Indivior PLC (INDV), a UK-based pharmaceutical company, lost almost three-quarters of its market value on Wednesday, plummeted to an all-time low after US Department of Justice charged it with fraudulent marketing of its treatment for people addicted to opioids. The US prosecutors said the drug maker, to boost prescriptions of its flagship opioid addiction treatments, deceived doctors about its addiction treatment's dangers using a fraudulent marketing scheme. The company allegedly fuelled a deadly epidemic of opioid abuse.
In December 2013, Department of Justice initiated a federal criminal investigation against the company. On 9th April 2019, Western District of Virginia jury indicted the company on a range of charges including 28 felony counts, conspiracy to commit wire fraud, mail fraud and healthcare fraud. The company was established in 2014 after it was spun off from conglomerate Reckitt Benckiser, and the allegation levelled against it are almost exclusively before Indivior became an independent company.
Share Price Commentary
5-Day Chart as on April-10-19, before the market closed (Source: Thomson Reuters)
On April 10, 2019, at the time of writing (before the market closed, at 4:00 pm GMT), INDV shares were trading at GBX 30.46, down by 71.25 per cent against its previous day closing price. Stock's 52 weeks High is GBX 504.60. At the time of writing, the share was trading 93.96 per cent lower than its 52w High. The company's stock beta was 1.51, reflecting more volatility as compared to the benchmark index. Total outstanding market capitalization stood at around GBP 219 million.
Two central claims have been made against the company: that it misled doctors and patients by claiming Suboxone was safer, less divertible, and less abusable than other opioid-addiction treatment drugs; and the company played a part in prescribing the medication to many people or in too high doses. In an open letter, group Chairman, Howard Pien, has denied the allegations and described them "flat wrong". He claims that the company engaged in an extensive education campaign to aware doctors about the rules governing the prescriptions. He also noted that major allegations have been contradicted by the federal government's own scientific agencies.
Mr Pien further claimed that the charges are not justified and said that the company would contest the charges. As stated by the Group, they will successfully defend itself against the government's allegations, but timing can't be predicted with certainty. However, it admitted that an adverse verdict would materially affect the financial position and outlook of the company. The department demanded at least $3bn in fines, as well as all the company's main business divisions, bank accounts, trademarks and patents – effectively putting the company out of business. The company had net cash of $681 million at the end of last year, while had an equity value of £348 million after its stock fell on Wednesday.
Reckitt Benckiser Group notes that the indictment wasn't brought against it, but against Indivior and has dissociated itself from its former business Indivior. In its most recent annual report, the company made a provision worth $400 million to cover any legal liabilities related to Indivior and had cautioned that the final cost could be substantially higher. The company, too, had to face the heat; its shares fell by more than 6% on Wednesday.
The company in a regulatory filing said that it has cooperated with the Justice Department's investigation for several years and had made several attempts to reach a settlement.
The indictment comes amid similar cases being pursued in court by state attorneys general across the US against many opioid makers, alleging fraud and claiming that deceptive marketing of opioids fuelled the public health crisis that takes the lives of 130 Americans a day.