Indivior bouncing back from legal troubles

Provider of opioid addiction treatment drugs Indivior (INDV) is benefiting from strong base effects. In the first half of last year it swung to an operating loss of $165m (£119m) largely due to its legal expenses in relation to the marketing of opioid addiction treatment drug Suboxone Film. With the legal case now settled and demand for its Sublocade injection rising, it has moved back into the black with its operating profit of £130m through the half.

Demand for addiction treatment is growing in the US (Indivior’s biggest market). According to data reported in medical journal The Lancet, between December 2019 and December 2020, more than 93,000 Americans died from overdoses, up 29.4 per cent in the previous 12 months. This will have provided uplift for Indivior's products, in particular Sublocade, which saw its sales rise 110 per cent in the three months to June compared to the same period last year. It also received a promising $7m order from a criminal justice system that management believes is pioneering treatment of prisoners suffering from this type of addiction.

It has become a crowded field and there were concerns over Suboxone Film’s eroding market share, though the rate of attrition has slowed appreciably. Management has increased its full year 2021 net revenue range to between $705m-$740m; previously it was pitched at $625m. It is also expecting a “significantly higher” level of profit before tax.

Numis has said that “Sublocade is tracking well ahead of its prior expectations” and expects full-year EPS to rise to 17.9p in 2022, up from 11.3p in the current year. Indivior has a lot of cash on its books and an enterprise value-to-sales ratio of 1.6 suggests that the stock could be undervalued. The Covid-19 pandemic maybe moving into the back window but the opioid epidemic is here to stay. Buy.