Indivior Pharmaceuticals Inc (INDV) Q4 2019 Earnings Report, Transcript and Summary

Good morning everybody and welcome to the 2019 Full-Year Results for Indivior. I’ll take the forward looking statement as read and welcome you to join us for our presentation this morning. I will give a short overview and perspective on the performance of last year, then Mark Crossley, the Chief Financial Officer will take you through the detail of last year’s financials. We’re also joined by Javier Rodriguez, the Chief Legal Officer who will give us a legal update; and Christian Heidbreder, the Chief Scientific Officer who will take us through an R&D update and some of the scientific developments that we have. So, just a few thoughts on last year, clearly it was a very challenging year operationally for the business. We had some major challenges to deal with. With the arrival of the generic film and the federal indictment, and the streamlining of our organization that was necessary, but sometimes with strong teams and healthy cultures, adversity can be very unifying, and I think that we’re particularly proud of the resilience shown by the teams within our businesses across the year. So, a natural fact, we finished the year with having created a very strong foundation for the future. We made good progress on establishing the foundation for SUBLOCADE in the U.S. We met our financial targets. We put the foundation in place for growth and we began the development of our new promotional campaign to drive for the future. We were also in parallel able to launch PERSERIS, so we’re starting to deliver on our long-term strategy to diversify the net revenue streams. And while we were doing all of that of course, we continue to evaluate our compliance programs to make sure that our compliance management monitoring and training is appropriate for the evolving shape of the business. In terms of financial performance, net revenue and net income were in line with expectation. We were pleased that SUBLOCADE came in just at over the top end of guidance and PERSERIS was also in-line with expectation. All of which enabled us to end the year with an improved net cash position of $140 million. In terms of next year, Mark will take you through the detailed guidance, but I would like to draw your attention to the guidance that we’re giving once SUBLOCADE of 150 million to 200 million, which shows a strong commitment and confidence as we start to invest in that business towards our aspiration of $1 billion of net revenue. So, let’s turn our attention now specifically to SUBLOCADE and reflect on some of the progress. Well, I think we’re very pleased that we really have established a strong foundation in terms of the close distribution system. Again, we look to innovate, we look to pioneer, we want to deport a SUBLOCADE in the closed distribution system because we think that that’s the most effective way to distribute a product like this. We’re pleased that not only did we get that system in place, but we also hit all our targets and we’ve attained those targets consistently in terms of the percentage, the quantity and the quality of the payout coverage, which bodes well for the future. We’ve also started penetrating new distribution channels and therefore we’re really at a place now where it’s all about new doctors, new patients, and executing on a well-established strategy with a strong foundation. So, as we think about the future when we look to accelerate the penetration, we continue to build and invest in new signs, new claims, and to expand the promotional side of our business as we reach out to patients and doctors. We’re very proud and we put ourselves in a little bit of a pedestal of being the leaders in addiction medicine. So, what do we really mean by providing leadership in addiction medicine. Well the great competitors not only to our business, but also the big barriers for patients are ignorance, apathy, and prejudice towards this disease space. It’s the lack of understanding of what’s going on that leads to a lot of the stigma and a lot of the barriers that stand in the way of patients accessing treatment. So, as we think of ourselves as leaders, we see what role can we play in changing the identity, the value and the beliefs around this situation. And the only real way to do that is to generate new scientific evidence that challenges some of the current misunderstanding, that creates clarity out of ambiguity, that gives people permission to say, I really understand this now because I’m looking at facts and things that have been scientifically established. Our job as a leader is to answer those questions that patients and society need answering to help move this disease base forward. We made tremendous progress with that last year and Christian will tell us a little bit more about that later. There is a lot of new science. We have been able to work through the FDA Department and create new claims and new messages that we can take out into the community to help expand access to treatment for patients. And we’ve delivered this through our groundbreaking direct-to-consumer TV advertising campaign, which is supported by digital and online promotion, comprehensive PR campaign, and a lot of policy and advocacy work with the policymakers and other stakeholders. So, I just like to share the TV advertising campaign, the ad now for those of you that haven't seen it. The idea here is that we are just in running this campaign; we are helping to normalize this disease space. We are taking it out of the backstreet clinics and we're pushing it further and further into mainstream medicine. We’re having a conversation with people, with families in their living rooms, in their own home about something that historically has not been talked about. There are many patients who are despairing, they want help, they’ve tried a number of things; they don't know where to go. So, to give them the opportunity for new treatment option and to raise awareness of treatment generally is going to help drive penetration of SUBLOCADE and expand our treatment generally for patients. So, let us take a look at the TV ad now. [Advertisement] So, as we reach out to patients it’s very important that when patients are looking for treatment, treatment is close at hand. We know that expanding access and distribution to services means those services are more likely to be utilized. So, we are working in a very focused way and extending our reach into the organized health systems in America to increase the penetration of treatment through those facilities. We want to make sure that there are more and more access points for patients for treatment, but not any old treatment. We want high-quality treatment with consistent standards of care. We want to make sure that counseling forms the foundation of that treatment because what we have with SUBLOCADE is medication-assisted treatment. By penetrating these institutions and encouraging them to provide treatment for patients, these institutions are governed by their own policies and procedures, which will help ensure that the doctors prescribing within those networks work and operate to standardize practices, which should help to continue to develop and improve standards of care. Also, very encouraging is the macro environment. We were very pleased with the national drug control strategy published by the government last week, clearly recognizing a huge treatment gap. Despite all the good work that’s gone on, only 3 million out of 21 million people who need treatment are actually in treatment. There’s a huge headroom for growth of treatment and a huge public health unmet need for treatment. So, there is a clear treatment gap. In the evidence base, as endorsed by the government is medication-assisted treatment is one of the three key pillars for us. So, I think there’s a real sort of momentum starting to build. Not only that, but last year saw the greatest increase in the number of physicians who were getting wavered to provide treatment for the first time, over 11,000 physicians last year got themselves wavered. So, it’s possible that we might be at the start of the evolution of this disease base towards mainstream medicine. We've made a commitment to patients all around the world in our vision to bring evidence based treatments and so I just like to share with you that we continue to progress the globalization of our new technologies in countries outside of the U.S., Canada and Australia already have SUBLOCADE approved and regulatory dossiers are working their way through the system in a number of European countries. We’re also going to progress the film and that is also on the regulatory review in Europe. Exactly what we launched where and when and how will determine obviously on the output of those regulatory doses and other conditions within the business, but we continue to make strategic progress on that commitment. So, if we turn now to PERSERIS, we’re pleased with the progress of PERSERIS across last year. Obviously, the net revenues were very modest, but still in line with our expectation. We will develop this as a diversification for our business, but not at the expense of both getting distracted from SUBLOCADE. We’re very encouraged with the level of the interest and feedback. The utilization and uptake of sampling has been very substantial and we saw that continue to build through quarter four last year. So, we hope as we move into this year that some of those, sort of, sampling initiatives will start to translate to net revenue as doctors then move on to mainstream prescribing. So, we feel that the trial and adoption of PERSERIS is very much on track and supported by more market research data that we have. So, we've issued guidance for PERSERIS this year, again revenue is modest, but nevertheless making good progress, and we will continue to explore additional opportunities to license PERSERIS outside the U.S. So, with that, I will hand over to Mark to take us through the financials.

Thank you Shaun and good morning everyone. Overall, we’re pleased with our 2019 financial results. The resilience of SUBOXONE Film along with the improvements we made to our cost structure put us in a position to raise our net revenue and net income guidance twice during the year. We’ve also maintained good capital stewardship with a cash balance of over $1 billion. As Shaun highlighted, we were able to use some of the benefit from our over performance to make incremental growth investments behind SUBLOCADE, notably our nationwide DTC campaign that you just saw an channel expansion behind organized health systems in the fourth quarter. Looking ahead, we will continue to maintain strong operational control over the business and make additional growth investments for SUBLOCADE, partially funded by the near-term resilience we continue to see in SUBOXONE Film, but before I get ahead of myself and into the details of 2020 guidance, let me first run down the results for the quarter and the year just past. Starting with net revenues, we saw a 22% decline in 2019 versus the prior year. While overall net revenue performance outperformed our expectations. It nevertheless declined versus the prior year, mainly due to unexpected, excuse me expected brand film share loss post the generic entry last February, albeit at rates in less than the analogues. The loss of share was partially offset by strong underlying BMAT market growth in the low double-digit range and by 72 million of net revenue from SUBLOCADE, as well as contribution from the authorized generic film product until its discontinuation in the fourth quarter. Looking at the fourth quarter, the 44% decline versus the prior year was steeper than in previous quarters largely driven by two one-off impacts. As discussed at the Q3 earnings, the impact of the federal legislation that was enacted October 1, H.R. 4378 modified the calculation as it relates to inclusion of the authorized generics for determining the rebate amount in government channels for SUBOXONE Film. The 47 million negative impact of net revenue in the fourth quarter was within the range of 40 million to 50 million we provided on the last earnings call. Importantly, we were successful in closing out the authorized generic program in the fourth quarter and as such do not expect any further impact on this item. We also had a one-time accrual adjustment related to authorized generic sales by Sandoz, recall for competitive reasons, we could not see our partners pricing or channel information. However, they underestimated their mix of government business in the initial profit sharing. Their under recruitment resulted in a profit true-up which offset the benefit we would have received from shipments of the authorized generic in the quarter. Further, focusing on U.S. film market dynamics for a moment SUBOXONE Film share averaged 25% in the fourth quarter, only a point lower than the 26% observed in the third quarter, but down from 53% year ago. We continue to caution that we did not have a strong quantitative basis to explain the films outperformance, although our belief is that the resilience today reflects a combination of the relative pricing environment and continued patient success on the film. We continue to prudently assume this dynamic is temporary and that branded film will ultimately arrive at the share position suggested by analogues. Certainly, we would expect a greater level of formulary scrutiny by payers as we move through 2020, which will result in further erosion of our brand shared. Now turning to the rest of the world, the fiscal year 2019 net revenue decrease was generally in line with our expectations. The 4% net increase in the second half brought the full-year decline to 9% or only minus 3% on a constant currency basis. The primary driver in the second half was one-time in nature benefits from generic out of stock situation in Canada. This resulted in greater SUBOXONE tablet revenues in Q4. The second half also saw modest uptick in distributor markets in the Middle East. Looking to 2020 in the rest of world, we continue to expect mid-single-digit revenue declines in the rest of the world similar to what we saw in 2019, based on the same general dynamics in the market, modest growth in Australia, and ongoing austerity pricing and competitive pressures in Europe. And we have seen that the generic is back in the market in Canada in January. Moving to gross profit and margin, fiscal year 2019 was broadly in-line with expectations. However, we saw significant decline in fourth-quarter, gross profit and margin due to the one-off items related to do SUBOXONE Film best price and authorized generic profit adjustment I just talked about in a modest inventory adjustment. When combined, we estimate that these impacts impacted gross margin by approximately 15 to 20 points. Looking at operating income on an adjusted basis, as expected, in the fourth quarter we had an operating loss, primarily due to top line and gross profit impacts mentioned above. Additionally, we increased marketing cost, primarily related to the promotional and channel development investments behind SUBLOCADE. Operating income for the full-year of 202 million on an adjusted basis declined 39%, but was in-line with our upgraded 2019 expectations, reflecting significant savings realized from OpEx action that we took in late 2018 and early 2019. Taking a closer look at OpEx, recall that our goal was to deliver around 120 million to 140 million of structural savings by the end of fiscal year 2019 compared to the 2017 baseline of 586 million. I’m pleased to report that we've achieved this goal for fiscal year 2019 while making further resource allocation decisions to continue to invest behind the growth of SUBLOCADE. While we have previously signaled that fiscal year 2019 OpEx would be at the higher end of our 44 million to 460 million range due to the incremental SUBLOCADE investments, we in fact came in at the lower end due to non-investing conditional share awards and a bit lower than expected legal expenses in the period. Combined these items were a benefit to OpEx of approximately $15 million. With this OpEx performance, benefits from finance income on our increased cash balance and our ongoing tax strategies we delivered adjusted 2019 net income of 176 million. This was in line with our upgraded guidance. Turning to cash and borrowing, we ended 2019 with a cash balance of $1,060 million. Our solid operating performance and year-over-year benefits from lower cash interest and taxes were the main drivers. The cash buffer remains critical to Indivior as we navigate through our transition period to renewed growth from our depot technologies and we continue to confront the legal uncertainties. While we don't provide guidance on cash, to help with your modeling I refer to our previous cautionary comments with the acceleration of the pace of erosion of the SUBOXONE Film. This will result in a material cash use associated with the group's negative net working capital position, chiefly the government payables, which at fiscal year-end were $460 million. Now, turning to guidance, we expect net revenue to be in the range of 525 million two 585 million. The range we’ve assumed reflects the continued uncertainty over the erosion rates of SUBOXONE Film share, which did see 2 share points of erosion in the month of January to 22%. In addition, the precise net revenue performance for SUBLOCADE has variability as you saw in the range we've provided today. As I previously mentioned, we’re continuing to make growth investments in SUBLOCADE including DTC funding through quarter one and investments to further open important organized health system channels. These investments do not have analogues in the opioid use disorder space, so while we’re confident we will see a good ROI on our initiatives, precisely targeting a net revenue range for SUBLOCADE is more challenging. Furthermore, the shape of the revenue curve is likely to be more weighted to the second half of 2020 due to the nature of the investments. That said, we’re confident we will see at least a doubling of net revenue and that informs the bottom of the 150 million to 200 million range. With regards to rest of the world, as I mentioned, we do expect to post similar net revenue declined to prior year in the mid-single digits. Despite the quarter-to-quarter variations in gross margin in 2019, we expect 2020 gross margin to be similar to the full fiscal year results in the low 80% range as both channel and country mix unfold. With regards to OpEx, we expect a material increase, compared to 2019’s 443 million, while this amount partly reflects the absence of the 15 million of one-off impacts associated with the share awards and more importantly signals that we are making further investments in the business. We’re committed to support the uplift of SUBLOCADE net revenue we’re seeing in the channel development and advertising as we strive towards delivering a 1 billion net revenue goal, and we funded DDC through the first quarter of 2020. Additionally, we’ll experience annualized impacts of the headcount and investments behind organized health system expansion, which launched mid-end of 2020 fourth quarter – 2019 fourth quarter. In addition, we expect a higher pace of legal activity and higher investment behind compliance. Finally, as we assess the ROI on our investments and track our operational performance, we’ll continue to evaluate and assess redeployment of any over-delivery into additional further investment to further enhance its HCP and patient demand for SUBLOCADE. Considering these factors, we’re expecting a net loss in the range of 20 million to 50 million for the year, including a modest tax benefit arriving from the loss. Finally, one last housekeeping item on Slide 19, moving forward, we will only be disclosing net revenue and units for SUBLOCADE on our quarterly results. First, on this, we have demonstrated through 2019 that we’ve maintained our yield in patient journey KPIs at or above the benchmarks. Second, as we focus on organized health systems, and they become a larger percentage of our business, the HCP and patient data become increasingly opaque, making net revenue and dispenses the best KPIs and strategic progress and value creation. With that, I will turn it over to Javier for the legal update.

Thanks Mark and good morning everyone. I’ll provide a few brief updates on legal matters since our last release in Q4. First in the Department of Justice case on November 14, the court denied Indivior's motion to dismiss the original indictment. Following that the DOJ filed a superseding indictment, which we have moved to dismiss on December 19 and that motion is still pending. And on January 29, the Department of Justice filed an application for post-indictment protective order seeking to prevent transactions in assets sought to be forfeited in the superseding indictment transactions not in the ordinary course of business and transactions of more than $1 million without prior court approval. The application also seeks to require Indivior to maintain $438 million in a financial account and other relief. Indivior will oppose that application by the Department of Justice. In the Van Dorp securities litigation, Indivior and the individual defendants have moved to dismiss the lawsuit that was filed on November 29. The motion is the spending and briefing is scheduled to be completed on February 27. Finally, regarding the ongoing SUBOXONE Film and the lawsuits, we’re pleased to announce that Indivior settled its case against Aveva Drug Delivery Systems on December 18. The terms of that settlement are confidential, and finally in light of the claim construction hearing on the 305 patent in the cases against Dr. Reddy's Laboratories and Alvogen Pine Brook Indivior entered into a stipulated order and judgment of non-infringement with the defendants, and so the lawsuits are proceeding on the basis that these defendants are infringing the 454 patent. That’s my summary and with that I will turn it over to Christian for an R&D update. Thank you.

Thank you Javier and good morning everyone. I will now spend a few minutes to update you on R&D activities starting with the strategic pillars to support SUBLOCADE in the U.S. The first two pillars are related to post-marketing requirements and post-marketing commitments following approval of SUBLOCADE in the U.S. back in November 2017. These requirements are mainly related to demonstrating the rapid induction of treatment with SUBLOCADE, as well as the characterization of patient subpopulations who may benefit from the highest maintenance dose of SUBLOCADE of 300 milligram. We also had few post-marketing requirements related to characterization of NMP safety and NMP is the solvent in our foundation. These are nonclinical studies. The clinical studies are on track and on their way. The nonclinical studies have already been submitted to the FDA back in 2018, and are currently under review. The commitments have all been approved by the FDA actually last Monday, February 10. So, we are currently working with the FDA to finalize a quality language in the U.S. labor. The third pillar is related to additional studies to demonstrate the clinical safety of SUBLOCADE. This is a study that we call the PK/UDS, Urine Drug Screen. It aims at determining the duration of the tactical levels of buprenorphine over extensive periods of time after association of treatment with SUBLOCADE which again with leads to a much better understanding for prescribers and patients. The fourth pillar is dedicated to evidence generation. So, of course we have our recover study. I’m very pleased to say that our recovery of 12 months data have been accepted for publication in the Journal of addiction medicine. So, keep an eye on this. It will probably be released over the next couple of months. To recover 24 months data where [quality control buyers] in December last year, so you will see in 2020 a series of presentations, as well as the preparation of Peer review publication. And then of course, I’m very pleased to announce that you probably have seen we sealed an alliance with Virginia Tech in order to pursue the recovery study that’s what we go now, recover 84 because the objective is to follow record of patients up to 5 years after they received their last administration of SUBLOCADE. The patient centre outcomes from the Phase 3 studies have all been published in 2019, and I will give you a brief update on the following slide. The fentanyl blockade study is now completed. The final clinical study report is on its way and very importantly in 2020, we will be preparing three peer review publications on the subject. Last is our VOTIVE study. This is a pilot study in collaboration with Virginia Commonwealth University Medical School. The objective there is to understand how to induct treatment with SUBLOCADE in the emergency department environment. And then the last pillar of course is to support the business with a series of peer review publications, of course we will continue to focus on the long-term safety and efficacy of SUBLOCADE. I’m also pleased to let you know that the 12-month safety and efficacy of SUBLOCADE was approved in the [draw of] clinical psychopharmacology, so again that is coming in the next few weeks. The recovery study, I talked about, as well as the fentanyl studies, we will continue to try to understand better the root causes of buprenorphine abuse, diversion, and misused. There have been several review papers, we will continue this effort in 2020 with additional quality surveys in different states in the United States and in different patient populations. Lastly, you may remember that we collected a lot of data on craving during our Phase 3 clinical trials and we are aiming at publishing a paper on the psychometric validation of the tool that we used during our pivotal Phase 3 trials. So, a few highlights on the accumulation of evidence in the literature so far. The first pillar as I said, is all about the long-term efficacy and safety of SUBLOCADE there have been several publications and presentations up to 12 months. In 2020, we will also release in the context of peer review publications 18 month safety data. The bottom one that you can see there is also very important paper looking at the relationship between plasma concentrations of buprenorphine at therapeutic level and at supra-maximal exposure and potential QTc prolongation and we were able to completely rule-out any liability in terms of high plasma concentrations of buprenorphine and potential QTc prolongation. The second pillar is all about the patient centered outcomes. As I said, now we gathered evidence for up to 12 months of exposure with SUBLOCADE on health related quality of life, mental health, physical health, employment and also decreased healthcare resource utilization. We also psychometrically validated a tool that we call the treatment effectiveness assessment tool, which is a relatively simple tool for prescribers in order to really assess the impact of a treatment over forming domains that is substance use per se; health, both mental health and physical health; lifestyle; and impact on the community. And what we could show is that SUBLOCADE over 12-month is significantly improving the ratings across these four domains, so very important paper as well. And then the bottom line, of course, we published the basic characteristics of the recover trial, including the very complex design of that trial, as well as several presentations and our peer-reviewed publication on the 12 months data. The last pillar is really additional evidence generation. As I mentioned, we performed a post-hoc analysis on the Phase 3 trial demonstrating that patient who are actually injecting opioids are doing significantly better when receiving the 300 milligram maintenance dose of SUBLOCADE. So, again, this is something that we will confirmed and strengthen with a post-marketing requirement study that I mentioned before, but we will also start preparing several presentations and publications. And then, lastly, the Fentanyl blockade study clearly showing that plasma concentrations of buprenorphine similar to those delivered by SUBLOCADE at a steady-state significantly reduce the respiratory depression triggered by increasing levels of exposure to Fentanyl. Again, expect additional presentations and peer-reviewed publications in 2020. We are also expanding opioid use treatment access outside of the U.S. with SUBLOCADE and SUBOXONE. As mentioned by Shaun, we received approval of SUBLOCADE in Canada and Australia. We also filed in Israel and New Zealand, Europe, according to a decentralized procedure, so that means that we filed into specific countries such as France and the associated decentralized countries, [all the more] Sweden, Norway, Finland, Denmark, as well as UK, Italy, and Germany. We are currently working with these regulatory agencies to answer their queries. SUBOXONE Film, we filed in Israel, Europe, Canada and New Zealand, pending a final agreement with local distributors. We are also planning to file in Middle Eastern countries. Lastly, you know that we got approval of the SUBOXONE tablet in China, back in 2018. We now are confirmed with the schedule to designation by the Chinese authorities as of August last year, and we are currently working towards a technical transfer with our partner Pukang Pharmaceuticals. PERSERIS in North America has four main pillars, we have two post-marketing commitments to these, both of them are currently ongoing. We are working on some drug product optimization to further improve the shelf life of the product in the [cold chain] up the 24 months and keeping one week at room temperature. In Canada, you know that we have built an alliance with HLS Therapeutics. HLS actually filed the NDS successfully at the beginning of November last year, and in 2020, we will continue to provide operating support to HLS to answer any queries from our Health Canada. Publications as well will be mainly focused on additional data on the long-term safety and efficacy of PERSERIS. The last section is dedicated to anything else in the pipeline right now, which is early-stage asset development, and first of all, our selective orexin-1 receptor antagonist is potentially the first non-opioid medication for the treatment of Opioid Use Disorder. You may have seen that we received the 10 million grant from the NIH to through the HEAL initiative. HEAL stands for Helping Ending Addiction Long Term, which is a massive initiative from the U.S. government up to $1 billion investment. We filed the IND in the middle of January. We also finalized the first First-In-Human protocol and I was very pleased to present our clinical development plans through the first HEAL investigator meeting that was held in of Bethesda on the 16th and 17th of January. So, we are really on track for enrolment of our first subject in the First-In-Human trial in the second quarter this year. Secondly, we continue our collaboration with ADDEX Therapeutics. The medicinal chemistry efforts are moving really forward. We believe that we will have a couple of lead molecules, probably at the beginning of the third quarter this year, which will then enable us to enter into a late lead optimization program and hopefully candidate selection in 2021. Lastly, our selective dopamine D3 receptor antagonist program, we initiated pre-IND activities and we are currently reviewing all the toxicological data that we gathered so far. And on that note, I’ll invite Shaun back.

Okay. Thank you, Christian. I think a very compelling, you know, roll-out of new science and its new science that will drive this disease space and rightly so. I feel particularly proud as CEO that our vision and our strategies have remained unchanged for some time. Our ability to invest in our strategies of course has been impacted by external events, but our focus, our dedication and our commitment to the patient and to pioneer and innovate in this disease space remains very resilient and resolute. So, as we think about our business moving forwards, in the short-term, clearly the big challenge that we have to deal with is the current litigation overhangs, which we take very seriously and continue to work on through our legal advices. Internally and commercially, it's all about the depot technologies. These technologies really do transform treatments for patients as evidenced by all the new scientific data that is not only already emerged, but is in the pipeline to help drive further forwards. The U.S. will be the core market in the near term, and as we are successful, we will invest in the growth of our business, but we will also conserve the cash along the way. Our longer term aspiration remains unchanged. Our early-stage assets, we would like to bring into our pipeline as our affordability allows to continue to target the other addictions outside of opioid addiction. We will continue to diversify our business where possible, in the U.S. and outside of the U.S., and in the future, as our business starts to grow and SUBLOCADE picks up, so we will look to further M&A. So, that's it. Thank you very much for your participation and now we will take any Q&A.

It’s Max Herrmann from Stifel. Just a couple of questions to start, just trying to understand how – you’ve obviously had some positive experience in the fourth quarter from larger kind of contracts from your OHS customers. Just trying to understand the attitudes of the judiciary for kind of MAT therapy versus absence in kind of non-opioid rehab, which I think maybe preferred in the past, so just trying to understand how that’s being reflected.

Yes, there is an increasing willingness to embrace medication assisted treatment through the judicial systems, and this is something that is evolving as an area. I think that the injectable technologies give more permission because one of the great issues in the past is how do you manage the dosing; how do you manage – supervise, you know, daily dosing, whereas the injectable therapeutic class will give the opportunity to make progress there, and I think that is recognized. Although it’s not fully developed, it's a scenario that we are investing in and helping the policymakers think this through.

And then, just a question for Mark in terms the kind of I guess, COGS gross margin, can you kind of explain obviously your volumes went down significantly. I know there’s been some change in the accounting for revenues, but how did – how come the overall costs have gone up in 2019 and the gross margin, obviously guidance for 2020 is this kind of gross margin of low 80s [percent]?

Yes. So, I think there’s two things. One is like you're talking about the absolute value in Q4 being up over the period despite volumes being down. You have to recall, we had a significant number of shipments in the period associated with closing out our commitments, you know, to the authorized generics. So, volumes, period-over-period, you know, might not have changed as much as one might expect, Max, would be how I would think about that. And then, as we look to 2020, when we get into the actual going rate, you know, what we’re starting to see is we get share erosion. The share erosion is going to come in your most profitable channels, right. That’s where the broadest differences is in the discounts in the market, so we’ll have item – you know retention in more of the government channels with higher discounts and thus a gross margin so you’ve got both channel mix, and then, you’ve got, you know, your ex-U.S. businesses is a higher percentage of business and that comes with also a lower gross margin. So, it’s more of the mix within your revenue profile than it is any absolute major cost increases.

Alright, thanks.

Yes.

Hi, guys. It’s Paul Cuddon from Numis. Just wonder if you could elaborate on the resilience of SUBOXONE Film in 2019 and perhaps by private versus government channel share and any sort of anecdotes that you’re getting back from kind of major distributors over generic dosing and presentation of the Film?

So, as it goes to the resilience, you know, I think the thing to think about is the overall pricing environment with regards to the Film. When generics first came out, we were on a long-established sort of market, so the discounting that it had established through time in government channels and on just based on how the algorithm works year-to-year where anything above a cost-of-living adjustment sort of on that goes back into discounts, right. So, you have a heavily discounted product already. So, when the generics first hit the market, you know, the price differential isn't that large. And so, that adds to – when I talk about the pricing dynamic, that adds to the retention in the short-term for just economic reasons, right, for economic reasons. And then, you know, payers just didn't make decisions totally on economics in the period. We saw Alvogen head out of stock, you know, so there could be and we’re hearing there is a bit of continuity, but now that that’s stabilized out, we think the economics will eventually take on, on a going basis, and thus a reversion to the analogs is how we forecasted the business.

Okay. And then, secondly, before we lose the KPIs all together, if you could kind of talk through some of the healthcare professionals that are initiating treatment and just give us a sense of the mix of these uses of SUBLOCADE, have they been long-term data waved, are they kind of recent sort of waive physicians, and then extending that into the patients, the physician are treating more than five patients, is that a gain at the 275 waived physicians? Thank you.

Yes. We’re seeing a mix across all physicians who are both initiating and adopting. We are particularly pleased with the number of physicians who have adopted, and we’ve said previously that’s a number of physicians with five patients or more, and that’s up over 900 now. So, we’re pleased that as the positive experiences of the physician and the patient, you know, is encouraging more patients and more doctors to increase that penetration of use.

Thank you.

Hi, Harry Sephton from Jefferies. Just a few questions please. So, I appreciate you comment directly on the DOJ, but clearly, you’re preparing to go to trial in May. If you were to go to trial in May, would [indiscernible] for any new slow post that and also would that still be a possibility of you potentially reaching assessment even if you were to go to trial?

The case is scheduled to go for six or seven weeks, so, you know, I presume there would be a news flow on a regular basis leading up to the trial and during the course of it. And then, obviously, if we’ve gotten to a point where there was a ruling, there’d be news following that. And to your question on the potential for settlement, we’re always open to the settlement and are, you know, pursuing all avenues to try and resolve this case. So, that's always a possibility.

Okay, thank you. And then, on PERSERIS, it’s been in the market for a while now, so approximately or less waver here. What has been the feedback from the prescribing community on the product relative to some its competitors?

Yes. We have been very encouraged by the positive feedback we’ve had from those doctors that, you know, we’ve been able to do reach with our sort pilot [indiscernible] team. The feedback is positive. We’ve had recent market research data that shows that 34% of doctors who’ve experienced PERSERIS would use it as a first or second line treatment. We have had heavy demand for sampling, so we hope that, you know, as the sort of – as we move beyond the initial sampling trail and that will convert to net revenue and we’ll start to see net revenues build. What I think is important to recognize with PERSERIS is that we’ve been very successful in getting rapid penetration of parity coverage in over 80% of payer accounts. So, we have not seen any accounts sort of blocking us in favor of the competition. So, you know, as the prescriber experience build and patients share their experience, and so, we expect that we will see modest growth in PERSERIS across this year.

That’s really helpful, thank you. And then, just on SUBLOCADE, I know, you just said you got a 5% price increase on the list price earlier this year. Do you envisage a comparable increase in net price? Would you expect rebating is going to increase for that product over the year?

It's because of the significant portion that's associated with government channels that has the same price protection. So, you’d expect kind of 50% to 60% of that kind of flowing through.

Okay, thank you.

Yes.

Rohit [indiscernible], I’m a shareholder and I have few questions all based on how Indivior is doing this morning before start of this presentation in the stock market. It's again, you know, about 19% fall and it has made on to the Top 3 losers of the day so far. So, I'm just wondering like how you are or will be planning to build confidence among the shareholders? Second, I see you have quite a lot of cash at the moment and we, as a shareholder, I mean to say, look forward to having dividends being declared, but you like reported loss, and you are projected to make loss again in the next financial year as well, so I don’t know I mean I am just looking for few answer so that I can decide whether to stay as long term with Indivior or, you know, what I'm saying. So, other question is, do you see Indivior hitting like [EUR2] again in near future? Currently its [39p – about 39p] before start of this presentation, and I believe that you have kind of a amount if there’s any like legal cost or settlement cost, now do we have any kind of up in the air figure what settlement cost currently if any is being informally or formally whatever being told to Indivior, is any – that kind of information available for us, shareholders? So, there are like three, four questions I’m trying to get answer for.

Okay.

So, yes, that's about it. Thank you.

Okay. So, with respect to shareholder confidence, we always share very transparently what’s going on in the business. We have a clear vision. We have a clear strategy and we report regularly and take the opportunity such as this to answer questions from shareholders on how we’re progressing on the implementation of the strategy and what the financial progress is. So, that's what we can do and to deliver performance, deliver on our objectives and our commitments and we will continue to do that. With respect to what might the share price be in the future, of course, I can't possibly predict what the share price will be in the future. You know that’s something for the market to determine as we continue to make progress. With respect to the cash position and the cash holding, Mark, would you like to?

Sure. I think it ties in with regards to both your comments on the reported loss and the cash and the provision. Obviously, we’re in a transition period, right. The Film revenues are dropping off and SUBLOCADE and PERSERIS are up ticking and we’re securing investment, which are leading to a short-term period with a loss this year, but it's helping secure the growth to the billion dollar franchise and those investments, we believe, are necessary and will drive us towards that sustainable franchise. The cash and our capital structure of keeping the debt in place, we think is the appropriate balance of flexibility for the long-term interest of shareholders and other stakeholders and the provision, which we kept in place at 438 million, continues to be in line with IFRS kind of our best estimate, so thank you.

[Indiscernible] we are aware of like, you have about [400,000 or 600,000] I don’t remember the exact figure that…

That’s the provision of the [multiple speakers].

Yes, yes, yes. But anything we know like why [indiscernible] will be able to cover, I mean, I know it’s going to be…

There’s n o update to the [indiscernible] we can’t speak to ongoing discussions and the litigation coming up. We have a provision for 438 million.

Just a couple of follow-up questions, firstly just on the authorized generics, you obviously mentioned one of the reasons for the high costs and the – and cost of goods in the fourth quarter was larger shipments two Sandoz. Now just that they still have products and prescriptions going through in the market, you – do you have an idea of where their inventory is and how long – much longer we may see kind of them being able supply the full market? Because I’m surprised at how [indiscernible] last for. And then, the second question is on you mentioned some of the litigation that I think the DOJ, if I understood correctly was trying to prevent you from doing in ordinary course of business any sort of transaction over $1 million. Just wanted to get a little bit more understanding of how that restricts you in terms of, you know if you wanted to in-license something would that be prohibitive for that if it was more than $1 million things like that?

So, let me maybe take a first cut and then we can have Javier add in this as necessary. I think with regards to the authorized generics, obviously, we've done our best to help close out that relationship in a good fashion and help them meet their contractual arrangements with their customers. That will lead to some share or some inventory in stock that they have bleeding through throughout 2020. Exactly, how much that is that's for you to ask Sandoz about and how long they think that'll be, but you’ve seen the shares and where those are. Those are readily available in IMS so. As it relates to the motion, I think listen, the motion is just that a motion. You know, we will object to that motion in court and we’ll see where that comes out, so it's hard to speculate on that right now, Max, with regards to the impacts, the ranges, there will be a lot of details that come out as that get put before the judge.

But if the basic motion that they’re trying to get is even in the ordinary course of business, you wouldn’t be able to enter a contract that was over $1 million where let’s say you want to license something in for $2 million.

Yes, again, I think there's a lot of details on the specificity of the motion that will play out. I mean they’ve – you’ve seen the public where they’ve asked for I think a court approval on $1 million, right. So, we'll see where that goes.

Okay, thank you.

Hi, I’m just curious if there’s anything to learn both SUBLOCADE and I think the competition on the long-acting cameras are now approved in Australia, is that correct? But I'm not sure whether they are both being launched or like what states – states of commercialization wherein in Australia, and if they are, is there anything to learn from that market in the context obviously those guys coming in at the end of this year in the U.S.?

So, regarding, ready for market entry in Australia. So, I think what, as I think is through. I think what’s the big win here. The big win here is for public health and for patients. The big win is the 85% of patients who are not in treatment, particularly in the U.S. You asked about the impact in the U.S., I think the emergence of a new therapeutic class of injectable products has to be good for public health. It has to be in the best interest of patients. It has to be in best interests of evolving the disease space. so you'd hope that if there are two companies driving and advocating for expanding access for treatment, two companies out driving the medication as to a treatment agenda, there will be a lot of growth in the – you know and penetration of the untreated – the treated percentage of the total patient population. So, it should be good for public health and I would imagine that targeting the patients who are not in treatment would be the way to go.

Okay. Well thank you very much indeed for your time, attention, and support and we look forward to seeing you through the year. Thank you.