Can Indivior hang onto 40% rally?

by Graeme Evans from interactive investor |

A legal spat has been put to one side by investors who chased the shares up to a three-month high.

Indivior (LSE:INDV) shares drew in brave bargain hunters today as the pharmaceuticals company offered some much-needed respite from its legal battles in the United States.

Slough-based Indivior jumped as much as 40% as it revealed that generic competition to its Suboxone treatment for opioid addiction had not been as severe as initially thought. It raised its full-year guidance following the stronger-than-expected first half of 2019.

While the flurry of buying interest lifted shares as high as 62p at one stage today, the stock is still far from the peak of almost 500p seen just over a year ago. It remains mired in uncertainty following April's indictment by the Department of Justice (DoJ) in which the company was accused of an "illicit nationwide scheme" to drive prescriptions of Suboxone Film.

Indivior denies the allegations, which stem from a federal investigation launched in 2013 and before the company was demerged from household goods giant Reckitt Benckiser (LSE:RB.) in 2014.

Source: TradingView Past performance is not a guide to future performance

Separately today, Reckitt said it had agreed to pay a total of $1.4 billion to fully resolve all federal investigations into the sales and marketing of Suboxone Film by Indivior. While it said it had acted lawfully at all times, Reckitt stated the settlement was necessary to avoids the costs, uncertainty and distraction associated with continued investigations and litigation.

The resolution will protect the group's participation in future US government programmes and ensure it is able to focus on its transformation programme and CEO transition.

Reckitt plans to fund the settlement through existing borrowing facilities and cash generation. Its shares rose 2% to 6568p amid relief that uncertainty over the long-running non-criminal investigation is out the way.

There's no immediate prospect of similar relief for Indivior and its investors, with analysts at Jefferies believing an update in relation to the matter is unlikely in the near term. The broker said in April that there was little visibility on what any settlement might look like, although it suggested that a figure below $800 million would be taken well by the market.

Indivior said in April:

"While the company believes that it will successfully defend itself against the government's allegations, an adverse verdict may have a material adverse effect on the company and its financial position and outlook."

It has also faced a battle to protect the market share of Suboxone after US courts allowed Indian firm Dr Reddy's and Alvogen to launch their own US versions in February. Last year, Indivior had a Suboxone market share in the US of around 59%, representing 80% of revenues.

Today's unscheduled update from Indivior revealed a slower-than-expected pace of market share erosion for Suboxone Film, meaning group revenues will be in the region of $670 million to $720 million - up from the $525 million to $575 million previously thought but down from $1 billion a year earlier.

The company also reported continued growth in Sublocade, which is its new injectable version for moderate-to-severe opioid use disorder and whose performance is now under even greater scrutiny due to the competition facing Suboxone. Indivior will provide further details with interim results on July 31.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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