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Why the Indivior share price crashed 30% today. And what I’d do now

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FTSE 250 pharmaceuticals company Indivior (LSE: INDV) saw a dramatic 30% dip in share price today. This was triggered by news that FTSE 100 company Reckitt Benckiser had filed an over £1bn claim against it. RB was INDV’s parent company before INDV was de-merged in 2014. According to news reports, the claim is linked to this de-merger. 

While today’s fall has been quite sharp, the Indivior share price has fallen through much of this past week as well, albeit slowly. If the decline had remained muted, it would have been chalked up to market moods. But the claim has clearly added to INDV’s existing woes. 

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Painful past issues 

The company, which manufactures drugs for treating opioid usage and mental illnesses like schizophrenia, saw its former CEO, Shaun Thaxter, imprisoned last month for six months. Indivior was charged by US courts of illegally increasing prescriptions for Suboxone Film, which is used to treat addictions. It also has to pay over $600mn in penalties.

Interestingly though, despite the embarrassment of the event, Indivior’s share price had been climbing up since the last week of October. It was up 30% from then to start of this week, though all gains have been lost now.

Can the Indivior share price continue to rise? 

The key question now is whether the Indivior share price get past its present challenges and turn out to be a good investment. On the whole, 2020 has been a good year for the company, share price wise. Until January, it was hovering at sub-40p levels. It started rising in February in fits and starts, but by March it was trading firmly above 40p. By the end of July, INDV’s share price had risen 3.5 times. It corrected from there, but still remained above 100p. Until now.

I’m not sure how the claim situation will turn out. I’m guessing this story will develop only over time. In the meantime, the company’s fortunes on the stock markets should be determined more by its own performance than anything else. 

On this count, its third-quarter results released late last month disappointed, with a fall in both revenue and earnings. Moreover, the impetus to defensive shares, like healthcare and pharmaceuticals, provided by the investor rush towards safer stocks now appears to be lost as the market rallies. 

The upside

Not all is gloomy with INDV, however. The company expects to see some profitability during the year in its guidance. Moreover, with the Covid-19 vaccine development now firmly underway, all companies should see increased demand for their products and services. I don’t think INDV is an exception to that.

The takeaway

On balance though, I think its current funk is a tough one to get over. The only other listed company I can think of that has seen some serious charges against the top boss is the luxury brand Ted Baker. And we all know what happened to that share. I’d let the story play out before thinking of buying INDV’s shares. 

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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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