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Numis Securities cuts Indivior to ‘hold’ from ‘buy’ on effects of copycat drug on sales and profits

Numis’s analysts said: “We now expect significant further downgrades to FY18 EPS (c.20) with US$25mln of cost savings targeted and substantial downgrades to FY19 forecasts c.50% … on the slower ramp of Sublocade and anticipated higher costs"
Drug addict
Last month, Indian giant Dr Reddy’s launched a cut-price version of Suboxone firm – Indivior’s blockbuster treatment for opiate drug addiction

Numis Securities has cut its stance on Indivior PLC (LON:INDV) to ‘hold’ from ‘buy’ in the wake of the group’s warning that its sales and profits will be lower than expected this year as its star drug comes under pressure from copycat rivals.

Last month, Indian giant Dr Reddy’s launched a cut-price version of Suboxone firm – Indivior’s blockbuster treatment for opiate drug addiction.

READ: Indivior slumps on profit warning as top-selling drug loses market share to copycat

A temporary restraining order (TRO) was granted but Indivior said it has already seen the impact from the launch of the copycat into the US market in those few days between the launch and the TRO being granted.

In a note to clients, Numis’s analysts pointed out that they had already substantially downgraded full-year 2018 sales and net profit forecasts for Indivior in anticipation of a  generic launch and assumed a loss of share for Suboxone.

They added that although the early launch trajectory for Sublocade - Indivior’s new injectable version of the drug - is slower than they had expected and guidance for Sublocade of US$25mln-US$50mln is light of their US$77mln expectations.

The analysts noted that Indivior will report interim results on the July 25 and does now expect to update guidance until at least third-quarter numbers in early November.

They said: “We now expect significant further downgrades to FY18 EPS (c.20) with US$25mln of cost savings targeted and substantial downgrades to FY19 forecasts c.50% … on the slower ramp of Sublocade and anticipated higher costs.”

The analysts added; “Feeding these changes through our DCF-based valuation with a slightly higher discount reduces our target price to 380p and so our recommendation drops to Hold, with further clarity needed on the impact of generics and the performance of Sublocade to consider the recovery trade.”

In late afternoon trading, Indivior shares were down over 29% at 268.1p.

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