Heightened macroeconomic risks and recession worries increase the likelihood of seeing more downgrades in company earnings. This puts a premium on finding companies whose earnings are less affected by the worsening economic backdrop.

One such company in our view is Indivior (INDV) which develops medicines for drug addiction and mental illnesses. The company has seen continued strong demand for its lead drug Sublocade, leading to persistent earnings upgrades.

Indivior trades on 15.8 times expected 2023 earnings which looks too cheap against the growth potential.

Sublocade is the only long-acting treatment for OUD (severe opioid disorder) which delivers a measured and controlled amount of the drug.

This keeps patients on an even keel and prevents the ‘highs’ and ‘lows’ associated with drug abuse. Injections are made monthly and can only be delivered by certified healthcare professionals.

The drug has generated strong sales momentum since launch in 2018 when it generated sales of $12 million. This year sales are expected to reach over $400 million while the firm’s medium-term sales target is $1 billion.

A key part of management’s strategy is to diversify the business beyond its market-leading opioid drug into other therapies such as schizophrenia, cannabis use disorder and alcohol use disorder.

The company is building a pipeline of drugs currently in clinical development to address these huge markets. Indivior plans to use the roughly $1 billion of cash on the balance sheet to make selective acquisitions and buyback shares.

Indivior is executing its second $100 million share repurchase programme, equivalent to around 4% of total shares outstanding.

On 14 November the company announced a deal to buy Nasdaq-listed Opiant Pharmaceuticals (OPNT:NASDAQ) for $145 million, representing a 112% premium to the undisturbed share price.

The deal further strengthens Indivior’s leadership position in addiction medicine while giving the company ownership of an opioid overdose rescue treatment OPNT003.

Management sees sales potential of between $150 million-to-$250 million after a potential launch in late 2023.

Shareholders have approved an additional listing for Indivior in the US which is expected to take place in the spring of 2023 alongside a five-for-one share consolidation.

The idea is to increase liquidity and attract wider analyst coverage and interest in the shares. The bulk of Indivior’s business is conducted in the US.

In October management increased 2022 revenue guidance by around 4% to between $890-to-$915 million. Analysts’ consensus estimates sit around the middle of the range at $900 million.

One risk to be aware of is the risk of further litigation regarding legacy OUD drug Suboxone.

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