Indivior bolstered by strong demand forecast

There’s no escaping the fact that Indivior (INDV) is a highly concentrated business – in more ways than one. Over 97 per cent of its revenues come from two drugs that treat a single condition: opioid use disorder (OUD). In addition, some 80 per cent of the company’s sales take place in the United States. 

There aren’t many pharmaceutical companies operating under these kinds of constraints that truthfully look like sound investment prospects. But the size of the market for Indivior’s products – and the ongoing need for them – make it something of a unique case. 

The firm expects long-term growth in the US market to be sustained in the mid- to high-single-digit percentage range. This is, in part, due to the continued severity of the opioid epidemic, as well as new legislative actions aimed at expanding access to OUD treatments. 

Net revenue grew 12 per cent year on year in the first half, mostly thanks to a stronger-than-expected uptake of Sublocade, an injectable that prevents opioid cravings and withdrawals. Indivior has subsequently increased its full-year sales guidance for the drug to $420mn (£346mn) from $390mn.

The outlook for its other major OUD therapy, Suboxone Film, is less clear. In the second half of the year, a fourth generic competitor drug is expected to launch – potentially eroding its market share. 

In the longer term, investors will want to see the company diversifying its product portfolio, which it is ostensibly already doing. Phase II studies of a potential therapy for cannabis use disorder are ongoing, and sales of Perseris, a schizophrenia treatment, are growing. 

Like all other pharma companies, Indivior’s future profits depend on building a strong drug development pipeline while fending off competition from low-cost generics. For now, it’s in the clear. With the shares changing hands at a 25 per cent discount to its consensus target price, we reiterate our buy call, not withstanding the Suboxone issue. Buy 

Last IC View: Buy, 254.6p, 16 Feb 2022