Indivior: Is Vivitrol A Threat To Suboxone?

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A study sponsored by the National Institute on Drug Abuse compared opioid addition treatments Vivitrol from Alkermes (ALKS), and Indivior’s (OTCPK:INVVY) (OTCPK:IZQVF) Suboxone. The trials were closely watched and could position Vivitrol as a candidate to disrupt the market for drugs used to treat opioid addictions:

A closely watched trial comparing two opioid-addiction treatments found patients had a harder time beginning treatment with one of the medications, leading to more relapses in that group.

Among patients who were able to start treatment, the medications were similarly effective at preventing relapse, a finding researchers and the study’s sponsor called particularly important.

In my opinion, the results could be damning for Suboxone. I explain below.

Suboxone Had Fewer Relapses

The study was done over 24 weeks and the participants were randomly assigned to receive Vivitrol and Suboxone. About 57% of participants taking Suboxone experienced a relapse versus 65% for Vivitrol. Vitriol’s drawback is is its major induction hurdle:

Patients must stop taking opioids for several days and be fully detoxified before they can get their first Vivitrol shot—a step some addicts find hard to take because it requires them to experience some withdrawal symptoms. Suboxone treatment can begin immediately, making it an easier option.

Only 74% of patients were able to start treatment with Vivitrol versus 65% for Suboxone. Once participants were successfully inducted the efficacy was similar for both drugs – just over 50% of the participants relapsed. In one regard Suboxone could be viewed as more effective. However, at a cost of $500 per month for a 30-day supply it is still out of reach for many:

Drugs do exist to reverse opioid overdoses or treat long-term opioid addiction. But while opioids have become easier and easier to obtain through illicit markets and sellers on the dark web, a drug that could save countless lives has become increasingly out of reach.

Consider the addiction treatment drug, Suboxone. Patents and other exclusivities on the basic version of Suboxone expired some time ago, yet the price remains sky-high, and access problems persist. Oral film strips now cost over US$500 for a 30-day supply; even simple tablets cost a whopping $600 for a 30-day supply. The cost alone puts the medication out of reach for many.

I understand that Vivitrol costs over 1,000. The drug currently treats heroin addiction. Alkermes might need to heavily discount Vivitrol to make it price competitive with Suboxone, and potentially overcome its induction hurdle. The pay off is that it could make Vivitrol available to a wider pool of patients suffering from opioid addiction.

Is The U.S. Ripe For Another Treatment For Opioid Addiction?

America has an opioid crisis. The number of accidental deaths related to opioids and the number of people addicted to them continues to rise. Some believe the statistics are driven by the proliferation of opioid prescriptions. According to Indivior’s November 15, 2017 presentation at Jefferies London Healthcare Conference, the following statistics applied to the opioid market:

  • The U.S. represents 80% of the world’s opioid users;
  • 300 million pain prescriptions were written in the U.S. in 2015, representing $24 billion;
  • 29 million Americans suffer from drug dependence and 91 Americans die each day from opioid use;
  • The EU has > 1 million opioid users – mostly heroin;
  • ROW has about 23 million people with drug disorders and opioid users; mostly consisted of heroin.

Given the the number of Americans who suffer from opioid addition, the U.S. opioid market could represent a major opportunity for Alkermes. It could be worthwhile to lower the price for Vivitrol specifically for opioid users in the U.S. and keep the pricing the same outside the U.S. In Q3 2017 Alkermes generated total revenue of $217 million, up 21% Y/Y. Revenue from Vivitrol was $69 million (32% of total revenue), up 24% Y/Y. That represents an annual run-rate for Vivitrol of about $276 million.

Vivitrol’s revenue pales in comparison to  that of Indivior which generated Q3 2017 revenue of $275 million, or an annual run-rate of $1.1 billion. The company generates the lion’s share of Suboxone sales in the U.S. It controls over 50% of the U.S. market. That said, at a price point of $350 – a 30% discount to Suboxone and over 70% discount to its Vivitrol’s current price – Alkermes could double quarterly sales of Vivitrol if it garnered 16,400 patients addicted to opioids. Vivitrol could likely make up the difference on price cuts from volume sales to the opioid market.

For Indivior the risks are substantial. First of all, the lion’s share of its revenue is derived from Suboxone sales in the U.S. Secondly, it has a gross margins of 90% and operating income margin of about 40%. Anything that negatively impacts Suboxone sales or its hefty margins could send the stock sharply lower. INVVY’s Q3 revenue was only up 3% Y/Y, yet the stock trades at over 33x earnings. Its earnings multiple likely reflects its strong U.S. share for the treatment of opioid addictions. The U.S. government is attempting to tamp down the number of opioid prescriptions, which represents a headwind for the company. Additional competition from Vivitrol could cause revenue growth to turn negative. The company currently has two drugs in phase 3 clinical trials – RBP-600 (opioid addiction) and RBP-700 (schizophrenia). However, for now, it remains a one-trick pony.

Conclusion

INVVY is up 12% Y/Y, but a potential challenge to Suboxone by Vivitrol could punish the stock. If Alkermes were to aggressively market Vivitrol at a lower price point it could potentially hurt Suboxone’s U.S. market share and profits. Investors should avoid INVVY.

 

On Trump And The Global Economy

Wuyi, Coconut Rob, Shock Exchange, Professor Brogman stunt for the ‘gram

The second installment of Trump And The Global Economy Town Hall took place October 24th in Fort Greene. It Featured Professor Lance Brofman, Coconut Rob (Coconut Rob Smoothies), Wuyi Jacobs (AfroBeats Radio) and Ralph Baker, author of Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead.

The event was well-received by the community. We parsed through President Trump’s proposed tax plan and [i] how it was pure economic folly and [ii] high net worth individuals could potentially game the system by shifting income around. Apparently, Kansas Coach Bill Self did this when the state of Kansas cut taxes in the past. We discussed the pros and cons of technology on workers and the economy. How will the economy and country prosper under Trump’s leadership vis-a-vis Obama? What’s behind the verbal sparring with black athletes, ESPN’s Jemele Hill and North Korea’s Kim Jong Un?

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