Investment bank Jefferies lifted its price target for Indivior Plc (LON:INDV), but kept its ‘hold’ rating for the specialist drug firm.
In a note, Jefferies set out the investment case for Indivior which is described as binary, on the outcome of the Department of Justice indictment – the court case for which is due on 28th of September.
Jefferies analyst Harry Sephton highlighted that the best case would be a settlement ahead of the court date. It estimates a remaining fundamental value of 212p per share, if it settles for the current US$621mln provision.
“In our view, the shares are pricing in close to a US$1.4bn cash discount, which we would view as the absolute highest settlement amount, given it is the amount Reckitts settled for,” the analyst said in a note.
Meanwhile, Jefferies downside case is based on the company going to trial and ultimately be excluded from the US government programs and pursue asset divestments.
“We note that although this assumes the penalty for INDV is the full US$621mln it has provisioned for, we cannot rule out further penalties for other litigation matters.
“If we were to assume that the outcome for INDV is binary between our upside and downside cases, then we believe the market is currently pricing in a c.20% chance of settlement.”
Looking at the prospects for Indivior’s products, amidst the pandemic, Sephton noted that Sublocade will see limited growth while Suboxone film market retention supports the company in the near term.
“COVID lockdowns combined with the availability of take home medication options for opioid use disorder in the US has seen the number of new patients moving onto Sublocade decrease c.40%, he added.
“While some states are coming out of lockdown, we do not expect a return to material growth until 4Q in the absence of a second wave.”