Indivior Pharmaceuticals Inc (INDV) Q2 2019 Earnings Report, Transcript and Summary

Welcome to our First Half Results Presentation at Indivior. My name is Shaun Thaxter. I'm the CEO and I look forward to hosting today's presentation. I will take it as read that you've read the forward-looking statements. We'd just like to walk you through the agenda for today's presentation. I will give an overview of the performance in the first half and then take a deep dive into some of the SUBLOCADE, our KPIs and then appreciate the good progress that we're making there and also take a look at the launch of PERSERIS and how that's progressing. Then Mark Crossley, our Chief Financial and Operations Officer will take a deeper look into the financials. And that will be followed by a legal update from our Chief Legal Officer, Javier Rodriguez. So I will warn you that under the advice of Legal Counsel, all we're able to say on the DOJ matter is that we are preparing for trial and we're not able to disclose any additional details. Christian will share some of the progress that's been made in R&D this year and there's some really exciting new science that has come out. So I think we'll all look forward to that. So starting with the financial performance in the first half, we saw declining revenues. It wasn't a surprise that revenues would come down of course because of the launch of the generics in the first quarter. What is the surprise however is just how well the SUBOXONE Film share has held up and the strong performance of the authorized generic. So this led to sort of better-than-expected revenues during the first half. Although declining, we exercised strong discipline over our cost base and through our savings programs that you know all about. We're able to deliver profit in the first half and that was an improvement over the performance in the first half of last year. All of which means, that we managed to maintain a very strong cash position of just short of $1 billion and that will be very helpful as we face the uncertainties and work our way through the DOJ in the coming year. So I think it's been a very positive first half. We've seen the market continues to grow. The federal government and the states now are doing more to improve access to treatment. I think the benefit of medication-assisted treatment with buprenorphine is well established. The fact that patients are under are not accessing treatment as easily as they would like and so there is a big push to improve access to treatment. This is underpinned and supported by a lot of new science that has been generated and published in the first half and Christian will share that with you. In addition to the good progress that we've made on SUBLOCADE in the U.S. which gives us the comfort that we are comfortably going to deliver our guidance for the year on SUBLOCADE, we're also now moving to registrations for SUBLOCADE in other countries around the world. So we're making good progress on our vision to ensure that all patients around the world have access to evidence-based treatment. So let's turn our attention now to SUBLOCADE. So a year ago today, I had to stand before you and tell you that a lot of the logistics and the payor mechanics were broken. Today I'm very pleased to say that they mended. We've made very good progress across the first half an increasing our payor coverage now up to 85%. Perhaps more importantly the quality of that coverage has improved enormously across the quarter. Continued improvements in -- simplifying prior authorization some accounts moving to pharmacy benefits, some accounts moving prior authorizations altogether. So I think that there's been real momentum there across the half. And I'm now pleased to say that the percentage yield has grown to 58%. So that side of things has worked very well and made tremendous progress. So now, the focus is really moving towards generating new trial with new physicians and increased adoption by patients. So we've added an additional 6,000 prescription initiations in the quarter and half of those have converted to patient injections. This is obviously a reflection that the yield has gone up to well over 58%. We've always said that the analog for where we want to get to with the yield is 50%. So that's from the long-acting injectables with schizophrenia. So once we get to 50%, we're kind of as good as everybody else, anything above that is overperformance. So we expect that we should get into the range of 60% to 70% before this yield starts to plateau out. But we have to wait and see how we progress with that, but very encouraged to be up at 58% already. As we see -- if we think about the number of healthcare professionals an additional 500 doctors coming in across the quarter in terms of new doctors initiating benefits investigations for the first time and another 500 doctors who've actually administered treatment to patients. So we're very pleased. We're building some very good momentum here. Doctors moving from trial to adoption continues to improve and we've added another 150 doctors to the pool of highly experienced doctors that have treated more than five patients. So we're very pleased with the progress here. In terms of retention, the retention continues to be in line with expectation from our Phase III studies and our experience overall. So we continue to be pleased with the progress there. Something that is increasingly important to our business is -- are the sort of integrated delivery networks and the whole sort of organized health care system. We've seen in many industries over the years, where the independents and the little guys get swallowed up by the chains and the groups. And we're seeing this in the U.S. health care system, there's more sort of individual doctors groups and practices are becoming parts of networks. So these organize health care system is going to become increasingly important. We have increased our capabilities and the capacity of resource that we have that are dedicated to understanding and penetrating these health systems. And we've made very good progress. Something that you should be aware of however is that the organized health systems acquire the product through specialty distribution rather than specialty pharmacy. So why is that important? Well, as we report a lot of the KPIs and a lot of the data, we can only see that data in the specialty pharmacies. During the first year of launch, most of the business has come through specialty pharmacies. As the business builds and expands and we increase the level of penetration into the organized health care system, we will -- we won't have visibility of a lot of that data. What we will be able to see is the number of prescriptions that are dispensed. So it isn't really a big deal today, but as we move forward and report numbers in the future, we may have to think about some of the data that we provide and how relevant it is to the total market, so just really something to think about moving forward. We're very pleased with the progress and the penetration that we've achieved with our digital marketing campaign. Of course, patients like to go online to search for information for health care, it can often be a private something they can do on their own when no one else is about. And we know that this is a preferred method of information. So our digital campaign continues well. And we've also seen an increased confidence in our sales force. As the yield percentages have improved, so it's made it a lot easier for them in their relationships with the physicians and providing a better experience for the physicians who are treating patients with SUBLOCADE. And that in turn fuels increased confidence and accelerates the experience of our sales team. So, we're very pleased with the loyalty, the resilience and the commitment to our vision from all our sales team through what was a very challenging first half. Thinking momentarily about PERSERIS now, it's too early really to say anything meaningful on PERSERIS other than everything is going in line with expectation. We have got the penetration of the payor coverage that we anticipated. The quality of the coverage is consistent with what other long-acting injectables have. So, we're not disadvantaged there in any way. There are no problems with distribution and infrastructure. So it really is a case of just generating trial and adoption with physicians which is going well. We've had a lot of demand for samples. We're hearing anecdotally encouraging things back from doctors and patients. So we just sort of await the sort of next phase of this and see how this unfolds. So that's the overview. I welcome Mark now to share more detail on the financials. So, thank you.

Thanks, Shaun, and good morning everyone. Overall, second quarter financial performance mirrored that of the first quarter, resulting in half year results that were ahead of our expectations. The slower-than-expected erosion of SUBOXONE Film versus analogs, along with continued benefits from operating cost reductions, resulted in a small increase in operating profit and net income versus the comparable period a year ago. Now as we think to the second half of 2019, the cost savings benefits will start to wash through year-on-year comparisons. In addition, given we're just five months into the launch of generic film and the market is not stabilized, we're prudently assuming an accelerated rate of share erosion for SUBOXONE Film toward observed analogs in Q4 and therefore further net revenue decline. We confirm our OpEx guidance for which there will be some incremental phasing, primarily planned legal activity and marketing investments in the back half of the year. Please consider these factors in your modeling. Taking a closer look at the income statement. There were no real surprises. Starting with net revenue. The overall decline in both periods largely reflects the decline in U.S. net revenue from SUBOXONE Film. In Q2, we had a full quarter of generic impact, resulting in a 24% decline in U.S. net revenue. SUBOXONE Film share declined a further 13 points from 40% at the end of the first quarter to 27% at the end of the second quarter and Film share now stands at 27%. The decline in the U.S. Film business was partially offset by SUBLOCADE net revenue of $17 million in the quarter and by a good contribution from the authorized film generic marketed by Sandoz, which continued to lead the generic category with an exit share of 49%. Additionally, the quarter results were flat at approximately five points by one-time gross to net adjustments associated with the authorized generic launch. Looking at the Rest of World. The 4% decline in the quarter is back on trend with modest growth in Australia more than offset by pricing pressure, competitive activity and FX. You may recall that the Q1 performance in the Rest of World was heavily affected by an episodic high net revenue comparison in the base period in Canada which explains why the decline in Rest of World net revenue in the first half was high at 19%. Looking at gross margin, this was in line with expectations. The modest decline was principally due to mix impact from the authorized generic and lower SUBOXONE Film shares. We would expect gross margin to continue to come down a bit in the expected range of 80% to 85% as U.S. Film shares continue to fall off. On an adjusted basis operating income increased modestly in Q2, also for the half year. Overall OpEx meaning SG&A and R&D combined declined in the first half by about 30% or $84 million, mainly as a result of the contingency plan actions we took in the back half of 2018. Our narrower strategic focus resulted in lower overhead costs from headcount and expense reductions as SG&A loan declined $75 million year-over-year. R&D expense was modestly lower by $9 million reflecting reprioritization of investment on study commitments and health and economics outcome data generation for SUBLOCADE and PERSERIS. Recall, we stated that our targeted OpEx reduction would be approximately $140 million versus the fiscal year 2017 baseline of $586 million. Throughout the first half we achieved $125 million of OpEx savings which compares favorably with this target. Looking ahead you should not extrapolate the Half one OpEx run rate as legal activity and planned investments will be weighted to the second half of the year. This explains why we maintain our fiscal year 2019 guidance for OpEx of $440 million to $460 million. Turning to adjusted net income. We also saw increases in both the quarter and the half year. The increase in both periods resulted from the modest operating income uplift together with the benefit from lower overall finance expense and modest interest income on our increased cash balance, as well as benefits from our operating structure impact on the tax rate. Cash in the balance sheet. Quickly turning to cash, our cash balance as you see here remain healthy with an ending balance of $988 million versus $924 million at the end of 2018. Net cash at the end of the quarter was $747 million. We continue to maintain a conservative policy of retaining a substantial cash buffer on the balance sheet given the ongoing commercial transition of the company towards our growth drivers of SUBLOCADE and PERSERIS together with the legal challenges, we're currently confronting. Cash conversion just a few words here. We've heard -- you've heard us talk in the past about the potential adverse impact on working capital and cash of a decline in Film net revenue associated with the generic entry. So you see here while we were cash flow positive on an operating and net cash net basis versus the prior period we saw an increased outflow of cash principally driven by government rebate payments, we're required to make. Consequently our cash conversion ratio declined versus the prior half year. Looking to the remainder of 2019. This trend is expected to continue based on our expectations of accelerated erosion of SUBOXONE Film in line with analogs. As we announced on July 11, we now expect fiscal year 2019 net revenue to be in the range of $670 million to $720 million. The range we've provided continues to be wide reflecting uncertainty over evolution of the U.S. film market. As Shaun already stated while SUBOXONE Film outperformed our expectations in the first half, we have to be prudent and expect it to revert to observe industry analogs during the second half. This would imply share loss reaching approximately 70% in the next couple of months and 80% by the end of the year. Additionally, we've assumed a reversion to analogs on the market share of the authorized generic due to competitive activity and payor pressure. For Rest of World we expect continued pressure in the legacy European markets due to austerity measures as well as intensified branded and generic competition. This said the performance should be closer to what we saw in the second quarter, given the unrepresented year-on-year comparisons in Canada. To close, as we've already been mentioned our expectations for SUBLOCADE net revenue, we feel comfortable with the 50% to 70% range and the total OpEx of $440 million to $460 million remains unchanged as does our expectation of only modest net revenue from PERSERIS. With that I'd like to hand over to Javier for a legal update.

Thank you, Mark. Good day and welcome everyone. With respect to the Department of Justice matter, Indivior filed a motion to dismiss the indictment with the court on July 19. Subject to change pending the outcome of this motion, trial is set for seven weeks scheduled to begin on May 11, 2020. As Shaun has previously stated the company is diligently preparing for trial. However as the DOJ received the protective order from the court that limits our ability to discuss this case publicly, we direct you to the public docket for any other information regarding this matter. Turning now to ANDA litigation, On July 12 the Court of Appeals for the Federal Circuit affirmed the earlier judgments of the District Court for the District of Delaware involving Dr. Reddy's Alvogen and Actavis. Specifically in a 2:1 majority ruling, the CAFC held that the asserted claims of the '514 and 150 patents are valid that DRL and Alvogen do not infringe the asserted claims of those patents, and that Actavis doesn't fringe the asserted claims of the '514 patent. This CAFC ruling maintains the status quo in the market as both DRL and Alvogen have previously launched the generic products at risk pending resolution of the outstanding district court litigation in the District of New Jersey on the 305 and 454 patents. Importantly, this ruling by the CAFC has affirmed the enjoinment of launch by Actavis until the expiry of the '514 patent in April 2024. As to DRL and Alvogen, Indivior is currently assessing with external counsel possible evidence to appeal the CAFC's ruling. Finally turning to Braeburn, on April 9, Braeburn sued the FDA in the U.S. District Court for the District of Columbia and asked the court to vacate the FDA's decision that SUBLOCADE's three-year exclusivity, bars approval of Braeburn's monthly Brixadi product. Indivior intervened in this case on April 12 and the court ordered expediting briefing on Braeburn's claims. Braeburn moved for summary judgment on May 13 and both the FDA and Indivior filed cross motions for summary judgment on June 3. The Court heard arguments on the parties' cross motions on July 15. On July 22 the court issued a ruling that granted summary judgment for Braeburn vacated the court's earlier decision holding that Indivior's three-year exclusivity period blocks Brixadi's monthly product, and remanded the matter to the FDA to reconsider with deliberate speed Braeburn's application for final approval for Brixadi monthly. Although the court held that the FDA had permissibly interpreted the governing statute it asserted that FDA had not identified a sufficiently clear standard for evaluating the scope of an applicant's exclusivity. The court also suggested that FDA's evaluation of the scope of SUBLOCADE's three-year exclusivity differed from the way the agency had approved similar queries in the past. In holding that FDA must re-evaluate the scope of SUBLOCADE's exclusivity on remand, the court also made it clear that FDA could still find that SUBLOCADE's exclusivity blocks the approval of monthly Brixadi, expressly noting that FDA's proceedings could lead to the same endpoint as its initial determination that SUBLOCADE's exclusivity bars approval of Braeburn's monthly Brixadi product. In light of this ruling, Indivior is evaluating next steps including a possible appeal. It is unclear at this time whether FDA intends to appeal the decision or if it wants to conduct the remand proceedings ordered by the court. We do not know when FDA will decide how we'll address this ruling and can't predict how long it will take FDA to reach a decision in this regard. Thank you. I'd like to now turn it over to Christian for an R&D update.

Thank you, Javier, and good morning, everyone. Let me start with highlighting some of the strategic pillars and strategic priorities in the R&D organization true to our vision and mission. There are basically six main pillars in that strategy. The first one is what I would refer to as the business continuity. It is important to us to make sure that we have the appropriate resources allocated to maintaining valid licenses for all marketed products globally support all the supply activities, and of course managing our risk evaluation and management strategy. The second one is to now expand the treatment with SUBLOCADE beyond the marketed product that is in the U.S., Australia and Malaysia. We have filed a series of regulatory dossier, and we are currently responding to queries from the wide range of regulatory agencies in Canada, Europe, Israel and New Zealand. And with respect to SUBOXONE tablet in China, we are currently working on the technical transfer to Pukang Pharmaceuticals. The third pillar, and of course one of the main focus right now is what can we do in the R&D organization to support SUBLOCADE in the U.S. As you know, we have a series of post-marketing requirement studies. All these are currently on track. We have post-marketing commitments as well. These are on track. Life cycle evidence generation and optimization studies, I will give you an update on all these studies in a few minutes. The RECOVER study, we had our last patient in the 24-month time point in March this year, and we are expecting the final report on that study in December. We are performing some additional drug optimization work. And of course, we are sharing the science of SUBLOCADE in a wide range of peer-reviewed publications and conference presentations. The fourth pillar is with respect to SUBLOCADE ex-U.S. This is what we call SUBUTEX MONDEPA. We are supporting a launch in Canada as well as filings and very importantly, responses to queries from agencies in Europe, Israel and New Zealand. And as you heard, we received the regulatory approval for SUBLOCADE in Australia on July 17. The fifth pillar is of course to support PERSERIS in the U.S. but now also in Canada. So we have a series of post-marketing commitment studies, some additional drug optimization work. And, of course, we are supporting our partner in Canada, HLS, in order to prepare the regulatory filing in Canada by Health Canada. Last but not least, again, a series of publications and conference presentations. And last but not least, we continue to do some work on our early stage assets. There are three of them. The first one is selective orexin-1 receptor antagonist. We are positioning this as a non-opioid medication for the treatment of Opioid Use Disorder and we are currently finalizing the IND preparation. The second one in collaboration with Addex Pharmaceuticals is a GABAB positive allosteric modulator for alcohol use disorder. And we reinitialized a lead identification and optimization program for hopefully candidate selection next year. Last but not least, a selective dopamine D3 receptor antagonist for the treatment of stimulant use disorder. We are currently finalizing the validation and again the preparation of an IND. Let me now take you through some examples of most recent science in support of SUBLOCADE and then a brief update on PERSERIS. So the first thing that we did is to continue to characterize the long-term safety and efficacy of SUBLOCADE and we shared this data at the American Society of Addiction Medicine and we are currently preparing a publication for peer review. We basically looked at the safety and efficacy at 12 months and 18 months, 12 points -- time points, clearly indicating again the high level of retention and abstinence in those patients who managed to stay in treatment. Very importantly, no new safety signals compared to the six-month pivotal Phase III trial that we published earlier this year in The Lancet. The second big effort is totally dedicated to patient-centered outcomes as part of these clinical trials. So first, we published in the Journal of Addiction Medicine earlier this year, the six-month pivotal data, but again listening to what patients have actually to say far beyond the typical clinical endpoints. And we clearly demonstrated that, if patients manage to stay in treatment for six months, compared with placebo, they have significantly better health, both physical health and mental health, increased medication satisfaction versus any other form of medication they had before they were on SUBLOCADE, increased employment and significant decrease in healthcare resource utilization. We also looked at what happened 12 months after SUBLOCADE treatment. And we used a tool that is called the Treatment Effectiveness Assessment tool that was actually invented by Professor Walter Ling at UCLA more than 20 years ago. So we did two things with the tool. First of all, we psychometrically validated the tool for Opioid Use Disorder. And secondly, we actually used it in order to measure performance with SUBLOCADE after 12 months of exposure to the medication. This is a very important tool. You cannot ask healthcare providers to submit patients to a 30-minute questionnaire. So this is a relatively simple questionnaire. It is basically evaluating effectiveness of the medication along four domains. First of all, substance use, of course. Second, we are looking at health in general, but specifically physical health and mental health. Third, life cycle in general. And fourth, the impact on your community. And so what we could see is that along the way through the 12-month treatment, these patients are getting significantly better along all four of these domains. Again, this is something that we published earlier this year in substance abuse and rehabilitation. The RECOVER study, as I said, we started sharing the 12-month data. May I remind you that this is a longitudinal study that is basically looking at patients once they are no longer on SUBLOCADE. So we look here at what is happening 12 months after they last received SUBLOCADE and we could clearly see that there was a clear relationship between the treatment duration on SUBLOCADE and the level of abstinence, as measured, not only by self reports, but also self reports and a negative urine drug screen. So, again that's something that we shared with the scientific community earlier this year, the American Society of Addiction Medicine and more recently at the CPDD meeting. We also continue to analyze some of the data that we generated as part of the Phase III trial. One question for example was what is the optimal dosage for maintenance treatment for Opioid Use Disorder by using SUBLOCADE. We now have post-hoc analysis clearly suggesting that injector opioid users definitely deserve to be maintained on the higher dosage strength of SUBLOCADE. This does not necessarily come as a surprise. It has been described in the literature before, but it has never been shown with a long-acting injectable such as SUBLOCADE. This by the way is part of our post-marketing requirement studies, whereby we will not only confirm this data, but we will also look at additional characteristics that may be beneficial for patients if they are maintained on a 300-milligram SUBLOCADE doses in the long-term. Last but not least, we are trying to contribute to what I would call disease understanding, and there are basically three main activities that we are actively pursuing. The first one is to understand the root cause of buprenorphine misuse, abuse and diversion. This is something that we are committed to and we started a couple of years ago to really trying to understand this phenomenon. And we published a paper last year in Drug and Alcohol Dependence. We just published a paper in the Journal of Substance Abuse Treatment clearly showing that the root cause really is a form of treatment -- of self-treatment of Opioid Use Disorder, such as maintaining abstinence and preventing withdrawal. The second level of activity is what can we do in order to induce a treatment in the emergency department. So we launched a pilot experiment in Virginia, this is what we call the VOTIVE study in collaboration with Virginia Commonwealth University their emergency department and the associated addiction clinic. And then last but not least, we shared for the first time at the American Society of Addiction Medicine our fentanyl blockade studies, clearly, showing that sustained plasma concentrations of buprenorphine higher than two nanogram per mil and five nanogram per mil, which by the way are very similar to dose that are delivered by the two approved dosage strength of SUBLOCADE block fentanyl-induced respiratory depression. Very briefly on PERSERIS. Again, a relatively similar pathway whereby we first focused on the further characterization of the long-term safety profile of PERSERIS, with a few presentations this year at the SIRS meeting, but also at the American Psychiatric Association meeting earlier this year. So we confirmed that both doses of PERSERIS 90- milligram and 120-milligram after 12 months of treatment, not only have a very positive safety profile, certainly again no new signal compared to the pivotal Phase III trial, but also the confirmation that we significantly improved the positive subscale of the PANSS scale as well as the general psychopathology scale. Very importantly as part of the reanalysis, we decided to actually follow the FDA recommendation to use a slightly different statistical analysis than the one we originally used in the NDA submission. And by doing so, we could demonstrate that the highest dosage strength of PERSERIS that is the 120-milligram is also actually significantly improving the negative symptoms of the PANSS scale. So again, we presented this data and we are currently preparing a publication for peer review. Similar approach as well beyond the typical clinical endpoints what is happening to these patients in terms of health-related quality of life. We just made a publication in the journal Patient Preference and Adherence showing that 12 months of PERSERIS at 90-milligram and 120 milligram significantly improved the quality of life of these patients subjective well-being treatment satisfaction and the medication preference, of course, in patients suffering from schizophrenia. So in summary, a lot of focus on long-term safety and efficacy for both SUBLOCADE and PERSERIS. Health economics and outcomes research with a focus on patient center the outcomes for both SUBLOCADE and PERSERIS in the longer-term this time with data over 12 months. The psychometric validation of an important tool for health care providers in order to assess the impact of treatment on their patient, and of course, the RECOVER study. The third cluster of activities is really dedicated to helping prescribers to further understand SUBLOCADE and PERSERIS and this is what we did for example with the SUBLOCADE optimal maintenance dose. We will continue to do that with post-marketing requirements and commitment studies as well as the fentanyl blockade. The fourth series of activities is our contribution to treatment guidelines and the disease understanding buprenorphine diversion misuse but very importantly also how can we induct treatment in the emergency department. Market extension PERSERIS in Canada in collaboration with HLS; SUBOXONE Film in Canada, Europe, Israel, and New Zealand; SUBOXONE Tablet technical transfer in collaboration with Pukang; and then SUBLOCADE's recent approval by the TGA in Australia; and the responses to queries in Europe, Israel, and New Zealand. Last but not least we are now translating all that science into peer-reviewed publications. We have had nine so far seven have been published in 2019, two have been submitted, and we shared the science in 17 conference presentations. So, on that note I thank you very much.

So, thank you Christian. So, what I think is very clear at Indivior is that we're making good strategic progress on our commitments to patients to the disease space and of course to you our shareholders. We see that the innovation the commitment to leadership and scientific advancement and understanding is really progressing at a very impressive rate. The number of publications and new scientific understanding and discovery is something that makes me incredibly proud as CEO of this company. We're seeing that our go-to-market capability that so many people have valued and invested in over the years is really starting to deliver on SUBLOCADE with the improvements in all the payor the logistics. We've really started to make some good progress there. Still we have to continue to work on the trial and the induction so that we can start to accelerate our growth rate to make sure that the financial profile of the company rewards those of you who've invested in our strategy and have confidence in our team. So, we continue to focus on that and look forward to updating you in the future. So, on the back of that I'll be happy to take any questions.

Hi, it's Harry Sephton from Jefferies. I just have a few questions please. I'll start with two on SUBLOCADE. Firstly, you've reiterated guidance $50 million to $70 million despite some quite strong sequential growth in the second quarter of $6 million. Does that mean that you expect sequential growth to slow into the second half of the year? And if so why? Secondly, are you currently occurring any SUBLOCADE rebates? What I really want to understand is if any of those SUBLOCADE rebates can potentially offset some of the maturing rebates that you're getting from the drop-off in SUBOXONE Film share? Thank you.

So, I'll answer the first one and give the second question to Mark. No, we're very pleased with the continued progress on SUBLOCADE and we don't expect things to slow down in the second half. And as we've said previously that we are very comfortable that we are tracking within our guidance.

And Harry as it pertains to the discounting with the Film versus SUBLOCADE, obviously, the Film is in a very mature cycle as it pertains to the rebates as we move towards SUBLOCADE it's had its infancy. So, we kind of have had the mandatory 23.1% government rebate that's out there with anything that flows through the government accounts. And then we've talked about while we don't disclose our gross to net on these assets we have talked about some minimal rebating as we look to take down the arduous sort of prior us that were affecting SUBLOCADE in year one. So, there's some minimal rebating there but so different sort of quantification. It will offset but relatively small.

I also had just two questions on the legal front. On the SUBLOCADE exclusivity if you were to appeal the decision from the court, would that delay any FDA decision on the potential approval or the final approval if that were the case of a Brixadi launch?

Yes, believe so. Although it's not clear what impact FDA's decision to appeal or not would have on that.

Okay. Thank you. And just a quick clarification question. Can you remind us what the timing around the 305 and 454 patent appeal is?

So, we don't have an appeal on the 305, 454. Those are district court cases. So, we don't have a trial date set yet, but the claims constructions -- hearing on claims construction is scheduled for October. But we don't have a trial date set yet. We expect it will be sometime in second half of 2020.

Great. Thank you.

It's Max Herrmann from Stifel. Three questions if I may. Firstly, just on SUBLOCADE. I guess, a similar question I've asked before, just in terms of the inflection point that you've talked about in the past. How do you see that now going forward? Do you still expect at some point that the momentum and the understanding of the product will get to a level where you'll start to see acceleration in the adoption? Secondly, just on PERSERIS, just I know it's early days, but wondered whether you're getting patients who are switching from risperidone tablets dailies or you're getting patients, new patients or is it coming from patients from Risperdal Consta? And then finally, just I know there's some ongoing discussion about whether SUBLOCADE enjoys orphan drug designation and may get exclusivity based on Subutex and back of that get an orphan drug status.

So yes, obviously we're pleased with the progress on SUBLOCADE. And we continue to expect that at some point there will be an inflection in the future. I don't know when that will be but clearly we feel confident that we continue to make good progress as demonstrated by the KPIs. With respect to PERSERIS, we don't have a great deal of information on where those scripts are coming from or I don't have it to hand right now. So we'd be glad to come back to you on that. And the third question just remind me Max.

It was orphan drug...

The orphan drug status yes. Yes at the moment once orphan drug status is granted then it remains with the molecule. So buprenorphine does have and our products do have orphan drug status. But at the moment, we don't have a period of exclusivity that's confirmed. That's something the FDA are looking at, at the moment.

Hi, it's Christian Glennie with Stifel as well. Just on SUBOXONE and the Film and the slower-than-expected erosion. Have you've been able to identify any particular reasons for that slower-than-expected decline and therefore any reasons why it would -- could go to that accelerate as you'd say would go to more dramatic erosion rates towards the end of this year. Any reason why particularly it would then change?

Yes. So we haven't been able to identify any sort of strategically sustainable reason as to why we are seeing this sort of outperformance of industry analogs. So in the absence of any reason why it would be different, our belief is that it will actually return to the analog. So this is really a sort of discussion about the area under the curve or the area above the curve depending which line you're looking at. We think that we will end up with that 90% erosion that we will migrate back towards then. We're very grateful and appreciative for the overperformance that we're seeing in the near term. But no evidence that suggests that this is going to be sustainable. So you form your own view as to how many weeks or months we think this phenomenon might continue for. We don't know obviously. There will be some momentum moving forward from here but we expect to be back at analogs around before the end of the year.

Thank you. And then just a follow-up on the SUBLOCADE retention rates that chart with the movement by month. I don't know what the sort of background data in terms of patient numbers is behind that? Is that do you think a fair reflection of the current retention rate? Or any reason why as you get more patient data in there that it might deviate from those sort of levels?

No, I think obviously the data is robust. So yes, it does reflect reality. We're not 100% sure exactly what the majority of the patient profile looks like in that population. So we'll have to wait and see as the data comes in as to how that evolves and how it impacts the retention rates. But certainly, I think that these are good retention rates than what we expected. That's what we saw in the Phase III studies. So we're encouraged with the results that we're seeing.

Okay. Well there being no further questions, thank you very much indeed for your attention. And we look forward to seeing you in all the usual places at conferences and our quarterly presentations moving forward. Thank you.