Long Acting Injectable Therapies Will Drive Margin Expansion And Support Long Term Recovery Solutions

Catalysts

About Indivior

Indivior develops and commercializes treatments for opioid use disorder with a focus on long-acting injectable therapies.

What are the underlying business or industry changes driving this perspective?

• Rising adoption of long-acting injectable therapies for opioid use disorder, supported by SUBLOCADE’s differentiated label features such as rapid induction and alternate injection sites, is expected to expand the treatment category and support product revenue growth and improved gross profit.
• The new Move Forward in Recovery direct to consumer campaign and broader omnichannel investment are expected to increase patient awareness, reduce stigma and drive higher initiation and persistence on SUBLOCADE, supporting top line growth and operating leverage.
• Mix shift toward higher value commercial patients, underpinned by strong coverage and low out of pocket costs, is expected to enhance pricing power and reimbursement quality, which could lift net revenue per patient and support net margin expansion over time.
• The multiyear Indivior Action Agenda, including at least $150 million in annual operating expense savings and a capped 2026 operating budget of $450 million, is intended to materially lower the cost base and support the translation of revenue growth into earnings and cash flow expansion.
• Portfolio and geographic focus on core markets such as the U.S., Canada and Australia, alongside streamlined R&D and optimized Rest of World operations, is intended to reduce complexity and volatility, which may improve earnings visibility and support more predictable free cash generation.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Indivior's revenue will grow by 1.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.5% today to 38.5% in 3 years time.
• Analysts expect earnings to reach $477.5 million (and earnings per share of $3.69) by about December 2028, up from $124.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 12.2x on those 2028 earnings, down from 36.2x today. This future PE is lower than the current PE for the GB Pharmaceuticals industry at 20.2x.
• Analysts expect the number of shares outstanding to grow by 0.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• If the long acting injectable category for opioid use disorder moves toward penetration levels seen in other chronic disease markets such as HIV and schizophrenia at 20 to 25 percent, SUBLOCADE could deliver sustained double digit volume growth and drive meaningfully higher revenue and earnings than implied by a flat share price expectation.
• The combination of tighter cost control, at least $150 million in annual operating expense savings and a capped 2026 operating budget of $450 million, together with rising SUBLOCADE sales, could structurally lift adjusted EBITDA margins and net margins, supporting a higher equity valuation over time.
• Continued commercial execution gains, label differentiation such as rapid induction and expanded injection sites, and the Move Forward in Recovery direct to consumer campaign may accelerate prescriber adoption and patient duration on therapy, increasing net revenue and earnings durability beyond current assumptions.
• A stronger balance sheet supported by robust operating cash flow generation and improving profitability could give Indivior greater strategic flexibility for capital allocation or business development, which may enhance long term earnings power and challenge the view that the share price remains unchanged.
• Stabilization of SUBOXONE Film pricing combined with focused Rest of World optimization in higher margin markets like Australia, Canada, France and Germany may make legacy and international revenues more resilient than expected, supporting total revenue and cash flow growth that is inconsistent with a flat share price outlook.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $37.86 for Indivior based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $477.5 million, and it would be trading on a PE ratio of 12.2x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $35.95, the analyst price target of $37.86 is 5.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.