Indivior PLC (LON:INDV) shares jumped by a third at the opening bell on Monday after a US court granted a preliminary injunction, stopping one of its rivals from selling a generic version of its top-selling drug.
The FTSE 250 drugmaker plunged last week as it warned full-year profits and sales would be lower than expected after Dr Reddy’s launched a cut-price version of Suboxone – Indivior’s blockbuster treatment for opiate drug addiction.
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The move surprised analysts, who thought the chances of the Indian giant launching ‘at risk’ – i.e. with various lawsuits hanging over it – were slim.
Indivior has frequently been to court to protect its star asset, which is responsible for more than 80% of its annual sales.
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It is adamant that Dr Reddy’s generic drug infringes on some of its patents and went straight to court which agreed to issue a temporary restraining order preventing its rival from selling it while the dispute is resolved.
That was only granted for a short period of time, so the preliminary injunction keeps the restrictions in place until US authorities decide whether or not Dr Reddy’s has infringed upon any patents.
While the injunction stops Dr Reddy’s from selling its copycat Suboxone, it only applies to new supplies; any drugs doctors have left over from before the TRO or injunction can still be prescribed.
Should US authorities decide that the patents are either invalid or haven’t been infringed, Indivior will have to fork out a sizeable sum to Dr Reddy’s for lost earnings.
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“As a result of the July 13 court ruling (TRO award), Dr Reddy's is prevented from re-launching its generic product until the patent litigation related to the '305 patent is concluded or until DRL prevails on an appeal of this injunction,” said Indivior chief executive Shaun Baxter.
“While we do not know the timing for these events, we will continue to vigorously defend our intellectual property.”
Indivior says it does not know how much of its generic drug Dr Reddy’s was able to sell into the US market before the restraining order and a subsequent injunction was put in place.
Based on the “abrupt loss of market” share, the company, which was spun out of Reckitt Benckiser Group PLC (LON:RB.) almost 25 years ago, said it expects net revenues to take a hit of at last US$25mln, although it admits that it “cannot reliably provide” any guidance until it knows the outcome of the patent hearing.
'Time to settle out of court'
In theory, the injunction will force Dr Reddy’s to hold off on selling its generic addiction treatment until an outcome of the patent trial is reached, which is expected to be in about two years’ time.
In reality, Dr Reddy’s will almost certainly appeal against the injunction, which presents some risk, and cost, to Indivior and its shareholders.
“A settlement with Dr Reddy’s would be our favoured outcome, rather than repeated, costly and binary litigation decisions, in our view,” wrote analysts at Numis.
Jefferies also reckons it might be a good time to strike a deal with other rivals looking to launch their own copycats in the near future.
The US investment bank reckons a settlement with Alvogen, which could possibly launch its version of Suboxone within a year, is now “more likely” given the “cautionary tone” set by the injunction result.
Shares are up 20% to 349.6p in afternoon trading on Monday, although they had been at almost 500p at the beginning of June.
--Updates for analyst comment and share price--