Fantastic body of work on this. Thanks for sharing.
Two main questions:
1) What will make Sublocade the preferred choice vs. the monthly version of Brixadi?
The Australian usage guide you linked to suggests that the weekly Buvidal (Brixadi's brand name in that market) can be used to fine-tune dosage before moving on to a monthly shot. So this is actually an advantage vs. Sublocade, but it's an *optional* advantage, i.e. if the practitioner and/or patient sees a reliability risk then they can go straight to the Buvidal (or Sublocade) monthly shot to mitigate the patient's ability to change their mind or make a bad decision (relapse) later.
Your arguments (and reading a bunch of the patient posts in one of your links above) convinced me of the value of a monthly shot as a superior way to do MAT. So I'd guess that there's enough market for two competitors, but pricing/margins then come into question. Do you have any data on market share/pricing in other countries where the two compete head-to-head? I suppose to the degree that governments are the primary/only payor that this may or may not be helpful for calibrating expectations in the US.
You mentioned Sublocade having first-mover advantage; is that advantage demonstrable in similar scenarios (i.e. a second highly effective medicine comes on the market to compete with the first)? Any lessons from what happened to market share/pricing?
2) Intent to maximize Sublocade/run off/sell vs. maintaining going concern status.
You touched on this quite a bit. I think your take is reasonable but I'm not sure how to read the tea leaves apart from that.
For instance, the below article mentions Indivior pursuing a cannabis addiction medication, and that Indivior could own the molecule's IP owner up to $100mm for certain milestones. I'm guessing those milestones are akin to full commercialization of a drug, but do you take this as them keeping their options open, or a clear sign they're looking to keep functioning as a going concern?
Has Scopia stated its ideal direction for the company?
Also along these lines, the recently announced buy-backs are great in the sense of shareholder returns but they do nothing to beef up the balance sheet. I don't have any concept of what it would cost to ramp Sublocade all the way to $1B but already returning capital to shareholders seems like the move of a company that wants to focus on what they already have. I know many companies want/try to do both and maybe at 85% gross margins they can. So I don't have an opinion here as to how to interpret the buy backs but would be interested in your take.
Thanks again for sharing.
I really like your approach; it occurred to me that one of my biggest successes in a stock pick was due in large part to the fact that it wasn't investable by institutions (tiny float). This later changed and I was fortunate to participate in a massive upward re-rating.
Given where broad valuations are, I believe that one has to selectively pick from the "market of stocks" rather than just own the stock market in order to be very successful.
I'm looking forward to digging into your second article in the near-future.
The Brixaldi (aka Buvidal abroad) comparison is certainly a good one to focus on. It only really competes against Sublocade in Australia so far, and corona has really muddied the comps there given how severe the lockdowns were (and smaller patient pool).
Brixaldi/Buvidal launched in Australia in 2019 and Sublocade was early to mid 2020 I recall. Buvidal has a “10%-20%” market share according to Camerus. Indivior has run rate Australian sales of $5M-$10M currently so single digit (if that?) market share.
My view in general is that unfortunately opioid addiction is a big and growing market so there is room for both. Product market fit is likely dependent on the gradient of patient/addict responsibility. So Sublocade for the most irresponsible, then Brixaldi for the somewhat responsible, and then film products the most responsible / high functioning. Of course patient preference comes into play as well.
Part of the reason Suboxone film scripts have held in is because many OHS / clinics have a policy that the film must be prescribed before taking the higher priced Sublocade shot. So in other words, Brixaldi may be a bigger threat to Suboxone/film than Sublocade and may even serve as a better precursor/complement to the Sublocade shot.
Regarding the first mover advantage on Sublocade. I think this really comes into play in the OHS volumes much more than broader public. These are big, slow and not nimble orgs so it takes time to get new treatments woven into the fabric of policies. So Indivior being first in say, the California penal system is a big advantage that could persist as treatments are very policy driven.
Regarding the Cannabis drug IP – I am admittedly a bit befuddled. My gut tells me it is a play to prove out the optionality of Atrigel / injectables but I am not sure. It was only $25M but obviously a curious cadence of announcement doing this before the buybacks.
On ability to scale – Indivior already had a pretty big opex footprint. They were previously building for a multidrug pipeline before the lawsuit. So in other words, my view is that they have a lot of the stickier opex costs already sunk, and incremental costs are more variable i.e. bonus payments. This is probably why they feel a bit more confident to return capital as they have hit the opex inflection point, IMHO.
I certainly agree regarding your market views and stock picks. An ability to size into a stock before institutions is a great advantage to press!
You are very welcome for the interest. It is well-deserved.
You said:
"My view in general is that unfortunately opioid addiction is a big and growing market so there is room for both. Product market fit is likely dependent on the gradient of patient/addict responsibility. So Sublocade for the most irresponsible, then Brixaldi for the somewhat responsible, and then film products the most responsible / high functioning. Of course patient preference comes into play as well."
I tend to agree there is room for both; duopoly pricing should still be pretty good even if not as robust as monopoly pricing.
However if I'm reading your quote correctly you're saying that Sublocade fits best for the least responsible and Brixaldi for the moderately responsible. But Brixaldi also has a monthly shot, so I don't see why it can't fill the "least responsible" sub-market just as well as Sublocade.
Thanks for your other detailed/thoughtful responses; I don't have time to react to them right now but wanted to dash off the above question as soon as I could.
Makes sense that Australia isn't yet a good test case for head-to-head competition. Launching right at the beginning of covid means there simply isn't a good data set.
Re: first mover advantage, makes sense to me as well. Hard to quantify but the first product to win market/mind share among prescribers/OHSes should have some stickiness.
Re: ability to scale, once again your answer makes sense to me. You also pointed out how they were slimming things down (laying off people) selectively even while hiring to target the OHS market. While I feel for those who lost their jobs, financially it makes sense for the company to press its biggest advantage by focusing effort/dollars there.
Re: The cannabis drug IP you said: "My gut tells me it is a play to prove out the optionality of Atrigel / injectables but I am not sure."
Can you explain further what you meant here? Do you mean prove their ability use Atrigel in other applications? If I understand correctly they'd be licensing the Atrigel IP to develop other Sublocade-like mediations (depot drugs). So I'm struggling to see how that helps them beyond perhaps creating at least the appearance of a pipeline.
Re: Atrigel and the appearance of a pipeline - we are on the same page - I am just not sure why they did it beyond appearance. I am guessing they want to show some potential acquirer that they can investment more into this platform - which is usually a consideration/motivation in pharma M&A. I haven't asked management about it yet because it was only $25M, but next time around I think I will bring it up!
Fantastic body of work on this. Thanks for sharing.
Two main questions:
1) What will make Sublocade the preferred choice vs. the monthly version of Brixadi?
The Australian usage guide you linked to suggests that the weekly Buvidal (Brixadi's brand name in that market) can be used to fine-tune dosage before moving on to a monthly shot. So this is actually an advantage vs. Sublocade, but it's an *optional* advantage, i.e. if the practitioner and/or patient sees a reliability risk then they can go straight to the Buvidal (or Sublocade) monthly shot to mitigate the patient's ability to change their mind or make a bad decision (relapse) later.
Your arguments (and reading a bunch of the patient posts in one of your links above) convinced me of the value of a monthly shot as a superior way to do MAT. So I'd guess that there's enough market for two competitors, but pricing/margins then come into question. Do you have any data on market share/pricing in other countries where the two compete head-to-head? I suppose to the degree that governments are the primary/only payor that this may or may not be helpful for calibrating expectations in the US.
You mentioned Sublocade having first-mover advantage; is that advantage demonstrable in similar scenarios (i.e. a second highly effective medicine comes on the market to compete with the first)? Any lessons from what happened to market share/pricing?
2) Intent to maximize Sublocade/run off/sell vs. maintaining going concern status.
You touched on this quite a bit. I think your take is reasonable but I'm not sure how to read the tea leaves apart from that.
For instance, the below article mentions Indivior pursuing a cannabis addiction medication, and that Indivior could own the molecule's IP owner up to $100mm for certain milestones. I'm guessing those milestones are akin to full commercialization of a drug, but do you take this as them keeping their options open, or a clear sign they're looking to keep functioning as a going concern?
https://www.drugdiscoverytrends.com/indivior-eyes-cannabis-disorder-treatment/
Has Scopia stated its ideal direction for the company?
Also along these lines, the recently announced buy-backs are great in the sense of shareholder returns but they do nothing to beef up the balance sheet. I don't have any concept of what it would cost to ramp Sublocade all the way to $1B but already returning capital to shareholders seems like the move of a company that wants to focus on what they already have. I know many companies want/try to do both and maybe at 85% gross margins they can. So I don't have an opinion here as to how to interpret the buy backs but would be interested in your take.
Thanks again for sharing.
I really like your approach; it occurred to me that one of my biggest successes in a stock pick was due in large part to the fact that it wasn't investable by institutions (tiny float). This later changed and I was fortunate to participate in a massive upward re-rating.
Given where broad valuations are, I believe that one has to selectively pick from the "market of stocks" rather than just own the stock market in order to be very successful.
I'm looking forward to digging into your second article in the near-future.
Thank you for the detailed response and interest!
The Brixaldi (aka Buvidal abroad) comparison is certainly a good one to focus on. It only really competes against Sublocade in Australia so far, and corona has really muddied the comps there given how severe the lockdowns were (and smaller patient pool).
Brixaldi/Buvidal launched in Australia in 2019 and Sublocade was early to mid 2020 I recall. Buvidal has a “10%-20%” market share according to Camerus. Indivior has run rate Australian sales of $5M-$10M currently so single digit (if that?) market share.
https://tv.streamfabriken.com/camurus-q2-2021?seek=367
My view in general is that unfortunately opioid addiction is a big and growing market so there is room for both. Product market fit is likely dependent on the gradient of patient/addict responsibility. So Sublocade for the most irresponsible, then Brixaldi for the somewhat responsible, and then film products the most responsible / high functioning. Of course patient preference comes into play as well.
Part of the reason Suboxone film scripts have held in is because many OHS / clinics have a policy that the film must be prescribed before taking the higher priced Sublocade shot. So in other words, Brixaldi may be a bigger threat to Suboxone/film than Sublocade and may even serve as a better precursor/complement to the Sublocade shot.
Regarding the first mover advantage on Sublocade. I think this really comes into play in the OHS volumes much more than broader public. These are big, slow and not nimble orgs so it takes time to get new treatments woven into the fabric of policies. So Indivior being first in say, the California penal system is a big advantage that could persist as treatments are very policy driven.
Regarding the Cannabis drug IP – I am admittedly a bit befuddled. My gut tells me it is a play to prove out the optionality of Atrigel / injectables but I am not sure. It was only $25M but obviously a curious cadence of announcement doing this before the buybacks.
On ability to scale – Indivior already had a pretty big opex footprint. They were previously building for a multidrug pipeline before the lawsuit. So in other words, my view is that they have a lot of the stickier opex costs already sunk, and incremental costs are more variable i.e. bonus payments. This is probably why they feel a bit more confident to return capital as they have hit the opex inflection point, IMHO.
I certainly agree regarding your market views and stock picks. An ability to size into a stock before institutions is a great advantage to press!
You are very welcome for the interest. It is well-deserved.
You said:
"My view in general is that unfortunately opioid addiction is a big and growing market so there is room for both. Product market fit is likely dependent on the gradient of patient/addict responsibility. So Sublocade for the most irresponsible, then Brixaldi for the somewhat responsible, and then film products the most responsible / high functioning. Of course patient preference comes into play as well."
I tend to agree there is room for both; duopoly pricing should still be pretty good even if not as robust as monopoly pricing.
However if I'm reading your quote correctly you're saying that Sublocade fits best for the least responsible and Brixaldi for the moderately responsible. But Brixaldi also has a monthly shot, so I don't see why it can't fill the "least responsible" sub-market just as well as Sublocade.
Thanks for your other detailed/thoughtful responses; I don't have time to react to them right now but wanted to dash off the above question as soon as I could.
So regarding your other responses:
Makes sense that Australia isn't yet a good test case for head-to-head competition. Launching right at the beginning of covid means there simply isn't a good data set.
Re: first mover advantage, makes sense to me as well. Hard to quantify but the first product to win market/mind share among prescribers/OHSes should have some stickiness.
Re: ability to scale, once again your answer makes sense to me. You also pointed out how they were slimming things down (laying off people) selectively even while hiring to target the OHS market. While I feel for those who lost their jobs, financially it makes sense for the company to press its biggest advantage by focusing effort/dollars there.
Re: The cannabis drug IP you said: "My gut tells me it is a play to prove out the optionality of Atrigel / injectables but I am not sure."
Can you explain further what you meant here? Do you mean prove their ability use Atrigel in other applications? If I understand correctly they'd be licensing the Atrigel IP to develop other Sublocade-like mediations (depot drugs). So I'm struggling to see how that helps them beyond perhaps creating at least the appearance of a pipeline.
Thanks again.
Re: Atrigel and the appearance of a pipeline - we are on the same page - I am just not sure why they did it beyond appearance. I am guessing they want to show some potential acquirer that they can investment more into this platform - which is usually a consideration/motivation in pharma M&A. I haven't asked management about it yet because it was only $25M, but next time around I think I will bring it up!