Indivior Pharmaceuticals Inc (INDV) Q2 2018 Earnings Report, Transcript and Summary

Okay. Good morning, everybody, and welcome to our first-half results presentation at Indivior, where I am pleased to share with you the progress we are making and our next steps as we continue to strengthen our global leadership position in the treatment of addictions. I will assume that you’ve all read the forward-looking statements. Today, I am going to give an overview of our performance and talk about SUBLOCADE, where we’re at with the launch, understanding some of the dynamics in the market and a look at what comes next. And Javier will give us a legal update. Obviously, we’ve been very busy with the litigation matters in the last few weeks. So we will get a clear update from Javier. Then Mark will take us through the financial review, before I summarize at the end. So let’s first look at the first-half and our position on guidance for the year. Well, clearly, we have a tremendously intense number of competitor pressures bearing on our base business at the moment. And this is reflected in our net revenue, which is 5% down over prior year. The market growth in the U.S. continues, and this is happening at a very healthy rate. But the shape and the mix of this growth is predominately coming from the Medicaid channel. And this channel is of course the lower margin channel for our business that carries the highest number of rebates. So the growth that we’re seeing is in the lower margin business. And we’ve also seen a loss of some film share. So while we’re very pleased that the film share is very resilient, there is inevitability about some of these competitor pressures, and further enhanced by the fact that the generic tablet pricing has now reached the top-end of the commodity price floor. And I think we’ve always said that when generic tablet pricing gets to the commodity price floor, then we will start to see increased pressure on our market share. So not necessarily a surprise in term of some of the risks that we’ve known for a while, but certainly the timing is here and now and we’re starting to see a bigger impact. So the SUBLOCADE, the initial revenue to date in the first half of $2 million is clearly below all of our forecasts, including ours. So we are going to acknowledge the reality of that and seek to understand underneath that, what’s going well and what are some of the challenges, how are we making progress in overcoming those challenges as we move forward. The big story, of course, with respect to SUBLOCADE is that we still believe in the $1-billion-plus peak revenue forecast. The more immediate story for today is, well, how are we doing at the moment and what does the build towards that peak look like, so we can get a better understanding of that. Clearly, we’re very pleased with the legal progress that we’re making, that Javier will talk more about. We won the preliminary injunction against Dr. Reddy’s. We were very pleased with that, of course. We’ve always said that we believe in the strength of our intellectual property. We were pleased with the quality of the ruling that the judge issued on that. So, we will understand from Javier, okay, so far so good. But what are the milestones moving forward? We know that Dr. Reddy’s has filed to appeal. We’ve already filed our motion to oppose all of that. And we need to understand the timeframe moving forwards and the process. So Javier will take us through that a little bit more later. We’ve also continued to advance our discussions with the DOJ. And if you look at the language in our release, there’s more information about that there. So let’s get into SUBLOCADE then. So strategically, the fundamentals, some of the fundamentals that we are looking at with SUBLOCADE are strong. Now, it’s early days and some of the numbers are low. But nevertheless, we are seeing positive signs within the performance of the product that are indicative of long-term success. We’re also seeing – experiencing some challenges however. And I’m sure that many of you have heard some of the things that physicians and patients are saying in the market. And we’re going to explore some of those and tie them back to the challenges that we have seen and look at the progress we’re making and the plans that we’ve put in place to address these challenges moving forwards. So let’s focus, first of all, on what are some of those strengths that give us continued belief in SUBLOCADE. Well, first of all, the anecdotal feedback that we’re picking up from patients, so this is things that doctors have said to us. These are the things that patients are saying to each other in chat rooms that we can observe, is that the patients are having good experiences when they are actually taking SUBLOCADE. The sorts of things that they’re talking about are the sorts of things that we would expect them to say based on the scientific advancement of SUBLOCADE. With so, SUBLOCADE is a pioneering new treatment. It’s highly innovative, and it transforms treatment. What does that look like to a patient? So some of the things patients are saying at the moment is: I was worried about going on SUBLOCADE, because when I wake up in the morning and I didn’t feel very good, I need to reach out and take my daily medication; and I won’t have a daily medication, and therefore, I’m worried about that. Patients who are actually on SUBLOCADE are saying: yeah, I was worried about that too, but I’ve been on SUBLOCADE a couple of weeks now, and I feel good; I don’t wake up in the morning with those withdrawal symptoms; I don’t wake up with those feelings. If you think about the science of SUBLOCADE, where we said the huge innovation here is that steady-state plasma concentration of 2 nanograms per mil and that translate to 70% receptor occupancy, which means you don’t get the highs and the lows that are associated with daily oral administration, then that’s exactly how you would hope the patient would wake up feeling in the morning. So as you tie all these things together, you’re seeing a good consistency. We are very pleased with not only the quantity, but the quality of payor coverage. Often in a launch or sort of you’re trying to get patients requesting the product. And then you’re in at the payor, and that the demand from the patients influences the payor. But nevertheless, the fact that it’s not on formulary can have a restraining force on the advancement of your product. We’re seeing those forces at play here, but we are winning on that front. 67% of all lives in the U.S. are now covered for SUBLOCADE. So if you think that the comparator price at the moment, there’s generic level tablet pricing, and we’re going in with a price of $1,580. That’s quite a delta for the payor. And they’re so compelled by the argument, the data and the health economics value created by this product that they are rushing to put it on formulary. So 67% formulary coverage, that’s today’s number. That’s not the number at the end of the H1, so that was 56%. Now, it’s 67% as of today. So I think that that’s very positive strategically moving forward. We’ve also actually seen a high number of doctors who’ve tried to start their patients on this medication. Now, unfortunately, we’ve had well over 6,000 doctors tried – 6,000 patient attempts. But a very small number of those have actually made it through the system and been successful. So there’s quite an erosion there. And I’m going to dive into the detail and show you a little bit more about that. But the physicians’ desire to treat the patient is evident in those numbers, so we are encouraged by that. Now clearly, there is a lot of frustration, and it is taking time to get that first prescription delivered. But what is positive, this is not an ongoing phenomenon that affects the patient for the rest of their time on SUBLOCADE. This is very much a onetime experience. Once you’ve had your first injection, when you need the second injection, that process all happens very quickly. So we are seeing that. We’re also seeing that patients are staying in treatment and that they are coming back for their second injection, and they are coming back for their third injection. So I think that’s a very important indicator. We’ll look at specific numbers there a bit later. Of the safety data that we have seen, and of course, the numbers are relatively small. But we’re also encouraged that we are seeing what we would have expected to see. We’re seeing an adverse events profile similar to transmucosal buprenorphine, and the additional things about injection site pain are consistent with what we observed in the Phase III study. We’re also pleased that the FDA has now completed its review of all our promotional materials. So this is sort of a positive now, but it has been a drag factor year-to-date because we’ve been talking to doctors about the product labeling. We haven’t had resources to be able to give to patients, so that has been a restraining force. But that is now behind us and we can feel good moving forward. So those are the things that we believe are going well. Let’s think about some of the challenges. The first and most obvious challenge is the duration of the prescription journey. And I’m going to talk a little bit more about the prescription journey in a minute. But basically, this is the time it takes from the time that doctor decides to treat the patient to the time it takes to actually get the injection into their practice to administer into the patient, all right. So this is taking a lot longer than it needs to and that we want it to, and we expected it to. And we are working very hard to get that done. Also, the number of patients who are successful is low as we mentioned earlier. We would also like to see more healthcare professionals actually trialing this, and I think that that will – this is naturally restrained by the first two challenges. So as those challenges start to become addressed then I think so this will pick up. This, obviously, knocks on to the absolute number of patients in the system. And we think that patients themselves will benefit from all the education and support that we will be able to give them from now moving forwards that we weren’t able to before. So we have labeled the term the Prescription Journey. So what do we actually mean by that? Well, I think it’s very important, just to the take a step back and understand the processes that go on for all prescriptions. In the U.S., when the doctor triggers the desire to have the patient put on a medication, there is a four-step process. The first is that a benefits investigation takes place as to whether that’s covered on the formulary. Secondly, are the prior authorization requirements met on the formulary? Then the pharmacy that’s responsible for dispensing the medication has to verify with the payor that they will actually give the medication for this treatment, and then you have to dispense the medication. Now, in the retail pharmacy channel, this is all done by computers, and systems, and algorithms, and artificial intelligence. It happens instantly. So with SUBOXONE Film, when the doctor decides to give the medicine to the patient, they press the button on their computer. And within seconds, it’s at the pharmacy, and the pharmacy systems automate it and presto, it comes up on the screen, ready to dispense. And all the patient has to do is walk to the pharmacy, get the medication and you’re on your way. What we are asking doctors to do is something radically different with our specialty pharmacy distribution. And why it’s radically different is the doctor and the patient have to sit together, and they have to fill out some forms. Those forms then get sent to an administrative center, where the forms are processed manually by hand. The process that take place is verification with the payor, verification for coverage, verification for prior authorizations. And when all that is complete, the papers then go to the specialty pharmacy. The specialty pharmacy then have to go through a verification process. And then, the specialty pharmacy has to organize the delivery of the product back to the patient. Now, the reason I’m sort of going out of my way to explain all of this because it’s fundamental to understanding why the launch and that things are where they are at the moment. So if we accept that that’s the process, there are two things related to that. First of all, I’ve said the time it takes to get through the process. So let’s just pause momentarily and let’s dig a little bit deeper into the time that it’s taking. If you look at this bar chart, you will see that the numbers are coming down quite dramatically. Well, on this occasion, that’s a good thing, because on the left, the average time it was taking in March was to get for the doctor deciding, I want to treat this patient to actually having the injection in their hands ready to inject into the patient that was taking between 43 and 62 days. So if you imagine you’re a doctor and you’ve started this process and only two months later, two whole months, right, you finally get the medication. Clearly, that’s an unacceptable length of time. So some of these things are directly within our control and some are within our influence, but not absolutely under our control. As you would expect, the things that are on our control are already dealt with. And we have taken what was sort of taking from 18 to 20 odd days, and we get our – the stuff we control done in one or two days at the moment. So we have optimized what’s within our control. Some of the things that have enabled with that is that, obviously, we said that we have made an investment of a field reimbursement specialist to go to doctor’s office and help them with this and educate them on how to get this right. So if you look at the end of the day, at the first month, it says that the intake took three to five days. But if you don’t fill the form in and you send it off, guess what, it’s going to come back and you’re going to have to redo it. So by spending our teams in to educate the doctor’s office, it has enabled them to get the forms right the first time, and therefore, we have addressed that issue. Getting the forms accurate is important. Having the number of people, administrative people within the hub, who actually do all this processing. At launch, we had far more investigations than we had the capacity for. We fixed that immediately, and now capacity is no longer an issue. As payor coverage continues to build, that’s helped speed up the process as well. So what are the things that are less controllable? The less controllable is how the specialty pharmacy operates. And this is also very new for specialty pharmacy. The specialty pharmacy was designed really for low-volume, really high-value products, products that cost $10,000, $15,000 a go, low-volume. So to have a mainstream volume technology that is also a scheduled drug that is also cold chain, it’s brought a new level of complexity to the specialty pharmacy as well. So they are currently learning that with this patient population, the coordination with the doctor’s office actually requires a little bit of effort. So they’re upgrading the quality of their processes to make sure that they are able to provide the type and quantity of service level that’s required to be successful in this disease space. So we expect that the 15 to 20 and the 10 to 12 days in June will start to come down, maybe not quite at the same rate as we’ve got things down to date. But the going state here, we would say that this thing is optimized when the total duration for this is between 15 and 18 days. So there is a certain minimum amount of time that these things take. We have studied other specialty pharmacy models, and we see that sort of 15 to 18 days is best-in-class. And that’s exactly the standard that we have set ourselves, and certainly I expect that we will get to over time. So of all the patients that got set on an – benefit investigation, which is the start of that prescription journey, only 13% of patients made it through. So if you imagine the wastage here from the top of the funnel, for every 100 that go in the top of the funnel you’re only getting 13 out at the bottom. And we did have a lot in the top of the funnel in the first half. There’s over 6,400 patients were set off on that journey. Only 1,000 made it through. And you can see that in April, 13% made it through; in May, 31%; and in June, 36%. So a third – over a third of all, the cases closed out in June, the patient actually received the medication. So again, you can see that a lot of work is going on to improve these things. We expect that when we reach a going state, if you get 65% to 70% of patients who are successful, then that is a good benchmark. Even in the retail pharmacy, you only get 85% to 90% yield of all patient attempts. In this specialty pharmacy the benchmarks are sort of in the 60% to 70%, so we would certainly expect set ourselves targets at the upper end of the range of that. So again, we wish it were the case that we didn’t have to make these improvements. But the reality is that you don’t always really know how these things are going to go until you actually dive in and you start doing. We have dived in. We are doing. And as you can see that we are being very analytical, and we are being very agile with the speed and purposefulness with which we are addressing the issues that we identify. Coincidently, by the way, this is exactly what happened 15 years ago. When we started this business, we had very similar issues. We thought this is so compelling there’s so many patients out there who need treatment, they haven’t got access to any treatment at the moment. Surely, when you launch your product, it will accelerate away. And we found that the time it takes doctors to understand and embrace a wholesale shift in how they do their work every day takes a little bit longer than you think. So the two charts I’ve shown you at the moment, we would all hope – you will say, yeah, but you will show us those charts in the next couple of quarters, Shaun. Surely, those charts will get to the going state, and then that will be it. So I certainly hope that that’s the case. I can’t promise you exactly when they will reach the going state, but I can reassure you that we will give it our best efforts. As we move forwards, I think data that will be very helpful is on this slide here. We’ve got 75% prompted awareness, and this is amongst all the physicians who are waivered and qualified to treat opioid dependence. So whilst we could sort of have an intellectual argument about 79%, why not 100%. Nevertheless, clearly, we have made a big impact on this disease space and physicians do know about this technology. We also know that over 1,300 physicians have tried to get at least one patient onto SUBLOCADE, but only 384 have actually succeeded. Again, so we see the desire the issues we’ve talked about of the preceding two slides mean that despite 1,300 doctors trying to get patients on it, only 384 have, so 384 health professionals have experience of administering SUBLOCADE. Of those, only 30 have administered to more than five patients. So we know from all the time that we’ve been doing this that when doctors are trying something new in this disease space, by the time they get to five to six patients, they’re usually over the brow of the hill. And you think, okay, we’re through the initiation phase now. Let’s look to see how those doctors have embraced and adopt the product moving forwards. If we look to the chart on the right, remember, I said we were pleased with the treatment adherence. Well, this is the numbers that stand behind that. And we are looking at our monthly cohorts and following them through. So this is the patients who were injected in March. And you say, well, what about the patients you injected in May and June, so we haven’t had enough time yet to see what happens to their sort of second and third prescription. But we do for March, so we’re sharing with you the March data. 77% of all the patients injected in March came back for their second injection. So this is clearly indicative of satisfaction with the patient. You have to assume that the doctor is pleased as well. Otherwise, he wouldn’t go ahead and administer the second injection. And we are encouraged that these are really good numbers for a chronic relapsing disease. If you then go to the third injection, which are still very positive, you’ll see that 59% of patients injected in March are retained in treatment in months three and come back for their third injection. Of course, we’re going to look at the fourth injection, the fifth injection and see how all this goes. So I think these are not encouraging in terms of the number of doctors and patients who made it through the system, slightly more encouraging of the doctors who’ve actually tried to get patients through the system, but this needs to obviously increase. But we are pleased with the patients and their desire to come back and have another treatment. Hang on. I’m going the wrong way. So let’s just reflect, what are patients and doctors saying? Well, you probably know as well as we do, because I’m sure that you’ve been to conferences and you’ve heard from doctors and you’re looking in the chat rooms, the same as we are. So what are some of the things that patients are saying? Well, first of all, they’re anxious, because we’re asking them to do something different. That is very characteristic of this patient population. They don’t like change. That’s one of the reasons why the film share has been resilient. It’s a very good product, and they don’t want the change. They’re happy with what they’ve got. So SUBLOCADE is a change. It’s something different. They don’t have that daily thing. That doesn’t mean they don’t want SUBLOCADE, but it does mean, I want it, but I’m a little anxious about what’s going to happen with it. So you might pick that up. Clearly, if you ask for something and you don’t get it for two months, you’re going to express your frustration. So I don’t think anyone is surprised to see that. And patients who have had the injection, some of them have said, yeah, the injection was painful. Some say, it went away quickly. Some say, it lasted a little bit longer. We haven’t picked up any evidence that this is a deterrent to people getting the treatment, and it’s certainly what we’re seeing is consistent with what we observed in our Phase 3 studies. But for those who have started treatment, again, it’s only anecdotal, but we are seeing that people are pleased, and they are getting the satisfaction. If we look to healthcare professionals, again, those that have treated appear to be big believers. They’re reporting positive experiences the safety profile, as we spoke before. But again, doctors – some things doctors are saying, well, I’ve got a lot of patients I want to try on this. I’ve already put five or 10 patients into the system, and I haven’t got all those patients back out yet. I’m not going to make more work for myself and go and put another 10 in until I’ve got the first 10 out. So I think it’s understandable that they would say some of those things. Different doctors are embracing the new storage requirements and processes at different rates, and I think all of this is expected when you know. So in terms of next steps, I mean we remain very positive about SUBLOCADE overall. Clearly, there is a huge opioid crisis. Clearly, there is a desire to improve the standards of care from patients and physicians and payors. That’s clearly demonstrated by payors. And at the end of the day they are the ones who have to pay for it. So that’s very positive. We will continue our relentless pursuit to reduce the duration and the efficiency of that prescription journey. And then all of our efforts will be focused on driving those new healthcare professionals and helping support them to get increasing numbers of patients treated on SUBLOCADE. So we remain very confident in the long-term potential for this, and we’ll keep you updated, of course, as we move on our journey. So that’s it for now on SUBLOCADE. I’m very happy to take your questions afterwards, of course. But now, I’ll invite Javier to update us on our legal progress.

Thank you, Shaun, and good day, everyone. As Shaun stated in his introduction we’ve adjusted our legal provision related to major litigation. Based on facts available to us at this time, the provision, the revised provision is reflected on this slide and also in our half year results release. Moving on to ANDA. We are continuing to vigorously defend our patent rights to SUBOXONE Film, which were again recently tested following FDA’s approval of Dr. Reddy’s Laboratories generic buprenorphine/naloxone SUBOXONE Film product and DRL’s subsequent launch of this product at risk. The subsequent events beginning with DRL’s product approval and at risk launch are summarized on this slide and described in further detail on our half year results release. The two key takeaways, however, from these events that I want to highlight for you are: one, we reacted immediately to DRL’s launch, and we’re successful in reestablishing the status quo for our SUBOXONE Film patent exclusivity through a court ordered, temporary restraining order and subsequent preliminary injunction; and two, that DRL is aggressively continuing to challenge the status quo. DRL has appealed the PI ruling, and they have also filed emergency motions seeking to expedite the appeal on the PI, and to stay the PI pending a ruling on appeal. We have opposed these motions and are continuing to vigorously pursue the broader appeal of the District Court’s ‘514 patent non-infringement ruling and the recently filed litigation asserting the ‘305 patent. Of course, in parallel with this pursuit, we will also continue to explore the possibility of settling these outstanding litigations as we have previously done with Mylan and Par. In terms of our current understanding as to how the estimated timing of these proceedings are likely or may play out, I’d like to draw your attention to this slide, which provides an overview of our current estimates of the key milestones in these outstanding legal proceedings as well as timing for potential generic entry. Yesterday, we filed our opposition to DRL’s motions to expedite the appeal of the PI and to stay the PI pending the appeal. We expect that the Federal Circuit Court will issue a ruling on these motions within the next several days. If the motion to stay the PI is granted, we anticipate a ruling – well, if the motion to stay the PI pending appeal is granted – excuse me, DRL would be free to launch its generic product at risk. If the motion to stay is instead denied, DRL will continue to be enjoined from launch pending the outcome of the appeal of the PI. If the motion to expedite the appeal is granted, we anticipate a ruling on the appeal could come in Q4 this year, whereas if the motion is denied, a ruling on the appeal could come in Q2 or Q3 of next year. Finally, if the underlying appeal of the PI is denied, we would maintain the status quo and DRL would continue to be prohibited from using, selling, offering for sale or importing its generic product in the U.S. pending the outcome of the lawsuit of the ‘305 patent or potentially earlier upon the issuance of a ruling on the appeal of the ‘514 patent. Conversely, if the underlying appeal of the PI is granted, DRL would no longer be prohibited from launching its generic product and could reenter the market on an at risk basis. Thank you. I’ll turn it over to Mark Crossley for our financial update.

Thanks, Javier. Good morning, everybody. As always, we appreciate your time and your attention to the Indivior story. I’ll take you through the first half financial performance as well as then review the overall financial position. Starting with an overview of the profit and loss account on an adjusted basis, which eliminates the effects of exceptional items. As always, we’ve provided a full reconciliation of the impacts of these exceptional items in the appendix of our published slides for your convenience. Overall, looking at the performance for both the first half of 2018 and the most recent quarter, you see the year-over-year impact to operating profit and margin from the lower sales and our higher level of investment in the SUBLOCADE launch. I’ll provide more detail on the drivers for each key line item in a moment. What I will note at the start of this, is that the year-over-year comparison was always likely to be more difficult in the first half given the back-end loading of our infrastructure and organizational investments in the late-stage assets in 2017, combined with the half-2 ramp-up of the SUBLOCADE net revenues in 2018. You’ll recall we added $40 million to $60 million in incremental investments in 2017 to support the launch of SUBLOCADE and to a lesser extent, investment behind RBP-7000. These investments were naturally phased to the back half of last year, given approval and launch timing of SUBLOCADE. In the most recent period, we’ve seen an annualization of a portion of these investments, chiefly, the in-support hub for SUBLOCADE, field reimbursement specialists as well as the medical science liaisons. All of these investments are actively engaged with the physician, the patient and the prescription journeys that Shaun spoke to you earlier. Further there’s also incremental investment behind the organizational start-up of the Behavioral Health unit for RBP-7000. Taking further down the P&L, you can see the benefits from the more favorable terms we negotiated as part of the term loan replacements in December. And our tax rate is substantially reduced from our ongoing tax planning strategies and the recent change in the U.S. tax law. The half-1 tax rate of 15% is a bit ahead of our fiscal year guidance of high teens. Turning to more detail on the top line for the period. Overall, buprenorphine medically assisted treatment market conditions in the U.S. continue to be good. However, as we said in our July 11 release, a disproportionate amount of market growth is now driven by the Medicaid channel through the increased government funding and growing awareness of the opioid crisis in general. As the branded market leader, Indivior is most impacted by this dynamic, which negatively impacts our mix. Pricing in the Medicaid channel is largely governed by generic tablet competition, which has previously indicated, has fallen an additional 6 points to 70% to 80% below list price. The other top line dynamic during the first half of 2018 was the share performance of SUBOXONE Film. It remained relatively resilient during much of the half, down about 1.5 points from fiscal year-end, for a total of 5 percentage points versus the year-ago period to 54%. While we plan for a similar share loss in the period, much of the loss occurred in the more profitable cash and commercial managed-care channels. This further exacerbated the unfavorable mix impact of net revenue from the Medicaid channel. As Shaun discussed earlier, we currently are revisiting our top line assumptions for SUBOXONE in light of Dr. Reddy’s U.S. market entry before the preliminary injunction was granted. The share DRL has captured from their one shipment a day has increased week over week from 0.7% in its first week to its current share of 4.7%. Our goal is to provide new fiscal year 2018 guidance on or before our third quarter results call on November 1, when this dynamic is more measurable. Sticking with the U.S. market, Shaun spoke to SUBLOCADE revenues for the period were $2 million. We indicated a range of net revenue of $25 million to $50 million for fiscal year 2018. The majority of which will be realized in the fourth quarter as access continues to grow and physician and patient experience improves with the initiative Shaun described earlier. The key here is that we would focus on both improving the prescription journey as well as healthcare trial. Turning to the Rest of World, the underlying story is one of solid growth in Australia and Canada, but continuing austerity and competitive impacts in Europe. Taking each in turn, SUBOXONE Film continues to perform well in Australia. And in Canada, it’s been approved for use in the prison systems. We filed for approval of SUBLOCADE in both countries, and Canada has granted our submission priority review status. On the other hand, our tablet based business in Europe has continued to face a challenging pricing and competitive environment, although our share in key markets has held up and the overall performance was within our expectations. Taking a look at operating margins and costs. On the left side, you can see the year-over-year impacts of SG&A, of the annualizations of the SUBLOCADE investments in 2017 over a relatively depressed spend in the base period. In addition, you also see the impact of recent investments we’ve made to improve the SUBLOCADE prescription journey and to establish the new Behavioral Health unit for RBP-7000. Lastly, legal costs were also up in the period as we continued to vigorously defend our IP. The increase in these costs was partially offset by lower R&D expenses in the period as we target our key spend on investments to support SUBLOCADE and our early-stage assets. Turning to margin performance for the period. Gross margin is down 3 points versus year ago and 1 to 2 points versus historical trends. This is primarily driven by the costs associated with preparation for generic launch at risk, specifically, our authorized generic. On the operating margin side, operating margins were down 14 points versus the base period, which was elevated due to half-1, half-2 spending phasing in 2017, as I just spoke to. As we announced on July 11, we’re targeting at least $25 million in cost savings this year to help support profitability of the business and counteract the adverse impact of the U.S. market developments. We expect these savings to be achieved by reducing lower priority spending, lower strategic investments without compromising our SUBLOCADE launch nor our core compliance programs. We’ve taken a similar approach to this in making strategic priorities within R&D within the year, which has resulted in lower year-over-year spend on key strategic projects. The targeted actions are underway, and we’ll look to provide an update on our progress in the Q3 results. Finally on the balance sheet. The key message continues to be that we’re maintaining Indivior’s financial strength and flexibility. Our gross cash position reached $951 million. And our net cash was $469 million an improvement of $93 million since year-end and an increase of over $200 million over the past 12 months. In light of recent events, we consider it prudent to maintain our cash position to protect the business against any further potential at risk generic film launch and give us the flexibility to resolve outstanding legal matters, while protecting our number one priority, the SUBLOCADE launch. With that, I’ll turn it back over to Shaun for our close.

Okay. Thank you, Mark. So clearly, we have plenty going on at the moment. The fundamentals of the business, I think, it remains strong and encouraging. Our existing film business is obviously being impacted by sort of known risks. And you sort of have a feeling, well, all these risks seem to be arriving at once, but obviously, they’re outside our control. Our job is to respond to those risks and vision forward the pathway to deal with those as effectively as we can. I think, we’ve seen from our legal function that we are running a capable campaign there, with key successes under our belt. And I think if you, once again, look at the presentation Javier has tried to vision forwards, what are the moments in time, when some of the cards turn on these generic risks to help you, as you think through your models and think about the future of the business, I can see some of those milestones as well. We are pleased with many elements of the start to SUBLOCADE. But clearly, we have to be self-effacing and recognize, we’ve got a lot of work to do, and we have to do a lot of that work better. So we will remain focused on that. Our first quarter’s focus has been primarily on the prescription journey. Now that we start crossing those issues off the list, we will be spending the next two quarters focusing intensely on the physician and the patient and generating more trial as we also optimize the conversion of trial into actual treatment. We’re also very excited and hopeful of RBP-7000. The FDA is due to give us the decision on Saturday. So they may do it Friday. They may do it Monday. Obviously, we’re very close to the end of process. We’re very hopeful of the news that we might receive, but we don’t want to get ahead of the FDA. They still have work to do. It’s their decision. And so we await to see what that decision is. So hopefully, we’ll have news to share in the coming days on that. We continue, as the leader and as the pioneer to drive the development of the treatment of the addition as a disease. SUBLOCADE is the tool to do that. We’ve also filed registrations in other countries of the world, in Australia, in Canada. We’re working towards filings for Europe. So we believe in this technology, and we’re still confident in our $1 billion peak sales revenue for this. We will help share the information along the way, so that you can decide the shape of the ramp-up curve that you think to get to that peak sales and when you believe that peak sales will happen. In the meantime, of course as Mark said, it’s prudent to acknowledge the reality. We have a number of risks. We haven’t yet got that net revenue curve going for SUBLOCADE. So for all the cash that we generate, we need to be prudent and we need to look after it, so that as we move forwards we’re in a strong position to cope with these risks should they materialize. So that’s it. Thank you very much, as always, for your interest and attention. We look forward to engaging more in the coming quarters and in our one-to-one meetings and conferences. But, for now, I’d be happy with the team to take any questions you may have.

Hi, it’s Christian Glennie with Stifel. Just firstly on the treatment adherence rates, and the chart you’ve got, obviously, it’s early days in terms of the numbers there. But just on the March patients, what was the actual number of patients in that cohort? And then, secondly, just for context as well on the – what you would typically see on a two and a three month adherence or retention rate for SUBOXONE Film.

Okay. I have the numbers on the top of my head for March. In terms of the film, these are similar or slightly better than we would expect to see for the film. But again, it’s very early days, very difficult to draw direct comparisons.

Okay. And then on – you talked a lot about the – one of the issues, pretreatment or some anxiety around how they’re going to cope on it without having something to reach on a daily basis. We’ve heard that there are people, as part of dealing with that, would give them a SUBOXONE Film prescription potentially alongside of SUBLOCADE, just as a safety net if you like or slightly a psychological thing maybe. Is that something you’ve observed? And is it something that anybody – any patients are ever having to reach for that daily med as well?

Well, I can’t guarantee or now what happens with every single patient. So – but what I can say is that the data that we’ve had from the clinical studies certainly do not suggest any need for daily supplementation. We certainly wouldn’t be recommending it, and we’re certainly not hearing of that as an issue or a problem. Now always, there may be a patient and a doctor or more than that that wants that reassurance. But I think that as the technology plays out, doctors will have greater confidence, because they’re saying, you know what, in all my other patients I’m not seeing that. So that will inform. But until you’ve actually got that experience and got that confidence under your belt, then doctors are going to approach this differently. But certainly, we are not advocating that there’s a need for supplemental daily dosing. In fact, we believe the strength of the technology is that that’s not required. But obviously, individual doctors will have to get comfortable with the experience of that. Next question?

Hi, there, Harry Sephton from Jefferies. Thank you for taking my questions. So on R&D, for the first half of the year, we saw spend fall by about $10 million compared to last year. I just wanted to get some idea on whether there are specific savings, potentially contingency savings in there or – and whether that’s just a lower degree of studies going on in 2018?

Yes, for the first half of the year, the reduction in R&D spend is just phasing in activity based on where we were and coming out of the approval, lining up the Phase 4s, in the balance to go, as we start to look towards the $25 million, we’ll have R&D and the overarching costs kind of in our strategic choices, so.

Yeah, that’s helpful. Thanks. And on R&D, you’ve got one of the post-marketing studies to determine whether SUBLOCADE requires initiation of the buprenorphine for the week prior to treatment. When can we probably expect the outcome of that study? And also have you had feedback from any of the physicians as to whether the initiation on the film is actually maybe a barrier to treatment for SUBLOCADE?

Yeah, so for that, I mean, that’s discussions that are going on with the FDA. Once we agree on the study protocol, then we can guide you a bit more on the timings with regards to that. From a barrier standpoint, we have not heard that the film is a journey. As we’ve talked through with regards to the prescription journey, almost every patient has to go through that initial prescription journey, where they have to get their prior auth and things like that. And so, no matter what dose you have or whether your indication, there’s going to be a period of time, where you need to enter treatment and be on a sublingual until you can actually get the medication.

Okay. Thank you.

Next question? Tom, down at the front.

Hey, guys. Thank you. Paul Cuddon from Numis. Can you elaborate possibly on the types of physicians or indeed patients that are completing the journey? I mean, is there a profile of patient that you are specifically targeting? Are you finding that the 275 waived physicians are having more success? And then…

Yeah, I think there are a number of factors. So we don’t have absolute clarity on exact precision on a number of those questions. In terms of who are the patients we’re targeting, it’s very clear. Anyone with a diagnosis of moderate to severe opioid use disorder is a, call it, eligible candidate for treatment with this medication. In terms of our focus, we focus on the new patients predominantly who are coming in because that’s who we studied in our Phase 3 trials. But any patient is eligible. And one of the things that we’re obviously going to be getting close to over the coming weeks is, well, who are those patients as the physicians are choosing, how do we start to segment out the physicians, the profile, and where they’re at in their adoption journey of the new technology, so that we really optimize our understanding.

And, secondly, Javier, the timing wasn’t quite clear to me as to whether you were saying that, in several days' time we’ll have a decision on the motion to stay the injunction of the decision on the expedited appeal. So perhaps you could just clarify that.

Right, so what – yesterday, we filed our opposition to those two emergency motions that DRL filed. And so, we expect that the Federal Circuit Court will issue a ruling on those emergency motions, both whether to expedite the appeal and whether to stay the PI pending the appeal.

So we should hear on both within days. Okay.

We will now commence in our audio questions. Our first question is from Nick Nieland from Citi. Please go ahead.

Hi, I hope you can hear me. Three questions, please. So you’ve reiterated your confidence in SUBLOCADE peak sales. I wonder if you changed your view internally on how long it will take to get to this $1 billion number. And secondly, a quick question on RBP-7000 guidance. Given that this market is $2.5 billion and growing at nearly 20%, do you think that your guidance of $200 million to $300 million in sales is conservative? I wonder if you could remind us of the differentiation of this product and why you think it will get less than 10% of this market in terms of sales. And then finally, for Mark, you’ve guided to high-teens tax rate for the full year. You mentioned tax planning and U.S. tax reform. I wondered how sustainable the lower tax rate seen in the second quarter might be going forward. Thank you.

Okay. Just remind me the first question again, sorry.

The first question was about SUBLOCADE peak sales and whether you’ve changed your internal view.

Well, we have never given a clear view on timing to actually reach the peak. But clearly, we’ve been very transparent that the $2 million in the first half was less than we had forecasted. It’s too early to say whether that impacts the time to peak. We have to see what we learn over the next two or three quarters and see how things develop there. So the second question was relative to RBP-7000. And this is again built on the ATRIGEL platform. This is also a once-a-month treatment. Here, it is for schizophrenia. And one of the key attributes here is that it does not require on-top dosing. So, again, we see that the ATRIGEL platform delivers a consistent plasma concentration across the whole month, so that’s something that we think is important to patients and physicians. With respect to our peak sales guidance of $200 million to $300 million, that is our guidance and that’s what we believe at the moment. When you get into the market and we see how things go, clearly, we will have more data points to guide us. But we don’t want to get ahead of ourselves, because we don’t actually have the approval yet. So, we will continue to work on that technology and, obviously, to try and make it as successful as we possibly can. And our first priority will always be on SUBLOCADE. So as we move forward, no matter how the sort of upsides and downsides of risks play out, we will always give all of our first efforts to SUBLOCADE. And then, there was a question for Mark.

Certainly. Nick, on the tax rate, we have seen the 15% through the first half, guided towards high-teens. We think that the revenue mix that’s in the back-half, we still stand behind the 17%. So I don’t expect it to stay with the lower Q2 sort of tax rate.

Okay. Thank you.

Hi, it’s James Vane-Tempest from Jefferies, just a couple on SUBLOCADE. Just curious, is SUBLOCADE is going to be the main product for the sales force. When you consider the sales force allocation today, how much of it is on SUBLOCADE versus the film? Just curious in terms of the efforts there. And then secondly, just – and I appreciate it’s very early days, but initial feedback from physicians. Are you finding that SUBLOCADE has been more beneficial in stable patients or less stable patients?

Okay. In terms of sales force allocation time, obviously, the vast majority of the time is spent on SUBLOCADE. But we’re also – they’re really answering questions that our physicians may have on film. So they are serving both the products, but clearly physicians are more hungry for new information, education with respect to SUBLOCADE. So that’s where the vast majority of their time is focused. In terms of the success and which patient profile does better on SUBLOCADE, it’s too early to have a clear view of that at the moment. And as we go through the next weeks and months, we’re looking to understand that.

Thanks.