REG - Indivior PLC - Half Year Financial Results <Origin Href="QuoteRef">INDV.L</Origin> - Part 2
29/07/2016 07:07
- Part 2: For the preceding part double click ID:nRSc5908Fa
table below sets out selected operating costs and expenses information:
Q22016$m Q22015$m H12016$m H12015$m
Research and development expenses (28) (34) (59) (54)
Marketing, selling and distribution expenses (32) (42) (64) (80)
Administrative expenses (77) (43) (143) (91)
Depreciation and amortisation (6) (6) (12) (12)
Operating lease rentals (1) (2) (2) (2)
Total (116) (93) (221) (185)
Exceptional Items
Q22016$m Q22015$m H12016$m H12015$m
Cost of Sales 10 - 10 -
Reconfiguration and separation costs - 3 - 5
Consulting costs 4 - 4 -
Total Exceptional items 14 3 14 5
$14m (2015: $5m) of exceptional items include write offs of manufacturing
costs and legal and advisory costs related to the exploration of strategic
initiatives for the event of a potential negative ANDA ruling. These have
been included within operating expenses and Costs of Sales.
4. TAXATION
In the six months ended June 30, 2016, tax on total profits amounted to $65m
and represented a half-year effective tax rate of 38% (H1 2015: 28%); $19m of
these relate to the tax effect on the movement of assets within the Group and
additional provisions for unresolved tax matters and are considered to be
exceptional. ($5m) relate to the tax effect of exceptional items within SD&A
and Cost of Sales. The Group's balance sheet at June 30, 2016 included a tax
payable liability of $70m and deferred tax asset of $110m.
The effective tax rate excluding exceptionals was 27%.
5. EARNINGS PER SHARE
Q22016cents Q22015cents H12016cents H12015cents
Basic earnings per share 8 9 15 20
Diluted earnings per share 8 9 14 20
Adjusted basic earnings per share 11 9 19 20
Adjusted diluted earnings per share 11 9 18 20
Basic
Basic earnings per share ("EPS") is calculated by dividing profit for the
period attributable to owners of the Company by the weighted average number of
ordinary shares in issue during the period. 720,597,566 shares were in issue
at the reporting date.
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company has dilutive potential ordinary shares
in the form of awards. The weighted average number of shares is adjusted for
the number of shares granted assuming the vesting of the awards.
2016Average number of shares 2015Average number of shares
On a basic basis 720,597,566 718,577,618
Dilution for Long Term Incentive Plan (LTIP) 24,845,443 14,459,717
Adjusted diluted earnings per share 745,443,009 733,037,335
Adjusted Earnings
The Directors believe that diluted earnings per share, adjusted for the impact
of exceptional items after the appropriate tax amount, provides additional
useful information on underlying trends to shareholders in respect of earnings
per ordinary share.
A reconciliation of net income to adjusted net income is as follows:
Q22016$m Q22015$m H12016$m H12015$m
Net income 57 66 107 144
Exceptional items 14 3 14 5
Tax effect of exceptional items (5) (1) (5) (1)
Exceptional items within taxation 14 - 19 -
Adjusted net income 80 68 135 148
6. FINANCIAL LIABILITIES - BORROWINGS
Current June 302016$m December 312015$m
Bank loans (47) (34)
(47) (34)
Non-current June 302016$m December 312015$m
Bank loans (504) (571)
(504) (571)
Analysis of net debt June 302016$m December 312015$m
Cash and cash equivalents 577 467
Borrowings* (582) (641)
(5) (174)
*Borrowings reflects the outstanding principal amount drawn, before debt
issuance costs
Reconciliation of net debt June 302016$m December 312015$m
The movements in the period were as follows:
Net debt at beginning of period (174) (428)
Increase in cash and cash equivalents 110 136
Net repayment of/(increase in) borrowings and overdraft 60 121
Exchange adjustment (1) (3)
Net debt at end of period (5) (174)
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 $750 million debt
facility. As a result of the syndication the new terms of the loan on March
16, 2015 were as follows:
Currency Nominal interest margin Maturity Scheduled repayments* Issuance cost$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 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.
The Indivior business (previously Reckitt Benckiser Pharmaceuticals (RBP)) was
demerged from Reckitt Benckiser Group plc (RB) on December 23rd 2014 and
Indivior PLC became the new ultimate holding company of the group.
In 2011, the USAO-NJ issued a subpoena to Reckitt Benckiser Pharmaceuticals
(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 the Company and various 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. The Company has responded
to both the FTC and to the Attorney General of the State of New York by
producing documents and other information. In August 2015, the Company was
informed that a contingent of additional states has initiated a coordinated
investigation into the same conduct that is the subject of the FTC
investigation and the Class Action litigation. The existing investigation of
these same issues by the State of New York has now been incorporated within
this multi-state investigation. On July 1st, 2016, the Company was notified
that 22 states and the District of Columbia intend to file a complaint in the
Eastern District of Pennsylvania alleging violations of state and federal
antitrust and consumer protection laws relating to the same conduct. The
notice indicated that additional states may decide to join in any action and
more recently the Company has learned that additional states do intend to
join. The investigations are ongoing, and as yet no decision has been made by
either agency on whether to pursue any legal action for enforcement.
A federal criminal grand jury investigation of Indivior initiated in December
2013 is continuing, and includes marketing and promotion practices, pediatric
safety claims, and overprescribing of medication by certain physicians. The
United States Attorney for the Western District of Virginia has served a
number of subpoenas relating to Suboxone Film, Suboxone Tablet, Subutex
Tablet, Buprenorphine our competitors, among other issues. Indivior is in the
process of responding by producing documents and other information in
connection with this ongoing investigation. It is not possible at this time to
predict with any certainty or to quantify the potential impact of this
investigation on the Company. Indivior is cooperating fully with the relevant
agencies and prosecutors and will continue to do so.
ANDA Litigation
· The ruling after trial against Actavis and Par in the lawsuit involving
the Orange Book-listed patents for Suboxone Film issued on June 3rd, 2016.
Ruling found the asserted claims of the '514 patent valid and infringed; the
asserted claims of the '150 patent valid but not infringed; and the asserted
claims of the '832 patent invalid, but found that certain claims would be
infringed if they were valid.
· Based on the ruling as to the '514 patent, Actavis and Par are
currently enjoined from launching a generic product. Par has appealed and
Actavis is expected to appeal this ruling. The generics have also moved to
reopen the judgment based on a more stringent claim construction in the Teva
case, which is expected to deactivate the appeals until the District Court
rules on the motions to reopen the judgement.
· Trial against Teva, Actavis and Par in the lawsuits involving the
recently granted process patent (US Patent No. 8,900,497) scheduled for
November 2016.
· Trial against Teva in the lawsuit involving the Orange Book-listed
patents for Suboxone Film scheduled for November 2016, with Teva's 30-month
stay of FDA approval on ANDA No. 20-5806 expiring April 17th, 2017. Indivior
believes Teva's 30-month stay of FDA approval on ANDA No. 20-5299 also expires
on April 17th, 2017, however, Teva disputes the applicability of the stay to
this ANDA.
· Trial against Alvogen in the lawsuit involving the Orange Book-listed
patents and the '497 process patent for Suboxone Film scheduled for April
2017, with Alvogen's 30-month stay of FDA approval expiring October 29th,
2017.
• Trial against Mylan and Sandoz in the lawsuit involving the Orange
Book-listed patents for Suboxone Film is scheduled for September 25th, 2017,
with Mylan's stay expiring March 24, 2018 and Sandoz's stay expiring April 2,
2018. There is also a second, stayed lawsuit between the Company and Mylan in
the Northern District of West Virginia.
· Indivior received a Paragraph IV notification from Teva, dated February
8, 2016, indicating that Teva had filed a 505(b)(2) New Drug Application (NDA)
for a 16mg/4mg strength of Buprenorphine/naloxone sublingual film. The
Indivior Group and Teva agreed that infringement by Teva's 16 mg/4 mg dosage
strength will be governed by the infringement ruling on the accused 8 mg/2 mg
dosage strength in its ANDA currently scheduled for trial in November 2016.
· The USPTO declined to institute Teva's petitions for inter partes
review of the three Orange Book-listed patents on procedural grounds. Each of
the three petitions were filed in December 2015. The Patent Trial and Appeal
Board ("PTAB"), in a decision dated May 23, 2016, found that two of the
petitions, '514 and '150, were untimely filed and rejected them on that basis.
The third petition, as to '832, was rejected based on the PTAB's finding, in a
decision dated June 10,2016, that the petition failed to establish a
reasonable likelihood that the challenged claims are unpatentable.
· Dr. Reddy's has filed an inter partes review petition on each of the
three Orange Book Patents. These petitions are substantively similar to those
filed by Teva.
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.
In August 2015 the IRS issued notices of a proposed adjustment for the
disallowance of certain manufacturing deductions claimed by the Company
following its audit of 2011 and 2012 income tax years. During the 4th quarter
of 2015, the Company was notified by the IRS of their intention to audit 2013
and 2014 income tax years and have since been notified that the IRS intend to
disallow these claims in 2013 and 2014 audit cycle. The Company will appeal
the proposed disallowance. The Company has evaluated its positions with
respect to these claims and has provided $19m tax reserve for amounts claimed
on all open periods as its best estimate of its expected settlement position
for this issue.
8. TRADE AND OTHER PAYABLES
June 302016$m December 312015$m
Sales returns and rebates (344) (287)
Trade payables (73) (113)
Accruals (140) (116)
Other tax and social security payables (22) (12)
Total (579) (528)
Customer return and rebate accruals, primarily in the US, are provided for by
the Group at the point of sale in respect of the estimated rebates, discounts
or allowances payable to customers. Accruals are made at the time of sale but
the actual amounts paid are based on claims made some time after the initial
recognition of the sale. As the amounts are estimated they may not fully
reflect the final outcome and are subject to change dependent upon, amongst
other things, the channel (e.g. Medicaid, Medicare, Managed Care, etc) and
product mix. The level of accrual is reviewed and adjusted quarterly in the
light of historical experience of actual rebates, discounts or allowances
given and returns made and any changes in arrangements. Future events could
cause the assumptions on which the accruals are based to change, which could
affect the future results of the Group.
9. SHARE CAPITAL
Equity Ordinary Shares Issue price Nominal value$m
Issued and fully paid
At January 1, 2016 718,577,618 $0.10 72
Allotments 2,019,948 $0.10 -
At June 30, 2016 720,597,566 $0.10 72
Equity Ordinary Shares Issue price Nominal value$m
Issued and fully paid
At January 1, 2015 718,577,618 $2.00 1,437
Nominal value reduction - ($1.90) (1,365)
At June 30, 2015 718,577,618 $0.10 72
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 general meetings of Indivior PLC.
The initial shareholders resolved, by a special resolution, passed on October
30, 2015, to reduce Indivior PLC'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 that will provide Indivior with,
among other things, capacity for the payment of future dividends.
As required under section 645 of the Companies Act 2006, 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, 2016.
Allotment of ordinary shares
During the year, 2,019,948 ordinary shares (2015: nil) were allotted to
satisfy vestings/exercises under the Group's Long Term Incentive Plan.
10. RELATED PARTIES
Subsequent to the demerger from former parent, RB, on December 23, 2014,
Indivior continues to receive certain services like office space rental and
other operational services on commercial terms and on an arm's length basis.
Adrian Hennah, the RB CFO, served on the Indivior PLC Board of Directors until
the AGM on May 11th, 2016. The amount included within SD&A in respect of these
services is $2m.
11. POST BALANCE SHEET EVENTS
The 2015 second interim dividend of 9.5 cents per ordinary share was declared
by the board on February 17th, 2016. This dividend totaling $68m will be paid
on July 29th to shareholders whose names appeared on the register of members
at the close of business on June 17th, 2016. The sterling equivalent per
ordinary share was set at 7.3 pence.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors declare that, to the best of their knowledge:
· This condensed set of interim financial statements, which have been
prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by
the European Union, gives a true and fair view of the assets, liabilities,
financial position, and profit or loss of Indivior; and
· The interim management report gives a fair review of the information
required pursuant to regulations 4.2.7 and 4.2.8 of the Disclosure Guidance
and Transparency Rules (DTR)
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Indivior's Directors are listed in the Annual Report and Accounts for 2015.
With the exception of Adrian Hennah, who stepped down as a Director on May
11th, 2016, there have been no changes in the period.
Details of all current Directors are available on our website at
www.indivior.com
By order of the Board
Shaun Thaxter
Cary J. Claiborne
Chef Executive Officer Chief
Financial Officer
July 29, 2016
Independent review report to Indivior PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Indivior PLC's condensed consolidated interim financial
statements (the "interim financial statements") in the quarterly financial
report of Indivior PLC for the 3 and 6 month period ended 30 June 2016. Based
on our review, nothing has come to our attention that causes us to believe
that the interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
What we have reviewed
The interim financial statements comprise:
· the condensed consolidated interim balance sheet as at 30 June 2016;
· the condensed consolidated interim income statement and condensed
consolidated statement of comprehensive income for the period then ended;
· the condensed consolidated interim statement of cash flows for the
period then ended;
· the condensed consolidated interim statement of changes in equity for
the period then ended; and
· the explanatory notes to the interim financial statements.
The 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 and the
Disclosure Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1 to the interim financial statements, 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.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The quarterly financial report, including the 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 the Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on the 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 for
the purpose of complying with the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority and for no other purpose.
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.
What a review of interim 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 interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
29 July 2016
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 interim
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.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Indivior
See all newsREG - Indivior PLC - Transaction in Own Shares
AnnouncementREG - Indivior PLC - Transaction in Own Shares
AnnouncementREG - Indivior PLC - Transaction in Own Shares
AnnouncementREG - Indivior PLC - Holding(s) in Company
AnnouncementREG - Indivior PLC - Transaction in Own Shares
Announcement