Do It Yourself Stock Investor

Therapeutic Synthetic Marijuana Has A Green Light

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Neptune stock chart with marijuana plant

Conventional marijuana has not received federal approval in the United States, but synthetic derivatives have. Dronabinol is one example of a synthetic THC that is utilized for nausea and vomiting caused by cancer chemotherapy. Syndros is the brand of dronabinol produced by publicly traded, Insys Therapeutics, Inc. (NASDAQ: INSY). They are also developing a synthetic cannabidiol oral solution for child epilepsy. Their stock trades on the more regulated NASDAQ exchange, unlike many penny stock or OTC companies in the industry.

Insys Therapeutic's products are not solely in the synthetic marijuana space. They also produce opioid pain relievers and cessation treatment. This diversity of drugs may be of a deterrent to the investor seeking marijuana stocks. For example, it is the company's opioid segment that has brought on the recent law suit and operational loss. Arizona, New Jersey, and North Carolina have all sued Insys for "pushing" fentanyl-based pain medicine. Additionally, arrests were made of physicians that were allegedly accepting kick-backs to push the fentanyl based drug. One of the side affects of opioids, especially fentanyl, is death by suffocation as the body stops breathing.

Insys income statement shows loss from settlement

Some estimates have shown the U.S. market for dronabinol to be as low as $200 million. This is a small market and to make matters worse, the estimated settlement to the U.S. Department of Justice for aforementioned violations is $150 million. However, that expense is possibly the low end of the range, "There can be no assurance that future discussions with the government to resolve these matters will be successful, that the approvals we need will be obtained or that any potential settlement will be agreed to on terms and conditions acceptable to us or the DOJ." - Sept. 2017, SEC Form 10-Q

Synthetic Cannabidiol (CBD) Pipeline

The 2018 focus on synthetic cannabidiol is sign of Insys moving away from past opioid goals. Their January 2018 presentation at the J.P. Morgan Healthcare Conference stated, "90% of sales force and commercial organization is new" and "Reviewed, revised and enhanced protocols [for compliance]." This does sound promising. The current pipeline status of developmental pharmaceuticals is as follows:

Cannibidiol medicinal pipeline

Insys' Marijuana Stock Price Action

As the settlement expense was first being implemented, the stock price per share went from $10 to $5. That low was likely the best opportunity to buy with high yield reward. Current price range of the $9s may be too high for a bargain buy. In other words, the ship has sailed.

Price chart for Insys Therapeutics

The company's cash flow is non-existent, which isn't too surprising for a developing pharmaceutical company. The net income continues to be at a loss for 2017 and will see further complications due to the settlements. However, the cash on hand with short term investments is approximately $183 million and they do not have any debt.

Insys Therapeutics has a differential angle in the marijuana stock market, because they focus upon synthetics that are permitted implementation. This may be considered a sign of things to come; that medicinal synthetics will be given the green light, while the U.S. organic plant continues to be restricted. Even though medicinal synthetics may have more legitimacy, marketing is not free to expand its demand. On the contrary, it's a controlled market with a quota.

"Quota. Only registered manufacturers are permitted to manufacture FDA-approved products containing dronabinol in an oral solution in accordance with a quota assigned pursuant to 21 U.S.C. 826 and in accordance with 21 CFR part 1303." - U.S. Dept. of Justice


Disclosure: I am/we have no positions in INSY with no plans to initiate any positions within the next 72 hours.