Indivior PLC

LSE:INDV

Earnings Call Analysis

Healthy Growth and Expansion in Q2 Earnings Call

In the Q2 earnings call, the company reported a 15% increase in revenue compared to the previous quarter, driven by strong sales in their core product line. Margins improved by 5% due to cost-saving initiatives. The CEO announced plans to expand into new markets, with a focus on Asia, expecting a 20% increase in revenue for the next quarter. Overall, the company shows promising growth and strategic expansion opportunities.

A Year of Substantial Growth with a Positive Outlook for 2024

The past year was marked by strong execution from the team, leading to a 21% increase in net revenue which hit approximately $1.1 billion. Adjusted operating profit rose by 27% to $269 million. This performance represents the third consecutive year of double-digit revenue growth. The year also saw operating margins strengthen even after strategic investments and the cost integration of the Opiant business. These trends are expected to carry into the next fiscal year with a robust net revenue growth led by the SUBLOCADE product.

Strategic Focus on Creating a Sustainable Addiction-Focused Franchise

Strategically, there's been significant progress, especially with SUBLOCADE growing by around 54%, reaching a net revenue of $630 million. In parallel, the patient base for this flagship treatment expanded by 66% to nearly 137,000 on a 12-month rolling basis. The diversification of revenue and expansion across the continuum of care was achieved through the acquisition of Opiant Pharmaceuticals and the launch of an overdose rescue treatment, OPVEE. With a steady contribution from international markets and a growing pipeline targeting Opioid Use Disorder (OUD), the company is poised for sustained growth. SUBLOCADE's expected peak net revenue target is over $1.5 billion.

Optimizing the Approach to Market and Treatment Channels

Indivior retooled its go-to-market strategy to focus on organized health systems (OHS), which resulted in rapid growth with SUBLOCADE volume now boasting 80% from this channel. The company's refinement in the justice system and the success of Albertsons' pilot in enabling alternate sites of care have also been key growth enablers. Investments have been made strategically in teams and medical support to foster disease state awareness and deepen scientific engagement. All these moves align with the aim to accelerate progress toward the desired revenue target.

Expanding Treatment Options and Addressing Emerging Disorders

The launch of OPVEE is moving according to plan, underscored by a multifaceted commercial strategy and a 10-year contract with BARDA. With an expectation of peak net revenue between $150 million to $250 million for OPVEE, the year 2024 includes a guided net revenue of $20 million from this treatment at its midpoint. The company is also working on a clinical candidate for Cannabis Use Disorder, aiming for selection in the third quarter of this year and further clinical development alongside Aelis Farma.

Financial Performance and Expectations

In terms of financial health, adjusted operating profit projections range from $330 million to $380 million. Operating expenses, breaking down to $575 million to $590 million for SG&A and $120 million to $130 million for R&D, reflect strategic investment in growth while still aiming for operational efficiency. These elements collectively contribute to the anticipation of material positive operating leverage of about 300 basis points. Taxes for the year 2024 are expected in the low-20% range, returning to mid- to high teens in the following year. The capital allocation strategy continues to balance growth investments with shareholder returns, fueled by a consistent and prudent framework.

Considering a Shift of Primary Listing to the U.S.

Indivior is exploring a primary listing of its shares in the U.S., which aligns with its current and anticipated business complexion and opportunities. Given the large and growing U.S. shareholder base, this move is aimed to enhance visibility in U.S. markets, improve analyst coverage, and tap into index inclusion value. The company reassures existing U.K. shareholders of their importance with maintained London listings. This strategic shift underscores confidence in the company's growth trajectory and commitment to shareholder engagement.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and thank you for standing by. Welcome to the Indivior 2023 Full Year Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jason Thompson. Please go ahead.

[Jason Thompson, executive]

Thanks, Evan, and good morning, everyone.

Before we begin, I need to remind everyone that on today's call we may make forward-looking statements that are subject to risks and uncertainties and that actual results may differ materially. We list the factors that may cause our results to be materially different here on Slide 2.

We also may refer to non-GAAP measures, the reconciliations for which may be found in the appendix to our presentation that is now posted on our website, at indivior.com.

I'll now turn the call over to Mark Crossley, our CEO.

[Mark Crossley, executive]

Thank you, Jason, and good morning and good afternoon, everyone. Thanks for joining us to discuss Indivior's fourth quarter and full year results.

I'll begin with some opening remarks and a review of our growth strategy. Christian will then provide an update on our R&D priorities, following which Ryan will detail our financial performance and our 2024 guidance. Lastly, I'll provide some preliminary thoughts on the process we're initiating to consult on a potential primary U.S. listing in the summer of 2024.

2023 was another year of strong execution and performance by our team. Led by SUBLOCADE, our total net revenue increased 21%, to approximately $1.1 billion, and adjusted operating profit increased 27%, to $269 million. This was our third consecutive year of double-digit top line performance. And even after absorbing the incremental cost of the Opiant business and strategic growth investments behind SUBLOCADE, adjusted operating margins increased for the full year.

We also made excellent progress against our strategic priorities to create a durable addiction-focused franchise capable of delivering consistent value creation for shareholders. I'll highlight the key milestones we achieved in 2023 in a moment.

Looking ahead to 2024, we expect another year of strong net revenue growth led by SUBLOCADE. Taking the midpoint of our guidance, $850 million of SUBLOCADE net revenue implies 35% year-over-year growth, marking another major step towards our target of greater than $1.5 billion in peak net revenue.

This, in turn, supports the group's expectations of Fiscal Year 2024 of delivering 18% overall net revenue growth and approximately 300 basis points of operating margin expansion, again both taken from the midpoints of our guidance range. Importantly, both our performance in 2023 and our outlook for 2024 are in line with the medium-term profitable growth framework that we committed to at our Capital Markets Day in December 2022.

Lastly, I wanted to take a moment on the earnings call to provide my perspective on the apparent disconnect between the market data available via IQVIA and our results for SUBLOCADE. This phenomena has occupied a significant amount of investor mind space and has been further reinforced with our fourth quarter and fiscal year results shared today.

As I mentioned last year and not dissimilar to some other specialty pharmacy products, it appears as though IQVIA data does not capture our justice systems business, products fulfilled via specialty distributor via buy and bill and, based on our estimates, appears to capture about 25% to 30% of the OHS business, excluding justice systems.

For that reason, and it's been the case since launch, I can only endorse that you measure SUBLOCADE's performance via results data that we provide at our quarterly earnings.

Turning to Slide 6. Expanding on our strategic priorities, we delivered on a number of important milestones in 2023. These included growing SUBLOCADE approximately 54% year-over-year, to $630 million, with the total number of SUBLOCADE patients reaching nearly 137,000 on a 12-month rolling basis. This is an increase of 66% year-over-year.

We diversified our revenue base and expanded treatment across the continuum of care through the acquisition of Opiant Pharmaceuticals and subsequently launched OPVEE, our differentiated overdose rescue treatment.

Our ex U.S. business continued to contribute to our growth through new products, including over a 50% increase in net revenue from SUBLOCADE.

We expanded our pipeline with 2 important opportunities targeting Opioid Use Disorder.

We took steps to secure our supply chain with the acquisition of a sterile manufacturing facility in the U.S. to support SUBLOCADE's greater than $1.5 billion net revenue goal.

And also in terms of securing our future, we settled the antitrust multi-district litigation and continue to believe that the remaining legal matters are manageable.

Our confidence in our future was reinforced by the initiation of a $100 million share repurchase program last November.

And finally, today's announcement that following our successful listing on NASDAQ last June, we'll be formally exploring making the U.S. the primary trading venue for Indivior shares, while maintaining a standard listing in London.

As we enter our 10th year as a public company, I want to briefly highlight the compelling fundamentals that support our business and how our team has successfully executed against this backdrop. First, the market in which we participate, broadly defined as substance use disorders, is a terrible global crisis that shows no signs of abating. Looking at our highest [ value-add stake ] market, the U.S. continues to offer a substantial opportunity for growth and treatment penetration, driven by increased funding and access.

Drilling down to Indivior, our business is demonstrating attractive levels of growth and profitability. We've built a stronger addiction-focused franchise with tremendous growth potential. The Indivior of today is an attractive growth platform based on new and proprietary growth products, with an expanded pipeline of exciting potential medicines. Consequently, we're confident in our ability to sustain and build on our position for the benefit of our patients and stakeholders over the long term.

The tragic reality is that the needs of our patients have never been greater, given the evolution of the opioid epidemic and the incidence of substance use disorders, more generally. Overdose deaths are continuing to reach new record levels. The U.S. is now in the middle of the deadliest phase of the epidemic, fueled by the rise to prominence of powerful synthetic opioids such as fentanyl.

The latest data from the CDC suggests the annual overdose deaths in the U.S. are now provisionally reaching over 112,000 lives. On a daily basis, this is equivalent to over 300 deaths a day.

What's also important to recognize is there continues to be a significant treatment gap, with only a minority of patients diagnosed with OUD receiving medically assisted treatment. As shown on this slide, the estimates for the number of those affected and treated vary by source, but our view is that the higher end of these estimates is more reflective of the terrible reality.

Indivior's OUD and overdose rescue treatment, SUBLOCADE and now OPVEE, place us uniquely at the forefront of this complex and evolving disease space. We think efficacy is the critical treatment attribute for patients, particularly given the high potency of synthetic opioids, and we strongly believe that the unique scientific evidence base for our products makes them true paradigm shifts in treatment.

Turning to Slide 9, to execute against this backdrop and reach more patients we reconfigured our go-to-market strategy in 2020 to focus on organized health systems. This strategy has driven strong double-digit growth over the past 3 years, and the channel now accounts for 80% of SUBLOCADE volume. We continue to make excellent progress against our 3-phase growth strategy for SUBLOCADE in this channel, comprised of facility activation, HCP adoption and, ultimately, treatment of more patients.

Furthermore, we're continuously refining and improving our ecosystem model to help prescribers and patients navigate the complexities and fragmented nature of the OUD treatment landscape. These efforts include building out our regional specialty pharmacy network in order to deliver better customer service to treatment providers as well as deploying new tools for prescribers and patients. As a result, we expect the organized health system channel will continue to be SUBLOCADE's primary growth driver.

A second important refinement to our go-to-market strategy was to build out dedicated capabilities to target the OHS subchannel, U.S. justice systems. This is critical, as it's estimated that over 60% of OUD patients pass through the justice system at some point in their journey. Furthermore, with the recognition that justice system patients are an underserved and high-risk patient group, the environment is improving, with increasing access to treatment as well as increased funding availability.

Following our investments since 2022, the justice system has become our fastest growing subchannel and now accounts for approximately 20% of SUBLOCADE's net revenue. With over 600 activated facilities out of 8,000 to 12,000, we believe this channel will continue to grow in importance in fighting the opioid and substance use disorder epidemic well into the future.

Taken together, we believe we've created an unrivaled continuum of care that will continue to meet and evolve with the needs of the majority of patients and treatment providers.

As we look to 2024 and beyond, we've chosen to strategically resource SUBLOCADE in the U.S. With our third quarter results last year, we announced the decision to extend SUBLOCADE's reach into the retail channel, which represents an incremental revenue opportunity. This followed the removal of the DATA 2000 waiver in December 2022, which is an important step to open up the potential alternate sites of care.

We successfully trialed this approach through our relationship with Albertsons, the second largest supermarket chain in North America. The pilot clearly indicated the value to smaller prescribers for alternate sites of care, and our network now operates approximately 1,160 locations across 20 states. We look forward to creating a nationwide network with additional partners in the future.

We've also made the decision to invest further in justice system team, building up on a strong performance and access achieved to date.

And lastly, we see a clear opportunity to provide additional medical and scientific inquiry support to help advance OUD disease state awareness and to engage key opinion leaders and clinicians with the differentiated science behind SUBLOCADE. To do this, we increased the size of our medical science liaison team.

I'm confident that these strategic growth investments are scalable and will help us accelerate our progress towards our peak net revenue aspiration of greater than $1.5 billion.

Moving from SUBLOCADE to our other proprietary growth opportunities, let me start with OPVEE, where I'm pleased to say that our launch is fully on track. We continue to believe that this product has the ideal profile to address the epidemic of overdoses caused by both natural and synthetic opioids.

We have a multifaceted commercial strategy which includes an approved experience program for states that are allowed to trial OPVEE within their populations. We're also leveraging our government affairs team to ensure that these state standing orders, grants and emergency medical service protocols are updated to include OPVEE as an overdose rescue treatment. And we were pleased to have secured a 10-year contract with BARDA that is potentially worth approximately $110 million, including funding for Phase IV clinical studies, a Year 1 order of $8 million in revenue for 100,000 units and options for similar orders over an additional 9 years.

Our 2024 guidance includes $20 million of net revenue from OPVEE at the midpoint, reflecting the early establishment phase for this important life-saving medicine, and we continue to expect peak net revenue in the range of $150 million to $250 million.

Moving now to PERSERIS, it's fair to say that we did face some significant challenges in the last couple of quarters of 2023 as a result of competitive pressures from a well-funded new market entrant. We nevertheless continue to believe in the potential of the important medicine for schizophrenia based on its differentiated clinical profile and strong feedback we get from clinicians. Furthermore, since we expanded the field force nationally in 2022, we've seen increases in market coverage and penetration.

Entering 2024, we believe the team is regaining share of voice across targeted prescribers, and volumes at the start of the year are building on the growth achieved in the fourth quarter. As a consequence, our guidance for 2024 is for strong double-digit net revenue growth, as Ryan will detail later.

On my final slide, I just wanted to remind you of the key elements of the medium-term profitable growth framework that we provided in December 2022. As you've seen today, we delivered against this in Fiscal Year 2023, with 21% net revenue growth and over 100 basis points of adjusted operating margin expansion; and as we achieve this operating leverage while also acquiring and integrating the Opiant acquisition, which is both strategically and financially attractive, albeit with dilution of $40 million in OpEx, or 400 basis points, in 2023. Our Fiscal Year 2024 guidance indicates another year of significant progress towards meeting these medium-term goals.

With that, I'll hand over to Christian for his R&D review.

[Christian Heidbreder, executive]

Thank you, Mark, and good morning, good afternoon, everyone. As you can see, over the last year our pipeline has expanded, with several projects expected to reach development milestones in 2024.

You may also note that INDV-4002, the intranasal naltrexone product for Alcohol Use Disorder that came with our acquisition of Opiant Pharmaceuticals last year, no longer appears in our pipeline. INDV-4002 failed to meet its primary endpoint in a clinical Phase II study that had been initiated by Opiant. We have, therefore, decided to discontinue its development and prioritize our most promising projects.

Let me start with an update on our activities in the Opioid Use Disorder and opioid overdose rescue. Our support to SUBLOCADE is fourfold. First, label updates with a focus on rapid induction and alternate injection body sites. We are currently planning for preapproval submissions to the FDA in the third quarter of this year, with estimated approval in the first quarter of 2025 if priority review is granted or third quarter of 2025 under a standard review.

Second, evidence generation and peer-reviewed publications, including additional Phase IV studies, externally sponsored studies and real-world evidence studies.

Third, product optimization with the implementation of our oxygen absorber desiccant for room temperature and shelf life extension in the U.S., Australia and Canada as well as additional regulatory submissions.

And fourth, access expansion in most of the world.

Unfortunately, fentanyl use continues to rise across the U.S., with now more than 90% of opioid overdose deaths involving fentanyl and other synthetic opioids. Synthetic opioids have a more rapid onset of action than, for example, morphine and heroin, and delayed intervention can produce diffuse brain damage and cardiac arrest. Therefore, the ability to rapidly restore normal breathing has become essential for a successful overdose reversal.

We are currently supporting our intranasal nalmefene rescue medication, OPVEE, through a series of initiatives, as follows. First, as we have previously disclosed, we have started our contract with the Biomedical Advanced Research and Development Authority, BARDA. The overall objective and scope of this contract is to further support the efficacy and safety of OPVEE in real world and to expand access as a medical countermeasure in the event of a synthetic opioid mass casualty event.

Second, we started post-marketing requirement studies, including pediatric studies, as well as studies further characterizing the safety profile of DDM, which is a nasal absorption enhancer in OPVEE's formulation.

Third, we are committed to conduct real-world evidence studies to help understand the clinical real-world utilization of OPVEE compared to naloxone.

Fourth, we are conducting studies to seek FDA approval of a shelf life extension from 28 to 36 months.

Fifth, we have expanded our externally sponsored studies program and independent medical education grants to cover opioid overdose rescue, as we believe encouraging the scientific and clinical review and use of these medications will help with this crisis.

And finally, we are preparing a series of peer-reviewed publications that are covering the pharmacokinetics and pharmacodynamic characteristics of OPVEE.

There are also 2 projects that are currently in clinical development for Opioid Use Disorder. First is INDV-2000, our selective orexin-1 receptor antagonist. On November 3 last year, we had a successful end-of-Phase I meeting with the FDA and agreed upon major aspects of clinical and nonclinical safety, enabling progression to a Phase II clinical proof of concept.

Therefore, our key objectives in 2024 are fourfold: first, release the final clinical study report for the multiple ascending dose study that we finished last year; 2, make sure the drug product is available to initiate the clinical Phase II proof-of-concept study; 3, initiate drug substance manufacturing campaign to supply future clinical Phase III studies; and 4, select the contract development and manufacturing organization for manufacturing the commercial drug product.

The second project, INDV-6001, is the outcome of our acquisition of the exclusive global rights to develop, manufacturing and commercialize Alar Pharmaceuticals' portfolio of long-acting injectable formulations of buprenorphine, which includes its lead 3-month injectable candidate, ALA-1000, now INDV-6001.

Our key objectives for 2024 are equally fourfold: first, complete the technical transfer from Alar to Indivior; 2, optimize the drug substance and drug product manufacturing to support future clinical Phase III studies; 3, initiate multiple-dose pharmacokinetic study to support future clinical Phase III studies; and 4, initiate the developmental and reproductive toxicology studies.

Let me now talk briefly about our contribution to Alcohol Use Disorder treatment. And as you can see, among the 137.4 million current alcohol users aged 12 or older in the U.S., almost 30 million people had a past year Alcohol Use Disorder. And unfortunately, only 2.1%, or a little bit more than 600,000 people, received a medication-assisted treatment in the past year.

Although several medications have been approved for the treatment of Alcohol Use Disorder, they have limitations in terms of efficacy and safety. Previous research, however, consistently indicated that GABAB receptor agonists can significantly attenuate alcohol intake. Unfortunately, the use of full agonists is limited due to their pharmacokinetics profile and unfavorable safety.

In contrast, positive allosteric modulators in the GABAB receptor have the potential to achieve mechanistic and therapeutic effects similar to GABAB receptor agonists, while avoiding their tolerance and toxicity issues. To date, all preclinical behavior results have invariably shown the efficacy of GABAB positive allosteric modulators for Alcohol Use Disorder treatment.

Our collaboration with Addex Therapeutics for the lead optimization of INDV-1000 has now resulted in the selection of 2 lead compounds for comprehensive in vitro and in vivo characterization. Extensive formulation work has also been initiated to optimize drug formulation over the anticipated dose range.

We are aiming at a clinical candidate selection in the third quarter of this year, and the selection will then be followed by starting investigation on New Drug Application enabling studies as well as the manufacture of the drug substance for Phase I studies currently planned in 2025.

Let me conclude this presentation with an update on our activities to support Cannabis Use Disorder. As you can see from the map, as of January 1 this year, about 38 states have legalized cannabis for either medical or recreational use. In the U.S., the latest data estimates that almost 62 million people aged 12 or older were past year cannabis users and 19 million were diagnosed with Cannabis Use Disorder in the past year.

And we now know that a quadruple confluence of factors is leading to Cannabis Use Disorder: first, increasing prevalence of use; 2, increasing intensity of use in both frequency and quantity; 3, increasing THC content of cannabis products; and 4, the age of cannabis use initiation.

Our partnership with Aelis Farma includes, as you know, an exclusive option and license agreement for the global rights to AEF-0117, which is Aelis' first-in-class synthetic signaling-specific inhibitor engineered to modulate the cannabinoid 1 receptor. In clinical Phase I and Phase III studies, AEF-0117 showed promising safety, tolerability and efficacy signals in subjects with Cannabis Use Disorder. These data were actually published in the journal Nature Medicine in June last year.

Our objective this year is to continue to carry out major collaborative work with Aelis aimed at completing the Phase IIb trial and supporting additional clinical and nonclinical studies in preparation of late-stage clinical development. Aelis is expected to have the clinical Phase IIb last patient, last visit in the second quarter of this year, with an end-of-Phase II meeting with the FDA that we are trying to plan for the fourth quarter this year.

And finally, the development of INDV-5004, which is drinabant, a cannabinoid 1 receptor antagonist for acute cannabis use overdose, is being pursued and funded by the National Center of Advancing Translational Sciences, NCATS, which is one of the NIH institutes, to progress IND-enabling studies, including the optimization of the drug product formulation and completion of toxicology and safety studies.

Thank you, and let me hand it over to Ryan for the financials.

[Ryan Preblick, executive]

Thanks, Christian. Good morning and good afternoon to everyone.

I'm pleased to report that we delivered a strong financial performance for Q4 and full year 2023. I plan to touch on some of the highlights before spending most of my time on our outlook for full year 2024.

At a high level, we reported total net revenue growth of 21% in full year 2023, driven primarily by the 54% increase in SUBLOCADE net revenue. Adjusted operating profit grew by 27%, faster than our top line, despite the absorption of close to $40 million of Opiant operating expenses and OPVEE launch expenses. From a liquidity standpoint, we exited the year with $451 million in gross cash and investments.

Looking at our financial performance in more detail, starting with the top line. Fourth quarter SUBLOCADE net revenue of $176 million increased 49% versus the prior year and 5% versus the prior quarter. U.S. SUBLOCADE net revenue also increased 5% versus the prior quarter; with expenses growing slightly higher, at 7%. During the quarter, there were modest increases in trade spend related to a higher mix of the Medicaid business. For the full year, SUBLOCADE net revenue reached $630 million, putting us at the top of our range that we increased with our Half 1 results.

Moving to PERSERIS. Full year 2023 and Q4 net revenue of $42 million and $12 million, respectively, both increased by 50% versus the comparable year ago periods, although full year results did come in below our guidance. Overall growth in PERSERIS was primarily driven by the expansion of the sales team completed in late 2022.

Turning to SUBOXONE Film. Average share in the fourth quarter was approximately 18%, down roughly 2 points from full year 2022 average. As a reminder, we do not promote SUBOXONE Film in the U.S. Net revenue outside the U.S. increased by 6% versus full year 2022 at actual and constant FX rates. We continue to see good growth in SUBUTEX Prolonged Release, the brand name for SUBLOCADE outside the U.S., which increased 52% in full year 2023, to $41 million, while SUBOXONE Film also grew. These benefits were partially offset by pricing and volume pressure in the legacy tablet business.

Moving down to P&L. Our full year 2023 adjusted gross margin was 84%, up from 82% in the prior year. This increase reflects a mix benefit from SUBLOCADE, which was partially offset by less profitable government channels for SUBOXONE Film in the U.S. and some inflationary impacts.

Adjusted operating expenses were $649 million in full year 2023, up 22% year-over-year. Adjusted SG&A increased 18% and was driven by Opiant and OPVEE launch expenses, targeted commercial growth investments behind SUBLOCADE and higher legal expenses. R&D expenses increased 47% in full year 2023. The significant step-up in R&D was driven by our ongoing Phase IV SUBLOCADE studies and the progression of our early-stage pipeline.

Moving to adjusted operating profit. Full year 2023 adjusted operating profit of $269 million was up 27%, reflecting the strong top line growth, partially offset by commercial growth investments and the incremental expenses from Opiant, including the OPVEE launch costs.

Adjusted net income also improved in full year 2023, reflecting similar dynamics as well as lower net finance expense, partially offset by a slightly higher effective tax rate.

Quickly touching on the balance sheet and our capital position. We ended full year 2023 with gross cash and investments of $451 million, versus $991 million at the end of full year 2022. Strong cash flow from operations for the year was more than offset by legacy legal settlement-related items. I would note that $415 million in settlement payments for the direct purchasers and payers is in escrow and reflected in other current assets pending final court approval. This is not included in the year-end $451 million figure.

We have maintained our balanced approach to capital allocation, with investment against each of our strategic priorities, including our third share repurchase program. As of February 16, as part of this repurchase program, we have purchased-canceled 2.6 million shares, for approximately $42 million.

Now turning to 2024 and guidance for the full year. As Mark noted, our overall financial guidance aligns to the attractive medium-term growth profile that we laid out in our Capital Markets Day in December of 2022.

Starting with total net revenue. We expect to deliver total net revenue in full year 2024 of $1.240 billion to $1.330 billion, primarily driven by SUBLOCADE. And at the midpoint, this would represent growth of 18% versus the prior year.

Our full year 2024 net revenue expectations for SUBLOCADE are $820 million to $880 million. The midpoint of this range suggests 35% year-over-year growth. Similar to last year, SUBLOCADE's growth is expected to be driven by deepening penetration in the OHS channel and continued growth in the justice system. We are still early in the retail channel expansion with our relationship with Albertsons, but do expect to gain momentum there. Our SUBLOCADE guidance range contemplates a modest impact from the Medicaid reenrollment similar to full year 2023, and we will continue to monitor this dynamic during the year. Overall, we remain confident in meeting our net revenue target of a $1 billion run rate exiting 2025 and our longer-term net revenue target of greater than $1.5 billion.

Our guidance for OPVEE is $15 million to $25 million, inclusive of approximately $8 million for 100,000 units as part of a multiyear agreement with BARDA. We expect sales to be back-half weighted due to heavy policy work continuing in the first half.

For PERSERIS, our full year 2024 net revenue expectations are $55 million to $65 million, which represents 43% growth at the midpoint. As Mark mentioned, we remain confident that PERSERIS' differentiated profile supports our peak net revenue expectations of $200 million to $300 million.

With regards to U.S. film, we continue to take a prudent stance on guidance. Our underlying assumption for full year 2024 reflects our overall observed historical share erosion of approximately 1 to 2 share points, together with some incremental share erosion from the recently launched fourth generic. I would remind you that we did come to an agreement with Teva, which allows them to enter the market after January 31, 2025.

To round out total net revenue for the Rest of World business, we are anticipating modest growth in full year 2024 net revenue based on new product contributions more than offsetting legacy tablet competition and pricing actions.

Looking at gross margin, we plan to deliver in the low- to mid-80% range. This reflects the expected mix benefits from SUBLOCADE, partially offset by continued cost inflation. In the medium term, we remain confident that SUBLOCADE will support higher gross margins overall.

Turning to operating expenses. We continue to break out R&D and SG&A to provide greater transparency in our guidance. Breaking down the components of operating expenses, we expect full year 2024 SG&A to be $575 million to $590 million and full year 2024 R&D to be between $120 million to $130 million.

Our full year 2024 SG&A range at the midpoint reflects a 7% increase versus full year 2023's adjusted SG&A. This increase is expected to be driven by the annualized impact of the targeted commercial investments we have discussed as well as a full year of Opiant and OPVEE launch expenses. I would also note that the rate of increase is expected to be significantly below the growth in our top line, supporting our planned margin expansion.

Turning to R&D, the midpoint of our guidance suggests an 18% increase, which reflects investments to advance early-stage assets as well as our Phase IV studies for SUBLOCADE. In the medium term, we expect R&D to align more closely with the industry benchmarks of low double digits as a percentage of net revenue.

Taking these elements together, we arrive at adjusted operating profit in the range of $330 million to $380 million, with material positive operating leverage at the midpoint of our guidance amounting to approximately 300 basis points.

I would note that we expect our tax rate to be in the low-20% range for full year 2024 due to the prior year's legal provisions. We do expect it will begin to return to the historical range of mid- to high-teens in early full year 2025.

Closing with our capital allocation framework, there is no change to our established approach. We continue to balance financial flexibility with investing for growth, either organically or inorganically, and returning capital to shareholders. We regularly evaluate these priorities together with the board and have maintained close adherence to this framework.

I will now turn the call back over to Mark.

[Mark Crossley, executive]

Thank you, Ryan. In closing, we announced today that the group is exploring the potential to transition to a primary listing of its shares in the U.S. Consultations with shareholders will begin over the coming weeks. If these discussions are supportive, the board intends to put forward a formal resolution to shareholders in the spring that would effect a U.S. primary listing in the summer of 2024.

We, along with the board, believe that the U.S. is Indivior's most logical primary trading venue based on our current and future business complexion and opportunities. As you see, the vast majority of our total net revenue is generated in the U.S. Further, the U.S. is expected to increase as a proportion of the group's total net revenue, driven by our proprietary products, SUBLOCADE, OPVEE and PERSERIS. The U.S. opioid epidemic, unfortunately, only continues to worsen, and we believe Indivior's treatments are a huge part of the solution.

We believe a primary listing in the U.S. will further elevate awareness of the group's profile in the U.S. capital markets and will attract more U.S. investors and U.S. analyst coverage. Also, we believe there is value in U.S. index inclusion over time.

Finally, our U.S. shareholder base continues to grow. We currently estimate that, cumulatively, almost 50% of Indivior's shares are owned by U.S. shareholders, versus over 30% for U.K. shareholders. That said, I do want to be clear that our intention is not to leave the London market. We think it's important for our U.K. shareholders to continue to have a liquid trading venue that is convenient to them.

Our organization is prepared to take this next step. We have investments in place for the required capabilities, including reporting, controls and legal, to make the transition successful. There will be no material incremental costs in effecting and maintaining a primary U.S. listing.

So in summary, the teams delivered strong underlying financial and operating results in Fiscal Year 2023, with significant progress against each of our strategic priorities. Fiscal Year 2024 is shaping up to be an exciting year with our pipeline initiatives and our listing evaluation. Our overall 2024 financial guidance is strong and supports our plans to deliver material operating leverage. We look forward to communicating our progress as we go through the year.

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

[Operator]

[Operator Instructions] Our first question comes from the line of Thibault Boutherin, of Morgan Stanley.

[Thibault Boutherin, analyst]

First question, on OPVEE. So $15 million to $25 million guided, of which $8 million from the BARDA contracts. Just like to know if you could comment on the initial kind of launch dynamics outside of BARDA, any commercial challenges you're facing and you're seeing on the market and if you could give us more color on the strategy to overcome that. And just generally, more color on the situation on the ground would be helpful.

A second question on business development. So you reached a point where you probably are well advanced in the integration of Opiant. Just wanted to kind of assess your appetite for deals now and the kind of specific therapeutic areas you're looking at, if your thinking has changed at all here.

And maybe just one last one on the [ asset sequencing ] facility. If you could remind us the kind of impact on P&L and cash flow this year and the next couple of years, when will it break even and then be margin accretive would be helpful.

[Mark Crossley, executive]

Thanks, Thibault. I appreciate the questions. I think I'll answer the question on OPVEE and business development, and then I'll hand off to Ryan to talk through our new manufacturing site sort of implications.

So let's talk about OPVEE. First off, I think we're exactly where we thought we'd be in this launch as we talked last year. The initial stages are much more on the policy side to prep the market for a new rescue medication with a new active. Because most of the laws, the funding are all constructed based on the existing paradigm of treatment, which is naloxone. So the work has been going there. We have standing orders in place in 31 countries. We've been working with those that provide grants and funding to enable all FDA-approved medications to be available for grants, and we're working on protocols at the local level. So those efforts are in line with our expectations.

I would also say that we've had some early adopters and have been very pleased with how the medication has performed in actual market versus the theoretical science that drove the actual acquisition. So it's good to see those starting to really line up, that the hypothesis is coming true in early adoption.

So very excited for OPVEE's potential not only in 2024, but as a paradigm shift for helping those who've been subject to opioid overdose.

On the business development side, listen, I think 2023 was a major step for us acquiring Opiant, acquiring a plant and bringing in a couple of assets into our pipeline. As we look forward for our capital allocation, we have a consistent framework, moving forward. But from a material M&A, we see 2024 more digesting what we have. So we don't anticipate material M&A in 2024. But we could, at any time, look to tuck in any early-stage assets of addiction that Christian finds to be good mechanisms of action. So we'll look to further sort of business development end of '24, into 2025.

Ryan, could you speak to the manufacturing facility and its impact.

[Ryan Preblick, executive]

So first, it is really exciting to bring this new facility under the Indivior umbrella. We considered it a low-risk capital investment for $5 million to secure long-term product supply.

The plant is already operational. We have assumed some of the contracts they had. If the contracts are at a loss due to the way that we've structured the deal, that goes on the balance sheet.

So what we're dealing with is we've communicated we're going to have to invest about $40 million of CapEx over the next 2 or 3 years to get that facility prepared for SUBLOCADE. But then we've also communicated we may incur some modest margin impact over the next year or so. But the plan is to become productive and profitable within 2 years, by the end of 2026, 2027, which at that point, we would see significant savings to the margins at that point.

So overall, I'm very excited about this, and all of these costs and investments [ are ] built into our guidance that we provided.

[Operator]

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

[Max Herrmann, analyst]

Congratulations on a strong end to 2023. I've got a number of questions. So please bear with me. Firstly, just in terms of SUBLOCADE and the potential longer term in terms of market penetration, clearly, you've now got another competing product, long-acting injectable, on the market. I guess, where do you see the impediments now to that market share expanding maybe beyond the sort of lags that we see with the analogs in the schizophrenia market and closer to where we see in markets like Australia and Finland? I wondered how, specifically, prior authorization is being used by the insurers as an impediment for its uptake. We've been speaking to a number of clinicians, and that seems to be one of [indiscernible] with before they can use SUBLOCADE or Brixadi. That's my first question.

[Mark Crossley, executive]

Okay. So Max, listen, I think you're right. Historically, in the U.S., when you're looking at the use of long-acting injectables, the adoption in Europe and other markets tends to be a bit higher, and that's just across most long-acting solutions.

When I look to the future growth for SUBLOCADE and broader long-actings in Opioid Use Disorder, I think there is such a huge unmet need in this space. We have less than 2 in 10 patients in treatment. Adherence is the #1 unmet need here. And long-actings still have a very small share, but are growing quite fast. And so plenty of room for multiple players in here.

And certainly, when you look at Indivior, the true paradigm shift in treatment that SUBLOCADE offers with getting to therapeutic levels in 4 to 8 hours, maintaining those therapeutic levels the full 28 days with no on-top or booster dosing required and therapeutic levels that create blockade of the opioid receptors with 2 to 3 nanograms per ml therapeutic levels of the 100-milligram dose and 5 to 6 nanograms per ml of the 300 milligram maintenance dose that, for us, we think are perfectly suited for the synthetic opioids that are in the market.

So we see continued strong growth, as demonstrated with the guide we gave on SUBLOCADE this year, and certainly setting the stage for us to get to our greater-than-$1.5 billion peak net revenue guidance that we have out there.

[Max Herrmann, analyst]

Great. In terms of SUBLOCADE, obviously, you've identified or highlighted that the IQVIA data is really not representative of the performance and is a pretty small sample now of the total. We've seen and you've talked about the seasonality of prescription trends. I wondered -- if you look back at the historical growth, you seem to see a stronger first half than the second half in terms of growth. Is that what you'll expect again this year in 2024?

[Mark Crossley, executive]

Without getting into any sort of quarterly guidance, I mean, I think we have experienced over the last 2 years that there is a bit of seasonality in this sort of transformational sort of change to impact patients that's impacting growth disproportionately in the first half on a quarter-over-quarter basis, where people are a little bit less motivated at the end of the year to take a transformational sort of change to engage with a long-acting. So we would expect based on the last few years for that trend to continue.

[Max Herrmann, analyst]

And then 2 final questions. One is on the community kind of setting, Albertsons, currently. I think you talked about over 1,100 pharmacies now. What portion of scripts are currently going through that channel? And how do you see that channel responding to the obviously recent promotional efforts you've made there?

[Mark Crossley, executive]

Thanks for the question on that, because I think it is an important sort of evolution in the market as we seek to continue to normalize addiction treatment and make it available in new locations. And I think the removal of DATA 2000 allows that.

As we've talked, it is still incredibly early days here, Max. I mean, Albertsons just came online at the half-year last year. And we are just now having the sales force expansion we talked about with the Q3 results. They're just now entering the field.

I think the key for here is the future aspirations of what this could become. We see it as an incremental revenue opportunity that wasn't included in our initial greater-than-$1.5 billion net revenue guidance, because we didn't have access to these independent physicians. And what we want to do is make it as seamless as possible, which means building off of Albertsons' early move and finding other providers to create a national network that makes it so these independent doctors are able to prescribe SUBLOCADE for their patients.

So this is going to be quarters before we see material growth in the sector, but we think it will certainly help these patients, and it is incremental revenue.

[Max Herrmann, analyst]

And then final question, just to give a -- you can't have a call without some discussion of litigation. Where do you see what the current situation is in terms of the movement there, obviously, post the major settlements that you made last year? In particular, focused perhaps on where you see the tooth decay MDL? And how you view the recent settlements, let's say, by Hikma and others with regards to the opioid pain MDL?

[Mark Crossley, executive]

Thanks for the questions there, Max. And listen, we are pleased with the settlement of the antitrust MDL, and we expect that to become final when the fairness hearing happens in front of the judge, who, as everyone knows, acted as the mediator in this case. So we expect that to occur.

When it comes to the rest of our litigation, obviously, we believe that these items are quite manageable. Do highlight that the tooth loss claims, which initiated last year and we disclosed, have now become an MDL, but it's still incredibly early days in that litigation. And from an opioid MDL, again we note that there are settlements going on. But as we look to enter into whether it's resolution via a mediation or whether it's defending our claims in court because of the strong defenses we have, we'll continue to move forward in our efforts to resolve that, moving forward.

[Operator]

[Operator Instructions] At this time, there are no further questions. I will now turn the call back over to Mark.

[Mark Crossley, executive]

Thank you, Evan. And that officially closes our Fiscal Year 2023 results call. We appreciate the continued interest and support in Indivior, and we look forward to seeing everyone in the near future.

[Operator]

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