Indivior warns of potential sales collapse after US court ruling

The US District Court of Delaware found that Alvogen's generic substitute does not infringe the asserted claims of three of its US patents protecting Indivior's Suboxone Film treatment for opioid addiction.

FTSE 250-listed Indivior said it believes that it has grounds to appeal. The company also has a Federal Court appeal already due against Dr Reddy’s towards the end of this year, which in effect will also be relevant to Alvogen.

As it stands, Alvogen has not yet gained approval from the US Food & Drug Administration and so any launch would be “at-risk” before the appeal plays out, putting therefore be liable for material damages if Indivior wins its appeal.

If Alvogen is successfully launched in the US, Indivior said it believes "it could potentially result in a rapid and material loss of market share for Suboxone Film in the US" within months.

Suboxone Film, a combination of buprenorphine and naloxone, averaged a market share of 57% in 2017 with US sales of $900m out of the company's total $1.09bn net revenue. For 2018, guidance of net revenue in a range of $1.13-1.17bn and net income in a range of $290-320m, excluding exceptional items and at constant FX, assumed no launch of a generic buprenorphine/naloxone film product will not take place during the year.

Analyst Paul Cuddon at broker Numis said the Federal Court appeal "is at best a 50/50 ruling, but with no new evidence being submitted we assume Indivior loses the appeal".

Cuddon said Indivior's main line of defence is the assertion of the two recently listed Orange Book patents, '454, '221, and a third to be issued on 3 April, '305, "that will take some time to work through or otherwise be settled".

As Indivior recently was granted FDA approval to launch Sublocade, a new longer-lasting formula of the drug, although initial net revenue expectations are likely to be relatively modest in the early stages, Cuddon said with net cash of $376m at the year end, "the key risks have been overcome".

"Contingency plans to significant reduce costs are in place if generics were to launch 'at risk' in 2018 and we assume Indivior could deliver material reductions in cost without compromising the launch of Sublocade."

RBC Capital Markets' view was that the loss in the courts is an obvious blow to Indivior and "could potentially leave the company more exposed to both an at risk launch and from future competitors, with the path to circumventing the 3 original patents has been laid out in the courts (twice) this makes it easier for others to follow, in our view".

However, RBC noted that there are currently no FDA approved generics, hence no launch is possible until at least one is approved and that there are three more patents to circumvent to provide incremental protection the generics must overcome.

With Indivior appealing the outcome, it means an at launch risk "brings triple damages to anyone who launches at risk and loses in appeal".

RBC sees "any negative share price reaction as likely being overdone against what will be ‘reality’ and a potential buying opportunity for investors", pointing to the rise and fall of the shares last August as the proxy.