REG - Indivior PLC - Preliminary Full Year Results Announcement <Origin Href="QuoteRef">INDV.L</Origin> - Part 2
18/02/2016 07:10
- Part 2: For the preceding part double click ID:nRSR3984Pa
taxes.
The introduction of Indivior PLC as the new ultimate holding company of the
Group in December 2014 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 and twelve month periods ended December 31, 2014 are
presented as if the Group had been in existence throughout the periods
presented.
The 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
financial statements have been reviewed and not audited. These financial
statements have been authorized for issue as at February 17, 2016.
Subject to the following matter, after making appropriate enquiries, the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future. However, as
disclosed on page 20 relating to the ANDA litigation, the outcome remains
uncertain. In the event of a negative ruling against the Group and, should
there be a regulatory approval and subsequent commercial launch of generic
Suboxone Film, there is the likelihood that revenues and operating profits
will decline. In these circumstances the Group has the ability to take
necessary measures to reduce its cost base and improve its cash flow to ensure
that the Group can continue as a going concern for the foreseeable future.
Accordingly, the Directors continue to adopt the going concern basis for
accounting in preparing these financial statements.
The financial information contained in this document does not constitute
statutory accounts as defined in section 434 and 435 of the Act. The auditors
issued an unqualified opinion and did not contain a statement under section
498 of the Act 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 were approved by the Board of Directors on March
27, 2015 and 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
years ended December 31, 2015 and 2014 were as follows:
Revenues from sale of goods:
Q42015$m Q42014$m 2015$m 2014$m
United States 194 209 807 855
ROW 54 63 207 260
Total 248 272 1,014 1,115
Non-current assets:
2015$m 2014$m
United States 80 63
ROW 14 42
Total 94 105
3. OPERATING COSTS AND EXPENSES
The table below sets out selected operating costs and expenses information:
Q42015$m Q42014$m 2015$m 2014$m
Research and Development expenses (58) (52) (148) (115)
Marketing, selling, and distribution expenses (44) (34) (166) (148)
Administrative expenses (75) (53) (227) (166)
Depreciation and amortisation (6) (6) (24) (26)
Operating lease rentals (2) (1) (6) (3)
Total (127) (94) (423) (343)
Exceptional Items
Q42015$m Q42014$m 2015$m 2014$m
Reconfiguration, separation, and impairment costs 24 24 31 24
Total Exceptional items 24 24 31 24
$31m (2014: $24) of impairment, reconfiguration and separation costs consists
primarily of the impairment of the intangible asset associated with Nasal
Naloxone and legal and advisory costs related to business reconfiguration
activities which have been included within operating expenses.
4. TAXATION
In the year to December 2015, tax on total profits amounted to $57M,
representing a full-year effective tax rate of 20% (2014: 28%). The reduction
in tax rate included $4M of exceptionals due to the resolution of prior year
matters that benefited the year and provision for tax contingencies.
The Group's balance sheet at December 31, 2015 included deferred tax assets of
$122M and tax liabilities of $41M
Indivior continues to believe that it has made adequate provision for the
liabilities likely to arise from open periods that have not yet been agreed by
tax authorities. The ultimate liability for such matters may vary from the
amounts provided and is dependent on the outcome of agreements with relevant
tax authorities.
5. EARNINGS PER SHARE
Q42015cents Q42014CentsPro-forma 2015Cents 2014Cents
Basic earnings per share 5 11 32 56
Diluted earnings per share 5 11 31 56
Adjusted basic earnings per share 7 13 34 58
Adjusted diluted earnings per share 7 13 34 58
Basic
Basic earnings per share ("EPS") is calculated by dividing profit for the
period attributable to owners of the Company by the weighted average number
of ordinary shares in issue during the period. 718,577,618 shares were issued
on the demerger.
For the purpose of calculating EPS, the share capital for the Company in the
period prior to the pre-demerger reorganization on December 23, 2014 is
calculated as if this reorganization was completed as at January 1 2014.
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company has dilutive potential ordinary shares
in the form of awards. The weighted average number of shares is adjusted for
the number of shares granted assuming the vesting of the awards.
2015Average number of shares 2014Average number of sharesPro-forma
On a basic basis 718,577,618 718,577,618
Dilution for Long Term Incentive Plan (LTIP) 14,507,535 5,307,010
Adjusted diluted earnings per share 733,085,153 723,884,628
Adjusted Earnings
The Directors believe that diluted earnings per share, adjusted for the impact
of exceptional items after the appropriate tax amount, provides additional
useful information on underlying trends to shareholders in respect of earnings
per ordinary share.
A reconciliation of net income to adjusted net income is as follows:
Q42015$m Q42014$m 2015$m 2014$m
Net income 37 77 228 403
Exceptional items 24 24 31 24
Exceptional items within taxation (11) (6) (13) (7)
Adjusted net income 50 95 246 420
6. FINANCIAL LIABILITIES - BORROWINGS
Current 2015$m 2014$m
Bank loans and overdraft 34 17
34 17
Non-current 2015$m 2014$m
Bank loans 571 719
571 719
Analysis of net debt 2015$m 2014$m
Cash and cash equivalents 467 331
Overdrafts - (9)
Borrowings* (641) (750)
(174) (428)
*Borrowings reflects the outstanding principal amount drawn, before debt
issuance costs
Reconciliation of net debt 2015$m 2014$m
The movements in the period were as follows:
Net debt at beginning of period (428) 7
Increase in cash and cash equivalents 136 324
Net repayment of/(increase in) borrowings and overdraft 121 (759)
Exchange adjustments (3) -
Net debt at end of period (174) (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 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 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 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. 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 and the
Attorney General of the State of New York. The existing investigation of
these same issues by the State of New York has now been incorporated within
this multi-state investigation. 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 Indivior is
cooperating fully with the relevant agencies and prosecutors and will continue
to do so.
ANDA Litigation
• Trial in the lawsuits against Actavis and Par involving the Orange
Book-listed patents for Suboxone Film November and December 2015. A decision
in these lawsuits will follow post-trial briefing and is expected early in Q2
and prior to any potential generic launch. Actavis' 30 month stay of FDA
approval expires February 28th, 2016. Par's 30 month stay of FDA approval
expires on September 25th, 2016.
• Trial against Actavis and Par in the lawsuits involving the two
recently granted process patents (US Patent No. 8,906,277 and US Patent No.
8,900,497) scheduled for November 2016.
• Trial against Teva in the lawsuit involving the Orange Book-listed
patents and process 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 process patents 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.
• 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. Indivior intends to file suit against Teva within 45 days which will
trigger a 30-month stay of approval of Teva's 5-5(b)(2) NDA.
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
2015$m 2014$m
Sales returns and rebates 287 273
Trade payables 113 29
Other tax and social security payables 12 7
Accruals 116 74
Total 528 383
Customer return and rebate accruals, primarily in the US, are provided for by
the Group at the point of sale in respect of the estimated rebates, discounts
or allowances payable to customers. Accruals are made at the time of sale but
the actual amounts paid are based on claims made some time after the initial
recognition of the sale. As the amounts are estimated they may not fully
reflect the final outcome and are subject to change dependent upon, amongst
other things, the channel (e.g. Medicaid, Medicare, Managed Care, etc) and
product mix. The level of accrual is reviewed and adjusted quarterly in the
light of historical experience of actual rebates, discounts or allowances
given and returns made and any changes in arrangements. Future events could
cause the assumptions on which the accruals are based to change, which could
affect the future results of the Group.
9. SHARE CAPITAL
Equity Ordinary Shares Issue price Nominal value$m
Issued and fully paid
At January 1, 2015 718,577,618 $2.00 1,437
Nominal value reduction - ($1.90) (1,365)
At December 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 December 31, 2014 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 general meetings of Indivior PLC.
The initial shareholders resolved, by a special resolution, passed on October
30, 2014, 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 which 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, 2015.
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, also sits on the Indivior PLC Board of Directors.
The amount included within administrative expenses in respect of these
services is $9M
11. POST BALANCE SHEET EVENTS
There have been no material post balance sheet events.
This information is provided by RNS
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