Overview
Insys Therapeutics, Inc. (NASDAQ: INSY) is a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules. INSYS currently markets one product, SUBSYS® (fentanyl sublingual spray), CII, and has received approval for the marketing of SYNDROS™ (dronabinol) oral solution, CII, a proprietary, orally administered liquid formulation of dronabinol. SUBSYS® and SYNDROS™ are trademarks of Insys Development Company, Inc., a subsidiary of Insys Therapeutics, Inc.
Recent negative headlines continue to impinge the business risk profile & brand image of the company. Elizabeth Gurrieri, a former manager of reimbursement services for Arizona-based Insys, will plead guilty to one count of wire fraud conspiracy, prosecutors said in a letter filed in Boston federal court. The filing is part of the criminal case against six ex-Insys executives and managers including former Chief Executive Michael Babich, who, prosecutors say, participated in a scheme to bribe doctors to prescribe the drug, Subsys. Gurrieri would become the second former Insys employee nationally to plead guilty in connection with Subsys, an under-the-tongue spray containing fentanyl, a highly addictive and regulated synthetic opioid.
Recently, Insys issued a response to the recent media reports that highlight concerns with the Company’s past commercial practices and former employees. Wherein, the company reiterated its commitment towards maintaining the highest ethical standards and compliance around all its activities and business practices and complying with governing laws and regulations & cooperating with relevant governmental authorities in ongoing investigations.
Management also highlighted that Insys intends to play a meaningful role in providing solutions to address the opioid epidemic by developing innovative products. These potential product solutions include cannabidiol (a novel, non-opioid) for the treatment of opioid dependence, cannabidiol for the treatment of pain and naloxone nasal spray for the treatment of opioid overdose.
On the brighter side, the Food and Drug Administration (FDA) approved the final labeling for Syndros (dronabinol oral solution, a pharmaceutical version of THC), which may classify the drug as a Schedule II (CII) controlled substance. Insys Therapeutics expects to launch the product in August 2017. Syndros is indicated for the treatment of anorexia associated with weight loss in patients with AIDS, and in the treatment of nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional antiemetic treatments. Syndros will be a direct competitor to Marinol, a product offered by Abbvie (ABBV) in pill form. Since Syndros is a liquid, it should be easier to swallow and can be administered in prescribed dosages. If the drug launches as a Schedule III drug, Insys anticipates annual sales of $200 million to $300 million. A Schedule II designation would trim that by an estimated 20% to 25%. Dronabinol was approved by the FDA decades ago as a treatment option for cancer patients. Today, the potential applications for dronabinol, including sleep apnea, epilepsy, and opioid dependency, could catapult dronabinol into annual sales in the billions.
On May 9th, The Company announced financial results for the three-month period ended March 31, 2017. Net revenue totaled $36.0 million, compared to $60.4 million for the first quarter of 2016. Gross margin was 87% for the first quarter of 2017 compared with 92% for the first quarter of 2016. During the first quarter, gross margin was impacted by a $2.1 million charge for excess and obsolete Subsys inventory. Going forward, the company is expected to report revenue in between $38.25 Million and $31.29 Million with an average of $36.02 Million.
INSYS Therapeutics, Inc. is being covered by a number of analysts. Recently, 2 rated the stock as Buy, 2 rated Outperform, 2 rated Hold, 0 gave an Underperform and 0 rated sell. With the recent developments, we believe the company stock is categorized as ‘BUY’, as the company is reflecting reasonable bullish signs and has a medium-term average price target of $16.40 from analysts.
About the company:
Insys Therapeutics is a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules that improve the quality of life of patients. Using proprietary sublingual spray technology and capabilities to develop pharmaceutical cannabinoids, INSYS is developing a pipeline of products intending to address unmet medical needs and the clinical shortcomings of existing commercial products. INSYS currently markets one product, SUBSYS® (fentanyl sublingual spray), CII, and has received approval for the marketing of SYNDROS™ (dronabinol) oral solution, CII, a proprietary, orally administered liquid formulation of dronabinol that INSYS believes has distinct advantages over the current formulation of dronabinol in soft gel capsule. INSYS is committed to developing medications for potentially treating addiction to opioids, opioid overdose, epilepsy, and other disease areas with a significant unmet need.
SUBSYS® and SYNDROS™ are trademarks of Insys Development Company, Inc., a subsidiary of Insys Therapeutics, Inc.
Other developments:
On May 16th, 2017, Insys announced that Darryl S. Baker, the Company’s Chief Financial Officer (“CFO”), will transition from the role of CFO when a successor is hired.
Insys has engaged an executive search firm to support the recruitment of a new CFO. Mr. Baker will continue to work closely with the management team, including the new CFO, to facilitate a smooth and successful transition of his responsibilities.
Revenue analysis for the first quarter of 2017:
Net revenue totaled $36.0 million, compared to $60.4 million for the first quarter of 2016.
Rationale for decline in revenue: The decrease in net revenue was attributable to a decrease in net revenue of SUBSYS®, which was the result of a 35.5% decrease in SUBSYS® shipments to pharmaceutical wholesalers and specialty pharmaceutical retailers for the three months ended March 31, 2017 due primarily to reduced demand for SUBSYS®, as compared to the three months ended March 31, 2016, combined with a 5.0% decrease in net sales price due to changes in mix of prescribed dosages and changes in provisions for wholesaler discounts, patient discounts, rebates, and returns.
Insys intends to remain committed to supporting its substantial R&D program and optimizing the performance of current approved assets as it focus on providing much needed relief to the patients for whom products are being developed.
This year, the Company is focusing on growing its commercial portfolio from one to two products, filing an NDA for buprenorphine, and significantly advancing its pipeline of products across both sublingual spray and cannabinoid platforms.
Its goal is to continue to focus on working towards a resolution in the DOJ investigation, stabilizing Subsys sales, successfully launching Syndros, and advancing its pipeline as it positions itself for future growth.
Profitability: Gross margin was 87% for the first quarter of 2017 compared with 92% for the first quarter of 2016. During the first quarter, gross margin was impacted by a $2.1 million charge for excess and obsolete Subsys inventory. Net loss for the first quarter of 2017 was $6.5 million, or $(0.09) per basic and diluted share, compared to net income of $2.3 million, or $0.03 per basic and diluted share, for the first quarter of 2016.
Liquidity: The Company had $218.5 million in cash, cash equivalents, short-term and long-term investments, no debt, and $267.8 million in stockholders’ equity as of March 31, 2017.
Net cash used in operating activities was $16.7 million for the three months ended March 31, 2017, as compared to net cash provided by operating activities of $12.2 million for the three months ended March 31, 2016. The net cash used during the three months ended March 31, 2017 primarily reflects the net loss for the period driven by a reduction in SUBSYS® net sales, adjusted in part by depreciation and amortization and stock-based compensation expense, and is also impacted by changes in working capital and payments in connection with the settlement of the investigation by the State of New Hampshire.
The company’s cash flows for 2017 and beyond will depend on a variety of factors, including sales of SUBSYS® and anticipated launch of SYNDROS™, regulatory approvals, investments in manufacturing and production, capital equipment, and research and development. The management, expect net cash flows from operating activities to fluctuate with the sales of SUBSYS® and SYNDROS™, partially offset by anticipated expansion in research and development, manufacturing, and general and administrative expenses.
Key risk factors and potential stock drivers:
Company’s cash flows have been declining and the financial flexibility of the company is going to depend on newer drugs or additional pipelines that the company is going to have to acquire.
From the recent PR and public perception standpoint it is relatively difficult for the company to see an aggressive valuation or optimistic multiple over the near term.
Insys performance and future success are dependent upon a number of factors, including their approved product sales, investments in infrastructure and growth, and their ability to successfully develop product candidates, and complete related regulatory processes. In addition, their ability to ensure that their products, policies, and practices adhere to the extensive national, state, and local regulations applicable to the industry is critical to their success
Stock Performance:
On Tuesday, June 13th, 2017, INSY shares declined by 0.73% to $10.87 on an average volume of 682,631.00 shares exchanging hands. Market capitalization is 747.81M. The current RSI is 33.82.
At $10.87, shares of INSY are trading below its 50-day moving average (MA) at $11.68 and below its 200-day MA at $11.51.
The present support and resistance levels for the stock are at $10.64 & $11.23 respectively.
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