Earnings Call Transcript - INDV Q2 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by and welcome to the Indivior PLC's Half Year Results 2020. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I must advise you that this conference is being recorded today. And I would now like to turn the conference to your speaker Mark Crossley, Chief Executive Officer. Please go ahead.

Mark Crossley, CEO

Good morning and good afternoon everyone. Thank you for joining us today. I'm Mark Crossley, CEO, and I'm accompanied by my colleagues Ryan Preblick, Interim Chief Financial Officer; Javier Rodriguez, Chief Legal Officer; and Christian Heidbreder, Chief Scientific Officer. I will start with some opening remarks before Ryan discusses our financials for the first half and second quarter, as well as our planning assumptions for the fiscal year 2020. Finally, Christian will provide updates on our R&D activities before we wrap up and take your questions. Before delving into our performance and progress, I want to express my confidence in Indivior's great future, driven by our compelling vision, dedicated employees, and unique capabilities. Despite the challenges of recent years, including generic competition, legal issues, and COVID-19, we have made strategic progress in establishing a sustainable growth platform through our two distinct depot technologies, SUBLOCADE and PERSERIS. Evidence of our future success is evident. We began to see tangible results from our SUBLOCADE strategy early in 2020, with key performance indicators and net revenue starting to gain momentum. My immediate strategic priorities include managing through COVID-19 and regaining our previous momentum with SUBLOCADE and PERSERIS; maintaining financial flexibility during this transition period due to ongoing film erosion; and resolving remaining litigation, having put the crucial DOJ matter behind us. With improved financial flexibility and visibility, we are in a position to be more active in business and pipeline development and to reassess our overall capital structure in due time. However, do not expect an immediate shift in our capital allocation priorities. I am also pleased that, despite the uncertainty surrounding any leadership transition, the change following Shaun's departure has gone smoothly. Shaun was pivotal in Indivior’s journey as founder CEO and made significant contributions to advancing addiction treatment worldwide, for which we are grateful. I am honored to have been appointed as CEO and privileged to work with such talented individuals. Having developed the strategy we are currently executing in my previous roles, I believe my continuity in leadership will be crucial in keeping our employees aligned with our vision as we continue to play a significant role in combating the opioid addiction crisis. Looking at our financial performance, we are managing well through the adverse conditions of the COVID-19 pandemic. During our last call in May, we outlined our clear plan to manage and progress our business while safeguarding our employees and ensuring a steady supply of medicine for our patients. I believe we have solidly met these objectives. Ryan will dive into further details, but notably, our first half net revenues and adjusted net income exceeded expectations, particularly considering the pandemic's impact. Our cash position at the end of the period was over $900 million, reflecting resilience in SUBOXONE Film, an acceleration in the BMAT market, and growing contributions from SUBLOCADE. On the performance of our depot technologies, as expected, SUBLOCADE and PERSERIS experienced good momentum early in the year, which was affected by COVID-related restrictions starting in mid-March. Given the sales force was remote throughout the second quarter, we’re pleased with SUBLOCADE’s Q2 net revenue of $29 million, resulting in a total of $58 million for the first half, up 100% year-over-year. As we look toward the latter half of 2020, the ongoing effects of the pandemic are unpredictable. However, having successfully navigated the first half amid COVID challenges, we feel more assured about the main drivers of our business. Ryan will provide details on our planning considerations for the rest of the year, but I want to emphasize that our assumptions are based on current market conditions, which could shift with new government measures. Regarding the DOJ agreement, we’ve reached a settlement for all outstanding legal matters, along with the associated FTC and State Attorney Generals, totaling a cash fine of $600 million payable over seven years through 2027. The upfront payment is $100 million, with the next $50 million due in January 2022. This settlement allows us to continue operations with government programs like Medicaid and Medicare, and we will operate under a corporate integrity agreement for five years. We are pleased to have resolved these issues to move forward with greater certainty for our business, communities, and stakeholders. Now, let’s focus on SUBLOCADE. Until March, we were experiencing positive effects from our growth strategies. Our penetration into organized health systems and a direct-to-consumer campaign led to accelerated enrollments from late 2019 into early 2020. However, stay-at-home orders in late March abruptly changed market conditions and contributed to a significant drop in enrollments. This trend persisted through the second quarter, affecting our sales force’s ability to engage. Yet, we’re encouraged as existing SUBLOCADE and PERSERIS patients have shown resilience compared to new enrollments which are more sensitive to marketing efforts. Despite challenges, our existing patients maintained their treatment regimen, showing the positive impact of our treatment once established. Even without the ability to visit new healthcare providers, we are still productively collaborating with organized health system partners while meeting our internal KPIs for 2020. In terms of strategy fundamentals, we are pleased that key metrics related to the prescription journey continued to hold up amid COVID. This reflects our efforts to create a strong distribution system to meet or exceed industry benchmarks. Turning to new patient enrollments from the second quarter, we’re seeing a slight uptick. Currently, about 80% of our U.S. salesforce has returned to the field, although activity is moderated as about 50% of our target healthcare providers are seeing patients at pre-COVID levels, with fewer than 25% allowing pharmaceutical representatives into their offices. Consequently, total call volumes have decreased, with in-person interactions at only 20% to 25% of pre-pandemic levels. Nevertheless, based on the earlier momentum in KPIs and net revenue, we remain confident in our product and strategy, as well as our ability to achieve our net revenue target of $1 billion. We've executed well on controllable elements, maintaining strong operational discipline and advancing our SUBLOCADE strategy’s focus areas. In the commercial domain, we've transitioned all promotional materials to digital formats and greatly enhanced our digital and remote sales capabilities. This adaptation will be crucial if COVID conditions persist. We've relaunched sublocade.com to create a more user-friendly experience and have maintained compliance training for our field team. Expanding into organized health systems is vital for achieving our long-term goals for SUBLOCADE, which has been a focal point due to their capabilities in managing specialty products. Given our performance before and during COVID, we are optimistic about increasing healthcare provider and patient throughput. As we continue focusing on organized health systems, we've strengthened our team and are now aiming to engage with over 500 organizations across various health systems. This includes approximately 25,000 waivered healthcare providers and around one million patients, representing a sizable and expanding segment of the opioid use disorder patient pool. Based on our significant progress and investment in this area, we expect the organized health system channel to grow in importance going forward. Now, regarding PERSERIS, the first half was similarly impacted by the pandemic. In the first quarter, we established a solid foundation with effective payer access and traditional sampling efforts, receiving positive feedback from healthcare providers on the treatment's simplicity. Unfortunately, in the second quarter, the pause in face-to-face meetings with physicians limited growth potential. As a new treatment among established options, PERSERIS is especially sensitive to promotional efforts. Consequently, we recorded first half net revenues of $7 million. Through COVID, our field leadership has kept our relatively small field force motivated with ongoing coaching and training. Our immediate goals include reinitiating face-to-face consultations with psychiatrists specializing in schizophrenia and resuming peer-to-peer educational programs, while also leveraging our organized health system team for targeted opportunities within state hospitals, the VA, and community treatment programs. In closing, it’s essential to recognize that being a global leader in addiction treatment extends beyond the U.S. We've made exciting progress internationally, with SUBLOCADE now available in Canada and Australia, and recent approvals in Finland and Sweden. We’re also advancing in key EU markets while addressing regulatory inquiries. We announced the approval of SUBOXONE Film, which will be available across 27 member states. We’re working through listing and pricing processes in major countries, anticipating availability starting in the first quarter of 2021. The film has also been approved in Canada with similar timing anticipated. Overall, we expect to see a more significant contribution from these international opportunities beginning in 2021 as pricing and launches materialize. We will continue to be prudent in our investment strategies for these markets based on environmental conditions and the scope of opportunities. Now, I’ll hand it over to Ryan to cover our financial details.

Ryan Preblick, CFO

Thank you, Mark. Good morning and good afternoon everyone. Let me now take you through the financials for the second quarter and first half 2020. On slide 15, starting with total net revenue of $150 million in Q2, declined 30% versus the comparable period and the $303 million in first half was 33% lower. The overall decline in the half-year period mainly reflects the increasing effect of the entry of generic film competition in the first quarter of last year along with termination of our authorized generic program towards the end of 2019. Second quarter U.S. net revenue declined by 34%, primarily due to the factors that I just outlined for the half-year despite the acceleration in BMAT market growth to the low teens. SUBOXONE Film share declined a modest 1 percentage point from 22% at the end of the first quarter. The rate of share decline continues to be significantly slower than historical industry analogs would suggest. As we have consistently maintained, we do not have a strong basis to explain this outperformance and you will see from our planning assumptions that we do not expect to sustain this in the second half. The decline in the U.S. Film business was partially offset by SUBLOCADE net revenue of $29 million in the second quarter, a 71% increase versus the prior year. This was unchanged versus the $29 million we reported in Q1 despite the sharp reduction in new patient starts that Mark described as the pandemic lockdowns took effect. Looking at the rest of the world, sales decreased by 17% in the second quarter, leaving first half sales unchanged on the prior year. This reflected a continuation of the underlying trends we have previously highlighted of competitive pressures in the EU region set against solid performance in Australia and Canada. As a reminder, rest of world growth in Q1 was expanded by our prior year net revenue adjustment in Canada. If we turn now to margins and start with the gross margins, the rates on an adjusted basis in the second quarter of 87% and 88% for the half year reflect the shift in product mix following the termination of the authorized generic program. Looking at the operating line, again on an adjusted basis, we reported a profit in the second quarter of $24 million taking the half year to $26 million. The impact of COVID-19 played out in a number of ways in our operating expense lines in the second quarter. SG&A expenses benefited from reduced T&E cost as the majority of our employees worked from home. On the other hand, we incurred slightly higher expenses from the initiatives we put in place to protect and support our employees. Finally, legal costs were relatively heavy in Q2 as we progressed towards the settlement with the DOJ. As a reminder, in the first quarter, we incurred significant expense associated with our national DTC campaign in the U.S. In the second half, we expect the SG&A run rate to be slightly lower than in the first half as we will not repeat the high level of DTC expense incurred in the first half and the business continues to seek out cost efficiencies. However, we will continue to invest behind our long-acting injectables, including flexing sales and marketing strategies in line with the easing of lockdowns. And we will have increased expenses related to the CIA compliance that is part of our DOJ settlement. R&D expenses will also increase in the back half as certain studies that were delayed by COVID pick up again. Moving down the income statement on page 15, we reported a modest adjusted net profit for both the second quarter and the half-year as a whole after net finance expense and taxes. Turning to cash and borrowing on slide 16, you will see a snapshot of our cash and borrowing positions as of June 30. Our liquidity remained strong in the first six months of 2020 with cash at the period end of $908 million and net cash was $671 million. The minimal decrease of cash versus Q1 was driven by continued resilience of U.S. SUBOXONE Film gross sales nearly offsetting the changes in working capital. As previously stated, as the film share continues to erode, we will expect to see the unwinding of the film trade payables, primarily from the government channel, which drives the cash outflow. I want to be clear about the effect of the DOJ settlement. In line with our provisioning, we put $100 million into escrow as part of the settlement with the DOJ in July. This payment is not reflected in our June 30 cash balance as it is a post-period event. The remaining annual payments of $50 million begin in January 2022 and continue through 2027 with the final installment of $200 million in December 2027. Except for interest, there is no foreseen further P&L impact resulting from the DOJ settlement. You will see additional details are provided in Note nine of the financial release. This payment schedule allows us to plan ahead with much greater certainty. As a reminder, our term loan borrowings of $232 million are due to be repaid by December 2022. On slide 17, we are sharing our planning assumptions for the remainder of 2020. At this point, we believe it would not be appropriate to provide full year guidance given continuing uncertainty around the impact of COVID, especially in the U.S. These assumptions are based on the expectation that the impact of COVID will last for several more months. The extent of any adverse impact on the group's operations will depend on the unforeseeable duration, extent and severity of the pandemic. Taking these in turn, we expect the buprenorphine market to continue to grow at a low-teens rate. For SUBLOCADE, we expect to see modest growth in new patient starts relative to the Q2 exit rate as in-person physician visits remain below pre-COVID levels. Meanwhile, we expect an accelerated decline in SUBOXONE Film share towards industry analogues, resulting in a significant reduction in second half 2020 net revenue versus the first half 2020. In the third quarter, we lost formulary coverage at Express Scripts as of July 1. This book of business represents about 2.5 share points or about 10% of our film business. The impact of this share will be more than average since it is primarily from the more profitable commercial business. Lastly, the majority of the market growth is coming from the less profitable government channels as patients are losing commercial insurance as a result of COVID and seeking enrollment in government-sponsored programs. In the rest of world, we expect continued competitive pressures, especially in Europe. On OpEx, as I noted earlier, this is expected to be slightly lower in the second half than in the first half in part due to the absence of the DTC investment. And finally, we expect the tax rate in the mid to high teens. And just to finish on this slide, we will continue to assess the impact of COVID-19 on our business and will provide quantitative guidance when market conditions allow.

Christian Heidbreder, Chief Scientific Officer

Thank you very much, Ryan. This R&D update is four-fold. First, I will take you through progress with our Opioid Use Disorder treatment franchise with activities to support SUBLOCADE in the U.S., as well as SUBLOCADE and SUBOXONE Film outside of the U.S.; second, activities to support PERSERIS in the U.S. and our regulatory filing in Canada in partnership with HLS Therapeutics; third, early stage assets development with a focus on our selective orexin one receptor antagonist and GABAB positive allosteric modulator programs; and fourth, peer-reviewed publications and conference presentations. So let me start with the treatment of Opioid Use Disorder with first SUBLOCADE in the U.S. You may remember that, at the time of SUBLOCADE approval, we had a series of post-marketing commitment and post-marketing requirement studies. The commitments are now all approved by the FDA and are considered closed. With respect to post-marketing requirement studies, we had a series of non-clinical studies, all of those have been submitted to the FDA and are currently under review. We also have two clinical post-marketing requirement studies. The first one was dedicated to the rapid induction with SUBLOCADE. This is now completed and will be submitted to the FDA. The last clinical post-marketing requirement study is dedicated to a better understanding and characterization of those patients who may benefit from the highest maintenance dose of SUBLOCADE of 300 milligrams. That is a study that is currently under a feasibility assessment and protocol finalization and has been slightly delayed because of the COVID-19 pandemic. We also initiated a series of life cycle management studies, and there are really five main pillars in our strategy here to generate more real-world evidence to support SUBLOCADE. First, we investigated how high plasma concentrations of buprenorphine that are consistent with those delivered by the two approved dosing regimens of SUBLOCADE can reduce the effects of respiratory depression produced by fentanyl. This is what we typically call the fentanyl interaction or fentanyl blockade study. That study is now completed. We already submitted two papers for peer review, as well as a third paper that is currently in preparation. Second, we are assessing how to induce SUBLOCADE treatment in the emergency department environment. This is our VOTIVE study in collaboration with Virginia Commonwealth University here in Richmond. Third, we are analyzing U.S. payer databases to understand the better – the behavior of SUBLOCADE in the real world. Fourth, understanding better the root causes of buprenorphine abuse diversion and misuse, as you remember this is an initiative we started a couple of years ago. And last but not least, the fifth pillar in our strategy here is the RECOVER study. And here again, I would say that there are three main milestones. First, the one-year outcome of the RECOVER study was published earlier this year in the Journal of Addiction Medicine. Second, the two-year outcomes were already presented at the CPDD meeting in June this year, and a peer-reviewed publication has been submitted. And then as you know, the third component here to support RECOVER is that the scope and duration of the RECOVER study which we call the RECOVER long term is currently being pursued through a partnership with the Virginia Polytechnic Institute and State University, also known as Virginia Tech. With respect to SUBLOCADE outside of the U.S., which is now called Subutex prolonged-release solution for injection. We secured regulatory approvals in Israel, Sweden, and Finland. We are currently handling advanced responses to questions with local regulatory authorities in Denmark, Germany, the U.K., and Italy. We are anticipating delays due to the COVID-19 pandemic in France and a few associated decentralized countries as well as Norway. And our review is currently ongoing in New Zealand. And then the third component of the treatment for Opioid Use Disorder is the SUBOXONE Film. Some great news there in terms of regulatory approvals, we secured approvals now in Israel, Canada, and Europe. In Europe, this is according to a centralized procedure that secures approval in the 27 European member states plus the United Kingdom, Norway, Iceland, and Liechtenstein. Our file is currently under review by local regulatory authorities in New Zealand and Kuwait, and we have some pending regulatory submissions in other Middle Eastern countries. Moving to the second part of this presentation dedicated to the treatment of schizophrenia with PERSERIS. We completed now a clinical post-marketing commitment study. The final clinical study report is expected towards the end of this year. As a reminder, this is a study that was designed to support labeling for both a 180-milligram in the form of two times 90-milligram dosage strength as well as alternative body injection sites. So we are expecting to submit it to the FDA before the end of the year, with anticipated approval in the third quarter next year. And in Canada, our partnership with HLS Therapeutics, you may remember that the NDS was actually submitted to Health Canada in November last year. It was accepted into formal review in January this year, and we are anticipating a notice of compliance in November this year. The third component then is the early stage asset development, some great news with our selective orexin one receptor antagonist program, although the start of our first dose in man was delayed due to the COVID-19 situation. I'm very pleased to announce that we dosed our selective orexin one receptor antagonist into men on July 28. So great progress there. We also pursued in the meantime all the non-clinical pivotal toxicokinetics and embryofetal studies to support that program. We are also pursuing our collaboration with Addex Therapeutics to move the lead optimization program in support of our GABAB positive allosteric modulator program. And last but not least, a quick update on the peer-reviewed publications and conference presentations. So far in 2020, we submitted six peer-reviewed publications. We have nine publications that have been submitted and a few in preparation, between now and the end of the year. We also presented at mainly three or four conferences, focusing essentially on the CPDD meeting and the ASAM meeting earlier this year. And we presented 11 pieces of work to mainly support SUBLOCADE and PERSERIS. And on that note, I'll hand it over back to you, Mark.

Mark Crossley, CEO

Thank you, Christian. So to quickly summarize our first half results. We delivered a solid first half performance, while focusing on our patients and safety of our employees through the pandemic. We resolved our most important outstanding legal matter, which allows us to plan for the future with much greater certainty. We're making great strategic progress with SUBLOCADE and PERSERIS, which have the power to drive a new era of growth for the company. Our immediate job is to recapture the strong momentum we had in the first quarter as we exit the COVID-19 lockdowns. Finally, as the new CEO of Indivior, I want to reassure you that the group's vision and overall strategy remain unchanged. I'm committed to building our long-term success, sustaining our global leadership in addiction for the benefit of our patients, our employees, and our shareholders. With that, I'd like to turn the call over to your questions.

Operator, Operator

And our first question comes from Max Herrmann from Stifel. Please go ahead.

Max Herrmann, Analyst

Good morning and thank you. I have three questions. First, regarding your longer-term expectations for SUBLOCADE, you've previously indicated a peak sales potential exceeding $1 billion. Do you still hold that expectation considering the short-term impact of COVID-19? Second, what are your thoughts on the competition for SUBLOCADE that may arise later this year from Camurus, Braeburn, and Brixadi? How do you think this will affect SUBLOCADE's growth, and how do you assess the product launches in Europe and other markets, especially since the revenue seems to surpass some earlier estimates? Lastly, I’d like to ask about finance. How do you plan to manage Indivior's profitability going forward while balancing investments in SUBLOCADE and PERSERIS with the P&L opportunities to enhance earnings? Thank you.

Mark Crossley, CEO

Thanks, Max. I'll take the first couple and then hand over to Ryan with regards to the balancing of our strategic focus with the current P&L. So with regards to the $1 billion, I'm fully confident in the $1 billion-plus net revenue target. We have a novel product which transforms the treatment paradigm. This product is in a market with strong low-teen market growth and under-penetration of medically assisted treatment. So I still confirm that. I think portions of that answer also carry over to when we talk about the competitive landscape with Brixadi, potentially coming out in December. This market is in double-digit growth. There is an unmet need in the disease space with low penetration in the treatment of patients, and plenty of room for multiple players in the injectable market. With regards to us, we think if we could get to similar access across all treatment areas, similar to what happens in the schizophrenia arena, then we can leave it to the doctor's offices regarding which product they believe is the most efficacious. And we've spoken in the past about why we believe that the benefits of SUBLOCADE are superior. So that's kind of our thoughts there. I'll hand it over to Ryan with regards to your discussion on balancing the investment versus the P&L.

Ryan Preblick, CFO

Yes. Hey, Max, good morning. And it's nice to finally meet you on the phone. In regards to your question, look, we just closed out the biggest risk that this company had to deal with over the last couple of years. And to be honest with you, we're not back to a full steady state just yet. We still have to work through the crisis of COVID. We do not know how long that's going to be and how severe it's going to be. And we also have to work through our transition period that we've talked about over the last couple of quarters, which is where we have our film business coming down and then the uptick of both SUBLOCADE and PERSERIS. So at this point, our priority is to make sure that we're putting our resources behind the growth of SUBLOCADE and PERSERIS. And also what's key is our cash flexibility during the next couple of months. So…

Max Herrmann, Analyst

Thanks, Ryan.

Operator, Operator

Our following question comes from the line of Harry Sephton from Jefferies. Please go ahead.

Harry Sephton, Analyst

Hi, thanks for taking my questions. Firstly, regarding SUBLOCADE, you mentioned in the first quarter call that patient enrollment was down by about 40%, in line with industry trends. I'm interested in how this has changed as we move out of the second quarter. My second question is about SUBOXONE Film. Do you have an idea of how much of your remaining market share is in the cash pay market and if there's potential for sustained brand value in that segment? Lastly, regarding your international business, you mentioned that SUBLOCADE is available in Canada and Australia. Are you currently marketing SUBLOCADE in those regions? Thank you.

Mark Crossley, CEO

Thanks for the questions, Harry. I'll handle the SUBLOCADE and the rest of the world business, and then I'll hand it over to Ryan on the film. I could confirm during the second quarter when the sales force was out of the field. We were in line with the IQVIA sort of industry metrics that we saw with overall patient enrollments down about 40% to 45%. As we've started to enter the second quarter and started to have our sales force out in the field starting to do face-to-face as we discussed there's a modest amount of growth starting to claw back some of that erosion in enrollment. So we're encouraged that as the social restrictions start to ease, we can return to the quarter one levels of growth that we are experiencing where they were starting to accelerate moving forward that we were all so excited about before the COVID pandemic hit. On the rest of the world business, we are out in the field with regards to SUBLOCADE in both Australia and Canada. It is early days, but the teams there are working vigorously and doing detailing, as well as some web advertising with regards to that. We look forward to seeing the results of that throughout the balance of the year and moving forward. So, Ryan, on the film?

Ryan Preblick, CFO

Yes. Good morning, Harry. So, yes, our share profile looks like the following. The majority of our business is in the state Medicaid programs, without doubt. And then after that, it's your pure commercial business. But as we noted in our release, we did lose formulary status on ESI, which is about 10% of our business. So that portion of our channel will become smaller. What we have left there are some Part D plans. And then to your question around the cash percentage of our business, that at this point is a very small amount of our business after the share erosion since last year.

Harry Sephton, Analyst

Okay, great. That’s very helpful. Thank you.

Ryan Preblick, CFO

Thank you.

Operator, Operator

And our following question comes from the line of Nick Nieland from Citi. Please go ahead.

Nick Nieland, Analyst

Hi, everyone. I appreciate you taking the time for questions. Can you explain how your plans have changed now that we have clarity from the DOJ settlement? Specifically, regarding your promotional spending on SUBLOCADE, are you planning to increase direct-to-consumer advertising in 2021? Additionally, more importantly, how will this impact your ability to engage in mergers and acquisitions to enhance your pipeline? Is that a priority for you? Will you focus on assets in the addiction sector, or would you consider options outside that field if it seems appropriate? One more question about your ongoing operating expenses. Can we anticipate similar levels as you indicated for the second half in the medium term, or will this structural change in corporate operations affect your daily operations in any significant way? Thank you.

Mark Crossley, CEO

Thanks, Nick, for the questions. I think I got them all. You broke up a little bit in the last one, but I took it to be how we can operate within the CIA. So let me maybe go through those. With regards to our plans, with clarity of the DOJ, what will that do with our near-term strategy? It doesn't change our near-term strategy. We're in this transition period where the film revenues are coming down because of the competitive pressures. And we're solely focused on the launch of our two transformational technologies of SUBLOCADE and PERSERIS. We're really excited about those. We were seeing great results in Q1. As it pertains to direct-to-consumer sort of advertising, I mean, putting that in place during a time where you don't have your sales force out in full stead with these, sort of, overriding pressures from COVID wouldn't seem appropriate and we'll reassess that as we look into the medium term. On the ability of the M&A, I think the clear focus here for us is we are in this transition period. And we're truly laser-focused on delivering on these two depot products, getting to the $1 billion-plus on SUBLOCADE and the $200 million to $300 million that we've guided on PERSERIS. Like most of the world, with the onset of COVID, despite the resolution of the DOJ, we are in this transition period with the net revenue loss in the film and the launch of the products. So we're going to focus our allocation of resources on those and delivering those with excellence. Then we can turn at some point in the medium to long term, where we start to think about M&A and broadening our leadership position in addiction and its comorbidities. And we can become a bit more creative in our allocation of capital as we try and build out the pipeline and diversify our net revenue profile. With regards to the ongoing OpEx, maybe I'll just hit that. Obviously, I think Ryan has provided clear guidance or business planning guidance with regards to the back half of the year. And, obviously, we haven't guided to beyond that and we'll deal with 2021 as we get to the full year results. Lastly, with regards to the CIA, obviously, I think any time that you're dealing with government agencies and these sort of resolutions, you anticipate having a corporate integrity agreement and other compliance measures, and we've been planning for these for a number of years, increasing our investment, increasing the talent of our integrity and compliance team. Eighteen months ago we brought in Cindy Cetani as our Head of Integrity and Compliance, who has significant experience operating with corporate integrity agreements, and continuing to broaden the training and DNA of the organization with regards to compliance. So we feel we're in a good spot with regards to that. And now we're in the formal implementation phases of that with the DOJ. We don't anticipate it impacting our business moving forward.

Nick Nieland, Analyst

Thanks very much.

Mark Crossley, CEO

Thank you, Nick.

Operator, Operator

Our following question comes from the line of Paul Cuddon from Numis. Please go ahead.

Paul Cuddon, Analyst

Hi, guys. Firstly, just congratulations on settling the DOJ and look forward to seeing those results in October. And the first question for me would be on the Organized Health System strategy and to what extent it changes the pricing dynamic and your OpEx requirement? Is this incrementally coming from the OHS? And do you need to drive up the number of HCPs? And you can start with that and I've got a couple more to follow.

Mark Crossley, CEO

Paul, I think there were some connectivity issues on your end. You mentioned a question regarding the Organized Health strategy. To address the first part about pricing, we haven't observed a significant impact from organized health systems. Our strategy focuses on institutions that have the necessary infrastructure to support specialty products, rather than smaller doctors' offices. Although our specialty pharmacy products are competitive, they create more challenges for smaller practices. The larger institutions typically have on-site pharmacies and back-office capabilities to handle payments, allowing doctors to concentrate on making the best decisions for their patients. Regarding operational expenses associated with organized health systems, we are reallocating our resources within our existing budget toward these systems. We believe our current resource mix is appropriate. In the future, we may allocate additional resources, but we will prioritize internal reallocation before increasing operational expenses.

Paul Cuddon, Analyst

Okay. So just to be clear, the organized health system is where the vast majority of the 125 and 275 waivered HCPs would be?

Mark Crossley, CEO

I'm not familiar with the number you have there. We have talked about our top 500 targets where there's one million patients and about 25,000 waivered physicians there, which we think is a dense population that we're targeting and are seeing considerable amounts of growth there. And that was what was really driving the first-quarter results where we started to see the accelerated growth on both the KPIs, but also the net revenue.

Paul Cuddon, Analyst

Okay. Thank you. And secondly, for the rest of the world business, which has proven pretty resilient over the years to competition. And now you've got SUBOXONE Film and SUBLOCADE or SUBUTEX prolonged-release coming, so I'm just wondering to what extent that's got potential to either cannibalize the existing business, or do you see it actually helping grow the rest of the world now?

Mark Crossley, CEO

Yeah. Great question, Paul. I think we're super proud of our rest of world team and what they've been able to do. They've continued to stem off the erosion associated with both the branded and generic competition that they've had over the last five to seven years and are excited that they're starting to get the new technologies that we've had in the U.S. We think that they are the best people in the globe to have those and bring those to market with their experience with the HCPs and partners across the globe. And we think this is an opportunity for that business to not just trade out the potential business on a sublingual basis but also return to growth with the new technology. So we're extremely excited for our teammates that are in the rest of world business.

Paul Cuddon, Analyst

Fantastic and last one if I may. The capital allocation decisions, I presume we need to wait through October. But could there be anything between October and February, or should we be waiting for kind of final results in the sort of February time to get a clearer picture there?

Mark Crossley, CEO

I think we're in this transition period Paul, which I think we need to get more certainty on. And if I had an answer to that, I'd be in really good shape. But I think what we'll have to do is wait out what is the length and the depth of the impact of the disease. And that's truly in the disease's hands, not in mine. So we'll continue to assess that. The impacts to our business and at the right time make those decisions.

Paul Cuddon, Analyst

Okay. Thank you very much and again congratulations.

Mark Crossley, CEO

Thank you, Paul.

Operator, Operator

Our following question comes from the line of Eric Fischer from Scopia Capital. Please go ahead.

Eric Fischer, Analyst

Hi guys. Thanks for taking my questions. Two questions from me. One, now that the DOJ issues are behind you, can you talk a little bit about whether now or when might be the right time to revisit a U.S. listing? And secondly, it's great to hear your continued commitment to reinvesting in the sales force and driving SUBLOCADE volumes. But given the depressed stock price, the cash on the balance sheet, and improved visibility with the DOJ resolution, it seems there's sufficient capital to take advantage of the current share price and potentially repurchase a meaningful amount of shares. So can you talk about how stock buybacks might fit into your capital allocation strategy from here?

Mark Crossley, CEO

Thank you for the questions, Eric. Regarding the U.S. listing and your inquiries about capital allocation and the potential use of cash, I would say the situation is similar to what I discussed with Paul. We are currently navigating a transition period due to the pandemic, and we are experiencing the effects of losing film while launching these transformative products. I believe it’s wise to adopt a conservative approach in the short term before we shift our focus to our medium- and long-term goals, which would initially involve diversifying the business. I truly appreciate your question, but I think it's not the right moment to draw conclusions on these matters.

Operator, Operator

There are no further questions at this time. Please go ahead.

Mark Crossley, CEO

With no more questions, I want to thank you for attending the half-one results. Thank you for your continued interest in Indivior. Look forward to the continued engagement in one-to-ones and the virtual conferences that are happening. And I hope you all have a great day. Thank you very much.

Ryan Preblick, CFO

Thank you everyone.

Operator, Operator

That does conclude our conference for today. Thank you for participating. You may all disconnect.