Indivior Pharmaceuticals, Inc. (INDV)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes in Item 8. Financial Statements—Audited Consolidated Financial Statements. Historically, we prepared our consolidated financial statements in accordance with International Financial Reporting Standards. As part of the Company’s efforts to align with industry peers and prepare for the expected loss of foreign private issuer status, the Company elected to file its 2024 annual report on Form 10-K, including presentation of its consolidated financial statements in accordance with U.S. GAAP. The transition to US GAAP is reflected retrospectively for all periods from the Company’s inception. The following discussion is based on our financial information prepared in accordance with U.S. GAAP and regulations of the SEC. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Item 1A. Risk Factors includes a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis, as well as Important Cautionary Note Regarding Forward-Looking Statements.

Overview

Indivior is a global pharmaceutical company working to help change patients’ lives by pioneering life-transforming treatment for addiction, including SUBLOCADE (buprenorphine extended-release) injection for subcutaneous use, a long-acting injectable for opioid use disorder and OPVEE (Nalmefene) nasal spray for opioid overdose recovery.

References below to “2024,” “2023,” and “2022” are for the financial years ended December 31, 2024, 2023, and 2022, respectively.

Operating Results

The following table summarizes our key measures of financial condition and results of operations for the periods under review:

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(1)On October 10, 2022, Indivior PLC completed a 5:1 share consolidation. The Company’s basic and diluted weighted average number of shares outstanding, basic earnings (loss) per share, and diluted earnings (loss) per share reflect the share consolidation for all periods presented.

For the periods presented, the Company operated as one business segment, which is predominantly the development, manufacture and sale of buprenorphine-based prescription drugs for the treatment of opioid dependence and related disorders, and nalmefene nasal spray for emergency opioid overdose reversal. Substantially all our net revenue for such periods were derived from sales of SUBLOCADE and other buprenorphine-based sublingual products (including SUBOXONE Film and SUBOXONE Tablet). SUBLOCADE accounted for 64%, 58%, and 45% of our net revenue in 2024, 2023, and 2022, respectively. Other buprenorphine-based sublingual products accounted for 32%, 38%, and 52% of our net revenue in 2024, 2023, and 2022, respectively. In the U.S. market for buprenorphine-based treatments for opioid dependence, SUBOXONE Film had an average market share of 16%, 19% and 20% in 2024, 2023, and 2022, respectively, according to data from IQVIA.

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The U.S. market is the largest contributor to our net revenue. The following table sets out a breakdown of net revenue as between the U.S. and the Most of World.

Key factors affecting operating results

Market growth

Our net revenue is impacted by the overall growth of the markets where we operate. Market growth is impacted by increased treatment penetration, which is a function of patient awareness and desire to seek treatment, as well as the number of certified physicians available to deliver treatment. Competitive pressures can drive pricing and can also influence decisions of third-party payors regarding inclusion of products on their list of approved drugs covered by insurance. To increase access to treatment for patients, we engage with government agencies, key opinion leaders in addiction and healthcare professionals to bring patient outcomes to the forefront of decision making. Additionally, we engage in non-branded marketing to increase awareness for patients and families impacted by addiction on a country-by-country basis as allowed by local regulations.

In 2024, the volume of U.S. buprenorphine medication-assisted treatments (BMAT) grew in mid-single digits. Market growth was adversely impacted by transitory items including Medicaid re-enrollment in many large states and an issue impacting patient coverage approvals with one of the largest pharmacy benefit managers. The Company continues to expect long-term U.S. growth to be sustained in the mid- to high-single digit percentage range due to increased overall public awareness of the opioid epidemic and approved treatments, together with regulatory and legislative actions to increase access to BMAT treatments. In 2024, the Company's share of the market growth was impacted by both competition in the LAI category, which we expect to continue, as well as competition in the oral category.

Distribution channels

In the U.S., we have distribution agreements with the three largest wholesalers, which accounted for 55%, 54%, and 55% of our global net revenue in 2024, 2023, and 2022, respectively. These wholesalers, in turn, distribute our products through various channels including the following:

•Commercial managed care. This category comprises insurance programs intended to reduce the cost of providing health benefits and improve the quality of care to their members. One of the most common forms of managed care is the use of a panel or network of healthcare providers that provide care to enrollees. Also within commercial managed care is the Medicare Part D Program, a social insurance program administered by the U.S. government.

•Medicaid. Medicaid is a jointly funded, Federal-State health insurance program that covers children, the aged, blind, and/or disabled and other people who are eligible to receive federally assisted income maintenance payments, including prescription drugs. We are obligated to offer “Best Price” under Medicaid, being the lowest price at which the manufacturer sells a drug to any purchaser in any pricing structure (inclusive of discounts and rebates).

•Federal. This channel encompasses the provision of outpatient drugs to federal government purchasers, including the U.S. Department of Veterans Affairs and the Department of Defense, or under the 340B Program. Pricing discounts are provided separately for drugs provided under these programs.

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•Pharmacy. This channel covers end customers paying cash directly at the pharmacy. Often, we provide discount coupons to customers where cash is used for payment.

Our fourth largest customer in the U.S. is a specialty pharmacy group which primarily purchases SUBLOCADE and dispenses product to patients through the various channels listed above.

In the Most of World, distribution channels differ by country. For example, in France, we engage with different wholesalers, hospitals, pharmacies and individuals, while in Australia, we engage with a single pre-wholesaler that negotiates the import and onward distribution of the products across the country.

Pricing

We offer various types of price reductions for our products, particularly in the U.S., which are reflected in net revenue. In the U.S., we primarily offer:

•Medicaid, Medicare Part D, and Commercial rebates. These are rebates granted to Medicaid, U.S. federal agencies and commercial managed care providers that purchase products from us. The level of these rebates varies by channel and product. Patients covered by commercial insurance often benefit from coupons to reduce any out-of-pocket payments they would otherwise be required to make.

•Fees under distribution agreements. Wholesalers, specialty pharmacies and specialty distributors of the Company’s products are generally offered various forms of consideration, including allowances/discounts, service fees and prompt payment discounts, for distributing the products. Wholesaler and specialty distributor allowances and service fees arise from contractual agreements and are estimated as a percentage of the price at which the Company sells product to them. In addition, customers are offered a prompt pay discount for payment within a specified contractual period.

•Chargebacks. Discounts that occur when contracted indirect customers purchase directly from wholesalers and specialty distributors. Contracted customers generally purchase a product at its contracted price. The wholesaler or specialty distributor, in turn, then generally charges back to the Company the difference between the wholesale acquisition cost and the contracted price paid to the wholesaler or specialty distributor by the customer.

•Returns. Returns are generally made if the product is damaged, defective, or otherwise cannot be used by the customer. In the U.S., the Company typically permits returns six months prior to and up to twelve months after the product expiration date. Outside the U.S., returns are only allowed in certain countries on a limited basis.

In Europe, changes to government policy or practices could adversely affect the level of reimbursement through government programs. In the U.S., proposals by legislators at both federal and state levels, regulators, and third-party payors continue to emerge with the aim of keeping healthcare costs down while expanding healthcare benefits. Similarly, in Europe, legislators, policymakers and healthcare insurance funds continue to propose and implement cost-containing measures to keep healthcare costs down, due in part to the attention being paid to healthcare cost containment and other austerity measures in Europe. Certain of these changes could impose limitations on the prices that the Company will be able to charge for its products and any approved product candidates. Further, an increasing number of EU member states and other foreign countries use prices for products established in other countries as “reference prices” to help determine the price of the product in their own territory. Consequently, a downward trend in prices of products in some countries could contribute to similar downward trends elsewhere.

Legal proceedings

The Company is involved in various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business. These proceedings may involve compliance and trade practices, antitrust, commercial claims, product liability claims, intellectual property rights and securities, among others.

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The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability will be incurred, and the amount of the loss can be reasonably estimated. The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with ASC 450-20-25, Contingencies. Developments in legal proceedings and other matters that could cause changes in the amounts previously accrued are evaluated each reporting period. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments.

Where the amount and timing of the payment is fixed, the obligation is not interest-bearing and the impact of discounting is significant, these obligations are recorded at their present value, generally using a discount rate appropriate to the obligation or approximating the risk-free rate at the time the Company entered into the obligation.

For further information regarding accrued litigation settlement expenses and other legal proceedings, refer to Item 8. Financial Statements—Audited Consolidated Financial Statements—Note 11. Accrued Litigation Settlement Expenses and Note 16. Commitments and Contingencies.

Discontinuation of marketing and promotion of PERSERIS (2024)

In July 2024, the Company discontinued the marketing and promotion of PERSERIS due to impending market changes that would make the product no longer financially viable. The Company has continued to supply PERSERIS to avoid disruption to patient care but no longer deploys a dedicated sales force.

Asset Acquisitions and Business Combinations (2023)

On March 2, 2023, the Company acquired 100% of the share capital of Opiant, which at the time was a publicly traded company in the U.S., for upfront cash consideration of $146 million and an additional amount to be potentially paid upon achievement of net sales milestones. Opiant was a specialty pharmaceutical company focusing on developing drugs for addictions and drug overdose. As a result of the acquisition, the Company added OPVEE, formerly the pipeline product OPNT003, an opioid overdose treatment well-suited to confront illicit synthetic opioids like fentanyl, to its portfolio. OPVEE was approved by the FDA in May 2023 and launched in October 2023.

The Consolidated Financial Statements for the year ended December 31, 2023 include the results of operations of the acquisition of Opiant since the acquisition date. As substantially all of the fair value of the gross assets acquired was concentrated in the value of the OPVEE in-process research and development asset, the acquisition was accounted for as an asset acquisition and total purchase consideration was allocated to the assets acquired and liabilities assumed based on their relative fair values as of the date of acquisition. The Company recorded a charge for in-process research and development associated with OPVEE for $120 million. As part of the acquisition, a subsidiary of Indivior issued Contingent Value Rights (“CVRs”) to the shareholders of Opiant. Total potential payments could be up to a maximum of $68 million over a period through September 30, 2030.

On July 31, 2023, the Company acquired full rights to the patents and other assets underlying INDV-2000 (oral Orexin-1 receptor antagonist) from C4X Discovery for $21 million, which was expensed as in-process research and development. As a result, the Company no longer has any obligation to pay future development or sales milestones or a royalty on net sales of this product candidate.

On October 11, 2023, the Company secured global rights to develop, manufacture, and commercialize Alar Pharmaceuticals Inc.’s (“Alar”) portfolio of buprenorphine-based ultra long-acting injectables, including lead asset ALA-1000 (now INDV-6001), which is potentially the first three-month LAI for OUD. The Company made an option payment of $5 million and an upfront payment of $10 million, each of which was expensed as in-process research and development. Alar is entitled to potential milestone payments if various developmental, regulatory, and commercial goals are achieved, and royalties in the low double digit to mid-teens as a percentage of net revenue.

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On November 1, 2023, the Company acquired an aseptic manufacturing facility in the U.S. for upfront consideration of $5 million in cash and assumption of certain contract manufacturing obligations. The facility will be further developed to secure the long-term production and supply of SUBLOCADE.

The acquisition of the manufacturing facility has been accounted for as a business combination using the acquisition method of accounting. The assets acquired and liabilities assumed were recorded at fair value, with the excess of the purchase price over the fair value of the identifiable assets and liabilities recognized as $5 million of goodwill. A liability was recorded at fair value to reflect the present value of the expected losses from assumed contractual manufacturing obligations. Net operating losses attributable to these contractual obligations will be recorded against the liability from the date of acquisition through fulfillment of the contracts in late 2025.

See Item 8. Financial Statements—Audited Consolidated Financial Statements - Note 18. Asset Acquisitions and Note 19. Business Combinations for more information on these transactions.

Results of operations

Comparison of the years ended December 31, 2024 and December 31, 2023:

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(1)See Item 8. Financial Statements—Audited Consolidated Financial Statements—Note 11. Accrued Litigation Settlement Expenses.

Net revenue. Our 2024 and 2023 net revenue was driven by sales of SUBLOCADE and other buprenorphine-based sublingual products (including SUBOXONE Film and SUBOXONE Tablet). In 2024 and 2023, SUBLOCADE accounted for 64% and 58% of our net revenue, other buprenorphine-based sublingual products accounted for 32% and 38%, and PERSERIS accounted for 3% and 4%, respectively. SUBLOCADE volume growth was the primary driver of the increase in 2024 net revenue as compared to 2023. In 2024, the first OPVEE orders from BARDA were fulfilled. Price changes were not a significant driver of the increase in net revenue.

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The following table shows the Company’s net revenue by major product line:

Total net revenue increased by $95 million, or 9%, to $1,188 million in 2024 from $1,093 million in 2023. The increase was primarily driven by double-digit year-over-year SUBLOCADE volume growth and the fulfillment of OPVEE orders from BARDA. Pricing was not material to net revenue growth. Higher net revenue from SUBLOCADE, which increased by $126 million, or 20%, from 2023 reflected further organized health system (OHS) channel penetration in the U.S. and increased new U.S. patient enrollments. 2024 SUBLOCADE growth was impacted by competition in the US LAI category and transitory items including Medicaid re-enrollment in many large states and an issue impacting patient coverage approvals with one of the largest pharmacy benefit managers. SUBOXONE Film net revenue declined 10% in 2024 and Film share averaged 16% and 19% in 2024 and 2023 and was 15% and 18% as of December 31, 2024 and 2023, respectively. In 2024, total net revenue from PERSERIS was $40 million, representing a 5% decrease from 2023 due to a decline in volume and the impact of discontinuation of PERSERIS in the second half of 2024.

The U.S. market is the largest contributor to our net revenue. Sales rebates, discounts and returns and other offsets to gross revenues are reflected in net revenue. The following table sets out a breakdown of net revenue between the U.S. and Most of World.

In 2024, U.S. net revenue increased by 11% to $1,008 million as compared to $912 million in 2023, primarily due to strong SUBLOCADE volume growth, supported by favorable mix between commercial and governmental channels for SUBOXONE and SUBLOCADE. Fulfillment of OPVEE orders from BARDA also contributed, offset by lower SUBOXONE revenue.

In 2024, net revenue attributable to Most of World decreased slightly from 2023 to $179 million. In 2024 and 2023, positive contributions from newer products (SUBLOCADE / SUBUTEX® Prolonged Release and SUBOXONE Film) were more than offset by the ongoing generic erosion of the legacy tablet business. In 2024 and 2023, SUBLOCADE / SUBUTEX Prolonged Release net revenue in Most of World was $52 million and $41 million, respectively.

Competitive dynamics and near-term Justice Systems funding challenges are expected to offset potential LAI category growth, resulting in modest SUBLOCADE net revenue growth in 2025. Competitive pressures, including from a potential fifth generic Film entrant, are expected to adversely impact both pricing and volume, resulting in an accelerated decline in Film net revenue in 2025. We also expect almost no revenues from PERSERIS in 2025 as a result of our decision to cease all marketing efforts in July 2024, although we continue to supply PERSERIS during a transition period. Together, these factors are expected to produce an overall decline in total net revenue and operating income in 2025 as compared to 2024.

We estimate provisions for rebates, discounts and returns based on contractual arrangements with customers or terms of the regulations and/or agreements applicable for transactions with healthcare

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authorities, and in some cases on assumptions about the attainment of targeted volumes. We recognize returns, discounts, incentives and rebates in the period in which we recognize the underlying sales, as a reduction of gross revenues and as current liabilities on our Consolidated Balance Sheets under trade and other payables or reductions of accounts receivable. The outstanding amounts are affected by changes in gross sales, the provision for net product sales deductions and timing of payments/credits. Estimates, assumptions and judgements applied to determine the provision for rebates, discounts and returns are set out in Item 8. Financial Statements—Audited Consolidated Financial Statements—Note 2. Summary of Significant Accounting Policies.”

The following table provides a summary of activities with respect to accrued rebates and product returns and prompt pay discounts for the years ended December 31, 2024 and 2023:

Accrued rebates and product returns includes chargebacks as these are paid by Indivior. Prompt pay discounts are recorded as offsets to accounts receivable as of December 31, 2024. Accrued rebates and product returns and prompt pay discounts increased to $565 million as of December 31, 2024 from $535 million as of December 31, 2023, primarily due to strong SUBLOCADE volume growth.

Cost of sales. Cost of sales increased by $57 million, or 32%, to $231 million in 2024 from $174 million in 2023. Cost of sales in 2024 includes $41 million of expenses related to the discontinuation of sales and marketing for PERSERIS and reflects the impact of cost inflation.

Gross margin, which we define as gross profit divided by net revenue, was 81% in 2024 as compared to 84% in 2023. The decrease in 2024 gross margin included the impact of $41 million of costs related to the discontinuation of sales and promotional activities for PERSERIS and cost inflation, partially offset by improved product mix from the continued growth of SUBLOCADE.

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $49 million, or 9%, to $618 million in 2024 from $569 million in 2023. In 2024, selling, general and administrative costs reflect $12 million of costs related to the discontinuation of sales and marketing for PERSERIS and $12 million of severance costs. Higher sales and marketing investments related to SUBLOCADE and OPVEE and cost inflation were partially offset by lower sales and marketing costs due to discontinuation of PERSERIS. Prospectively, savings resulting from restructuring actions and discontinuation of PERSERIS marketing will be partially reinvested to support long-term SUBLOCADE growth.

Research and development expenses. Research and development expenses decreased by $9 million, or 8%, to $107 million in 2024 from $116 million in 2023. The decrease is primarily due to re-prioritization of pipeline activities on the Company's OUD assets as well as related cost savings.

Acquired in-process research and development expenses. Acquired in-process research and development expenses decreased by $161 million, or 99%, to $1 million in 2024 from $162 million in 2023. The decrease is primarily due to the 2023 acquisition of OPVEE and Orexin-1 receptor antagonist INDV-2000.

Litigation settlement expenses. Litigation settlement expenses decreased by $44 million, or 18%, to $195 million in 2024 from $239 million in 2023. The decrease is primarily due to variability in, and unpredictability of, the timing of settlements of major contingencies. See Item 8. Financial Statements—Audited Consolidated Financial Statements - Note 11. Accrued Litigation Settlement Expenses.

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Other operating expense (income), net. In 2024, net other operating expense was $4 million and in 2023 net other operating income was $9 million. In 2024, net other operating expense included $9 million mark-to-market adjustments related to the decline in value of an equity investment. In 2023, net other operating income included $3 million of income recognized in relation to a supply agreement.

Net interest (expense) income. Net interest expense was $18 million in 2024 as compared to net interest income of $8 million in 2023. The increase in net interest expense reflected a $4 million write-off of unamortized deferred financing costs due to early extinguishment of the previous term loan, a decrease in earned interest income on lower cash and investment balances and increased borrowings under the Company's new debt facility. We expect interest expense to continue to exceed investment income.

Income tax (expense) benefit. Income tax expense in 2024 was $11 million, resulting in an effective tax rate of 76.0%, on the Company's earnings for 2024. The income tax benefit of $20 million in 2023 reflected an effective tax rate of 13.2% on the Company’s earnings for 2023.

Comparison of the years ended December 31, 2023 and December 31, 2022

(1)The Company recognized provisions in 2023 and 2022 related to certain multi-district antitrust claims (refer to Item 8. Financial Statements—Audited Consolidated Financial Statements - Note 16. Commitments and Contingencies) and an intellectual-property-related matter.

Net revenue. Substantially all of the Company's 2023 and 2022 net revenue was derived from sales of SUBLOCADE, PERSERIS and other buprenorphine-based sublingual products (including SUBOXONE Film and SUBOXONE Tablet). In 2023 and 2022, SUBLOCADE accounted for 58% and 45% of our net revenue, PERSERIS accounted for 4% and 3%, and other buprenorphine-based sublingual products accounted for 39% and 52%, respectively. SUBLOCADE volume growth was the primary driver of the increase in 2023 net revenue as compared to 2022. Price changes were not a significant driver of the increase in net revenue.

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The following table shows the Company’s net revenue by major product line:

Total net revenue increased by $192 million, or 21%, to $1,093 million in 2023 from $901 million in 2022. The increase was primarily driven by strong year-over-year SUBLOCADE and PERSERIS volume growth, partly offset by a reduction in SUBOXONE Film share. Higher net revenue from SUBLOCADE, which increased by $222 million, or 54%, from 2022 reflected further organized health system (OHS) channel penetration in the U.S. and increased new U.S. patient enrollments. In 2023, total net revenue from PERSERIS was $42 million, representing a 50% increase from 2022 due to increasing awareness of the treatment across the U.S. healthcare system. SUBOXONE Film share averaged 19% and 20% and exited at 18% and 19% in 2023 and 2022, respectively.

The following table sets out a breakdown of net revenue as between the U.S. and the Most of World.

In 2023, U.S. net revenue increased by 25% to $912 million as compared to $732 million in 2022, primarily due to strong SUBLOCADE volume growth and underlying BMAT market growth.

In 2023, net revenue attributable to the Most of World increased 7% to $181 million from $169 million in 2022. In 2023, positive contributions from new products (SUBLOCADE / SUBUTEX® Prolonged Release and SUBOXONE Film) were partly offset by ongoing competitive pressure on legacy tablet products. In 2023 and 2022, SUBLOCADE / SUBUTEX Prolonged Release net revenue in the Most of World was $41 million and $27 million, respectively.

We estimate provisions for rebates, discounts and returns based on contractual arrangements with customers or terms of the regulations and/or agreements applicable for transactions with healthcare authorities, and in some cases on assumptions about the attainment of targeted volumes. We recognize returns, discounts, incentives and rebates in the period in which we recognize the underlying sales, as a reduction of gross revenues and as current liabilities on our Consolidated Balance Sheets under trade and other payables or reductions of accounts receivable. The outstanding amounts are affected by changes in gross sales, the provision for net product sales deductions and timing of payments/credits. Estimates, assumptions and judgements applied to determine the provision for rebates, discounts and returns are set out in Item 8. Financial Statements—Audited Consolidated Financial Statements - Note 2. Summary of Significant Accounting Policies.

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The following table provides a summary of activities with respect to accrued rebates and product returns, and prompt pay discounts for the years ended December 31, 2023 and 2022:

Accrued rebates and product returns and prompt pay discounts includes chargebacks as these are paid by Indivior. Accrued rebates and product returns and prompt pay discounts increased to $535 million in 2023 from $432 million in 2022, primarily due to strong SUBLOCADE volume growth.

Cost of sales. Cost of sales increased by $23 million, or 15%, to $174 million in 2023 from $151 million in 2022, driven by higher sales volumes in the U.S. and the impacts of cost inflation.

Gross margin, which we define as gross profit divided by net revenue, was 84% in 2023 as compared to 83% in 2022. The increase in 2023 gross margin reflected an improved product mix from the continued growth of SUBLOCADE, partly offset by cost inflation.

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $100 million, or 21%, to $569 million in 2023 from $469 million in 2022. Approximately $22 million of this increase relates to acquisition-related and U.S. exchange listing costs. The remaining increase primarily reflects higher expenses related to increased SUBLOCADE commercial investments, the addition of the Opiant business and subsequent launch expenses for OPVEE, legacy legal defense costs and cost inflation.

Research and development expenses. Research and development expenses increased by $42 million, or 57%, to $116 million in 2023 from $74 million in 2022. The increase is primarily due to a greater activity level related to post-marketing studies for SUBLOCADE, process validation testing related to LAI capacity expansion and ongoing early-stage pipeline activities.

Acquired in-process research and development expenses. Acquired in-process research and development expenses increased to $162 million as a result of the acquisition of OPVEE, the Orexin-1 receptor antagonist INDV-2000, and the potential three-month LAI INDV-6001.

Litigation settlement expenses. Litigation settlement expenses increased primarily due to finalization of settlement negotiations with several anti-trust litigation parties. See Item 8. Financial Statements—Audited Consolidated Financial Statements - Note 11. Accrued Litigation Settlement Expenses.

Other operating income, net. Net other operating income was $9 million in 2023 and $8 million in 2022. In 2023, net other operating income included $3 million of income recognized in relation to a supply agreement. In 2022, net other operating income included a $5 million benefit related to an aged Directors' & Officers' insurance claim settlement.

Net interest income (expense). Net interest income was $8 million in 2023 as compared to net interest expense of $8 million in 2022. The change in net interest reflected higher interest rates earned on the Company's investments.

Income tax benefit. Income tax benefit in 2023 was $20 million, resulting in an effective tax rate of 13.2%. The income tax benefit of $44 million in 2022 reflected an effective tax rate of 49.3% on the Company’s earnings for 2022.

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Liquidity and Capital Resources

Overview

The Company's financial condition is summarized as follows:

Cash flows

Operating activities

Net cash provided by operating activities was $36 million in 2024, an increase of $336 million, compared to net cash used in operating activities of $300 million in 2023. The increase was primarily due to 2023 litigation settlement outflows of $387 million, including the State, end payor and direct purchaser Antitrust MDL settlements. Net cash provided by operations in 2024 reflected ongoing operating performance partially offset by scheduled litigation settlement payments of $173 million. Refer to Item 8. Financial Statements—Audited Consolidated Financial Statements—Note 10. Accrued Litigation Expenses for additional details on the litigation-related settlement payments.

Net cash used in operating activities was $300 million in 2023 an increase of $296 million compared to the net cash used of $4 million in 2022. The additional outflow was primarily due to litigation settlement payments of $610 million, partially offset by increased accruals for government rebates and trade payables. The litigation settlement related outflows include the Antitrust MDL settlement payment of $103 million with States, transfer of $415 million into an escrow account for the settlement with the Antitrust MDL end payors and direct purchasers, and settlement payments of $24 million for intellectual property-related and other legal matters, in addition to the Group's previously scheduled litigation settlement payments totaling $68 million for the Department of Justice, Reckitt Benckiser and Dr. Reddy's Laboratories matters.

Investing activities

Net cash provided by investing activities was $69 million in 2024, an increase of $164 million, compared to net cash used in investing activities of $95 million in 2023. The prior year use of cash reflects a $129 million outflow for the Opiant acquisition, net of cash acquired. The current year inflows primarily reflect proceeds from maturity of debt investments, partly offset by capital expenditures.

Net cash used in investing activities was $95 million in 2023, $127 million less cash used as compared to net cash used of $222 million in 2022. Lower net cash outflows for investments in debt securities from

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2022 to 2023 were partially offset by the acquisition of Opiant, net of cash acquired, for $129 million, and $45 million in IPR&D purchases in 2023.

We expect to spend approximately $50 million to $70 million on capital items in 2025, primarily to establish and scale manufacturing of SUBLOCADE at the Raleigh Manufacturing Facility (refer to Item 8. Financial Statements—Audited Consolidated Financial Statements—Note 19. Business Combinations), after which time we expect capital expenditures to revert to levels more in line with Indivior’s history.

The Company expects to continue investing in development stage assets from time to time but presently has no commitment to do so.

Financing activities

Net cash used in financing activities increased by $38 million, from $64 million in 2023 to $102 million in 2024. Net cash used in financing activities in the current period primarily reflects shares repurchased and canceled offset by net proceeds from the change in debt after issuing the new Note Purchase Agreement and repaying the previous Term Loan. Cash paid for net settlement of employee share awards, net of cash received was materially consistent with 2023.

Net cash used in financing activities decreased by $37 million, from $101 million in 2022 to $64 million in 2023. Net cash used in financing activities in 2023 reflects shares repurchased and canceled, the extinguishment of debt assumed in the Opiant acquisition, principal portion of lease payments and quarterly amortization of the Group’s term loan facility, partially offset by proceeds received from the issuance of shares for employee compensation agreements. In 2022, the outflow from financing activities primarily reflected shares repurchased and canceled.

Current Liabilities

Our current liabilities exceed our current assets by over $100 million and total liabilities exceed our total assets by over $300 million. Additionally, the Company could sustain negative working capital because of the timing of rebate payments relative to the collection of accounts receivable (see Item 1A Risk Factors, "Our balance sheet is leveraged, and any reduction in annual sales may adversely affect our liquidity.")

Debt

In November 2024, the Company refinanced its term loan, repaying in full the previous term loan and replacing it with a new Note Purchase Agreement with principal amount of $350 million that matures in November 2030 and a committed, revolving credit facility of $50 million. As of December 31, 2024, the revolver was undrawn. The Note Purchase Agreement contains financial and non-financial covenants customary for facilities of this nature, including a maximum leverage ratio, a minimum interest coverage ratio, a limitation on disposal of assets, prepayments and redemptions of certain indebtedness, further indebtedness, liens, negative pledges, and limits on share buybacks and redemptions, dividends and other “restricted payments,” subsidiary distributions, investments, mergers and acquisitions and other fundamental changes, sale and lease-back transactions, and a restriction on changes to any material line of business, most of which are subject to various carve-outs, grace periods and qualifications. The Company was in compliance with all covenants as of December 31, 2024. See Item 1A. Risk Factors at "Our term loan contains certain covenants that could limit our ability to plan for or respond to changes in our business." and Item 8. Financial Statements—Audited Consolidated Financial Statements - Note 12. Debt for additional information. In addition, substantially all of the assets of the Company are pledged to secure this debt. The restrictions under the Note Purchase Agreement substantially limit our ability to obtain other financing, other than the $50 million revolving credit facility.

Capital Resources

The Company believes its existing cash and cash equivalents and investments together with cash generated from operations and debt will enable its anticipated cash needs to be met, including working capital, capital expenditures, litigation settlement payments, milestone payments, income taxes, repurchase of ordinary shares, debt repayments and other funding requirements, for at least the twelve-month period

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following the issuance of this Form 10-K. The Company will have to sustain sales volume performance with no material change in the timing of its collections and rebate payments to maintain necessary liquidity in the near term and to meet our obligations in the long term. The Company is also subject to contingent liabilities as described in Item 8. Financial Statements—Audited Consolidated Financial Statements—Note 16. Commitments and Contingencies.

Capital Expenditures

The Company’s capital expenditures for 2024 reflected the expansion of the Raleigh Manufacturing plant. Capital expenditures in 2023 and 2022 were primarily for equipment used in the manufacture of our products. The Company funded these expenditures from its existing cash balances.

IPR&D and intangible asset purchases for the years ended 2024, 2023 and 2022 were $2 million, $45 million, and $1 million, respectively, and were funded from existing cash balances. The 2023 cash paid includes $21 million for the acquisition of INDV-2000 (oral Orexin-1 receptor antagonist) from C4X Discovery and $15 million to secure the global rights to develop, manufacture, and commercialize Alar Pharmaceuticals Inc.’s portfolio of buprenorphine-based ultra LAI, including INDV-6001, the lead asset which is potentially the first three-month LAI for OUD.

Contractual Obligations

The table below sets forth the Company’s anticipated contractual cash flows including bank debt, legal settlement payments (including expected interest payments), share repurchase liabilities and lease liabilities on an undiscounted basis as of December 31, 2024.

Potential milestone and royalty payments

The Company is party to collaboration and license arrangements for the development of pharmaceutical and digital products. Milestone payments will be due if various developmental, regulatory and commercial goals are achieved and in certain cases royalties will be payable as a percentage of net revenue, although the Company generally has the right to terminate these agreements at no cost. The Company has no significant milestone payments expected in 2025.

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Agreements for contract manufacturing and supply of materials

The Company is obligated to purchase specified amounts of goods or services under various contract manufacturing and material supply agreements over periods ranging from 1 to 6 years. These agreements could require us to pay approximately $210 million (before annual price index adjustments).

CVR Agreement

In connection with the acquisition of Opiant, a subsidiary of Indivior issued Contingent Value Rights (“CVRs”) to the shareholders of Opiant. Each CVR represents the obligation of Indivior Inc. to make cash payments upon achievement of certain worldwide net sales milestones during the period from October 1, 2023 to September 30, 2030.

Total potential payments could be up to a maximum of $68 million over a period of up to 7 years from the date of the first commercial sales of a new Opiant product. Refer to Item 8. Financial Statements—Audited Consolidated Financial Statements—Note 18. Asset Acquisitions for additional details on the CVR agreement.

Research and Development Expenses, Patents and Licenses, etc.

See “Item 1. Business—Research and Development,” “Item 1. Business—Intellectual Property,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Results.”

Trend Information

For a discussion of trend information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Results.”

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Selected Quarterly Financial Data (Unaudited)

The Company adopted U.S. GAAP for the year ended December 31, 2024 and has presented all comparative periods in accordance with U.S. GAAP. Supplemental unaudited quarterly results of operations for 2024 is presented below:

Critical Accounting Estimates

Management makes several estimates and assumptions regarding the future and significant judgments in applying the Company’s accounting policies. Estimates and assumptions may affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. These estimates are based on the Company’s knowledge of the amount, events or actions; however, actual results may ultimately differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to estimates are recognized prospectively. The key estimates and assumptions used in the financial statements are set out below.

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Returns, incentives and rebates

The Company offers various types of reductions from list prices on its products. Products sold in the U.S. are covered by various programs (such as Medicare and Medicaid) under which products are sold at a discount. Rebates are granted to healthcare authorities, and under contractual arrangements with certain customers. Some wholesalers are entitled to chargeback incentives under specific contractual arrangements. Cash discounts may also be granted for prompt payment.

The discounts, incentives and rebates described above are estimated based on contractual arrangements with customers or terms of the relevant regulations and/or agreements applicable for transactions with healthcare authorities, and in some cases on assumptions about the attainment of targeted volumes. Several months may pass between the original estimate of rebates due and confirmation of the amount, which may increase the estimation risk. Please refer to the revenue accounting policy for further details.

Accruals for product returns are estimated based primarily on analysis of the Company’s historical product return patterns, expected future returns, and contractual agreement terms. Estimated returns are accrued in the period the related revenue is recognized.

During 2024 and 2022, net revenue was increased by $28 million and $14 million, respectively, from performance obligations satisfied in prior years, primarily relating to changes in payor mix and resolution of aged accruals for U.S. government programs. During 2023, net revenue was reduced by $9 million from performance obligations satisfied in prior years, primarily relating to differences between invoices received from U.S. government programs as compared to the respective accruals held for those years. The estimates for U.S. governmental and commercial end-payor accruals are also reasonably expected to vary due to shifts between U.S. governmental end-payor sales and U.S. commercial end-payor sales. A 1 percentage point shift between these channels would impact the accrual by $4 million. Due to the number of variables contributing to the accruals for returns, incentives and rebates, further meaningful sensitivity is not able to be provided. Accruals for returns, incentives and rebates are disclosed in Item 8. Financial Statements—Audited Consolidated Financial Statements—Balance Sheet.

Determination of income tax provision

Significant judgment is required in determining our provision for income taxes. These judgments and estimates occur in the calculation of tax credits, benefits, and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Changes to these estimates may result in a material increase or decrease in our tax provision in the current period or subsequent periods.

Recoverability of deferred tax assets

Also, we must assess the likelihood that we will be able to recover our deferred tax assets. If all or part of our deferred tax assets are not recoverable in the future, we must increase our provision for taxes and reduce our net deferred tax assets to the amount that is more likely than not to be recoverable. To recover deferred tax assets, we must be able to generate sufficient taxable income in the jurisdictions where the deferred tax assets are located. We consider forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, in determining the need for a valuation allowance. As of December 31, 2024, we believe our deferred tax assets are more likely than not to be recovered, with the exception of valuation allowance items as detailed in Item 8. Financial Statements—Audited Consolidated Financial Statements - Note 4. Income Tax. Our ability to realize deferred tax assets could be reduced in the future if our estimates of future forecasted income do not support the realization of our deferred tax assets. Should there be a change in our ability to realize our deferred tax assets, our tax provision would be affected in the period in which such change takes place.

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Ongoing litigation

The Company is involved in litigation, arbitration and other legal proceedings. These proceedings typically are related to compliance and trade practices, commercial claims, product liability claims, intellectual property rights, and employment and wrongful discharge claims. For each claim or grouping of similar claims, management makes judgments regarding the relative merits and risks within the claims. These judgments inform the Company’s defense strategies, whether a loss or settlement from the claims is probable and whether sufficient information exists to make a reliable estimate of he likely outcome of the claims. Provisions are recognized when the Company has a present legal or constructive obligation, an outflow of resource to settle the obligation when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. Management has assessed as “contingent” matters that cannot be reliably estimated or are not considered probable at the current time. For more details of all the outstanding legal proceedings including those that have been deemed contingent, see Item 8. Financial Statements—Audited Consolidated Financial Statements - Note 16. Commitments and Contingencies.