REG - Indivior PLC - 1st Quarter Results <Origin Href="QuoteRef">INDV.L</Origin>

IndiviorAnnouncement

15/07/2015 16:04

RNS Number : 1755M
Indivior PLC
05 May 2015
May 5, 2015
INDIVIOR PLC
Q1 Financial Results Modestly Ahead of Plan.
Quarter to March 31
2015
$m
2014
$m
% change
at actual FX
% change at constant FX
Net Revenue
251
281
-11%
-8%
Operating Profit
115
165
-30%
-27%
Net Income
77
119
-35%
-32%
EPS (cents per share)
11
16
-35%
-32%
 US market growth so far in 2015 has been in low double digits, helped in part by the continuing impact of the Affordable Care Act. Suboxone Film market share for the quarter was 59% (down from 64% in Q1 2014). Total volume sold in the USA was ahead of the same period last year.
 Net revenue at $251m (Q1 2014: $281m) declined 11% reflecting higher rebates in the US, in connection with formulary access, which continues trends from the second half of 2014, and FX rates on Euro to US$. Constant FX net revenue declined by 8%.
 Operating Profit of $115m (Q1 2014: $165m), reflected lower net revenues, and the expected higher operating costs as a standalone public company, including $2m exceptional costs arising from the demerger and establishment of Indivior PLC. 
 Net income of $77m (Q1 2014: $119m). 
 Cash balance at quarter end of $466m, partially reflecting the timing of disbursements between Q1 and Q2. Net debt at quarter end $275m (vs. Year End 2014: $428m). Syndication of the $750m borrowing facility was completed in March 2015, resulting in an all-in cost of debt of 8%.
Commenting on the results, Shaun Thaxter, CEO of Indivior, said
"We have enjoyed a good start to the year with Q1 numbers modestly exceeding our plan which anticipated no rapid deterioration in the quarter's trading environment. In the US, generic tablet pricing has not yet disrupted our market share while branded competitors had very limited impact although as in the second half of last year we continued to offer tactical rebates in connection with formulary access for Suboxone Film. In Europe, Government austerity measures and price constraints have continued in line with expectation. This overall environment was in line with our plan for Q1; if it continues, we may have room to reassess our full-year guidance at the half year."
"Our first quarter as an independent company has been a great experience. We made progress against our key strategic priorities for 2015; our Suboxone share of 59% in the US is minimally changed from the exit share for 2014 and reinforces our confidence in the sustainability of Suboxone Film; the treatment market has grown in the US, with many new doctors certified. In Europe we are piloting treatment for opioid painkiller dependence which we expect to drive future growth; our pipeline of transformational treatments for addiction is moving forward apace with our opioid overdose rescue medication soon to be submitted to the FDA for approval, our monthly depot of Buprenorphine (RBP-6000) in Phase 3 trials, and our IND for Arbaclofen Placarbil for alcohol use disorders to be submitted shortly. We are today announcing the compelling preliminary data from our Phase III trial of RBP-7000, the monthly risperidone depot, another important step in the further development of our pipeline of transformational treatments designed to improve patient and physician outcomes. Additionally in April, we completed transfer of the Fine Chemical Plant in Hull to our operation. Our confidence in the medium-term opportunity for Indivior PLC continues to grow." 
Operating Review
US Market Update
The market for buprenorphine products continued to grow in Q1, showing volume growth of low double digits in line with expectation. The Affordable Care Act has continued to contribute to this volume growth although it is expected that the market will pass the anniversary of this effect in Q2. Consequently, Medicaid channels, which are lower margin, have grown faster than the market overall. A key driver of growth remains the certification of new physicians to practice addiction medicine.
Suboxone Film had a market share of 59% in Q1, compared to 64% in Q1 2014. This was in-line with the exit share at the end of 2014, so market share has been maintained through the quarter. As in the second half of last year, the Company continues to offer tactical rebates in connection with formulary access for Suboxone Film, in the face of continuing aggressive discounting by competitors. Branded competitors have made limited impact on the market so far. 
Update on Guidance for Full Year
Generic tablet pricing in the US has begun to reflect greater discounts as four generic competitors are now on the market, although the level of discounts has not yet accelerated towards the "commodity price floor" of c.80%. In anticipating the speed and severity of this acceleration in generic discounts, Indivior has been guided by industry analogues experienced in other sectors; we anticipated relatively limited impact in Q1, as has proved to be the case; the level of impact in Q2 so far indicates that the steep decline in pricing in the analogue (see link to chart) has not yet occurred, but estimating exact timing is difficult. 
http://www.rns-pdf.londonstockexchange.com/rns/1755M_-2015-5-5.pdf
The Company still believes that the likelihood is that industry analogues on generic pricing will apply, the issue being one of timing and severity. To the extent these are delayed, financial guidance for the full year may be too cautious. The Company has benefited from a relatively benign environment in Q1, both in respect of generic tablet pricing, and of the impact of competitors, very much as anticipated in drawing up the financial plan for the year. However, if this more positive environment continues in subsequent periods, there may be room to reassess guidance at the half year. The Company will reassess the full-year guidance, and the assumptions underpinning it, at the half year results on July 29, 2015.
Financial Performance in Q1
Total net revenue decline of 11% at actual exchange rates reflects higher rebate levels in the US and the impact of adverse translation into US$s from weaker currencies in Rest of World (Euro, Australian Dollar and Sterling). At constant exchange rates, the decline in net revenue was 8%.
US net revenue declined by 9% to $200m (Q1 2014: $218m). Volume was ahead of last year reflecting market growth offset by lower market share compared to prior year. Pricing reflected a combination of channel mix, with lower margin Medicaid sales growing faster than total market, and continuing tactical rebates, as in the second half of last year, in connection with formulary access in both commercial managed care and Medicaid in the face of aggressive discounting by competitors.
Rest of World net revenue declined by 19% to $51m (Q1 2014: $63m) as reported in US$s but the majority of this decline 13% was due to translation into a much stronger US dollar. At constant exchange, the net revenue decline was 6%, reflecting continuing price constraints from Government austerity measures and forced switching to generics in Europe, offset by continuing growth in Australia. 
Gross margin remains at 90%, slightly behind prior year due to mix of business (Q1 2014: 92%.)
SD&A expenses increased by 19% to $92m (Q1 2014: $77m). The increase mainly reflects standalone public company costs in line with the guidance given at the time of the demerger. Exceptional costs of $2m were included in SD&A. These relate to one-off costs arising from the demerger and establishment of Indivior PLC, such as product and company re-registration. Excluding these exceptional costs, the increase in SD&A in Q1 was 17%
R&D expenses increased by 25% to $20m (Q1 2014: $16m), reflecting the level of activity in the Company's clinical development pipeline, which has advanced compared to prior year, and in particular to the fact that there were two pivotal Phase III trials running in Q1 2015. 
Operating profit was $115m, 30% below prior year (-27% at constant exchange). Excluding exceptional costs, operating profit was $117m, 29% below prior year. 
EBITDA was $121m (Q1 2014: $171m), and excluding the exceptional costs was $123m (Q1 2014: $171m). 
Operating margin was 45.8% as reported. Excluding the exceptional costs, the operating margin was 46.6% (Q1 2014: 58.7%). This margin reflects lower net revenues and higher operating costs, primarily due to the additional costs of operating as a standalone public company compared to the carve-out financials for Q1 2014, as laid out in the prospectus last November.
Finance expenses in the quarter were $13m (2014 Q1: nil) being the interest and amortisation costs for the $750m borrowing facility marginally offset by interest received on cash balances.
The tax charge in Q1 was $25m, a rate of 25% (Q1 2014: 28%) on the pretax profit for the period reflecting the mix of profits in the period and the benefit of lower tax rates in the UK, the Group's domicile. Based on current projections we expect our full year effective tax rate to be 29% though we are continuing to assess opportunities to optimize our tax structure and will provide updated guidance on our estimated full year effective tax rate at the half-year.
Net income for the quarter was therefore $77m (Q1 2014: $119m), a decline of 35% compared to Q1 2014 as reported. At constant exchange rates, the decline would have been 32%. Excluding exceptional costs, the net income would have been $79m, a decline of 34% (31% at constant exchange).
EPS were 11 cents (Q1 2014: 16 cents) on both a basic and fully diluted basis.
Balance Sheet & Cash Flow
Net working capital (inventory plus trade and other receivables, less trade and other payables) was minus $239m at end Q1 2015, an improvement of $90m on December 2014. This represents a ratio of minus 22% of moving annual total net revenue.
Cash and cash equivalents at the period end was $466m, reflecting a net cash increase of $135m in the quarter partly due to the timing of some disbursements between Q1 and Q2, reflected in the higher trade payables balance at the end of Q1. Borrowings, net of issuance costs, were $697m (Dec 2014: $736m) at the quarter end. 
The net debt of the Group were therefore $275m (Dec 2014: $428m).
The $750m term loan obtained by Indivior and drawn in December 2014, fully underwritten by Morgan Stanley and Deutsche Bank, has now been syndicated. As a result of the syndication, the new terms of the loan are; nominal interest of 6% above a minimum LIBOR rate of 1%; 5% scheduled repayments for the first two years, 10% thereafter; a financial leverage covenant to maintain a net debt to Adjusted EBITDA ratio of 3.25x, with step down to 3.0x on June 30, 2016; minimum liquidity of $150m; a term of 5 years to maturity.
Following the registration of the Order of the High Court of Justice with Companies House, a restructuring of Company's share capital became effective on January 21, 2015. This decreased the nominal value of each Indivior Ordinary Share from $2.00 to $0.10, creating distributable reserves on the balance sheet which will provide Indivior with, amongst other things, capacity for the payment of future dividends.
Cash generated from operating activites rose to $213m (Q1 2014: $105m), an increase of $108m despite lower levels of operating profit of $115m (Q1 2014: $165m), reflecting a significant improvement in net working capital to a release of cash of $91m (Q1 2014: cash usage of $65m).
Net cash inflow from operations increased to $165m in the quarter (Q1 2014: $75m) reflecting the higher cash from operating activities and lower tax payments in the quarter of $14m (Q1 2014: $30m), but after interest and transaction costs relating to the loan facility of $36m (Q1 2014: nil). 
Demerger Update
Work on separation from Reckitt Benckiser Group PLC continues under the Transitional Service Agreements signed in December 2014. In April, formal operation of the Fine Chemical Plant in Hull, where Buprenorphine is manufactured for all our Suboxone and Subutex products, was transferred to Indivior PLC. There has been no disruption to our supply chain. 
R&D / Pipeline Update
Developments since FY2014 press release on February 11, 2015.
 RBP-7000, Monthly Depot Risperidone for the treatment of schizophrenia. Preliminary data from pivotal Phase III Efficacy study. Both doses met the primary endpoint with statistically and clinically significant reductions in the symptoms of acute schizophrenia over an 8-week treatment period using the change from baseline to end of treatment in the total Positive and Negative Syndrome Scale (PANSS) scores. RBP-7000 also met the key secondary endpoint with significant improvements in the Clinical Global Impression-Severity of Illness (CGI-S) scale compared with placebo over the 8-week treatment period. These results further emphasise the compatibility of our Atrigel drug delivery platform with a range of pharmaceutical compounds for their safe, sustained release over targeted time period through an easy biodegradable and biocompatible process. More detailed information regarding this data is available at www.indivior.com and in the separate press release being issued today.
 RBP-6000, Monthly Depot Buprenorphine: First patient randomized in Phase III Efficacy study (RB-US-13-0001). February 2015.
 Intranasal Naloxone for opioid overdose rescue: Final Clinical Study Report pivotal PK study NLX1301 (RB-US-13-0009). February 2015.
 Arbaclofen Placarbil for alcohol use disorder: Pre-IND meeting with FDA held on January 29th 2015.
Litigation Update
 Indivior PLC succeeded with its petition to separate the trial on infringement against Par in its ANDA lawsuit with a trial date now set for December 17, 2015, recognising that Par had prematurely filed its Paragraph IV notice. The trial on invalidity against Par will continue to be conjoined with that of Watson/Actavis as originally scheduled on August 31, 2015.
 On or about April 30, 2015, Indivior was informed of the filing in the US of an ANDA by Alvogen for generic Suboxone Film. The Company will respond by filing a patent infringement lawsuit against Alvogen in due course.
 The Judge overseeing the legal privilege dispute in the FTC investigation has appointed a Special Master (an independent external lawyer) to investigate the claims of legal privilege and provide a recommendation to the Court on how the documents at issue should be treated.
Exchange Rates
The average and period end exchange rates used for the translation of currencies into US dollars that have most significant impact on the Group's results were: -

3 Months to March 31,
2015
3 Months to March 31,
2014
US $: GB  period end
1.4849
1.6583
US $: GB  average rate
1.5164
1.6545



US $:  Euro period end
1.0884
1.3781
US $:  Euro average
1.1279
1.3700
For Further Information
Investor Enquiries
Tom Corran
IR Director, Indivior PLC
+44 1753 217800
tom.corran@indivior.com
Media Enquiries
Stephen Malthouse
Jonathan Sibun
Beth Keshishian

Tulchan Communications

Biosector 2

+44 207 353 4200

+1 212-229-8417
bkeshishian@biosector2.com
www.Indivior.com



About Indivior 
Indivior is a global specialty pharmaceutical company with a 20-year legacy of leadership in patient advocacy, health policy and evidence-based best practice models that have revolutionized modern addiction treatment. The name is the fusion of the words individual and endeavour, and the tagline "Focus on you" makes the company's commitment clear. Indivior is dedicated to transforming addiction from a global human crisis to a recognized and treated chronic disease. Building on its robust, global opioid dependence portfolio featuring SUBOXONE (buprenorphine and naloxone) Sublingual Film (CIII), SUBOXONE (buprenorphine and naloxone) Sublingual Tablet, and SUBUTEX (buprenorphine) Sublingual Tablet, Indivior has a strong pipeline of product candidates designed to both expand on its heritage in this category and address other chronic diseases of addiction - including opiate overdose, alcohol use disorders and cocaine intoxication. It also is pursuing novel product candidates in related mental health disorders such as schizophrenia. Headquartered in the United States in Richmond, Va., Indivior employs more than 700 individuals globally and its portfolio is available in over 40 countries worldwide. Visit www.Indivior.com to learn more.
Forward-Looking Statements
This press release contains forward-looking statements. We may, in some cases, use terms such as "predicts," "believes," "potential," "proposed," "continue," "estimates," "anticipates," "expects," "plans," "intends," "may," "could," "might," "will," "should" or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements include, among other things, statements regarding our financial guidance for 2015 and our medium- and long-term growth outlook, our operational goals, our product development pipeline and statements regarding ongoing litigation..
Various factors may cause differences between Indivior's expectations and actual results, including: factors affecting sales of Suboxone Tablet, Suboxone Film, Subutex Tablet and any future products; the outcome of research and development activities; decisions by regulatory authorities regarding the Indivior Group's drug applications; the speed with which regulatory authorizations, pricing approvals and product launches may be achieved; the outcome of post-approval clinical trials; competitive developments; difficulties or delays in manufacturing; the impact of existing and future legislation and regulatory provisions on product exclusivity; trends toward managed care and healthcare cost containment; legislation or regulatory action affecting pharmaceutical product pricing, reimbursement or access; claims and concerns that may arise regarding the safety or efficacy of the Indivior Group's products and product candidates; risks related to legal proceedings; the Indivior Group's ability to protect its patents and other intellectual property; the outcome of the Suboxone Film patent litigation relating to the three ongoing ANDA lawsuits; changes in governmental laws and regulations; issues related to the outsourcing of certain operational and staff functions to third parties; uncertainties related to general economic, political, business, industry, regulatory and market conditions; and the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls and withdrawals and other unusual items.
Any forward-looking statements that we make in this press release speak only as of the date of this press release. We assume no obligation to update our forward-looking statements whether as a result of new information, future events or otherwise, after the date of this press release.
Condensed consolidated interim income statement

Unaudited
Unaudited

2015
2014
For the three months to March 31
Notes
$m
$m
Net Revenues
2
251
281
Cost of Sales

(24)
(23)
Gross Profit

227
258
Selling, distribution and administrative expenses 
3
(92)
(77)
Research and development expenses
3
(20)
(16)
Operating Profit

115
165
Operating profit before exceptional items

117
165
Exceptional items
3
(2)
-
Operating profit

115
165
Finance expense

(13)

Net finance expense 

(13)
-
Profit on ordinary activities before taxation

102
165
Tax on profit on ordinary activities
4
(25)
(46)
Net income

77
119




Earnings per ordinary share



Basic earnings per share
5
0.11
0.16
Diluted earnings per share
5
0.11
0.16
Condensed consolidated interim statement of comprehensive income


Unaudited
Unaudited


2015
2014
For the three months to March 31
Notes
$m
$m
Net income

77
119
Other comprehensive income



Items that may be reclassified to profit or loss in subsequent years



Net exchange adjustments on foreign currency translation, net of tax

(9)
3



Other comprehensive income, net of tax

(9)
3
Total comprehensive income

68
122
The notes on pages 11 to 15 are an integral part of these condensed consolidated interim financial statements.
Condensed consolidated interim balance sheet


Unaudited
Audited


March 31, 2015
Dec 31, 2014

Notes
$m
$m
ASSETS



Non-current assets



Intangible assets

84
91
Property, plant and equipment

13
13
Deferred tax assets

83
77
Other receivables

1
1


181
182
Current assets



Inventories

40
41
Trade and other receivables

167
193
Cash and cash equivalents

466
331


673
565
Total assets

854
747




LIABILITIES



Current liabilities



Borrowings
6
(29)
(17)
Trade and other payables
8
(446)
(383)
Current tax liabilities

(76)
(62)


(551)
(462)
Non-current liabilities



Borrowings
6
(669)
(719)
Provisions for liabilities and charges

(42)
(41)


(711)
(760)
Total liabilities

(1,262)
(1,222)
Net liabilities

(408)
(475)




EQUITY



Capital and reserves



Share capital
9
72
1,437
Other Reserves

(1,295)
(1,295)
Foreign currency translation reserve

(17)
(16)
Retained Earnings

832
(601)
Total equity 

(408)
(475)
The notes on pages 11 to 15 are an integral part of these condensed consolidated interim financial statements.
Condensed consolidated interim statement of changes in equity 
Notes
Share
capital
Share
Premium
Other
reserve
Foreign
Currency
Translation
reserve
Retained
earnings
Total equity
Unaudited

$m
$m
$m
$m
$m
$m
At January 1, 2014

1,437
-
(1,295)
-
(208)
(66)
Comprehensive income







Net income 

- 
-
-
-
119
119
Other comprehensive income

-
-
-
3
-
3
Total comprehensive income

-
-
-
3
119
122
Payments to former owners, recognised directly in equity

-
-
- 
- 
(81)
(81)
Balance at March 31, 2014

1,437
-
(1,295)
3
(170)
(25)
















At January 1, 2015 

1,437
-
(1,295)
(16)
(601)
(475)
Comprehensive income







Net income 

-
-
-
-
77 
77
Other comprehensive income 

-
-
-
(1)
(9)
(10)
Total comprehensive income

-
-
-
(1)
68
67
Transactions recognised directly in equity







Capital reduction

(1,365)
-
-
-
1,365
-
Total transactions recognised directly in equity

(1,365)
-
-
-
1,365
-
Balance at March 31, 2015

72
-
(1,295)
(17)
832
(408)
The notes on pages 11 to 15 are an integral part of these condensed consolidated interim financial statements.
Condensed consolidated interim cash flow statement

Unaudited
Unaudited


2015
2014
For the three months to March 31
Notes
$m
$m
CASH FLOWS FROM OPERATING ACTIVITIES



Operating Profit

115
165
Adjustments to reconcile net cash provided by operating activities:



Foreign exchange impacts

1
(1)
Depreciation and amortisation

6
6
Changes in assets and liabilities:



Trade and other receivables

26
(5)
Inventories

1
(5)
Trade and other payables and provisions

64
(55)
Cash generated from operations

213
105
Amortisation of debt issuance costs

2
-
Interest paid

(13)
-
Transaction costs related to loan

(23)
-
Taxes paid

(14)
(30)
Net cash inflow from operating activities

165
 75




CASH FLOWS FROM INVESTING ACTIVITIES



Net cash (outflow) from investing activities

-
-




CASH FLOWS FROM FINANCING ACTIVITIES



Repayment of overdraft

(9)
-
Repayment of loan 

(9)
 - 
Net transfers to former owners

-
(75)
Net cash (outflow) from financing activities

(18)
(75)




Net (decrease)/increase in cash and cash equivalents

147
 -
Cash and cash equivalents at beginning of the period

331
7
Exchange differences

(12)
-
Cash and cash equivalents at end of the period

466
7
The notes on pages 11 to 15 are an integral part of these condensed consolidated interim financial statements.
Notes to the condensed consolidated Interim Financial Statements
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
Indivior PLC (the 'Company') is a public limited company incorporated and domiciled in the United Kingdom on September 26, 2014. In these condensed consolidated interim financial statements ('Interim Financial Statements'), the 'Group' means the Company and all its subsidiaries.
These interim financial statements have been prepared in conformity with IAS 34 Interim Financial Reporting. The financial information herein has been prepared in the basis of the accounting policies set out in the annual accounts of the Group for the year ended December 31, 2014 and should be read in conjunction with those annual accounts. The Group prepares its annual accounts in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and the Companies Act 2006 (the Act) applicable to companies reporting under IFRS. In preparing these condensed interim financial statements, the significant judgments made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2014, with the exception of changes in estimates that are required in determining the provision for income taxes. 
The introduction of Indivior PLC as the new ultimate holding company of the Group does not meet the IFRS 3 definition of a business combination and as such falls outside the scope of that standard. Following the guidance regarding the selection of an appropriate accounting policy in IAS 8, the introduction of the Company as the new ultimate holding company of the Group has been accounted for as a group reconstruction using merger accounting principles. This policy, which does not conflict with IFRS, reflects the economic substance of the transaction. This means that although the reorganization did not become effective until December 23, 2014, the consolidated Financial Statements are presented as if the current Group structure had always been in place. Accordingly, the results of the Group for the comparative three month period ended March 31, 2014 are presented as if the Group had been in existence throughout the period presented.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at December 31, 2014. These interim condensed consolidated financial statements have been reviewed and not audited. These interim condensed consolidated financial statements have been authorized for issue as at April 30, 2015.
The Directors continue to adopt the going concern basis for accounting in preparing these interim financial statements. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. 
The financial information contained in this document does not constitute statutory accounts as defined in section 434 and 435 of the Companies Act 2006. The auditors issued an unqualified opinion and did not contain a statement under section 498 of the Companies Act 2006 on the Group's statutory financial statements for the year ended December 31, 2014. The Group's statutory financial statements for the year ended December 31, 2014 will be delivered to the Registrar of Companies.
2. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker (CODM), who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer (CEO). 
As the Indivior Group is engaged in a single business activity, which is the development, manufacture and sale of prescription drugs that are based on Buprenorphine for treatment of opioid dependence, the CEO reviews financial information presented on a combined basis for evaluating financial performance and allocating resources. Accordingly, the company reports as a single reporting segment.
Revenues
Revenues are attributed to countries based on the country where the sale originates. The following table represents revenue from continuing operations attributed to countries based on the country where the sale originates and non-current assets, net of accumulated depreciation and amortisation, by country. Non-current assets for this purpose consist of property, plant and equipment and intangible assets. Revenues and non-currents assets for the three months to March 31, 2015 and 2014 were as follows:
Revenues from sale of goods:
For the three months to March 31
2015
$m
2014
$m
United States
200
218
ROW
51
63
Total
251
281
Non-current assets:

March 31 2015
$m
December 31 2014
$m
United States
38
64
ROW
59
40
Total
97
104
3. OPERATING COSTS AND EXPENSES 
The table below sets out selected operating costs and expenses information:
For the three months to March 31

2015
$m
2014
$m
Research and Development expenses

(20)
(16)




Marketing, selling, and distribution expenses

(38)
(39)
Administrative expenses

(47)
(31)
Depreciation and amortisation

(6)
(6)
Operating lease rentals

(1)
(1)
Total

(92)
(77)
Exceptional Items
For the three months to March 31

2015
$m
2014
$m
Reconfiguration and separation costs

2
-
Total Exceptional items

2
-
$2m (2014: $nil) of reconfiguration and separation costs consists primarily of legal and advisory costs related to business reconfiguration activities which have been included within operating expenses.
4. TAXATION
In the three months ended March 31, 2015, tax on total profits amounted to $25m and represented a quarterly effective tax rate of 25% (Q1 2014: 28%). The Group's balance sheet at March 31, 2015 included a tax payable liability of $76m and deferred tax asset of $83m. 
The decrease in the effective tax rate was primarily driven by income mix between countries in the quarter, but this income mix is expected to change in the full year and therefore the annual effective tax rate is expected to be 29%.
5. EARNINGS PER SHARE
For the three months to March 31

2015
cents
2014
Cents
Pro-forma




Basic earnings per share

11
16
Diluted earnings per share

11
16




Adjusted basic earnings per share

11
16
Adjusted diluted earnings per share

11
16
 
Basic
Basic earnings per share ("EPS") is calculated by dividing profit for the period attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period. 718,577,618 shares were issued on the demerger.

For the purpose of calculating EPS, the share capital for the Company in the period prior to the pre-demerger reorganisation on December 23, 2014 is calculated as if this reorganisation was completed as at January 1 2014. 
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has dilutive potential ordinary shares in the form of stock options. The weighted average number of shares is adjusted for the number of shares granted assuming the exercise of stock options.


2015
Average number of shares
2014
Average number of shares
Pro-forma
On a basic basis

718,577,618
718,577,618
Dilution for Executive Options outstanding and Executive Restricted Share Plan*

1,847,880
1,847,880
Dilution for Employee Sharesave Scheme Options outstanding*

3,459,130
3,459,130
Adjusted diluted earnings per share

723,884,628
723,884,628
*These do not represent new options; Indivior executives exchanged previously awarded RB restricted shares and options for Indivior shares and options
Adjusted Earnings
The Directors believe that diluted earnings per share, adjusted for the impact of exceptional items after the appropriate tax amount, provides additional useful information on underlying trends to shareholders in respect of earnings per ordinary share.
A reconciliation of net income to adjusted net income is as follows:
For the three months to March 31

2015
$m
2014
$m
Net income

77
119
Exceptional items

2
-
Tax effect of exceptional items

-
-
Adjusted net income

79
119
6. FINANCIAL LIABILITIES - BORROWINGS
Current

March 31
2015
$m
December 31
2014
$m




Bank loans and overdraft

29
17


29
17
Non-current

March 31
2015
$m
December 31
2014
$m




Bank loans

669
719


669
719
Analysis of net debt

March 31
2015
$m
December 31
2014
$m
Cash and cash equivalents

466
331
Overdrafts

-
(9)
Borrowings*

(741)
(750)


(275)
(428)
*Borrowings reflects the principal amount drawn, before debt issuance costs
Reconciliation of net debt

March 31
2015
$m
December 31
2014
$m
The movements in the period were as follows:



Net debt at beginning of period

(428)
7
Increase in cash and cash equivalents

135
324
Net repayment of/(increase in) borrowings and overdraft

18
(759)
Net debt at end of period

(275)
(428)
The carrying value less impairment provision of current borrowings and cash at bank, as well as trade receivables and trade payables, are assumed to approximate their fair values.
On March 16, 2015, the Company completed syndication of its $750 million debt facility. As a result of the syndication the new terms of the loan are as follows:

Currency
Nominal interest margin
Maturity
Scheduled repayments*
Issuance cost
$m
Face value
$m
Carrying amount
$m
Unsecured bank loan
USD
Libor (1%) + 6%
5 years
5%
40
644
644
Unsecured bank loan
EUR
Libor (1%) + 6%
5 years
5%
6
106
106
*For years 1 and 2 only; 10% thereafter
Also included within the terms of the loan were:
  
 A financial covenant to maintain a net secured leverage covenant (Net debt to Adjusted EBITDA ratio) of 3.25x with step down to 3.00x on June 30, 2016.
 An additional covenant requiring minimum liquidity of $150 million (defined as cash on hand plus the undrawn amount available under the Company's $50 million revolving credit facility).
7. CONTINGENT LIABILITIES
The Indivior Group is currently subject to other legal proceedings and investigations, including through subpoenas and other information requests, by various governmental authorities. 
In 2011, the USAO-NJ issued a subpoena to RBP requesting production of certain documents in connection with a non-public investigation related, among other things, to the promotion, marketing and sale of Suboxone Film, Suboxone Tablet and Subutex Tablet. RBP responded to the USAO-NJ by producing documents and other information and has had no communication from USAO-NJ since March 2013. 
In late 2012, the FTC and the Attorney General of the State of New York commenced non-public investigations of RB, RBP and various other entities in the RB Group focusing on business practices relating to Suboxone Film, Suboxone Tablet and Subutex Tablet, including alleged involvement in a scheme to delay FDA approval of generic versions of Suboxone Tablet. RBP has responded to both the FTC and to the Attorney General of the State of New York by producing documents and other information. The investigations are ongoing, and as yet no decision has been made by either agency on whether to pursue any legal action for enforcement.
In December 2013, the USAO-VAW executed a search warrant on RBP's headquarters in Richmond and conducted searches of the homes of four field-based employees. The USAO-VAW has since served a number of subpoenas relating to Suboxone Film, Suboxone Tablet, Subutex Tablet, buprenorphine and any real or potential competitor, among other issues. The investigation is ongoing and RBP is in the process of responding to the USAO-VAW by producing documents and other information. 
Given the limited information available to the Indivior Group regarding the foregoing civil and criminal investigations, it is not possible at this time to predict with any certainty if there will be a liability associated with these investigations nor, if one were to occur, is there an ability to quantify the potential impact on the financial statements of the Indivior Group.
8. TRADE AND OTHER PAYABLES


March 31
2015
$m
December 31
2014
$m
Sales returns and rebates

309
273
Trade payables

39
29
Other tax and social security payables

6
7
Accruals

92
74
Total

446
383
Customer return and rebate accruals, primarily in the US, are provided for by the Group at the point of sale in respect of the estimated rebates, discounts or allowances payable to customers. Accruals are made at the time of sale but the actual amounts paid are based on claims made some time after the initial recognition of the sale. As the amounts are estimated they may not fully reflect the final outcome and are subject to change dependent upon, amongst other things, the channel (e.g. Medicaid, Medicare, Managed Care, etc) and product mix. The level of accrual is reviewed and adjusted quarterly in the light of historical experience of actual rebates, discounts or allowances given and returns made and any changes in arrangements. Future events could cause the assumptions on which the accruals are based to change, which could affect the future results of the Group.
9. SHARE CAPITAL


Equity Ordinary Shares
Issue price
Nominal value
$m
Issued and fully paid




At January 1, 2015

718,577,618
$2.00
1,437
Nominal value reduction

-
($1.90)
(1,365)
At March 31, 2015

718,577,618
$0.10
72


Equity Ordinary Shares
Issue price
Nominal value
$m
Issued and fully paid




At January 1, 2014 (pro forma)

718,577,618
$2.00
1,437
At March 31, 2014 (pro forma)

718,577,618
$2.00
1,437
The holders of ordinary shares (par value $0.10) are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Parent Company.
The initial shareholders resolved, by a special resolution, passed on October 30, 2014, to reduce Indivior's share capital by decreasing the nominal value of each Indivior Ordinary Share from $2.00 to $0.10. This created distributable reserves on the balance sheet which will provide Indivior with, among other things, capacity for the payment of future dividends.
As required under section 645 of the Companies Act, the High Court of Justice has confirmed the reduction of the Company's share capital. Following the registration of the Order of the Court with the Companies House, the Capital Reduction became effective on January 21, 2015. 
10. POST BALANCE SHEET EVENTS
There have been no material post balance sheet events.
Independent review report to Indivior PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed the condensed consolidated interim financial statements, defined below, in the quarterly financial report of Indivior PLC for the three months ended 31 March 2015.Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.
This conclusion is to be read in the context of what we say in the remainder of this report. 
What we have reviewed
The condensed consolidated interim financial statements, which are prepared by Indivior PLC, comprise:
 the condensed consolidated statement of financial position as at 31 March 2015;
 the condensed consolidated income statement and statement of comprehensive income for the three month period then ended;
 the condensed consolidated statement of cash flows for the three month period then ended;
 the condensed consolidated statement of changes in equity for the three month period then ended; and
 the explanatory notes to the condensed consolidated interim financial statements. 
As disclosed in note 1, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. 
The condensed consolidated interim financial statements included in the quarterly financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
What a review of condensed consolidated financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. 
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the quarterly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.
Responsibilities for the condensed consolidated interim financial statements and the review
Our responsibilities and those of the directors
The quarterly financial report, including the condensed consolidated interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the quarterly financial report in accordance with International Accounting Standard 34 as adopted by the European Union.
Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the quarterly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
5 May 2015
1 Embankment Place, London, WC2N 6RH
Notes:
(a) The maintenance and integrity of the Indivior PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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The company news service from the London Stock Exchange
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