Why this FTSE 250 stock doubled its share price in 2021

2021 was a great year for many stocks, as recovery resumed. But some stocks clearly outperformed others. One of them is the FTSE 250 opioid addiction treatment provider Indivior (LSE: INDV), whose share price more than doubled during the year. It rose by 135% to be precise. To my mind, the stock was potentially a good one, even when I wrote about it around a year ago. 

Indivior’s improving financials

But I was hesitant to buy it because I was unsure of its financials. I wanted to see more stability before adding it to my investment portfolio. Cut to now, and that is exactly what has happened. For the first nine months of 2021, up to 30 September, it reported a 23% increase in net revenue compared to the same period in 2020. Moreover, it also reported positive net income, which is a comeback after it clocked losses in the year before. In fact, it is now so positive about the full-year 2021, that the company has actually upgraded its guidance for both revenues and pre-tax earnings.

The FTSE 250 stock made gains through 2021

It is little wonder then, that investors gave it a thumbs-up. Its share price started 2021 on a somewhat uncertain note. Indivior had had a difficult year in 2020, when its net revenues had declined and it had swung into a loss. But by April 2021, signs of improvement were visible already, as its revenue started growing once again and it even reported profits.

Its share price continued to rise through the year as it financials improved. And by November last year, the stock was back to levels not seen since 2018. It did take a bit of a wobble in late November and December, when the Omicron variant created fresh panic in the financial markets. But it was able to shrug that off soon enough, and it ended the year at almost the highest levels in the year. 

Potential roadblocks ahead

In 2022 so far, the stock has corrected a bit. This could be correlated with a new report by the US Food and Drug Administration which states that using buprenorphine, a painkiller, in products to treat opioid use could be associated with severe dental problems, including teeth loss. Indivior’s products do use this. This could be playing on investors’ minds for sure. But I think there is more to its recent share price fall than that, because the price was falling even before the report was released. I expect that it could be on account of profit-taking, considering the big gains on the stock in 2021.

My assessment 

In fact, I still think there is upside to the stock. The opioid crisis is a big challenge, so demand for its treatment should stay strong. Moreover, Indivior has resolved its past issues, which included serious consequences from misrepresentation of the safety of its products. Interestingly, all analysts unanimously expect an increase in its share price over the next 12 months, as per a Financial Times compilation, with the average rise expected to be 30%. It goes without saying that all forecasts are subject to change, depending on evolving circumstances. This is particularly so now when we have still not put the pandemic behind us. 

Still, I think this FTSE 250 stock has come a long way. That in itself says a lot about the company’s ability to manage itself. I’d buy it now.