Indivior PLC

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00:36 Thank you very much. Good morning and good afternoon, everyone.

Thanks for joining us. With me today to discuss our third quarter results are Ryan Preblick, our Chief Financial Officer; Dr.

Christian Heidbreder, our Chief Scientific Officer; and Jon Wasserman, our Interim General Counsel. For today's call, I'll provide an overview of our strategic progress after which Ryan will detail our financial performance and our updated guidance.

We will then move on to Q&A. 01:02 Moving to slide three, I'll assume everyone's read the forward-looking statements, and I'll move on to key messages for the third quarter.

Let me start by saying how pleased I am with our Q3 performance and progress. We continue to face a complex operating environment with the pandemic, but through maintaining our dedication and focus on executing our strategy, we delivered better than expected financial results.

And most importantly, we've made further good progress to SUBLOCADE our key value driver and top strategic priority. 01:35 Over the past year, you heard to articulate our go-to-market strategy centered organized health systems.

This strategic pivot in twenty twenty has really driven our momentum. And the proof point is now five consecutive quarters of double digit increases in SUBLOCADE underlying net revenue and patient expenses.

01:55 On the back of this momentum, we're again raising our full year twenty twenty-one guidance for total net revenue, largely on the strength of SUBLOCADE and continued SUBOXONE Film resilience. Ryan will take you through the details shortly.

Looking more closely at our organized health systems strategy execution, as we learn more about engaging and activating these large customers, we're increasingly confident that we've established the right commercial strategy that we believe will drive us towards our one billion dollars peak revenue goal for SUBLOCADE. 02:30 It's taken time, patience, and investment, we are starting to see the fruits of our labor come through across a range of KPIs that point to continued momentum.

To illustrate our progress, the organized health systems category is already the main growth driver for SUBLOCADE now generating about seventy percent of our growth and accounting for fifty five percent of our net revenue. 02:54 This is faster than our stated target for exiting twenty twenty-one at fifty percent.

We're also pleased with the increasing pace of activation of organized health system customers, At the end of the quarter, we activated over three hundred organizations, up from around two fifty at the end of the second quarter. As a reminder, our goal is to activate five hundred priority organizations, so we're well over halfway towards achieving our target.

03:23 As I outlined in July, we continue to invest where we see the biggest opportunities. This includes the criminal justice system where we're building a dedicated commercial team.

Our efforts here are well timed as legislation centering on medically assisted treatment for either incarcerated or newly released patients or both gained momentum. In addition to the Medicaid Ryan tracked, which is being considered in Congress, New York State just passed legislation, establishing medically assisted treatment, in all state prisons and jails.

03:58 The legislation goes into effect February twenty twenty-two and is a major intervention on behalf of patients. In fact, sixty five percent of incarcerated patients suffer from SUD, while only five percent actually received treatment.

04:15 Meanwhile, despite the complications posed by the Delta Variant in the quarter, our commercial organization continues to see improving levels of healthcare professional engagement. In person access was up to seventy percent in Q3 up from around sixty five percent at the half year.

This improved access is helping SUBLOCADE patient enrolments to continue to reach new highs and is also benefiting PERSERIS as I would touch on shortly. 04:44 I want to close my opening remarks with our report card that demonstrates the progress we're making against these strategic priorities.

Starting with SUBLOCADE, we delivered Q3 net revenue of sixty-five million dollars nearly double Q3 twenty twenty. When we look at this sequentially, this compares with sixty-one million dollars in the second quarter, but I remind you that include a large seven million dollars order from a criminal justice system customer.

If we set that aside, sequential net revenue growth, would have been around twenty percent and with year-to-date net revenue reaching one hundred and sixty-nine million dollars, we're pleased to again raise our full year guidance for SUBLOCADE. 05:24 Among the KPIs we track, you can see from the slide that the growth in SUBLOCADE net revenue is being driven by strong double-digit growth in U.

S. Patient expenses.

And in the total number of patients under treatment, as well as by increasing net revenue contribution from ex-U. S.

Launches which brings me onto the next strategic priority, revenue diversification. On this measure, I'm pleased to report we've made further progress with launches in new geographies for SUBLOCADE and SUBOXONE Film.

05:52 Net revenue for SUBLOCADE in international markets was four million dollars in the quarter. We're also pleased with initial SUBOXONE Film net revenue from new markets in the European Union, and we expect its contributions to grow as we move forward.

The combination of these product launches is helping us offset the declines we continue to see in the legacy tablet product. 06:17 We also saw a welcome return to growth from PERSERIS are monthly risperidone injectable, targeting schizophrenia patients in the U.

S. This reflected the progressive reopening of healthcare systems in the U.

S. But I referenced earlier.

We're seeing renewed month over month growth and are now increasing the investment behind this important asset to enable us to reach the two hundred million dollars to three hundred million dollars net revenue potential that we believe this differentiated product can deliver. 06:45 Toward this end, we will be investing to double the PERSERIS sales force to achieve full national coverage in fiscal year twenty twenty-two.

Our net revenue goal has always been predicated on national coverage and with the U. S.

Healthcare system continuing to open. Now is the right time to make this investment.

07:05 Regarding the pipeline, as well as strengthening our evidence base for our long acting injectables, we continue to progress our innovative early approaches to a range of addiction disorders. In particular, we're looking forward to the early twenty twenty-two start of the Phase 2b study of AEF0117.

The promising asset for cannabis use disorder on which we have an exclusive license from Aelis. 07:30 Finally, on our operating model, we maintained our focus on prudent cash management and asset optimization so that we can balance investment in the business with returning value to shareholders.

By the end of the quarter, we had bought back shares for a total of thirty-one million dollars as a part of the one hundred million dollars share buyback program we announced in July. Even after this outflow, we ended the third quarter with a strong cash position of over one billion dollars and net cash over seven fifty million dollars.

This leaves strongly positioned to pursue our strategy both organically and potentially inorganically as we see the right opportunities. 08:07 To quickly summarize, the team has delivered another strong quarter of execution delivery against our strategic priorities, which exceeded our expectations.

I'll now hand over to Ryan to take you through the financials in more to detail.

08:21 Good morning and good afternoon. Looking at the Q3 results in more detail on Slide eight, we had another solid financial performance.

What stands out to me and what I will cover in more detail in just a moment, is first, Q3, strong Q3 net revenue growth of eighteen percent which brings overall year-to-date net revenue to five sixty-eight million dollars an increase of twenty three percent compared to the year ago period. 08:50 Our growth continues to be led by SUBLOCADE strong performance in the U.

S. SUBLOCADE Q3 and year-to-date net revenue growth was ninety seven percent and eighty six percent respectively versus last year.

And as you have heard, this performance along with SUBOXONE continued resilience is allowing us to raise full year twenty twenty-one guidance. 09:13 Second, we are beginning to see the step up in operating expenses from the sales and marketing investments we are making behind SUBLOCADE to accelerate its leadership position in U.

S. OUD treatment.

And as Mark discussed, we have also approved a significant investment behind of PERSERIS to drive this treatment towards our stated peak annual and net revenue goal of two hundred million dollars to three hundred million dollars. 09:39 Our OpEx in the back half of twenty twenty-one will reflect these growth investments.

And as such, we do expect to be at the higher end of our four seventy to eighty million dollars OpEx range for full year twenty twenty-one. 09:55 Third, we have maintained our strong financial position, gross cash at the end of the third quarter stood at over one billion dollars.

This has allowed us to deliver on our number one capital allocation priority of investing in the business, while also returning value to shareholders in the form of our share repurchase program. 10:16 Now, looking at the P&L in more detail on slide nine, starting with net revenue.

We continue to be pleased with the progression of our overall net revenue in the third quarter to one hundred and eighty-seven million dollars The principal drivers of the strong year-over-year increase were the continued outstanding growth in U. S.

SUBLOCADE net revenue and SUBOXONE Film resilience in the U. S.

10:40 Q3 SUBLOCADE net revenue of sixty-five million dollars represents growth of twenty percent sequentially. When you exclude the large criminal justice system order of seven million dollars from last quarter's net revenue of sixty-one million dollars.

On the same basis, expenses in the quarter increased thirteen percent. The difference versus the net revenue growth rate being the initial stocking from some new CJS customers and rebate accrual adjustments.

11:08 Touching on PERSERIS, net revenue was five million dollars up slightly compared to four million dollars in the previous quarter. As Mark said, we are seeing renewed sequential month to month growth with the reopening of the U.

S. Healthcare system.

Quickly turning to U. S.

Films performance net revenue remained resilient at seventy-seven million dollars which was essentially unchanged versus the year ago quarter. 11:33 This was primarily due to mix as volume from a small number of non-contracted payers remained steady in the quarter.

U.S. Share was relatively unchanged compared to the previous quarter at twenty percent.

Looking ahead while the resilience of film remains a welcome positive both for our net revenue and cash position. We continue to caution that there are no strategic actions we are taking to maintain current share that we expect share erosion towards industry analogs over time.

12:03 Closing up the net revenue discussion with rest of the world, third quarter net revenue of forty-four million dollars on an actual basis decreased eight percent compared to the year ago quarter. The sale of the Temgesic Buprex business impact net revenue by about two million dollars in the quarter while continued competition in a legacy tablet market was the other major factor.

12:26 These items were partially offset net revenue from SUBLOCADE of four million dollars and modest sales of SUBOXONE Film. As our new product become more widely available and health systems normalize across the EU, we expect to reverse in net revenue declines, we have historically seen in the rest of the world business and to return to growth.

12:46 Looking at gross margin, Q3 eighty six percent level was ahead of our low eighties expectations. This was due to better productivity and some one-time supplier credits we received in Q4.

Also, in Q4, we expect gross margin to be in the low 80s and as such, our gross margin outlook for full year twenty twenty-one overall remains in the low 80s range. 13:11 Proceeding to operating profit, we saw a year-over-year improvement in Q3 on an adjusted basis of twenty seven percent to thirty-eight million dollars.

This result includes incremental growth investments in kind our LAI technologies. Q3 OpEx, which redefine as SG&A and R&D was one hundred and twenty-three million dollars.

This compares to adjusted OpEx of one hundred and one million dollars in Q3 last year. 13:36 As we previously indicated, the growth investments we are making in full year twenty twenty-one are primarily focused on SUBLOCADE including search engine marketing and the deployment of a dedicated team focused on criminal justice system customers.

We've also begun this year to invest behind increasing the U. S.

Sales force of the service. 13:56 Our goal is to achieve U.

S. National coverage in full-year twenty twenty-two.

In line with the expected broader reopening of the U. S.

Healthcare system. As Mark indicated, we will essentially plan to double the sales force.

Continuing down the P&L, net revenue was twenty-seven million dollars reflecting a tax rate of thirteen percent while substantially ahead of the prior year net income was down versus the prior quarter, mainly due to the increased investment levels we expect to see for the remainder of twenty twenty-one and a modest step up in net interest expense. Finally, in the quarter, you may have noted some exceptionals, the result of which is a wash between the items.

14:36 First, we had a technical adjustment to our end litigation provision, amounting to twenty-four million dollars which is non-cash and includes modest interest. This adjustment is based on our most up to date expert judgment of the potential value we would owe.

I would, however like to call out two important points here. First, we continue to believe strongly in the validity of our four fifty-four patent and second, that we had already posted cash collateral totalling eighty-two million dollars that exceeds the revised total provision amount of seventy-three million dollars.

As such, we feel well covered should our litigation efforts prove unsuccessful. 15:19 Fully we are selling this twenty-four million item our proceeds from the sale of the legacy Temgesic BUPREX business outside the U.

S. For net nineteen million dollars and five million dollars of DOJ related accrual reversals.

15:33 Turning to the balance sheet on slide ten, we exited the quarter with just over one billion in cash. The main cash movements during the quarter were the sale proceeds of approximately nineteen million dollars net related to the disposal of the Temgesic Business and an outflow of approximately thirty-one million dollars relating to share repurchases.

15:55 With regards to the share repurchase program, at the end of Q3 we had repurchased and cancelled approximately eleven point seven million shares an average price of approximately one hundred and ninety pence. 16:08 Finally, to wrap up on guidance on slide eleven we are pleased to raise our total net revenue expectations to seven fifty million dollars to seven seventy million dollars.

This is based on our expectations for continued sequential net revenue growth in SUBLOCADE and an essentially unchanged U. S.

Share position for SUBOXONE Film for the remainder of the year of around twenty percent. The midpoint of our revised total net revenue guidance, seven sixty million dollars with represent an approximately eighteen percent increase versus full year twenty twenty net revenue of six forty-seven million dollars.

Within the total, we have raised a narrowed of our expectations for full year twenty twenty-one SUBLOCADE net revenue to between two thirty-five million dollars and two forty-five million dollars from two ten million dollars to two thirty million dollars. This reflects better than expected business momentum we have seen so far this year, including with CJS customers.

17:05 The midpoint of our new SUBLOCADE net revenue guidance with represent a year-over-year increase of eighty five percent. The other elements of our guidance, including gross margin, OpEx range are unchanged.

However, given our increased net revenue guidance, we are now also expecting our pre-tax income to be higher than we previously forecasted. 17:29 With that, we are happy, and we are able to take your questions.

18:04 Great. Thanks very much for taking my questions and congratulations on a strong quarter.

Three questions if I may. Firstly, just wanted to understand a little bit about the SUBLOCADE performance obviously benefiting a little bit, I think you mentioned from additional criminal justice systems revenues in the third quarter.

Wondered if you could kind of give us a bit of a clearer idea of how significant those were and trends are with this new sales force and also the SUBLOCADE rollout in ex-U. S.

Seems flat quarter-on-quarter so, but obviously have just four million, it's hard to see exactly what the movement was, that's first question. Secondly, just longer term, what do you think the business can do in terms of the margin and how will that evolve over time particularly given where you historically were obviously, those have dipped over the last few years with Generac competition, but then as SUBLOCADE gains traction?

And then finally, just a little bit more detail on the patent litigation increase in provision. If you may.

Thanks.

19:24 Thanks Max. I appreciate the questions.

Maybe I'll take the first two, and then I'll hand over to Ryan to talk a little bit out about the provision. I think when it comes to the SUBLOCADE performance, we're really excited about the continued progress there five quarters in a row, double digit growth and it is uniform across the organized health systems.

If you think about the dynamics versus the second quarter to third quarter, with the seven million dollars that was in Q2 actually criminal justice was probably the less than that in the quarter. Now we don't curve that out, but what we have seen is just continued strategic progress across all of our organized health system in KPIs and continued momentum moving forward.

So, I think it exciting testament to the strategy that we pivoted our organization behind last year. 20:14 On the ex-U.

S listen, we're in Israel, Australia and Canada and continue to make good progress. In those markets with regards to increased ACP engagement, increased patient usage, unfortunately, we have seen in Australia where they're continuing to deal with COVID at a higher level maybe than the rest of the world, they have gone back down into a country wide lockdown, so that obviously impacts some of them into there, but continued great progress on SUBLOCADE and the rest of our business too.

When I think about margin over time, listen, we've made a number of what I would call working investments and increasing the strategic elements of the sales force with the criminal justice with getting PERSERIS up to a full national sales force we've added in medical science to help with the new science that Christian and his team have created behind SUBLOCADE and the disease space in general. And as we look to move forward, some of those will obviously annualize next year and I think you'll see [Indiscernible] kind of come back to normal levels in twenty twenty-two.

And then from a business standpoint, we're relatively scaled absent pipeline sort of investments as they move forward. So, we'll guide on that when we get to February, but I think those are a few of the moving pieces with regards to that.

So, Ryan, could you help Max with regards to the provision?

21:49 Morning Max. Yes, the change in provision is simply a change to our management's best estimate that's required by accounting standard IAS number thirty-seven, and all really is during the normal case proceedings over the last couple of weeks.

The damages experts from both sides had the chance to testify and coming out of that, we were able to use this new intel to form the basis for this update, it doesn't change our position on our patent Defense, and we will continue to fight this in court as we previously communicated. It is a non-cash event because if you recall, we have posted the cash collateral sometime last year up to eighty-two million dollars.

22:41 Sorry, just to follow-up, I thought the surety bond had been returned or something just clarify on what the [Indiscernible] role is?

22:51 Yes. So, I think we bought a year ago or a year and a half ago, we were required to fund the full cap amount of one hundred and eight million dollars I think it was.

They're in the proceedings, one of the bond holders did the return close to twenty million dollars, twenty-five million dollars back to us, but that still leaves us outstanding cash of eighty-two million dollars.

23:13 Okay Thank you.

23:14 Thank you Max.

23:31 Hello there guys. Thank you very much.

I've just got I think three, the first one was just on the environment. For SUBOXONE and just the pricing environment, the Q2 to Q3 revenue number for U.

S. SUBOXONE seems declines slightly.

So I'm just wondering if that's close net type situation. I suppose it also kind of feeds into the market environment where we, so here of increased funding and sort premium adjustment system kind of focus on medical assisted treatment and yet and variable market growth is a bit slower.

24:08 And then just also on the Aelis Farma collaboration and funding for the Phase 2b study is how well are they supported to run that study? Thank you.

24:21 So, I think Paul, thank you for the questions. And I'll start maybe with the market growth things, and I'll hand it over to Ryan on some of film dynamics and then we'll ask Christian to comment on the U.S.

Pharma. From a market growth standpoint, I think we have seen a bit of slowing of that market growth in twenty twenty-one to kind of mid-to-low single digits.

But I think we have to think a little bit bigger picture with regards to the market dynamics. We're still in a tremendously underserved disease space, only about twenty percent penetration of treatment with overdoses that have grown over thirty percent year-over-year and are in excess of seventy thousand per year, which is just an amazing stat, developed countries such as the United States.

Behind that sort of environment where for whatever reason is stigma knowledge such a low penetration of treatment. We're seeing unprecedented sort of funding legislation sort of activity to bring this to the forefront.

HHS just put out an overdose strategy yesterday, and we talked a little bit earlier with regards to what's happening in New York Statement criminal Justice. So, while this year was a little bit low on market growth, the base year or the year before with mid-teens or maybe a little higher and we think that that kind of average of those as we move forward, thinking to mid-to-high single digit sort of market growth still is where we see the market going.

25:54 So with that, maybe Ryan talks about the film dynamics.

25:58 Yes, good morning. I'll break your question down into two parts if you don't mind.

So, A, you had a question about Q3 versus Q2 of this year. So fundamentally, the shares did remain flat about twenty share points, the decline versus Q2 was just the result of having some trade spend releases in Q2.

Q2 is one of those quarters where we really began looking at our balance sheet accruals in the previous year to see how we did versus our assumption. So, there were some trace releases in Q2 that did not recur in Q3, but there was no external factors that would change that.

26:37 And then part B, your question was the total film dynamic. So, we are certainly pleased to have the share remaining at the twenty percent and we believe that it will remain there for the balance of the year.

And because there has nothing changed in a marketplace since Q2 of there's still three Generac players, we haven't promoted the product since twenty eighteen and still believe that COVID has had an impact on the share as we discussed over the last couple of quarters due to patient continuity concerns and the benefit of Telehealth. And one data point in the state of New York in Q4 they decided to put the film back on their formulary as a preferred agent.

That was their decision. So, you may see an uptick in the film in Q4, but net, the current film situation may or may not roll over in twenty twenty-two.

That will come as a result of the states, formally decisions as they begin to ramp up. But as usual, we continue to caution that we believe there's no structural reason in the market that the share with the three Generac players should not revert [Indiscernible] over time and we will certainly begin give guidance in February at that plan.

Thanks.

28:01 Thank you.

28:02 Christian, could you just talk about partnership of this and where we're headed on that assets?

28:05 Absolutely. We had a very good partnership with Aelis Farma as you probably know, we established joint committee on a monthly basis to really discuss the overall strategy with the main focus right now on clinical Phase 2b protocol, which has been finalized, and this is a key collaboration within New York Psychiatric institutes with Dr.

[Indiscernible] Principal investigator. We also nail down the non-clinical strategy that is all the toxicology studies that need to be performed prior to the start of the Phase 2b as well as the completion the Phase 3.

So, altogether, very nice progress there, protocol finalized ready need to go in first quarter twenty twenty-two.

29:03 Okay, thank you. And could just make one quick follow-up on SUBLOCADE to what extent the fentanyl claim has opened up an opportunity for you within sort of sort of AR sort of discharge and whether you can put some investments in there?

29:21 Yes. I think that no claim obviously is quite pertinent given what is happening with overdoses with overdoses over seventy thousand a year and about seventy fiveish percent of those the data says, our synthetic opioids fentanyl other types.

So, it is quite pertinent. It is a buprenorphine-based claim, not a SUBLOCADE claim, but we think it is quite pertinent.

And listen, we think it's created some discussions within the medical community with regards to broaden news of buprenorphine and SUBLOCADE, which is a buprenorphine product to address this.

29:59 Okay. Thank you, guys.

30:01 Thank you, Paul.

30:08 Okay. Thank you very much.

We'll listen. That concludes our Q3 results.

I'd like to thank everyone on the call both on the call and on the web for their continued support of Indivior and we look forward to seeing you at the various conferences and one to ones. Thank you very much.