Indivior PLC

LSE:INDV

Earnings Call Transcript 2022-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the Indivior PLC Q1 2022 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mark Crossley, Chief Executive Officer. Please go ahead.

[Mark Crossley, executive]

Thank you, Sharon, and good morning and good afternoon, everyone. Thanks for joining our first quarter results call. Here with me today are Ryan Preblick, our Chief Financial Officer; and Christian Heidbreder, our Chief Scientific Officer. I'll start with an overview of the results for the first quarter and a progress report against our strategic priorities. Ryan will then discuss the results in more detail, and we'll follow up and move on to Q&A.

Before I move on to my overview, I'll assume that you've read the forward-looking statements. On Slide 4, turning to the quarter, we delivered strong results, which put us on track to meet our full year 2022 guidance. This performance was driven by the team's successful execution against our strategy focused on growing SUBLOCADE in Organized Health Systems.

In summary, our first quarter net revenue grew 15% and operating profit improved modestly, even including the significant uplift in strategic growth investments we are making to grow SUBLOCADE and PERSERIS.

Our financial position also remained extremely strong. I want to briefly call out a few highlights. First, SUBLOCADE net revenue of $85 million grew 13% versus the previous quarter and about doubled versus Q1 a year ago, with year-over-year growth of 98%. With this performance, SUBLOCADE has now surpassed SUBOXONE Film as our largest contributor to overall net revenue. Growth was driven by increased penetration of the Organized Health Systems, which represented over 75% of SUBLOCADE's growth fueled by the platform investments we've made.

The success of our SUBLOCADE strategy means this important therapy is becoming available to an increasing number of patients at a time when combating the U.S. opioid epidemic has never been more urgent. The CDC now estimates that drug overdoses have caused more than 105,000 deaths in the latest 12-month period, with almost 80,000 of those deaths related to opioids, which astonishingly translates to 219 deaths a day.

Second, based on our strong first quarter results, we remain confident in our fiscal year 2022 guidance. Our confidence is bolstered by the strategic investments we made in the second half of 2021 to grow SUBLOCADE and PERSERIS. Though no, we do continue to navigate some COVID restrictions and are monitoring the performance of SUBOXONE Film share in light of some modest loss related to formulary changes with New York state plans.

Third, based on our strong balance sheet and business momentum as well as our continued focus on organic growth in 2022, we're today announcing a new $100 million share repurchase program. We continue to maintain a balanced capital allocation policy seeking to both return cash to shareholders if and when appropriate, and most importantly to also reinvest in our strategic priorities, which we expect to broaden to the potential for business development.

Moving to Slide 5, which is our report card, we've made excellent progress against our strategic priorities in the quarter. Our #1 strategic focus continues to be delivering on the peak net revenue goal for SUBLOCADE of greater than $1 billion. As I mentioned, we delivered continued strong sequential and year-over-year net revenue growth for SUBLOCADE, and our growth was driven primarily by our Organized Health Systems-focused strategy.

During the quarter, we saw an easing of Omicron restrictions across the U.S. health care system as the quarters progressed. Exiting Q1, we're back to achieving access to approximately 70% to 75% of our call platform, compared to 60% at the peak of Omicron in January.

Turning specifically to Organized Health Systems, I'm pleased to report we've achieved access to over 430 of our priority systems. This is just shy of our goal of accessing the 500 priority systems we set for ourselves 2.5 years ago and is ahead of our expected timing, owing to our investments in SUBLOCADE's access in this channel. While we continue to activate new accounts, our focus is increasingly toward the depth of prescribing within those that we've already accessed.

Our dedicated efforts focused on the criminal justice system are also starting to gain traction, and we are seeing sequential unit growth in this Organized Health System sub-channel. Recall, this team was formed in the fourth quarter last year. And while the upsurge in the Omicron subvariant of COVID had an impact on their early ability to access customers, this impediment is easing. Around 2/3 of patients with opioid use disorder will pass through the criminal justice system at some point during their patient journey. So this is a key element of our strategy to support patient access to SUBLOCADE.

Moving to diversification, we're seeing encouraging progress from PERSERIS in the quarter across a number of metrics. Net revenue grew year-over-year, but was unchanged sequentially. While COVID restrictions were a factor in Q4 and first half of Q1, the period that primarily determines the revenue of the quarter, we're now experiencing early signs of renewed growth as those restrictions subside and the national sales force becomes firmly embedded in previously uncovered space. Specifically, we're seeing growth in both unit volume and in the number of HCPs prescribing in previously uncovered territories.

In addition, sample demand from HCPs across both patient and acute care, psychiatric facilities as well as outpatient clinics is strong. We expect this, combined with strong national coverage to translate into growing net revenue as we progress through 2022. Looking at ex-U.S. net revenue, it was a challenging quarter primarily due to our legacy tablet business, which is continuing to face pricing pressure from branded and generic competitors as well as government austerity measures. Additionally, there's a mid-single-digit headwind associated with the disposal of our TEMGESIC business.

While there have been COVID-related restrictions which have impacted our ability to make greater headway with SUBOXONE Film in Europe, there are green shoots, and we're extremely pleased with SUBLOCADE's steady progress outside the U.S. with net revenue growing to $6 million in the first quarter, representing an increase both sequentially and year-over-year.

Overall, we remain focused on returning the rest of world business to growth and continue to believe this is achievable based on the prospects for SUBLOCADE and SUBOXONE Film.

Turning to the 2 strategic pillars in terms of pipeline updates, I'll mainly focus my comments on AEF 0117, the promising asset for cannabis use disorder on which we have a strategic collaboration and option license agreement with Aelis. We're expecting Aelis to begin the planned Phase IIb study this quarter. The estimated study completion is November 2023, and the clinical study report is due to be delivered in second quarter 2024.

We have option to in-license development and commercialization rights in return for $100 million fee payment to Aelis, together with potential customary future milestones and royalties. We continue to be very excited about the potential to treat cannabis use disorder, which is increasing in prevalence with the availability and potency of current marijuana products as well as the mechanism of action, which is the first signaling specific inhibitor of the CB1 receptor.

You will have also seen we're continuing to advance our early-stage assets, INDV-1000 for alcohol use disorder and INDV-2000 for opioid use disorder. 1000 is progressing 2 lead molecules to dosage tolerant studies and 2000 clinical hold is expected to be resolved in the second half of 2022, as our data package submission to the FDA is expected in the current quarter.

In terms of optimizing our operating model and capital allocation, I've already highlighted we will commence a new $100 million share repurchase program. This is our second repurchase program within the last 12 months, and it underscores our disciplined approach to capital allocation that appropriately balances returning capital to shareholders with maintaining our ability to execute on our strategic priorities.

Finally, on Slide 6. With regard to the potential additional U.S. listing, we're currently engaged in formal consultation with shareholders, and these conversations are progressing well. We expect to make a further announcement following the conclusion of the consultations at the time of our half year results in July. If shareholders are supportive, we would expect a formal shareholder vote in September and implementation in the spring of 2023.

To conclude my formal remarks, the Indivior team has sustained the improved business momentum we delivered in 2021 and delivered a strong start to the year. We're confirming our fiscal year 2022 guidance and our capital allocation priorities continue to be relentlessly focused on increasing shareholder value via reinvestment in our strategic priorities, with direct returns to shareholders when and if appropriate.

And finally, with the expected continued momentum behind SUBLOCADE, we have the potential for business development. With that overview, I'll turn it over to Ryan to detail our first quarter performance.

[Ryan Preblick, executive]

Thanks, Mark, and good morning and good afternoon to everyone. We had a strong first quarter to start full year 2022. We are pleased with our execution, and we are on track to achieve the full year 2022 guidance that we communicated in mid-February. During the quarter, double-digit top line growth was driven by the strong momentum behind SUBLOCADE, while SUBOXONE Film share remained relatively resilient. Our adjusted operating income increased modestly versus the prior year, reflecting our increased net revenue and a significant investment in sales and marketing we have made over the last year to accelerate the growth of our LAIs.

We also maintained our financial flexibility with more than $1 billion in cash and investments. As Mark mentioned, this has enabled us to return value to shareholders through the announcement of a new $100 million share repurchase program. We expect this program to begin May 3.

Now I will provide some more detail on the drivers of our performance in the quarter. Starting with the top line, total net revenue grew 15% versus the year-ago quarter and by 17% at constant exchange rates. The increase in net revenue was mainly a function of the near doubling in SUBLOCADE net revenue. By geography, total U.S. net revenue grew by 26%. In contrast to the strong performance, net revenue in rest of the world was down 10% year-over-year, excluding an unfavorable FX impact. This decline was driven by ongoing austerity measures, generic competition and the divestiture of the TEMGESIC franchise, which contributed $2 million of net revenue in the year-ago period.

On the positive side, SUBLOCADE net revenue outside of the U.S. doubled to $6 million, putting us on track to offset the decline in the legacy tablet business over time. Total SUBLOCADE net revenue for the first quarter of $85 million was within our expectations and consistent with our full year view of $360 million to $400 million. First quarter SUBLOCADE net revenue growth of 14% versus the previous quarter was in line with expense growth on a like-for-like basis.

Q1 SUBLOCADE net revenue included a mid-single-digit trade spend benefit, while the fourth quarter included a stocking benefit of approximately the same amount. Moving to PERSERIS, net revenue of just over $5 million was also within our expectations for the quarter. We expect the ramp for PERSERIS net revenue to accelerate into the year with our now fully embedded national sales team and ability to promote the unique benefits of this important schizophrenia medicine on a more frequent in-person basis with COVID restrictions continuing to ease.

For SUBOXONE Film, the average share of 22% in the quarter was elevated by our sole preferred status on New York State Medicaid plans going into 2022. We have, however, now seen a reduction in share at the end of the quarter to approximately 20%. In late March, New York Medicaid added generics to their preferred formulary alongside SUBOXONE Film. This market share development, a decline of 1 to 1.5 points of share is embedded in our full year 2022 guidance. To date we have not been notified of any other material formulary changes. As a reminder, we do not promote SUBOXONE Film in the U.S.

Moving down the P&L, our first quarter adjusted gross margin was 82%, down modestly from the prior quarter, but steady versus the prior year reflecting a higher mix of government business for SUBOXONE. We continue to expect gross margins in the low to mid-80%s range for the full year at SUBLOCADE, which carries a more beneficial margin continues to grow as our largest product. Our overall operating expenses were $117 million in the quarter, which are up $20 million versus Q1 of last year, reflecting the strategic investments we made in the business to accelerate growth and diversify revenue.

We continue to expect operating expenses to increase in the coming quarters due to the phasing of R&D spend and to increasing sales and marketing activity. Our adjusted operating income of $54 million was up modestly versus the prior year as higher net revenue more than offset the strategic investments mentioned. For the full year, we expect this general dynamic to continue and full year 2022 adjusted operating income to be similar to the prior year.

Quickly touching on the balance sheet and our capital position. During the quarter, we maintained a strong liquidity position and ended the quarter with growth cash and investments of $1.24 billion and net cash and investments of $776 million. Positive operating cash flow was offset by timing differences on cash receipts and payables on government rebates. During the quarter, we also took the opportunity to invest $139 million of our cash in investment-grade income-generating debt securities. This will allow us to generate some income on a large cash balance we carry.

Overall, we are pleased with our execution and our financial results for the quarter. We believe our Q1 performance puts us solidly on track to deliver our full year 2022 guidance, and we look forward to updating the market as the year progresses.

With that, I will now turn the call back over to Mark.

[Mark Crossley, executive]

Thank you, Ryan. So in summary, a strong start to the fiscal year by the entire Indivior team, progress against our strategic priorities and strong financial results. Additionally, we've announced a return of capital to shareholders and continue to progress with shareholder consultation on a potential U.S. listing.

With that, I'll go ahead and open up to questions and answers.

[Operator]

[Operator Instructions] Your first question comes from the line of Paul Cuddon from Numis Securities.

[Paul Cuddon, analyst]

I've got 2 questions initially, please. And firstly, on the sort of reconciliation between the patients in treatment growing around 16% from the end of '21 to the reported revenue growth. To what extent is that a sort of late Q1 increase in patients that just starting out, essentially new patient capture versus an average patient number? If you could start with that one first, and then I can pick up on the next question after.

[Mark Crossley, executive]

Thanks, Paul. Listen, I think that this is a small difference of a couple of points between the 2, and they're generally highly correlated, as you can see between both patients, dispensers and the revenue line. So we're really super pleased if you look at the strategic progress as well as the execution that the team has delivered as they started off Q1 on SUBLOCADE.

[Paul Cuddon, analyst]

The net revenue per dispensed dose in the U.S. seems to be holding up pretty well. But I don't want to overread this. Do you think there could be changes up or down as the year progresses that we should be aware of?

[Mark Crossley, executive]

I think, Paul, as we look at the U.S. market with regards to SUBLOCADE, it's a relatively stable pricing environment with regards to where we are. We have good coverage, good access and have our continuous patient program with regards to buying down co-pays in the market. We took a price increase of -- a gross price increase of about 5% in January. So that should be factored in on the year ago metrics on a net basis and continue to just drive and execute across the fundamentals of our Organized Health System strategy.

[Paul Cuddon, analyst]

If you don't mind, just one quick one on the Aelis Farma assets, if I were looking at the Phase 2a data, I mean one thing I would say is that it does seem to be quite a sticky drug. So the daily dosing regimen, do you think that's going to be the right approach kind of heading into later-stage trials?

[Mark Crossley, executive]

Yes, I think first of all, we are super excited about it, as I said in my comments and expect that first dosing here in Q1. But I'll hand over to Christian, who's here to talk us through a bit of the scientific endpoints and thoughts on the asset itself.

[Christian Heidbreder, executive]

Yes, absolutely. Aelis will embark on a Phase IIb. As you know, we are expecting first subject first visit in the second quarter. Based on the preliminary data of the Phase IIa showing a decrease in the subjective effects of cannabis and a decrease in self-administration, we are proposing to really test the 3 doses of the Aelis compounds once a day for 12 weeks. And we are going to look into the proportion of subjects with the response of less than 1 day of cannabis use per week compared to placebo.

And then as a secondary objectives, we will investigate the proportion of subjects that reach various levels of reduction of use. And very importantly, how this influences their quality of life. And then, of course, on top of that, we will continue to monitor the safety and the tolerability of AEF0117. So quite exciting time for this product, with collaboration with the Department of Psychiatry at Columbia University.

[Operator]

Your next question comes from the line of Thibault Boutherin from Morgan Stanley.

[Thibault Boutherin, analyst]

Just a couple. The first one, what are the kind of next key pieces of legislation to watch in the U.S. that could provide further support to your business and to opioid addiction treatment in general? And maybe a second question is on the ANDA litigation, if you could give us a little bit more color on the mediation process and what can be expected here in terms of potential resolution, and just potential for resolution in general?

[Mark Crossley, executive]

I think the first question, Thibault, you broke up a little bit, but was what are the next keys in the overarching U.S. market that will [indiscernible]...

[Thibault Boutherin, analyst]

Sorry, it was about potential legislation that could pass and could provide support for the business. So in terms of, if there is anything that you're watching in the pipeline in terms of potential legislation that could change the situation?

[Mark Crossley, executive]

Legislation. Okay, I apologize. So I think in the overall U.S. market, I think opioid epidemic is just a huge -- there's a huge unmet need. There's a treatment gap of 80%, where only 20% of people that suffer from OUD actually get any form of treatment. It's a truly bipartisan issue that we're seeing across both aisles in the administration. And we continue to see this get focus from a funding standpoint, and there's legislation that's in Congress that has to do with addressing treatment where patients are most able to get it, specifically the Medicaid Reentry Act that's sitting in Congress, and we're hoping will gain some momentum as we move into the second and third quarter of the cycle.

Additionally, you've seen some things that popped recently with the administration's position on addressing the opioid epidemic as well as with the increases in fentanyl use over 80% of the death of fentanyl, we're having the first fentanyl day in the U.S. to increase awareness, and that is in May. And so I think all of these things in a disease space where awareness of treatment, the stigma associated with the disease and this huge treatment gap that exists that we think will fuel treatment and the growth of treatment moving forward, we think these are all positive momentum that will hopefully decrease the stigma and open up treatment broader.

With regards to litigation and the mediation in the ANDA, I think nothing has really changed there. We're looking to have that get scheduled and take place, and we'll see where that takes us moving forward, and we'll comply, of course, with the court order. But our legal team and our external advisers are working on that actively.

[Operator]

Your next question comes from the line of Max Herrmann from Stifel.

[Max Herrmann, analyst]

3 if I may. Firstly, just on SUBLOCADE, obviously you had a good quarter. Can you give us a little more color in terms of the underlying, I think you mentioned maybe there was a bit of stocking in the number. Can you quantify that? And then just in terms of the ex-U.S. kind of rollout of SUBLOCADE, how that's progressing and what new markets are you looking at this year? Secondly is PERSERIS and I'll ask those later.

[Mark Crossley, executive]

Okay. I think with SUBLOCADE, Ryan spoke to really 2 effects. There was stocking in Q4, and then there were some one-off trade releases in Q1, that really those impacts offset each other, kind of $4 million to $5 million. So the growth that's there is relatively clean, albeit both periods are elevated a bit with one-offs when you look at the actual underlying. So a very, again, strong quarter as you look at dispenses, you look at patient acquisition and you look at growth quarter-over-quarter, which is clean, albeit the base is on both sides are inflated with one-offs.

From an ex-U.S. standpoint, we're really pleased with the continued growth and progress there. As you know, we're in our Australian, Israel and Canadian markets and continue to see quarter-over-quarter and year-over-year growth. As we look to other markets, in the back half of the year Q4 and beginning of 2023 as we get reimbursement and approval and start to supply those markets, we look to enter those and offer patients who are suffering from opioid use disorder are kind of paradigm shifting treatment. So we're excited to get into those new markets as we move forward.

[Max Herrmann, analyst]

Okay. And just on -- and secondly on PERSERIS, obviously, I had expected that we might be seeing a little bit of acceleration in prescription trends given the expansion of the sales force is pretty significant doubling or more than the rep promotional effort. So what's holding it back? And I mean, do you still see this $200 million to $300 million opportunity given the headwinds that you're experiencing?

[Mark Crossley, executive]

Yes. Thanks for that question, Max, and very appropriate. Let me just start with -- I remain confident in both our fiscal year guidance of the $30 million as well as our peak net revenue guidance of $200 million to $300 million that we've shared with folks. Our first quarter was in line with our planning assumptions. We have expanded the national launch, and they've been in the field since Q1, which is leading to signs of renewed growth as the Omicron sort of restrictions subside, but these are leading sort of indicators as the national team gets embedded with their optimal reach and frequency in the platform to drive that growth.

It's leading to both growth in unit volumes as well as number of HCPs as we exit the quarter and enter Q2 and higher demand for HCP-requested samples in both in-patient and acute care psychiatric facilities as well as outpatient clinics. So it's these things that along with the continued full national exposure throughout the year that we have confidence that the growth will start and will hit our target for the year as well as the peak net revenue guidance of $200 million to $300 million.

[Max Herrmann, analyst]

Okay. My final question is more strategic. I totally appreciate that as you want to focus your attention on SUBLOCADE and to a lesser extent PERSERIS to make sure you achieve the objectives you've set for those products, you obviously still have and are generating a significant amount of cash. From a strategic perspective, when do you think SUBLOCADE will be established enough so that you might be able to look at broadening the business perhaps through an M&A sort of type in maybe bringing some other assets onboard?

[Mark Crossley, executive]

Now it's another great question, Max. I think here, I think we are focused on really driving the momentum on SUBLOCADE, not distracting the team from that. And while we don't expect to pursue material M&A this year, with that continued momentum, we do see it as a logical next step towards diversification and shareholder value creation, and it's one that the Board and management are spending time as we move forward. So we'll look to it. No time sort of guidepost on that because you know how M&A works in these spaces, but it's one that we're strategically turning to as we move ahead.

[Operator]

Your next question comes from the line of James Stein (sic) [ James Vane-Tempest ] from Jefferies.

[James Vane-Tempest, analyst]

It's James Vane-Tempest from Jefferies. A couple of questions, please, just on SUBLOCADE. What is the average duration patients take SUBLOCADE for? And I guess when people stop taking it, how much of it is just due to the relapsing or versus affordability issues? And then my second question is thinking about the opportunity of SUBLOCADE in the criminal justice system, how much potentially also is there in drug courts? And how would you envisage the pricing dynamics evolving given the potential uplift in volumes in that scenario?

[Mark Crossley, executive]

Thanks, James Vane-Tempest, for the question. I think first on average duration, with SUBLOCADE, the average duration is in the 5 to 5.5 month range. With regards to that, I see this as kind of a normal sort of exploration, I don't see it as an affordability issue. When you look at SUBLOCADE, we have excellent coverage approaching 90%. We have a very solid co-pay program that buys down co-pays to $0 for patients, which makes it quite competitive with even the orals on a patient affordability standpoint.

So we don't see affordability as a major barrier. And we think this is a transition with 5 to 5.5 months, where you've seen Christian science that he and the team have delivered with the Recover study that talks about the higher chances of staying in recovery when you stay in treatment for 12 months or more. And I think this is just an evolution that will hopefully occur in the disease space as stigma drops off, as normalization of treatment occurs and people realize that given you typically abuse for 6 or more years before you enter treatment for the first time, that getting off treatment should not be your first priority.

So that's a little bit with regards to the duration of treatment. As we look to the SUBLOCADE opportunity in criminal justice, I agree with you. We're focused on both facilities and expanding into drug courts. We think both of those are a great entry point where patients are motivated to enter treatment and get on their recovery journey. As we've talked, 60% to 65% of patients go through the criminal justice system at one point in their journey. So we agree with that.

As it relates to pricing, we've built in the criminal justice system with regards to our guidance and as we move forward but obviously that pricing is more like a government channel than it is a commercial sort of channel sort of pricing environment as it relates to growth to [indiscernible].

[James Vane-Tempest, analyst]

And just one more follow-up if I can and apology, I know you've talked about it a couple of times on this call, but just a clarification. So the destocking and the stocking seen in Q4 and Q1, you mentioned sort of $4 million to $5 million in Q4 and the same in Q1. Just wondering, the stocking in Q4, was that fully destocked in kind of Q1? And how should we think about that in terms of what the real kind of underlying growth is? Because it wasn't -- I didn't quite completely understand the parameters you were saying in terms of where the underlying growth is versus the stocking-destocking elements?

[Ryan Preblick, executive]

Yes. Hey James, it's Ryan. So just to clarify, so in Q4, there was stocking of about $4 million worth, which we cause price speculation where the trade does increase their inventory. In Q1, the one-off was related to trade spend benefit of $4 million. So when you back those 2 onetime events out of the base and also Q1, your underlying net revenue growth was up 14%, which is in line nicely with the U.S. dispense growth, which was 14%. So net-net the volume, the underlying baseline that you should be focusing on is the 14% growth quarter-over-quarter. And the destocking that could have happened has not, but we think that's because the increase in demand is at the level now that they did not need to destock and needed the product to fulfill orders going on in the future.

[Operator]

Your next question comes from the line of Peter Testa from One Investments.

[Peter Testa, analyst]

I have a couple of questions on marketing channel for SUBLOCADE. I was wondering if you could give a sense on the OHS traction. You talked about the numbers, you talked about increasing focus on depth. Is there any understanding you can help us with on how that depth progress is going, i.e., number of doctors prescribing first-time number regularly, these sorts of things to get some understanding of how the OHS channel depth program is going?

[Mark Crossley, executive]

Thanks, Peter, for that. And listen, Organized Health Systems, we continue to make great progress and they're driving over 75% of the growth and represent in excess of 60% of the revenue for SUBLOCADE. So really, truly the strategic channel in which we've really focused more is driving the vast majority of the growth and the increases you're seeing. So the numbers that are represented when you talk dispensers and you talk patients are being driven by the Organized Health System.

Now as I think to depth in the Organized Health Systems, we obviously are coming in on our 500 parent Organized Health System target to get access of a script in those. And the growth is really across 3 different vectors moving forward. Each of those parents have satellite sort of sites. We call those children. We need to gain access to those to get the full benefit of each of those Organized Health Systems.

Then we're looking to have more physicians get first-time prescriptions. Obviously those are growing through time, and we're looking for depth of prescribing with regards to prescribers moving forward. So all 3 of those sort of dimensions of growth are what give us confidence in the short, the medium and the long term with regards to the $1 billion-plus guidance that we have.

[Peter Testa, analyst]

Are you able to provide any understanding on those 3? Has there been any progress made, maybe just looking over the past 12 months or any period you'd like to give, so we can understand how that depth part is going?

[Mark Crossley, executive]

Yes, we've not carved those out to date. I think the key metrics that we see that really show the progress because 90% of our platform is in the Organized Health Systems are truly the dispensers and the patients as we move forward, but we can give some consideration to that, Peter.

[Peter Testa, analyst]

Okay. And then just a question on the justice system too, on the justice system. Can you give any sense on patients -- the patient numbers you've given to the extent to which the patients have been originated in justice system during Q1?

[Mark Crossley, executive]

Yes. We've not given out specific sort of patient sort of information. But what we are seeing is sequential growth in systems that are activated, which means that you're getting to -- with an activation you're getting to a dispense in those channels. And obviously we're focused on the top 1,000 criminal justice systems, unique criminal justice systems across the U.S. And we've got prescriptions in over 100 of those at this time.

And I think one of the things that we're proud about is that the Q1 dispenses already to date are almost in the range already of what we had in all of 2021 combined, so absent the large one-off order we had in Q2. So you can see we're getting some accelerated growth in those channels. And for us, the key with criminal justice system because these patients that are in there are typically in shorter-term offenses, getting a patient in treatment there is also a patient who will then transition into potential Organized Health Systems while they stay in recovery.

[Peter Testa, analyst]

Okay. And the other question that you mentioned that the pricing in justice system was sort of more government-type pricing. When you think of the total at an EBIT margin level taking account of different marketing and support requirements, is there much difference between a patient coming through the justice system versus coming through OHS?

[Mark Crossley, executive]

Well, again, I think it's -- when you think of absolute pricing, it's more government channels. So Organized Health Systems have both commercial payers as well as government payers, so there's a blended mix, whereas the criminal justice system is predominantly a government mix. So what you're talking about is lower overall net pricing. And really then when you look at criminal justice system, while there is some marketing activities on materials and those sorts of things, we have -- I think we talked last year, we've increased to about a 20-person team that's focused on those areas. So we don't disclose the actual product, but the P&L is by channel, but that's a little bit of insight to help you with your question.

[Peter Testa, analyst]

I guess the question is, is it much different or not because you have all the educators and other factors that go through OHS is quite sales force and support staff intensive. I didn't know whether there's much difference with this guideline?

[Mark Crossley, executive]

Yes, we don't break it out at that sort of granular level because of...

[Operator]

Your next question comes from Paul Cuddon from Numis Securities.

[Paul Cuddon, analyst]

Just a couple more from me. Just -- and I appreciate this is going to be difficult as the year progresses, but sort of current exchange rates with sterling, you're getting a lot more kind of raw materials for your dollar these days. I'm just wondering whether we should be thinking of sort of gross margin impacts for the year. And then whether you're starting to see any inflationary -- wage inflation given the prevailing economic climate that we should be factoring in?

[Mark Crossley, executive]

Thanks, Paul. I'll give that one to Ryan to handle.

[Ryan Preblick, executive]

Yes. We certainly have factored in those variables into the guidance that we did provide and feel comfortable that we have appropriately managed that through the metrics. What I would say is majority of our cost base on the SG&A side is really personnel, and we've managed those through your typical merit increases and have done fairly well in regards to head count retainment. And so we're not seeing a lot of risk at that point.

And then when you look at our cost of goods sold line item around inflation there, we are lucky that the primary product in the cost of goods sold is the raw material from buprenorphine, which is quite manageable at this point in terms of the inflation on that item. We are certainly seeing inflation for power and for some supply costs, but those are small components of our overall cost. So net-net, we feel that we're in a good position. We're going to continue to monitor it during the first half and then see how it plays out as we get into the second half.

[Operator]

Your next question comes from the line of Max Herrmann from Stifel.

[Max Herrmann, analyst]

Just a single follow-up question from me as well, which is just in terms of the physicians that are prescribing SUBLOCADE, do you get a feel for kind of how many, let's say, patients are on their books and let's say, on average, what sort of number of patients they see as suitable for SUBLOCADE versus the dailies? Just give us an idea of what sort of proportion you're getting to in accounts that are or doctors that are prescribing?

[Mark Crossley, executive]

That's a great question, Max. And it's one that obviously, when you're in the launch mode we're in, is developing through time as physicians become more experienced in SUBLOCADE and continue to see the breadth of patients that are suitable for it. So there is no endpoint with regards to that. What we do see is that in the Organized Health Systems, the physicians that start to prescribe, prescribe faster and with a deeper number of patients per HCP than in our original call platform, and we've seen a significant increase in the number of HCPs that have 5 or more patients and are more higher adopters over since we've shifted into Organized Health Systems.

So we're making good progress on the deeper adoption, but the percentage of patients suitable for this is tough to play out through the actual prescription. So that's one that will play out through time.

[Operator]

And your next question comes from the line of Peter Testa from One Investments.

[Peter Testa, analyst]

Just one quick question, R&D. Given the phasing is obviously lighter in Q1, I was wondering if you could just give us any sense as to how we should think about R&D spend phasing in the rest of the year, but is there any particular high or low quarters we should think about?

[Ryan Preblick, executive]

No, that's a fair question, and we are certainly excited and look forward to the programs really ramping up starting in Q2, and we're going to see the acceleration of those investments that we talked about last year. So I would anticipate high activity in Q2, Q3 and even into Q4 across the 3 categories.

One are the studies and trials on SUBLOCADE. The second are the investments we're putting behind the increased capacity to manufacture SUBLOCADE. And then the last is the continued support of the other assets that Mark did discuss in his script today.

[Operator]

I will now hand the call back over to Mark.

[Mark Crossley, executive]

Thanks again, Sharon. And that officially closes our first quarter results call. Appreciate the continued interest and support in Indivior, and we look forward to seeing everyone at the upcoming conferences. Have a great day.

[Operator]

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.