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INDV - Indivior News Story

155.3p 2.3  1.5%

Last Trade - 07/05/21

Market Cap £1.14bn
Enterprise Value £666.3m
Revenue £482.4m
Position in Universe 409th / 1821

Indivior PLC - Annual Report and Notice of Annual General Meeting

Wed 31st March, 2021 2:50pm
RNS Number : 1689U
Indivior PLC
31 March 2021
 

March 31, 2021

Indivior PLC (the 'Company')

Annual Report and Notice of Annual General Meeting

The Company has today posted or made available to shareholders the following documents:

-      Annual Report and Accounts for the year ended December 31, 2020 (the '2020 Annual Report');

-      Notice of 2021 Annual General Meeting ('AGM'); and

-      Form of Proxy for the AGM.

In accordance with LR 9.6.1, a copy of each of these documents has been submitted to the FCA and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

The 2020 Annual Report and Notice of AGM can also be viewed on the Company's website at www.indivior.com/annual-reports/ and www.indivior.com/shareholders/shareholder-communications/.

The Appendix to this announcement contains information which has been extracted from the 2020 Annual Report for purposes of compliance with the FCA's Disclosure Guidance and Transparency Rules and should be read together with the Company's Final Results announcement released on February 18, 2021.  Together these constitute the material required by Disclosure Guidance and Transparency Rule 6.3.5 which is required to be communicated to the media in full unedited text through a Regulatory Information Service. This announcement is not a substitute for reading the full Annual Report and Accounts. Page numbers and cross references in the extracted information refer to page numbers and cross references in the 2020 Annual Report.

AGM meeting arrangements

The 2021 AGM will be held on Thursday 6 May 2021 at 3.00pm. Due to the current COVID-19 restrictions, the AGM will be held at the Company's offices with a limited number of Company representatives attending to ensure that a valid meeting is held.  Other shareholders will not be permitted to attend the AGM in person and shareholders are therefore asked to appoint the Chair of the meeting as their proxy. Arrangements have been made to allow shareholders to join the meeting online, further details can be found in the Notice of Meeting. The Board understands that the AGM is an important event in the corporate calendar and is committed to returning to an open AGM format in future years when COVID-19 restrictions are eased.

 

Jason Thompson

Vice President, Investor Relations

Indivior PLC

Tel: +1 (804) 402 7123

jason.thompson@indivior.com

 

Forward-Looking Statements

The purpose of the Annual Report and Accounts is to provide information to members of the Company. The Annual Report and Accounts have been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company, its Directors and employees, agents or advisors do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

The Annual Report and Accounts contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty, since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of the Annual Report and Accounts and the Company undertakes no obligation to update these forward-looking statements. Nothing in this Annual Report and Accounts should be construed as a profit forecast.

APPENDIX - additional information required by DTR 6.3.5

The principal risks and uncertainties set out below are extracted from pages 38 to 45 of the 2020 Annual Report.

i.          Principal risks and risk management

Effective management of existing and emerging risks is critical to the success of our Group and the achievement of our strategic objectives. Risk must be accepted to a reasonable degree for our Group to execute on our strategic objectives and pursue our business opportunities in alignment with our mission. Risk management is therefore an integral component of our culture and governance.

The Board of Directors (Board) has carried out a robust assessment to ensure that the principal risks, including those that would threaten the Group's business model, future performance, solvency or liquidity, are effectively managed and/or mitigated to help ensure the Group remains viable. While the Group aims to identify and manage such risks, no risk management strategy can provide absolute assurance against loss.

The tables on pages 39 to 45 provide insight into the Group's principal risks, outlining why effective management of these risks is important, how we manage them, how the risks relate to the Group's strategic priorities, and which risks are increasing, decreasing or have remained static during the past twelve months. Additional risks, not listed here, that the Group cannot presently predict or does not believe to be equally significant, may also materially and adversely affect the Group's business, results of operations and financial condition. The principal risks and uncertainties are not listed in order of significance.

Managing risks

Our Enterprise Risk Management (ERM) process is designed to identify, assess, manage, report and monitor risks and opportunities that may impact the achievement of the Group's strategy and objectives. This includes adjusting the risk profile in line with the Group's risk tolerances to respond to new threats and opportunities. An effective ERM process is fundamental to our ability to meet and align to our operational and strategic objectives. The competitive market in which we operate has industry-specific risks, particularly those relating to new product development and commercialization, intellectual property enforcement and legal proceedings, and compliance with laws and regulations. This requires that existing and emerging business risks are effectively assessed, appropriately measured, regularly monitored, and addressed through mitigation plans. Our ERM process fosters and embeds a Group-wide culture of risk management that is responsive, forward-looking, consistent, and accountable.

Governance and responsibilities

The Board has overall responsibility for the Group's risk management. The Audit Committee assists the Board in overseeing the Group's risk management activities, including reviewing the Group's principal risks and emerging risks with a focus on key risk areas. In addition, the Board's Committees regularly review risks relevant to their area of focus; this includes, but is not limited to, risks relating to legal, financial, commercial, regulatory, and compliance matters.

The Executive Committee is required by the Board to oversee and monitor the effectiveness of the Group's risk management activities. Quarterly, the Executive Committee reviews enterprise risks as part of its regular quarterly business reviews, and assesses any changes impacting the Group, including emerging risks and impacts to Indivior's principal risks, as well as the underlying mitigating plans.

Business Unit and Functional Leadership executes day-to-day risk management activities, including risk identification, and manages risk mitigation actions within their respective areas in alignment with the ERM framework.

The Risk Management Team facilitates the ERM program, including the implementation of processes and tools to identify, assess, measure, monitor and report risks.

Any one or a combination of the risks listed below could impact the Group's viability (refer to our Viability Statement on page 46).

The emergence of the Coronavirus (COVID-19) pandemic and related government measures to address the pandemic have resulted in business pressures and disruptions across industries worldwide, and corresponding risks to the Group's business and operations. The COVID-19 pandemic has specifically heightened risks for four of our principal risks: business operations (refer to page 39); product pipeline, regulatory, and safety (refer to page 40); commercialization (refer to page 41); and supply (refer to page 42). Excluding the impact of the COVID-19 pandemic, risks for these four principal risks would have remained mostly unchanged compared to the prior year.

1.   Business Operations

Change from 2019

The Group's operations rely on complex processes and systems, strategic partnerships, as well as specially qualified and high performing personnel to develop, manufacture and sell our products. Failure to continuously maintain operational and compliance processes and systems as well as to retain and/or recruit qualified personnel could adversely impact product availability and patient health, and ultimately the Group's performance and financials. Additionally, an ever evolving regulatory, political, and technological landscape requires that we have the right priorities, capabilities, and structures in place to successfully execute on our business strategy and adapt to this changing environment.

COVID-19 pandemic - The persistence of the COVID-19 pandemic and the ongoing government measures to address the pandemic continue to create a very challenging business environment for companies across industries worldwide and therefore related risks to the Group's business and operations. In response to COVID-19, the Group has established an agile cross-functional response structure; and implemented a number of mitigation and contingency actions to help maintain the functioning of operations across the organization, supply of all products to our patients, and help ensure the welfare of our employees. The Group continuously monitors the potential impact on the health and well being of our employees as well as the workforce of our key third parties, which ultimately may impact our operations. Furthermore, given the remote working environment, the Group continues to closely monitor cybersecurity threats and the overall operating effectiveness of the monitoring and control activities. Given the evolving and dynamic nature of the COVID-19 pandemic, and uncertainty surrounding the duration of measures designed to mitigate its spread, including the vaccination of the population or attainment of herd immunity, the impact on the Group's operations and financial position is highly uncertain and cannot be predicted with confidence. COVID-19 related developments are under constant review to ensure our mitigation and contingency actions are appropriate, proportionate, and as effective as possible. However, despite the measures the Group has taken, if the pandemic adversely affects Indivior's operations and/or performance, it will have a heightened effect on many of the risks impacting the Group, including its business operations (refer to the other principal risks: product pipeline and regulatory on page 40, commercialization on page 41, and supply on page 42).

The manufacturing of our SUBOXONE and SUBUTEX tablets for all of our European markets is performed by a third-party contract manufacturer located in the UK. The Group has been proactive in taking appropriate actions since the Brexit referendum, including changes to logistics, shipping, and quality testing and release processes, as well as transfer of regulatory licenses and additional inventory builds. While the UK and the European Union (EU) signed the Trade and Cooperation Agreement on December 24, 2020; certain operational risks remain which may impact various areas of the Group, including Operations, Regulatory, Supply Chain, and Quality. The Group is closely monitoring it.

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Increased complexity and operational challenges due to the COVID-19 pandemic, significant network of third-party partners, impact on our operations of the Trade & Cooperation Agreement between UK and EU

Examples of risks

Management actions

Link to strategic priorities

Failure or significant performance issues experienced with our key processes, Information Technology (IT) systems, and/or at our critical third-party partners including due to the COVID-19 pandemic

Loss of intellectual property, confidential data, and personally identifiable information or significant impact on operations from cybersecurity breaches

Failure to retain and recruit qualified workforce and key talent

Disruptions in our operations due to Brexit

An agile cross-functional response structure led by Executive Management is in place

Business operating standards, monitoring processes, and contingency plans are in place

IT policies, processes, systems, and disaster recovery plans supporting overall business continuity are in place

Strategy, processes, and tools to secure systems and protect data are deployed

Talent management programs are in place, including talent review and retention programs with focus on identifying key roles and successors

Operational and regulatory process changes were implemented, and a Brexit steering committee regularly monitors the impact of Brexit on our operations and facilitates appropriate business planning

Grow SUBLOCADE to $1bn+ net revenue, diversify revenue, build our pipeline for future growth, and optimize our operating model

 

2.   Product pipeline, regulatory and safety

Change from 2019

The development and approval of the Group's products is an inherently risky and lengthy process requiring significant financial, research and development resources, and strategic partnerships. Complex regulations with strict and high safety standards govern the development, manufacturing, and distribution of our products. In addition, strong competition exists for strategic collaboration, licensing arrangements, and acquisition targets. Patient safety depends on our ability to perform robust safety assessment and interpretation to ensure that appropriate decisions are made regarding the benefit/risk profiles of our products. Deviations from these quality and safety practices could impact patient safety and market access, which can have a material effect on the Group's performance and prospects.

COVID-19 pandemic - The COVID-19 pandemic has negatively impacted our R&D operations, specifically trial patient enrollments and limited chemistry, manufacturing & controls (CMC) operations, and therefore caused certain delays in conducting clinical and/or CMC studies internally and/or at our third-party partners.

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Increased challenges in conducting clinical trials and/or CMC activities due to COVID-19 pandemic

 

Examples of risks

Management actions

Link to strategic priorities

Failure to advance the development and/or obtain regulatory approval of pipeline products, as well as failure to execute on business development opportunities

Potential liability and/or additional expenses associated with ongoing regulatory obligations and oversight

Unexpected changes to the benefit/risk profiles of our products

Product development, business development and international growth strategies are in place

Due diligence, market valuation, and economic and financial modeling are in place

Ongoing Quality and Safety monitoring and auditing programs are in place

Strategies to defend against and pursue appropriate resolution of product liability claims are in place

Rigorous pharmacovigilance processes for ongoing evaluation of data collected from multiple sources related to patient safety are in place, including Risk Evaluation & Mitigation Strategy ("REMS") programs in the US and Risk Management Plans (RMP) outside the US

Grow SUBLOCADE to $1bn+ net revenue, diversify revenue, and build our pipeline for future growth

 

3.   Commercialization

Change from 2019

Successful commercialization of our products is a critical factor for the Group's sustained growth and robust financial position. Launch of a new product involves substantial investment in marketing, market access and sales activities, product stocks, and other investments. Certain factors, if different than anticipated, can significantly impact the Group's performance and position. These factors include: HCP/Patient adoption and adherence; generic and brand competition; pricing pressures; private and government reimbursement schemes and systems; negotiations with payors; erosion and/or infringement of intellectual property (IP) rights; and political and socioeconomic factors.

COVID-19 pandemic - The pandemic has resulted in overall fewer patient visits to healthcare provider offices for non-COVID-19 reasons or essential treatments, as patients become unable or unwilling to make visits due to overburdened healthcare systems or elect to have remote consultations (telehealth) with their providers. As a result, in Q2 2020, the Group observed a rapid decline in new US patient enrollments followed by a modest improvement in Q3 compared to Q2, and continued growth in Q4 compared to Q3. The pandemic has also resulted in safety concerns, quarantines, or other travel restrictions for patients. Furthermore, even though the Group has developed remote (digital) meeting capability with healthcare providers, the Group's commercial organization is still only able to engage in-person with a limited number of healthcare professionals (HCPs) and Organized Health Systems (OHS). Although COVID-19 has not significantly impacted the Group's overall operating results and financial position to date, a potential enduring and/or significant decline in patient enrollments and on the patient journey, and the inability to effectively engage with HCPs and OHS would have a negative impact on the Group's financial results in future periods.

Governments across the world are considering and taking actions to lower drug prices. In the US, there is bi-partisan support for drug pricing reforms at both federal and state levels, which include potential legislative and regulatory actions to encourage the import of drugs, to price drugs according to a defined international pricing reference, to encourage more competition, and to undertake other initiatives. These, together with federal and state government fiscal constraints resulting from the COVID-19 pandemic, which constrain public benefit health programs, pose direct and indirect downward pressure risk on drug prices. The Group continues to monitor potential legislative and regulatory changes and their impacts, advocating for the Group's products based on scientific studies and patient-centered outcomes. However, certain potential legislative and regulatory drug pricing changes could have an adverse impact on the Group's financial performance and results in the future.

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Increased commercial challenges due to COVID-19 pandemic for SUBLOCADE and some government pricing pressure. (Refer to Chief Executive Officer's review on pages 5 to 11 or the Financial Review section on pages 29 to 32.

Examples of risks

Management actions

Link to strategic priorities

Lower HCP adoption and patient enrollments of SUBLOCADE, including the decrease linked to limited/restricted patient visits and HCP interactions due to the COVID-19 pandemic

Unexpected changes to government and/or commercial reimbursement levels and government pricing pressures

Launch of competing branded and/or generic products

Competition and challenges in the product/geographic expansion outside the U.S.

Enhanced investments in OHS access, interactions with HCPs, including remote (digital) meeting capability, as well as facilitation of patients' access and reimbursement working with key stakeholders

Emphasizing value of products and health economics tailored to commercial and government payors through market access activities

Patient platforms supporting provider location, reimbursement support, and co-pay assistance for eligible patients are in place

Ongoing training and development for field-based employees are in place

Monitoring of government and commercial pricing and reimbursement related trends/measures and development of mitigation strategies

International growth, pipeline development, marketing, and business development strategies are in place

Grow SUBLOCADE to $1bn+ net revenue, and diversify revenue

 

4.   Economic and financial

Change from 2019

The pharmaceutical business includes inherent risks and uncertainties, requiring the Group to make significant financial investments to develop and support the success of our product portfolio. Generating cash flow from our approved products, together with external financing, sustains our financial position, allows development of new products, and funds business growth. Realizing value on those investments is dependent upon regulatory approvals, market acceptance (including pricing reimbursement levels), strategic partnerships, competition, and legal developments. Unfavorable outcome from resolutions of legal proceedings, impacts from the COVID-19 pandemic, and/or changes in government pricing regulations could negatively impact our operating results and financial position. Together with potential pressure on our level of net working capital, our ability to comply with our debt covenants could be negatively impacted. As a global business, we are also subject to political, economic, and capital markets changes.

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No change

Examples of risks

Management actions

Link to strategic priorities

Inability to raise capital, or execute on business development and alliance opportunities

Failure to meet financial obligations and performance

Realignment of cost and finance structures, and active expense management are in place

Ongoing monitoring of financial performance and compliance with financial covenants

Strategies supporting expansion opportunities and diversification are in place

Regular appraisals of debt and capital market conditions with advisors and counterparties are in place

Grow SUBLOCADE to $1bn+ net revenue, diversify revenue, build our pipeline for future growth, and optimize our operating model

 

5.   Supply

Change from 2019

The manufacturing and supply of our products are highly complex and rely on a combination of internal manufacturing capabilities and third parties for the timely supply of our finished drug and combination drug products. The Group uses third parties, including contract manufacturing organizations (CMOs), to manufacture, package and distribute our products. The manufacturing of oral solid dose, film products and aseptically filled injectables is subject to stringent global regulatory, quality and safety standards, including Good Manufacturing Practice (GMP). Delays or interruptions in our supply chain and/or product quality failures could significantly disrupt patient access, adversely impact the Group's financial performance and lead to product recalls and/or potential regulatory actions against the Group along with potential reputational damages.

COVID-19 pandemic - The pandemic could adversely impact our broad supply chain (i.e., "supply to patient delivery" process) if we experience a significant absence of our employees and/or employees at our CMOs and vendors due to infection and/or government containment measures. Through on-going management and risk mitigation, internally and with CMOs, the Group has not experienced any significant COVID-19 related disruptions to its supply to patient delivery process through this date.

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Increased challenges throughout the "supply to patient" process due to the COVID-19 pandemic, including potential related operational disruptions at our CMOs.

Examples of risks

Management actions

Link to strategic priorities

Reliance on critical CMOs and supply chain partners

Inability to supply compliant finished products in a continuous and timely manner due from operational disruptions due to the COVID-19 pandemic

Business continuity, disaster recovery, emergency response plans, and enhanced communication protocols across the supply chain network are in place

Contingency plans and management of safety stocks are in place

Comprehensive product quality and control processes and manufacturing performance monitoring across the supply chain network are in place

Ongoing monitoring of stock levels and business contingency planning

Grow SUBLOCADE to $1bn+ net revenue, and diversify revenue

 

6.   Legal and intellectual property

Change from 2019

Our pharmaceutical operations, which include controlled substances, are subject to a wide range of laws and regulations. Perceived or actual noncompliance with these applicable laws and regulations by a pharmaceutical company can result in investigations or proceedings leading to civil or criminal sanctions, fines and/or damages, as well as reputational damages.

Intellectual Property (IP) rights protecting our products may be challenged by external parties, including generic manufacturers. Although we have developed robust patent protection for our products, we are exposed to the risk that courts may decide that our IP rights are invalid and/or that third parties do not infringe our asserted IP rights.

In connection with the agreements to resolve criminal charges and civil complaints related to SUBOXONE Film (see Legal proceedings section on page 33), the Group has specific requirements that are in addition to the Group's preexisting obligations to comply with applicable laws and regulations associated with its US pharmaceutical operations. The Group is subject to penalties if it fails to fulfill the requirements within the agreements.

The Group is also a party to several civil lawsuits, including ongoing litigation in the Federal FCA qui tam suits, and civil antitrust and state claims filed by various plaintiffs. Many of the civil claims concern the same conduct at issue in the Superseding Indictment filed by the DOJ.

The Group is also a defendant in fewer than 400 civil lawsuits brought by various plaintiffs as part of the opioid class action litigation. These cases are at an early stage and are currently stayed.

Unfavorable outcomes from resolutions of these legal proceedings, could have a material adverse impact on the Group's business, financial condition and/or operating results.

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Decreased given the agreements reached with DOJ, OIG and FTC resolved the risk of exclusion or other potential federal civil and criminal penalties associated with the matters alleged in the superseding indictment, and being able to continue to participate in US federal healthcare programs. However, material business impact from remaining legal proceedings exist (refer to Legal proceedings section on pages 33 to 36 and Chair and Chief Executive Officer statements on pages 5 and 11 respectively).

Examples of risks

Management actions

Link to strategic priorities

Legal proceedings related to antitrust, state, shareholders, product liability claims, government enforcement and/or private litigation associated with the manufacturing, marketing, and distribution of our products

Inability to obtain, maintain, and protect patents and other proprietary rights

Quality, patient safety, monitoring and compliance are embedded in the Group's processes and culture

Cooperation with the Government authorities in connection with ongoing litigations, utilizing internal and external counsel

Insurance coverage and monitoring activities are in place

Ongoing active review, management and enforcement of our product patents, marketing exclusivity and other IP rights are in place

Geographic expansion and product diversification strategies are in place

Grow SUBLOCADE to $1bn+ net revenue, diversify revenue, and build our pipeline for future growth

 

7.   Compliance

Change from 2019

Our Group operates on a global basis and the pharmaceutical industry is both highly competitive and regulated. Complying with all applicable laws and regulations, including engaging in activities that are consistent with legal and industry standards, and our Group's Code of Conduct are core to the Group's mission, culture, and practices. Failure to comply with applicable laws and regulations may subject the Group to civil, criminal and administrative liability, including the imposition of substantial monetary penalties, fines, damages and restructuring the Group's operations through the imposition of compliance or integrity obligations and have a potential adverse impact on the Group's prospects, reputation, results of operations and financial condition.

As part of the Group's resolution of federal criminal and civil charges related to its legacy products (see Legal proceedings section on page 33), the Group has also entered into a Corporate Integrity Agreement (CIA) with HHS-OIG. The five-year CIA requires, among other things, that the Group implement measures designed to ensure compliance with the statutes, regulations, and written directives of U.S. Medicare, U.S. Medicaid, and all other U.S. Federal health care programs, as well as with the statutes, regulations, and written directives of the U.S. Food and Drug Administration. Furthermore, the Group is subject to additional periodic reporting and monitoring requirements related to the Agreements. In addition, the CIA requires reviews by an independent review organization, compliance-related certifications from the Group's executives and certain Board members, and the implementation of a risk assessment and mitigation process. The CIA sets forth specified monetary penalties that may be imposed on a per day basis for failure to comply with the obligations specified in the CIA. The CIA also includes specific procedures under which the Group must notify HHS-OIG if it fails to meet the requirements under the CIA. In the event that HHS-OIG determines the Group to be in material breach of certain requirements of the CIA (including: repeated violations or any flagrant obligations under the CIA, a failure by the Group to report a reportable event and/or take corrective action, a failure to engage and use an independent review organization, a failure to respond to certain requests from HHS-OIG), the Group may be subject to exclusion from participation in the U.S. Federal health care programs, which would have a severe impact on the Group's ability to comply with the financial covenants in the Group's debt facility, maintain sufficient liquidity to fund its operations, pay off its debt in 2022, generate future revenue and ultimately impact the Group's viability.

The Resolution Agreement with the United States Attorney's Office for the Western District of Virginia and Consumer Protection Branch contains certain requirements, such as reporting obligations and that the Group's CEO (a) certify on an annual basis that, to the best of the CEO's knowledge, after a reasonable inquiry, the Group was in compliance with the Federal Food, Drug and Cosmetic Act and has not committed health care fraud, or (b) provide a list of all non-compliant activities and steps taken to remedy the activity. The FTC Stipulated Order contains specific notice and reporting requirements over a ten-year period related to certain activities (e.g., product switching conduct, filing of a Citizen Petition). The Group is subject to contempt prosecution if it fails to comply with any terms of the resolution agreement.

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In connection with the agreements to resolve criminal and civil complaints related to SUBOXONE Film, the group is subject to heightened compliance requirements and commitments (refer to Legal proceedings section on page 33). However, to prepare and support the implementation of these agreements, the Group has retained experienced personnel. Further, as ongoing evolution of the Group's compliance journey and in anticipation of these agreements, a robust strategic plan, advanced preparedness efforts, and external and internal resources have been deployed to develop and operationalize an effective compliance program, including: enhanced written  standards; training, best practice standards for concerns "speak up" reporting and internal investigations; crossfuntional oversight with certification; and monitoring activities.

Examples of risks

Management actions

Link to strategic priorities

Failure to meet the requirements of the government agreements (i.e., CIA, DOJ, and FTC)

Non-compliance with our Code of Conduct, anti-corruption, healthcare, data privacy, or local laws and regulations

Inability to adequately respond to changes in laws and regulations, including data privacy

Failure to comply with payment and reporting obligations under the U.S. and foreign

Oversight, monitoring and reporting of compliance requirements with government agreements have been implemented, including a management certification, and defined sub-certification process

Ongoing evolution of our compliance program and development of compliance capabilities, guided by defined strategic plan and learnings from program operations, are in place

Compliance policies and processes, including Code of Conduct and risk assessment, and related mandatory employee training programs are in place

Confidential independent reporting process for employees to report concerns is in place

Oversight and monitoring of controls and procedures in emerging markets are in place

Data governance and management framework are in place

Continuous review and assessment of developments in the law, applicable industry standards, and business practices are in place

Ongoing monitoring of controls over government pricing and reporting is in place

Grow SUBLOCADE to $1bn+ net revenue, diversify revenue, and build our pipeline for future growth

 

The statement of directors' responsibilities in respect of the financial statements is extracted from pages 113 to 114 of the 2020 Annual Report.

ii.         Statement of directors' responsibilities in respect of the financial statements

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the Directors to prepare the Group financial statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 Reduced Disclosure Framework, and applicable law, together "UK Accounting Standards"). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group and Parent Company for that period. In preparing the financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;

state whether international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the Parent Company financial statements, subject to any material departures disclosed and explained in the financial statements;

make judgments and accounting estimates that are reasonable and prudent; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business.

The Directors are also responsible for safeguarding the assets of the Group and Parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.

The Directors are responsible for the maintenance and integrity of the Parent Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

The Directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Parent Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Annual Report, confirm that, to the best of their knowledge:

the Group financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group;

the Parent Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company; and

the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and Parent Company, together with a description of the principal risks and uncertainties that it faces.

Disclosure of information to auditors

A Directors' statement in relation to disclosure of relevant audit information can be found in the Directors' Report on pages 109 to 112.

Going concern

The Group's business model, strategy, and viability assessment are set out in the Strategic Report on pages 2 to 47, along with the Group's risk management strategy and the principal risks that could threaten the Group's business model, future performance and solvency or liquidity. The Group's and Parent Company's financial position, cash flows, and liquidity position are discussed in the notes to the Group and Parent Company financial statements, along with the Group's and Parent Company's objectives, policies and processes for managing its financial risks, and the Group's and Parent Company's exposure to liquidity risk and capital risk.

The Directors have considered the Group's and Parent Company's financial plan, in particular with reference to the period through June 2022.

As disclosed in Notes 4, 21, 22 and 23 to the Group Financial Statements, the Group reached a resolution with the U.S. Department of Justice (DOJ), Federal Trade Commission (FTC) and the Department of Health and Human Services (HHS), which was approved in November 2020. The agreement reached with HHS (as described in Note 23) has eliminated the risk of potential exclusion from participating in US government health programs. Additionally, subsequent to the year-end, the Group resolved a claim raised by Reckitt Benckiser (RB) in November 2020. These settlements have resulted in liabilities totaling $536m as at December 31, 2020. While the uncertainty relating to these matters has been resolved, various other legal proceedings as discussed in Note 23 carry their own specific ongoing risk and uncertainty.

The Directors have assessed the Group's and Parent Company's ability to comply with the financial covenants in the Group's debt facility, maintain sufficient liquidity to fund its operations, fulfil obligations under the DOJ and RB agreements, and address the reasonably possible financial implications of the ongoing legal proceedings. The Directors have modeled the failure of SUBLOCADE to meet revenue growth expectations due to the continued impact from the COVID-19 pandemic (considering a 15% decline on forecasts) as part of the Group's and Parent Company's going concern assessment and downside scenario. The risk of a worse than expected outcome relating to the remaining ongoing legal matters has been considered for purposes of the viability period only as these cases are not expected to be concluded during the going concern period. Should the maximum reasonably possible risk occur (as disclosed in Note 23) in the going concern period, the Group and therefore also the Parent Company would still maintain adequate liquidity to comply with its financial covenants and obligations.

These risks were balanced against the Group's current and forecast working capital position, impact of the cost saving actions taken to date, and timing of the final balloon payment on the term loan in Q4 2022 which is outside the going concern assessment period and would also impact the Parent Company. As a result of the factors set out above, the Directors of the Group and Parent Company have a reasonable expectation that the Group and Parent Company have adequate resources to continue in operational existence for at least one year from the approval of these financial statements. Based on the above assessment, the previous material uncertainty relating to the Group's and Parent Company's ability to continue as a going concern has been removed.

The Directors have given the going concern assessment due consideration and have concluded that it is appropriate to adopt the going concern basis for accounting and preparing these financial statements. The viability statement is on pages 46 and 47.

 

Related party transactions are extracted from page 163 of the 2020 Annual Report.

iii.       Related party transactions

Key management compensation is disclosed in Note 7.

The subsidiaries included in the consolidated financial statements at December 31, 2020 are disclosed in Note 2 to the Parent Company financial statements.

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