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Indivior stares into the unknown

The opioid addiction specialist is facing a host of uncertainties following a recent legal judgment
Indivior stares into the unknown

Ever since opioid addiction specialist Indivior (INDV) was split from consumer goods giant Reckitt Benckiser (RB.) five years ago, it has been forced to fight off attempts by rivals to mimic its products, and launch cheap ‘generic’ copies of its treatments. It has now failed to secure a rehearing following the US Court of Appeal’s decision to allow Indian competitor Dr Reddy’s to launch a copy of its oral tablet treatment, Suboxone Film, confirming our bearish view of the stock. Although Indivior is planning to take the case to the US Supreme Court to maintain the injunction against a future product launch, as well as launching its own generic version, City analysts appear doubtful it will prevent “a rapid and material loss of market share”, as Dr Reddy’s will launch the product immediately.

IC TIP: Sell at 110p
Tip style
Sell
Risk rating
High
Timescale
Medium Term
Bull points

New products in the pipeline

Cash backstop

Bear points

Ongoing legal battles

Impending generic launch

Significant cost base

Lack of guidance on US market

As part of a wider contingency plan, Indivior's bosses intend to maintain a $250m (£194m) cash ‘backstop’. But analysts at broker Numis warn that management’s own guidance for operating expenses (sales, general administrative and research & development) of between $440m and $460m this year is only $109m shy of the $569m reported in 2018. In the broker’s view, if the cash backstop is to be maintained, current guidance indicates “far higher revenue expectations” than current consensus, or less cash outflow in other areas, such as working capital, legal settlements and capital expenditure. 

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