It has been a summer of violent one-day falls in individual share prices, as Carillion, Dixons Carphone and Provident Financial can all attest.
Today, Indivior can be added to that roll-call, the drug company having just seen its shares fall by almost 40% on a US court ruling. The decline has wiped more than £1bn from its stock market valuation.
Indivior was spun out of Reckitt Benckiser, the household goods giant behind brands including Mr Sheen, Lemsip, Cillit Bang and Durex, in 2014.
Its main product is Suboxone, which is prescribed to drug addicts to help wean them from their dependence.
Overnight, though, a US court has ruled that a product developed by an Indian rival, Dr Reddy’s, did not infringe its patents.
Assuming Dr Reddy’s can win approval from the US Food & Drink Administration, the industry regulator, it will be able to start selling a cheap copycat version of Suboxone Film, a variant of the product which is placed under the tongue and absorbed by blood vessels.
The product accounted for four-fifths of Indivior’s $1bn annual sales last year and the company admitted on Friday that, if US pharmacists were to stock the cheaper product, Soboxone Film could lose “up to 80% of its market share within a matter of months”.
It went on: “A material loss in market share in the US would have a significant impact on the company’s revenues, profitability and cash flows.”
Shaun Thaxter, Indivior’s British chief executive, said the company would appeal the ruling, made by the US district court for the District of Delaware.
Indivior, which is based in Virginia but listed on the London Stock Exchange and is a member of the FTSE Mid-250, is a company that has long attracted a degree of scepticism from some City investors.
Critics claim that Suboxone Film was a cynical attempt to wring more life out of the product which, in its tablet form, has faced cheap copycat rivals since 2012.
Indivior has argued that, with five million Americans addicted to drugs but only two million of them diagnosed as such, it has solid growth prospects so long as its patents remain intact.
It has also argued that attitudes towards drug addiction are shifting in countries like America which, previously, regarded addicts as people who had done something bad and needed to be punished but was now, increasingly, starting to regard addiction as a chronic condition that needs to be treated.
It is currently working on specific products to help people addicted to cocaine.
The overnight ruling is particularly disappointing for the company because, only three months ago, it won a separate US court case over Suboxone Film against two other rivals.
The violence of the share price reaction today is one of the recurring stock market themes this summer – disappoint investors and, regardless of the severity of the profits warning, your shares will be smashed.
Such falls happen when investors are sceptical about the strength of the stock market. Plenty of investors do not trust the current rally and so, whenever a company gives them an excuse to sell, they will do so.
Source: Sky News