If a shareholder who bought into Indivior (INDV) this time last year were to sell out this week, they would have made a market-beating 15 per cent return on their investment. But they would also have had to deal with the trauma of three separate one-day share price falls of more than a fifth, courtesy of the group’s persistent legal battles. That volatility looks unlikely to let up.
Admittedly, there has been some regulatory relief this week. On 16 July, the group was granted a preliminary injunction, which prevents Indian pharma group Dr Reddy’s from selling a cheap version of its drug, Suboxone Film. That gives Indivior at least three months of breathing space before the competitor appeals the ruling, according to broker Numis. Dr Reddy's did not respond in time for comment.
But Dr Reddy’s product has been given regulatory clearance by the US Food and Drug Administration (FDA) and managed to sidestep three of Suboxone’s six patents. Indivior is now reliant on patent ‘305 (which protects the drug’s delivery mechanism) to halt the sale of a product that could have a major impact on the group’s market share. Indivior has already had a taste of what competition feels like. Before the injunction was granted, Dr Reddy’s enjoyed a day of sales into the US market, which management thinks may have wiped $25m (£19m) off this year's revenue.
Dr Reddy’s is not the only company hoping to usurp Indivior’s market dominance: Mylan also has an FDA-approved competitor, while Alvogen’s medicine doesn’t infringe most of Suboxone’s patents. And constant warring does not come cheap. At the end of 2017, the group raised its provisions for ongoing legal matters to $438m, from $242m just six months earlier. But these are fights that Indivior can’t afford to lose: in 2017, Suboxone contributed 100 per cent of group revenue and will continue to be dominant this year after new drug Sublocade experienced lower-than-expected initial demand.
Facing down generic competition with just one or two medicines in the portfolio is an exceptionally bad position for a pharmaceutical company, but one in which a surprising number find themselves. For example, Acorda recently lost patent protection on its only commercial drug, while Celgene will soon face competition for Revlimid which made 63 per cent of its $8.2bn of sales in 2017. It is particularly concerning as politicians clamour to bring down US drugs prices and are thus encouraging the FDA to approve generic products at a faster rate than ever before.
