Why Indivior shares halved in one month

A stockmarket star until last month, Indivior has fallen out of fashion fast. Graeme Evans reports on the latest plunge at the £2 billion firm.

Indivior investors are facing up to four months of uncertainty after the FTSE 250-listed maker of opioid addiction treatment drugs said it was no longer able to provide guidance on 2018 performance.

With Indivior battling to understand the impact of US market competition on its blockbuster drug Suboxone, it could be as late as 1 November until we get updated guidance from the Reckitt Benckiser spin-off company.

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Unsurprisingly, the removal of full-year forecasts spooked the City as shares slumped more than 30% to their lowest level in two years. Only last summer, analysts were eyeing a share price of 640p amid talk it could eventually reach £10.

Source: interactive investor      Past performance is not a guide to future performance

That optimism was at a time when Indivior boasted a Suboxone market share in the US of around 59%, representing 80% of Indivior's revenue. Now, the most recent industry weekly figures indicate that market share is down another two-and-a-half percentage points to 52%.

This reflects a short period in which Indian firm Dr Reddy's (DRL) was able to sell a copycat product before a restraining order was granted by a US court.

Chief executive Shaun Thaxter said Indivior was continuing to assess DRL's launch, but that it currently anticipates the 2018 revenues impact to be around $25 million.

He said: "We know that they are skilled in rapid distribution in quantity and, as such, there is a range of uncertainty around the amount of product they were able to ship before the temporary restraining order was granted by the court."

In addition, heavy discounting of Suboxone generic tablets in the US market has impacted the company by as much as $50 million.

There was further bad news for investors as Indivior also said that initial sales of Sublocade, its new injectable version for moderate-to-severe opioid use disorder, will be in the range of $25 million to $50 million.

That's about $50 million lower than its internal expectations, although the company remains confident in achieving peak sales of at least $1 billion a year.

A further a ruling is expected tomorrow on the Dr Reddy's restraining order, which analysts at Jefferies think could result in further negative share price movements if it goes against Indivior

However, they add: "If positive we believe the base has been reset today as there was always going to be some impact from the initial launch prior to the retraining order being granted."

Indivior will report half-year results on July 25, but may not publish new 2018 guidance until Q3 figures are published in early November.

Jefferies has cut its net income forecast to about $227 million, which is 24% lower than its previous estimate and compares with the company's original guidance of between $280 million and $320 million.

Numis Securities expects to lower its earnings per share forecast for 2018 by 20%, with substantial downgrades to 2019 forecasts of about 50%.

Reducing its target price to 380p, the broker said: "Our recommendation drops to 'hold', with further clarity needed on the impact of the generics and the performance of Sublocade to consider the recovery trade."

Formerly known as Reckitt Benckiser Pharmaceuticals, Indivior was spun out of Reckitt in 2014. Opening at 120p, the shares briefly broke above 500p in June, albeit after a bumpy journey involving a few shocks along the way.

Donald Trump's declaration of the US opioid crisis as a national emergency means that there is a big opportunity to capture for Indivior. However, generic competition and legal uncertainty also ensure that this is a stock where the risk/reward needs to be considered very carefully.