question.

Speaker 2

Okay. So Max, listen, I think you're right. And historically in the U. S. When you're looking at the use of long acting injectables, the adoption in Europe and other markets tends to be a bit higher and that's just across most long acting solutions.

Speaker 2

When I look to the future growth for SUBLOCADE and broader long actings in opioid use disorder, I think there is such a huge unmet need in this space. We have less than 2 in 10 patients in treatment. Adherence is the number one unmet need here. And long acting still have a very small share, but are growing quite fast. And so plenty of room for multiple players in here.

Speaker 2

And certainly we're when you look at Indivior, the true paradigm shift in treatment that SUBLOCADE offers with getting to therapeutic levels in 4 to 8 hours, maintaining those therapeutic hours or those therapeutic levels the full 28 days with no on top or booster dosing required and therapeutic levels that create blockade of the opioid receptors with 2 to 3 nanograms per ml therapeutic levels of the 100 milligram dose and 5 to 6 nanograms per ml of the 300 milligram maintenance dose that for us we think are perfectly suited for the synthetic opioids that are in the market. So we see continued strong growth as demonstrated with the guide we gave on SUBLOCADE this year, and certainly setting the stage for us to get to our greater than $1,500,000,000 peak net revenue guidance that we have out there.

Speaker 6

Great. Thank you. In terms of SUBLOCADE, obviously, you've identified or highlighted that the IQVIA data is really not representative of the performance and is pretty small sample now of the total. We've seen and you've talked about the seasonality of prescription trends. I wondered if you look back at the historical growth, you seem to see a stronger first half than the second half in terms of growth.

Speaker 6

Is that what you'll expect again this year in 2024?

Speaker 2

Yes. Without getting into any sort of quarterly guidance, I mean, I think we have experienced over the last 2 years that there is a bit of seasonality, in this sort of transformational sort of change to impact patients that's impacting growth disproportionately in the first half on a year on a quarter over quarter basis, where people are a little bit less motivated at the end of the year to take a transformational sort of change to engage with the long acting. So we would expect based on the last few years for that trend to continue.

Speaker 6

And then two final questions. One is on the community kind of setting. Albertsons currently, I think you said talk about over 1100 pharmacies now. What portion of scripts are currently going through that channel? And how do you see that channel responding to the obviously recent promotional efforts you've made there?

Speaker 2

Yes. Thanks for the question on that. I think it is an important sort of evolution in the market as we seek to continue to normalize addiction treatment and make it available in new locations. And I think the removal of Data 2000 allows that. As we've talked, it is still incredibly early days here, Max.

Speaker 2

I mean Albertsons just came on line at the half year last year. And we are just now having the sales force expansion we talked about with the Q3 results. They're just now entering the field. I think the key for here is the future aspirations of what this could become. We see it as an incremental revenue opportunity that wasn't included in our initial greater than $1,500,000,000 net revenue guidance because we didn't have access to these independent physicians.

Speaker 2

And what we want to do is make it as seamless as possible, which means building off of Albertsons early, early move and finding other providers to create a national network that makes it so these independent doctors are able to prescribe SUBLOCADE for their patients. So this is going to be quarters before we see material growth in the sector, but we think it will certainly help these patients and it is incremental revenue.

Speaker 6

And then final question, just to give a I can't have a call without some discussion of litigation. Where do you see what the current situation is in terms of the movement there, obviously, post the major settlements that you made last year, in particular focus perhaps on the way you see the tooth decay MDL and how you view the recent settlements on, let's say, by Hikma and others with regards to the opioid pain MDL?

Speaker 2

Yes. Thanks for the questions there, Max. And listen, we are pleased with the settlement of the antitrust MDL and we expect that to become final when the fairness hearing happens in front of the judge who as everyone knows acted as the mediator in this case. So we expect that to occur. When it comes to the rest of our litigation, obviously we believe that these items are quite manageable.

Speaker 2

Do highlight that the tooth loss claims which initiated last year and we disclosed have now become an MDL, but it's still incredibly early days in that litigation. And from an opioid MDL, again, we note that there are settlements going on, but as we look to enter into whether it's resolution via a mediation or whether it's defending our claims in court because of the strong defenses we have, we'll continue to move forward in our efforts to resolve that moving forward.

Speaker 6

Great. Thank you very much.

Speaker 5

Thank you,

Operator

At this time, there are no further questions. I will now turn the call back over to Mark.

Speaker 2

Thank you, Evan. And that officially closes our fiscal year 2023 results call. We appreciate the continued interest and support Indivior and we look forward to seeing everyone in the near future.

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Earnings Conference Call
Indivior Q4 2023
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