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Americans think it’s safer to use marijuana than opioids to relieve pain, but they were less comfortable with children and pregnant women using the drug to treat medical conditions, according to a recent Yahoo/Marist poll. Two-thirds of the respondents in the telephone survey said opioid drugs such as Vicodin or OxyContin are “riskier” to use than marijuana, even when the pain pills are prescribed by a doctor. Only one in five said marijuana was riskier than opioids. The rest weren’t sure.

Every day, an overdose of prescription opioids or heroin kills 91 people, and legions more are brought back from the brink of death. Some 2 million Americans are thought to be hooked on the pills. Last month, President Donald J. Trump appointed an opioid commission to look into the problem. Marijuana by itself is not fatal. Doctors technically don’t prescribe it for pain or other purposes but most states that allow medical marijuana do require patients to get a doctor’s written recommendation to purchase it to treat their conditions.

Among those answering the Yahoo/Marist poll, 83% said the drug should be legal nationally for medical treatment. However, 70% said it is not acceptable for pregnant women to use marijuana to reduce nausea or pain. And the survey respondents were about evenly divided on whether marijuana should be recommended for children if it were legal. The survey respondents were deeply divided on how Trump should approach marijuana: 38% said he shouldn’t be as tough about enforcing federal laws against recreational marijuana use as President Barack Obama, whose policy generally was to leave states alone.

Another 30% said Trump should take a harder line than Obama, while the rest weren’t sure or said Trump should treat it about the same as Obama did. Trump’s administration has sent mixed messages to the 28 states and Washington, D.C., in violation of federal drug law when it comes to marijuana. Trump said as a candidate that states should be allowed to tinker with marijuana laws. However, new U.S. Attorney General Jeff Sessions has said marijuana is dangerous and marijuana changes by states should not be allowed. There has been no action yet by the U.S. Justice Department or any other federal agencies to crack down on states violating the Controlled Substances Act, which bans marijuana for any use.

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In states where medical marijuana is legal, a new study finds that fewer motorists killed in traffic accidents test positive for opioids-providing further evidence that cannabis medicine brings about a reduction in the use of prescription painkillers. Researchers from Columbia University’s Mailman School of Public Health say that in a recent investigation of federal data involving motor vehicle accidents, they found fewer drivers who died as a result of a fatal automobile accident tested positive for opioids in those states that have passed laws allowing marijuana to be used for medicinal purposes.

“We would expect the adverse consequences of opioid use to decrease over time in states where medical marijuana use is legal, as individuals substitute marijuana for opioids in the treatment of severe or chronic pain,” lead study author June H. Kim said in a press release obtained by the Washington Post.

Researchers concluded that the analysis, which was published this week in the American Journal of Public Health, provided significant proof that “In states with medical marijuana laws, fewer individuals are using opioids.” This is not the first time a study has emerged suggesting a decrease in opioid use in states with medical marijuana laws on the books. Over the summer, a study published in Health Affairs found that prescription drug claims in medical marijuana states are on the decline.

Researchers from the University of Georgia concluded that “The use of prescription drugs for which marijuana could serve as a clinical alternative fell significantly, once a medical marijuana law was implemented.” This data might help explain why the pharmaceutical industry is working to prevent marijuana legalization from happening in some states.

It was recently revealed that Insys Therapeutics chipped in a whopping $500,000 to combat a recreational marijuana ballot measure in Arizona. Ironically, this is the same drug manufacturer that recently won approval from the U.S. Food and Drug Administration to manufacture a synthetic form of marijuana to be marketed to AIDS and cancer patients.

Despite medical marijuana being legal in over half the United States, the federal government is still not ready to loosen some of the restrictions that have prevented the herb from being studied to find its true therapeutic benefit. Incidentally, there have never been any reports of a marijuana overdose death.

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Cara Therapeutics Selected to Present at the 2016 International Conference on Opioids

  • Leading experts to discuss unique pharmacology of peripherally selective opioids to manage chronic and acute pain during opening session
  • Company to present positive data from Phase 2a study of Oral CR845 in chronic pain patients

Cara Therapeutics, Inc. (CARA), a biotechnology company focused on developing and commercializing new chemical entities designed to alleviate pain and pruritus by selectively targeting peripheral kappa opioid receptors, today announced that it was selected to deliver a presentation  titled “Kappa Opioid Receptor Agonists (KORAs), a Novel Pharmacology for the Treatment of Acute and Chronic Pain” at the International Conference on Opioids, which will be held June 5-7, 2016 in Boston.

Three experts in the field of clinical research and clinical practice will discuss the latest data and clinical developments in the treatment of acute and chronic pain, and will share results from Cara’s human abuse liability study of I.V. CR845. CR845 is Cara’s first-in-class peripherally selective kappa opioid agonist with potential to be the only Schedule V or non-scheduled opioid for acute and chronic pain.

Details of the presentation are as follows:

Date: Sunday, June 5, 2016
Time: 9:15 – 10:00 a.m. ET
Location: The Joseph B. Martin Conference Center at Harvard Medical School
Experts:

  • Joseph Stauffer, D.O., M.B.A., Chief Medical Officer, Cara Therapeutics; Assistant Professor, Department of Anesthesiology & Critical Care Medicine, Johns Hopkins University School of Medicine
  • TJ Gan, M.D., M.H.S., F.R.C.A., Professor and Chairman of the Department of Anesthesiology, Stony Brook School of Medicine
  • Lynn Webster, M.D., Vice President of Scientific Affairs, PRA Health Sciences

In addition, Dr. Stauffer will present a poster detailing positive data from Cara’s Phase 2a study of the oral formulation of CR845 in osteoarthritis patients.

Title: “The Safety, Tolerability, and Effectiveness of Orally Administered CR845, a Peripherally Acting Kappa Opioid Agonist, in Patients with Osteoarthritis of the Knee or Hip”
Date: Monday, June 6, 2016
Times: 10:00 – 10:30 a.m., 12:30 – 1:30 p.m., and 3:30 – 4:00 p.m. ET
Location: The Joseph B. Martin Conference Center, second floor

For more information on the International Conference on Opioids, visithttp://www.opioidconference.org/Home_Page.html.

About CR845

CR845 is a peripherally acting kappa opioid receptor agonist currently in development for the treatment of acute and chronic pain and pruritus. In multiple randomized, double-blind, placebo-controlled Phase 2 trials in patients undergoing laparoscopic hysterectomy or bunionectomy procedures, I.V. CR845 treatment resulted in statistically significant reductions in both pain intensity and opioid-related side effects. In a human abuse liability trial, I.V. CR845 demonstrated statistically significant reductions in “drug liking,” “feeling high,” “overall liking,” and “take drug again” scores in comparison to I.V. pentazocine, a Schedule IV analgesic. In more than 635 subjects dosed to date, I.V. CR845 was found to be well tolerated, without incurring the dysphoric and psychotomimetic side effects that have been reported with centrally acting (CNS-active) kappa opioid receptor agonists.

An oral formulation of CR845 has also been evaluated in a Phase 2a study in osteoarthritis patients and was shown to be well tolerated with twice a day dosing for two weeks.

About Cara Therapeutics

Cara Therapeutics is a clinical-stage biotechnology company focused on developing and commercializing new chemical entities designed to alleviate pain and pruritus by selectively targeting peripheral kappa opioid receptors. Cara is developing a novel and proprietary class of product candidates that target the body’s peripheral nervous system and have demonstrated initial efficacy in patients with moderate-to-severe pain without inducing many of the undesirable side effects typically associated with currently available pain therapeutics.

Contact:
INVESTOR CONTACT:
Jesse Baumgartner
Stern Investor Relations, Inc.
212-362-1200 
Jesse@sternir.com

MEDIA CONTACT: 
Annie Starr
6 Degrees
973-415-8838 
astarr@6degreespr.com

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Those who have access to marijuana usually lower the amount of prescription pills that they consume. In addition, they also lower the amount of alcohol and hard drugs consumed, say the Canadian investigators who recorded the habits of patients with legal medical marijuana.

“Substituting cannabis for one or more of alcohol, illicit drugs or prescription drugs was reported by 87 percent of respondents, with 80.3 percent reporting substitution for prescription drugs, 51.7 percent for alcohol, and 32.6 percent for illicit substances,” the investigators reported.

Those between the ages of 18-40 typically had the highest rates of substitution; that is to say that those who smoked marijuana for pain relief were more likely to use the drug instead of prescription drugs.

“The finding that cannabis was substituted for alcohol and illicit substances suggests that the medical use of cannabis may play a harm reduction role in the context of use of these substances, and could have implications for substance use treatment approaches requiring abstinence from cannabis in the process of reducing the use of other substances,” the authors stated.

The finding was released this September in the journal Drug and Alcohol Review. Many are not at all surprised. A recent recording of the patients involved in Arizona’s medical marijuana program shows that most of those patients “used conventional pharmaceuticals ‘less frequently’ after initiating pot therapy.” Another record of patients participating in Rhode Island’s program produced the same results. A study in 2012 written by investigators at the Centre for Addictions showed that those who suffered from chronic pain used pot along with opioids. According to them, this resulted in “a greater cumulative relief of pain [and] in a reduction in the use of opiates.” According to data published in 2011 by the journal Clinical Pharmacology & Therapeutics, “inhaled cannabis augments the analgesic effect of opioids” and that this “combination may allow for opioid treatment at lower doses with fewer side effects.”

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Cara Therapeutics to Present at the 2015 International Conference on Opioids

 Cara Therapeutics, Inc. (CARA), a biotechnology company focused on developing and commercializing new chemical entities designed to alleviate pain and pruritus by selectively targeting kappa opioid receptors, today announced that Chief Medical Officer Dr. Joseph Stauffer will present data from the Company’s human abuse liability study of I.V. CR845 during a poster session at the International Conference on Opioids (ICOO 2015), being held June 7-9 in Boston, MA. CR845 is Cara’s first-in-class peripherally-selective kappa opioid receptor agonist, which has potential to be the only Schedule V or non-scheduled opioid for acute pain.

The poster presentation details are as follows:

Title: “CR845, a novel peripherally-acting kappa opioid receptor agonist, has low abuse potential compared with pentazocine”
Date: Monday, June 8, 2015
Times: 10:00 — 10:30 a.m., 12:30 — 1:30 p.m., and 3:30-4:30 p.m. EDT
Location: Second Floor, Joseph B. Martin Conference Center at Harvard Medical School, Boston, MA
Poster Number: 48
Speaker: Joseph Stauffer, D.O., M.B.A., Adjunct Assistant Professor, Johns Hopkins University School of Medicine, Chief Medical Officer, Cara Therapeutics

The poster will be on display from 8:00 a.m. until 6:00 p.m. EDT on Monday, June 8.

For more information about ICOO 2015, please visit http://www.opioidconference.org.

About CR845

CR845 is a peripherally acting kappa opioid receptor agonist currently in development for the treatment of acute and chronic pain and uremic pruritus. In multiple randomized, double blind, placebo-controlled Phase 2 trials in patients undergoing laparoscopic hysterectomy or bunionectomy procedures, I.V. CR845 treatment resulted in statistically significant reductions in pain intensity and opioid-related side effects. In over 400 subjects dosed to date, I.V. CR845 was found to be safe and well tolerated, without incurring the dysphoric and psychotomimetic side effects that have been reported with centrally acting (CNS-active) kappa opioid receptor agonists. In a human abuse liability trial, I.V. CR845 met the primary endpoint showing highly statistically significant reductions (p < 0.0001) in scores for “drug liking,” as well as “feeling high,” “overall liking,” and “take drug again” when compared to I.V. pentazocine, a Schedule IV opioid analgesic.

About Cara Therapeutics

Cara Therapeutics is a clinical-stage biotechnology company focused on developing and commercializing new chemical entities designed to alleviate pain and pruritus by selectively targeting kappa opioid receptors. Cara is developing a novel and proprietary class of product candidates that target the body’s peripheral nervous system and have demonstrated efficacy in patients with moderate-to-severe pain without inducing many of the undesirable side effects typically associated with currently available pain therapeutics.

Contact:
INVESTOR CONTACT:
Jesse Baumgartner
Stern Investor Relations, Inc.
212-362-1200
Jesse@sternir.com
MEDIA CONTACT:
Annie Starr
6 Degrees
973-415-8838
astarr@6degreespr.com

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Cara Therapeutics to Present at 3rd Conference on the Therapeutic Potential of Kappa Opioids

  • Company to present data from human abuse liability (HAL) study of I.V. CR845

SHELTON, Conn., April 15, 2015 (GLOBE NEWSWIRE) — Cara Therapeutics, Inc. (CARA), a biotechnology company focused on developing and commercializing new chemical entities designed to alleviate pain and pruritus by selectively targeting kappa opioid receptors, today announced that Chief Medical Officer Dr. Joseph Stauffer will present data from Cara’s human abuse liability (HAL) study of I.V. CR845 in an oral session at the 3rd Conference on the Therapeutic Potential of Kappa Opioids, held in Chapel Hill, North Carolina. CR845 is the Company’s first-in-class peripherally-selective kappa opioid agonist, which has potential to be the only non-scheduled or Schedule V opioid for acute pain.

The presentation details are as follows:

Title: “CR845, a novel peripherally-acting kappa opioid receptor agonist, has low abuse potential compared with pentazocine”
Date: Wednesday, April 22, 2015
Time: 9:15 a.m. ET
Location: The Carolina Inn, Chapel Hill, North Carolina
Speaker: Joseph Stauffer, DO, MBA

For more information about the 3rd Conference on the Therapeutic Potential of Kappa Opioids, please visithttp://depts.washington.edu/nidactr/kappatherapeutics2015.html.

About CR845

CR845 is a peripherally acting kappa opioid receptor agonist currently in development for the treatment of acute and chronic pain and uremic pruritus. In multiple randomized, double blind, placebo-controlled Phase 2 trials in patients undergoing laparoscopic hysterectomy or bunionectomy procedures, I.V. CR845 treatment resulted in statistically significant reductions in pain intensity and opioid-related side effects. In over 400 subjects dosed to date, I.V. CR845 was found to be safe and well tolerated, without incurring the dysphoric and psychotomimetic side effects that have been reported with centrally acting (CNS-active) kappa opioid receptor agonists. In a human abuse liability trial, I.V. CR845 met the primary endpoint showing highly statistically significant reductions (p < 0.0001) in scores for “drug liking,” as well as “feeling high,” “overall liking,” and “take drug again” when compared to I.V. pentazocine, a Schedule IV opioid analgesic.

About Cara Therapeutics

Cara Therapeutics is a clinical-stage biotechnology company focused on developing and commercializing new chemical entities designed to alleviate pain and pruritus by selectively targeting kappa opioid receptors. Cara is developing a novel and proprietary class of product candidates that target the body’s peripheral nervous system and have demonstrated efficacy in patients with moderate-to-severe pain without inducing many of the undesirable side effects typically associated with currently available pain therapeutics.

Contact:
INVESTOR CONTACT:
Jesse Baumgartner
Stern Investor Relations, Inc.
212-362-1200
Jesse@sternir.com
MEDIA CONTACT:
Annie Starr
6 Degrees
973-415-8838
astarr@6degreespr.com

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West Virginia Governor Jim Justice signed a bill that makes his state the 29th to allow medical use of marijuana. West Virginia is the sixth state to legalize medical marijuana in the last year and the third (along with Ohio and Pennsylvania) to do so through the legislature. In the other three states: Arkansas, Florida, and North Dakota, voters approved ballot initiatives authorizing medical marijuana last November.

West Virginia’s new law recognizes marijuana as a treatment for patients with terminal illnesses or any of 14 specified conditions, including cancer, HIV/AIDS, epilepsy, multiple sclerosis, Crohn’s disease, post-traumatic stress disorder, and intractable pain. Patients whose doctors recommend marijuana will be able to obtain it in the form of pills, oils, gels, creams, ointments, tinctures, liquids, and vaporizable extracts from state-regulated dispensaries. The dispensaries will not sell buds for smoking or marijuana edibles, although patients can prepare their own at home. The law does not allow home cultivation, and patients can legally possess no more than a month’s supply at a time.

Matt Simon of the Marijuana Policy Project (MPP) stated, “This legislation is going to benefit countless West Virginia patients and families for years to come. Medical marijuana can be effective in treating a variety of debilitating conditions and symptoms. It is a proven pain reliever, and it is far less toxic and less addictive than a lot of prescription drugs. Providing patients with a safer alternative to opioids could turn out to be a godsend for this state.”

One downside to West Virginia’s law is a new standard for driving under the influence of marijuana that erroneously equates impairment with a blood THC level of three nanograms per milliliter. That’s even lower than the unfair and unscientific five-nanogram cutoff that Colorado and Washington adopted when they legalized marijuana for recreational use. As MPP notes, West Virginia’s DUID standard “could make it illegal for some patients to ever drive, since many patients have THC levels at this amount or greater many hours or days after last administering cannabis.”

West Virginia’s rules put it on the less liberal end of a medical marijuana spectrum that ranges from highly permissive (e.g., California) to highly restrictive (e.g., New York). Eight of the 29 medical marijuana states also allow recreational use. Medical use was approved by ballot initiative in 14 of those states, beginning with California in 1996. In the rest, as in West Virginia, medical marijuana laws originated in the state legislature.

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NFL players are banned from using the marijuana for any purposes under the existing collective bargaining agreement, even in states where it is legal. Under that agreement, players who test positive for marijuana must enter a substance abuse program. Multiple violations lead to fines, game suspensions, and banishment from the league.

Former NFL players have been increasingly vocal in their criticism of the ban in recent years, saying that medical marijuana is a safe alternative to the powerful prescription opiates routinely prescribed to NFL players for pain. Documents obtained by The Post earlier this year show that NFL teams are heavy users of prescription pain medications, averaging about “six to seven pain pills or injections a week per player over the course of a typical NFL season.”

There’s little evidence that opiates work for the chronic aches and pains often suffered by football players. But there’s strong evidence that anyone, NFL pro or otherwise, who uses opiates on a long-term basis is putting themselves at serious risk for drug dependency, overdose, and death. A 2014 review of 39 studies investigating the efficacy of opiate painkillers for chronic pain found that “evidence on long-term opioid therapy for chronic pain is very limited but suggests an increased risk of serious harms that appear to be dose-dependent.” In other words, there’s little evidence of benefit for treating chronic pain with opioids, but a there is a real risk of harm.

The implications of this finding shouldn’t be understated, for either NFL players or the public. Opiate painkillers, like the ones prescribed in bulk by the NFL, kill over 15,000 people a year via overdose. No death from a marijuana overdose has been reported, according to the DEA. On the other hand, chronic pain is one of the conditions that marijuana has been shown to be effective at treating. Earlier this year the National Academies of Sciences, Engineering and Medicine published an expansive literature review, spanning decades of research, showing “substantial evidence that cannabis is an effective treatment for chronic pain in adults.”

The NFL, in other words, is pumping its players full of highly addictive and deadly substances that are of dubious use for treating the long-term, chronic pain suffered by so many players, and fining and suspending players who choose instead to self-medicate with a less-addictive and non lethal substance. The disproportionality of the league’s substance abuse policy was put into stark relief in 2015, when the Browns’ Josh Gordon received a year-long suspension for multiple violations of the league’s marijuana ban. When Ravens running back Ray Rice was charged with aggravated assault for beating his then-fiancee, his initial suspension from the league was only two games.

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Form 10-K for INSYS THERAPEUTICS, INC.


3-Apr-2017

Annual Report

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSForward-Looking Statements

The information in this Annual Report on Form 10-K, or this Form 10-K, including this discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts, included or incorporated in this Form 10-K could be deemed forward-looking statements, particularly statements about our plans, strategies and prospects under this MD&A heading and under the heading “Business.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “intend” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these identifying words. All forward-looking statements in this Form 10-K are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations as described from time to time in our SEC reports, including those risks outlined under the heading “Risk Factors” in Part I, Item 1A of this Form 10-K. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in this Form 10-K. You should carefully consider the trends, risks and uncertainties described below and other information in this Form 10-K and subsequent reports filed with or furnished to the SEC before making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management; PBM formulary changes relative to SUBSYS� or established for SYNDROS� (once commercially launched, if at all) may have a material impact on future net revenue; our intent to file an IND application for the treatment of epilepsy with cannabidiol; the sufficiency of our manufacturing capacity; the beneficial attributes of our dronabinol product candidates and delivery mechanisms; that our suppliers are equipped to supply us with our current and future chemical needs; that pending dronabinol candidates will default to Schedule II classification; that changes in healthcare laws will result in reduced Medicaid and Medicare payments for prescription drugs; that sales and marketing and research and development costs will be our largest categories of expenses; that sales and marketing expenses will fluctuate based on changes in SUBSYS� net revenue; our development of different dronabinol delivery systems; our anticipated timing of the commercial launch of SYNDROS�; our ability to obtain finalization of labeling by the FDA as the final approval prior to commercial launch of SYNDROS�; that we can maintain or even grow market share and net revenue for SUBSYS� and our strategies relating thereto; that we may pursue strategies relating to synthetic cannabidiol; our sales and marketing strategy for future products and delivery systems; that we may pursue strategic transactions such acquisitions or other companies, asset purchase out- or in-licensing of products, strategic partnerships, joint ventures, divestitures, business combinations and investments; our ability to obtain foundation materials and manufacture dronabinol in light of government quotas; our strategy of using Marinol as a reference drug in future drug approval applications; the expected pathway of drug applications we expect to file in the future; that physicians and payers will continue to gain familiarity about and accept the features of SUBSYS�; our plans and strategies for obtaining future international approvals; our plans and strategies to protect our intellectual property; our intention of not paying dividends; possible capital raising transactions we may pursue; that we may avail ourselves of certain Nasdaq governance provisions because of our status as a controlled company; that research and development and operating costs will increase; that our investments in our sales and research and development infrastructure will result in increased sales; accounting estimates and the impact of new or recently issued accounting pronouncements; that cash flows from operations will increase and/or stabilize as a result of sales of SUBSYS�; the source and sufficiency of our liquidity and capital resources to fund our operations; trends in restrictions and impediments relating to reimbursement policies imposed by PBMs; the impact of pending litigation and our strategy relating thereto; that we will not recognize revenue in the near term from current research and development initiatives; our exposure to interest rate changes and market risks related to our investment; and the potential impact of Section 382 limitations on our NOLs. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify


forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.The following discussion and analysis of the results of operations and financial condition of Insys Therapeutics, Inc. for the years ended December 31, 2016 and 2015 should be read in conjunction with the consolidated financial statements and the notes thereto, and other financial information contained elsewhere in this Form 10-K.

Overview

We are a commercial-stage specialty pharmaceutical company that develops and commercializes innovative supportive care products. We have one commercially marketed product and one product awaiting final labeling approval by the FDA, prior to commercial launch, after receiving FDA approval in July 2016 and DEA scheduling in March 2017:

� SUBSYS� – a proprietary, single-use product that delivers fentanyl, an opioid analgesic, for transmucosal absorption underneath the tongue, offered in 100, 200, 400, 600, 800, 1,200 and 1,600 mcg dosages. SUBSYS� is approved for the treatment of BTCP in opioid-tolerant patients. We received FDA approval for SUBSYS� in January 2012 and commercially launched SUBSYS� in March 2012.

� SYNDROS� – a dronabinol oral solution that is equivalent to Marinol, an approved second-line treatment for CINV and anorexia associated with weight loss in patients with AIDS. We received FDA approval for SYNDROS� in July 2016. In March 2017, the DEA issued an interim final ruling that would result in SYNDROS� being placed in Schedule II of the CSA. We are currently awaiting the finalization of labeling by the FDA as the final approval prior to commercial launch.

We also have one discontinued product:

� Dronabinol SG Capsule – a dronabinol soft gelatin capsule that is a generic equivalent to Marinol, an approved second-line treatment for CINV and anorexia associated with weight loss in patients with AIDS, offered in 2.5, 5.0 and 10.0 milligram dosages. We received FDA approval for Dronabinol SG Capsule in August 2011. We commercially launched Dronabinol SG Capsule through our former exclusive distribution partner, Mylan Pharmaceuticals, Inc., in December 2011. We do not have any current plans to manufacture or market this product in the future.

We market SUBSYS� through our U.S.-based field sales force focused on supportive care physicians. Consistent with most pharmaceutical manufacturing companies, we sell and distribute SUBSYS� primarily to pharmaceutical wholesalers and collect sales proceeds from those wholesalers. For the year ended December 31, 2016, sales to our four largest wholesale customers accounted for 67% of gross revenue. We also sell SUBSYS� directly to certain specialty pharmaceutical retailers who distribute our product. For the year ended December 31, 2016 direct sales to specialty pharmaceutical retailers accounted for 33% of gross revenue. We do not own or have any ownership stake in any pharmaceutical wholesaler or specialty pharmacy, nor do we have an option to acquire any wholesaler or specialty pharmacy. All pharmacies that fulfill SUBSYS� prescriptions are fully independent. Our relationships with every pharmacy that fulfills SUBSYS� prescriptions are non-exclusive in that each of these pharmacies may also fulfill prescriptions for other pharmaceutical manufacturers, including our competitors. For the year ended December 31, 2016, over 920 independent pharmacies have fulfilled at least one SUBSYS� prescription.

Our sales of, and revenue from, SUBSYS� depend in significant part on the coverage and reimbursement policies of third-party payers, including government payers such as Medicare and Medicaid, and private health insurers. All third-party payers are sensitive to the cost of drugs and consistently implement efforts to control these costs, which efforts include, but are not limited to, establishing excluded or preferred drug lists. SUBSYS� has been, and will likely continue to be, subject to these restrictions and impediments from third-party payers, particularly PBMs and private health insurers. We provide administrative reimbursement support assistance, in large part through our


insurance reimbursement support hub, which provides administrative support assistance to help patients coordinate with their insurance companies.We are also developing other product candidates, such as cannabinoid line extensions and sublingual spray product candidates.

We produce the API for SYNDROS� at our U.S.-based, state-of-the-art dronabinol manufacturing facility. While we believe that this facility has the capacity to supply sufficient commercial quantities of dronabinol API for our initial launch quantities of SYNDROS�, if final approvals are obtained, and support the continued development of our other dronabinol product candidates in the near-term, we have opened and expanded a second dronabinol manufacturing facility, which we anticipate will enable us to supply sufficient commercial quantities of dronabinol API for the anticipated commercialization of our proprietary dronabinol product candidates, if approved.

We have the capability to manufacture pharmaceutical CBD, an over 99.5% pure form of cannabidiol, in our Round Rock, Texas manufacturing facility. On April 23, 2015, we announced that we had commenced dosing of epilepsy patients in a Phase I PK study in pediatric subjects. We intend to file an IND application with the FDA for the treatment of epilepsy.

Factors Affecting Our Performance

We believe that our performance and future success are dependent upon a number of factors, including our approved product sales, investments in our infrastructure and growth, and our ability to successfully develop product candidates and complete related regulatory processes. In addition, our ability to ensure that our products, policies and practices adhere to the extensive national, state and local regulations applicable to our industry is critical to our success, particularly as our operations and product opportunities continue to grow at a rapid pace. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must successfully address.

Approved Product Sales. Our operating results will depend significantly upon our, and any of our third-party distributors’, sales of approved products. During the year ended December 31, 2016, all of our net revenues were generated from the sale of our approved product, SUBSYS�. We will not generate any revenue from the sale of our discontinued Dronabinol SG Capsule in future periods. Our results will depend on prescription volume generally, which we believe will be driven primarily by achievement of broad market acceptance and coverage by third-party payers and effectiveness of the marketing and selling efforts with respect to SUBSYS�. Moreover, our gross margins improve on a unit-by-unit basis as we sell higher dosage strengths of our products. Importantly, the proportion of prescriptions written for repeat SUBSYS� patients has continued to increase since July 2012 from 50% of prescriptions to approximately 92% of prescriptions as of December 31, 2016. Generally, repeat SUBSYS� patients receive significantly higher doses of SUBSYS� on average than first-time patients as patients are titrated from a starter dose of SUBSYS� to their effective dose in accordance with the TIRF REMS protocol.

According to IMS, the total market for TIRF products for the year ended December 31, 2016 was approximately 72,000 prescriptions and we estimate SUBSYS� prescriptions were approximately 43% of the TIRF market, compared to a total market for TIRF products of approximately 94,000 prescriptions and approximately 46% SUBSYS� market share for the year ended December 31, 2015.

The continuing and heightened publicity surrounding the national opioid epidemic continues to result in sensitivity by some healthcare professionals to prescribe, and pharmacies to dispense, opioids. In part, this sensitivity by healthcare professionals and pharmacies is the result of third-party payers, such as insurance companies, and regulatory and government agencies increasingly scrutinizing the indications and uses for which healthcare professionals are prescribing, and pharmacies are dispensing, opioids. Moreover, ongoing state and federal investigations into our sales, marketing and other commercial practices and developments and media reports that may arise in connection with such investigations may negatively affect our relationships with healthcare professionals and pharmacies and their prescribing or dispensing habits. Consequently, these current and potential future events have and will likely continue to affect the manner in which, and the situations when, SUBSYS� is being prescribed, dispensed and approved for coverage. While we continue to sell directly into wholesalers and retail pharmacies for


our revenue, the direct pressures discussed above related to the retail demand-side components of our business contributed to the decline in full-year 2016 SUBSYS� revenue when compared to 2015.Third-Party Payer Interactions and Government Programs Associated with Reimbursement. Our interaction with third-party payers is critical to the success of our business and financial condition. Our relationships with these third-party payers evolves on a regular basis and is often difficult to predict. By way of example, from time to time, third-party payers modify which drugs they choose to reimburse. For instance, on or around August 1, 2014, ESI officially released its exclusion list of drugs, effective January 1, 2015, in connection with its national preferred formulary. Other PBMs may take similar actions and these actions may have a material impact on our net revenue in the future. As we have in the past, we will continue working with PBMs to evaluate price increases and to communicate with managed care and health-system decision-makers to ensure a balanced approach, which takes into account the clinical performance and efficacy of our products.

In addition, from time to time, our business may be affected by evolving or new governmental programs in the reimbursement landscape. For instance, CMS, which is part of the HHS, has instituted The Recovery Audit Program. The program’s mission is to identify and correct improper Medicare payments through the efficient detection and collection of overpayments made on claims of health care services provided to Medicare beneficiaries, and the identification of underpayments to providers so that CMS can implement actions that will prevent future improper payments in all 50 states. We are aware that in January 2016, certain specialty pharmacies received written correspondence from Humana indicating that as a result of a CMS audit, Humana was initiating a deletion of certain PDEs related to SUBSYS� which will result in a reversal and recovery of identified claims paid to certain pharmacies. This audit by CMS may have been part of The Recovery Audit Program or a similar initiative of CMS. Based upon information available to us, all of these claims involve Medicare Part D patients whose prescriptions were in connection with off-label indications and related to approximately $5.6 million in SUBSYS� claims in the aggregate. Upon our inquiry for more information about these matters, Humana notified us that these deletions of certain PDEs resulting from the CMS audit also involve TIRF medications other than SUBSYS� and Humana intends to resolve these matters with the pharmacies. We believe that some affected pharmacies may alter their processes and or protocols related to dispensing off label TIRF prescriptions to Medicare patients as a result of these and similar events.

Investments in Our Infrastructure and Growth. Our ability to increase our sales and to further penetrate our target market segments is dependent in part on our ability to invest in our infrastructure and in our sales and marketing efforts. In order to drive further growth, we may hire additional sales and marketing personnel and invest in marketing our products to our target physician prescriber base. For example, as of December 31, 2016, we had 274 full-time sales and marketing personnel. This will lead to corresponding increases in our operating expenses, although we anticipate that these investments will result in increased product sales and net revenue. In addition, we have constructed a second dronabinol manufacturing facility, which we anticipate will supply us with sufficient commercial quantities of dronabinol API for the commercialization of our proprietary dronabinol product candidates, if approved. This second facility will also increase our operating expenses.

Product Development and Related Regulatory Processes. Our operating results will also depend significantly on our research and development activities and related regulatory developments. Our research and development expenses were $75.4 million and $55.3 million for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016, we had 59 full-time research and development personnel. We expect research and development expenses to increase as we continue our planned preclinical studies and clinical trials for our product candidates, particularly our proprietary cannabinoid product candidates, including SYNDROS�, and sublingual spray product candidates. We do not expect to realize net revenues from all of these research and development initiatives in the near term and may never realize net revenues from these investments. Due to the risks inherent in conducting preclinical studies and clinical trials, the regulatory approval process and the costs of preparing, filing and prosecuting patent applications, our development completion dates and costs will vary significantly for each product candidate and are very difficult to estimate. The lengthy process of seeking regulatory approvals and the subsequent compliance with applicable regulations require the expenditure of substantial additional resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals or acceptable DEA classifications for our product candidates, in particular those related to SYNDROS�, could cause our research and development expenditures to increase significantly and, in turn, have a material adverse effect on our results of operations.


Basis of PresentationRevision of Previously issued Financial Statements for Correction of Immaterial Errors

During September 2016, we identified an error related to the accounting for the rebates component of our product sales allowances since 2014. We determined that we had miscalculated our rebate obligations on government payer and managed care contracts. In addition, we recorded out-of-period adjustments that resulted in an increase in operating expenses of $1,500,000 related to stock option modifications during the three months ended March 31, 2016 and a decrease in income tax expense of $834,000 related to the deductible interest expense portion of accrued litigation award and settlements recorded during 2016. We concluded that the errors were not material to previously issued annual financial statements. However, to correctly present net revenue, operating expenses and income tax expense in the appropriate annual period, management has revised the 2015 and 2014 financial statements. Refer to Note 2 of the Consolidated Financial Statements for a summary of the amounts and financial statement line items impacted by the revision. All amounts set forth in the discussion and analysis of the results of operations and financial condition for the years ended December 31, 2015 and 2014 have been adjusted to reflect these revisions.

Net Revenue

We sell SUBSYS� in packages of various sized single-dose units in dosage strengths of 100, 200, 400, 600, 800, 1,200 and 1,600 mcg, to wholesale pharmaceutical distributors and specialty retail pharmacies, collectively, our customers, on a wholesale basis. Sales to our customers are subject to specified rights of return. We record revenue for SUBSYS� at the time the customer receives the shipment.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue consists primarily of materials, third-party manufacturing costs, freight in, indirect personnel costs, and other overhead costs based on units dispensed through patient prescriptions. Also included in cost of revenue are charges for reserves for excess, dated or obsolete commercial inventories and production manufacturing variances.

Gross profit is net revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of net revenue.

Sales and Marketing Expenses

Our sales and marketing expenses consist primarily of salaries, commissions, benefits, consulting fees, costs of obtaining prescription and market data, and market research studies related to SUBSYS�. As of December 31, 2016, we had 274 full-time sales and marketing personnel. We expect our sales and marketing expenses, along with our research and development expenses, to be our largest categories of operating expenses for the foreseeable future. In addition, because we use an incentive-based compensation model for our sales professionals, we expect our sales and marketing expenses to fluctuate from period to period based on changes in SUBSYS� net revenue. We will also incur expenses directly related to the launch of SYNDROS�, if finalization of labeling by the FDA is obtained.

Research and Development Expenses

Research and development expenses consist of costs associated with our preclinical studies and clinical trials, and other expenses related to our drug development efforts. Our research and development expenses consist primarily of:

� external research and development expenses incurred under agreements with third-party CROs and investigative sites, third-party manufacturers and consultants;

� employee-related expenses, which include salaries, benefits and stock-based compensation for the personnel involved in our preclinical and clinical drug development activities; and

� facilities, depreciation and other allocated expenses, equipment and laboratory supplies.


To date, our research and development efforts have been focused primarily on our fentanyl, dronabinol and cannabidiol programs. As of December 31, 2016, we had 59 full-time research and development personnel. We expect research and development expenses to increase as we continue our planned preclinical studies and clinical trials for our product candidates. We determine which research and development projects to pursue, as well as the level of funding available for each project, based on the scientific and preclinical and clinical results of each product candidate and related regulatory action.The following table provides a breakdown of our research and development expenses (in millions):

                                                     Years Ended December 31,
                                               2016               2015           2014
                                                              (As Revised)
   Cannabidiol                               $    15.3       $         16.3     $  5.8
   Buprenorphine                                   9.4                  3.4        3.4
   Fentanyl                                        4.5                  2.8        2.8
   LEP-ETU and IL-13                               2.3                  2.5        1.1
   Naloxone                                        3.0                  2.2        0.2
   Dronabinol                                      3.9                  6.3        1.6
   Ondansetron                                     1.2                  1.4        0.7
   Buprenorphine/Naloxone                          1.0                  4.6        0.8
   Sildenafil                                      0.6                  0.2        0.8
   Internal research and development costs        29.5                 15.9       15.9
   Other                                           3.2                  1.2          -
   Total research and development expenses   $    73.9       $         56.8     $ 33.1

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, accounting, business development and internal support functions. In addition, general and administrative expenses include facility costs not otherwise included in research and development expenses, and professional fees for legal, consulting and accounting services. As of December 31, 2016, we had 46 full-time general and administrative personnel. We expect general and administrative expense to modestly increase as a result of expanding our operating activities and the costs we incur operating as a public company. We expect these increases to include salaries and related expenses, legal and consultant fees, regulatory fees as new products are commercialized, accounting fees, director fees, increased directors’ and officers’ insurance premiums, fees for investor relations services, and enhanced business and accounting systems.

Charges Related to Litigation Award and Settlements

Charges related to litigation award and settlements for the year ended December 31, 2016 represent legal expense accruals of $3.4 million related to a settlement reached with the State of New Hampshire and $0.5 million in connection with the investigation by the State of Massachusetts. Charges related . . .

 

 

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South Carolina Representative Eric Bedingfield used to oppose all marijuana use until his son lost a battle with opioid addiction and died from overdose. The conservative Republican co-sponsored marijuana legislation. Bedingfield recently stated, “My mindset has changed from somebody who looked down on it as a negative substance to saying, this has benefits.”

Bedingfield now believes marijuana may successfully help addicts wean themselves from a dependence on opioids. He also believes marijuana may be an alternative to prescription medications like OxyContin.

Almost twenty years after California became the first state to legalize medical marijuana, efforts to let patients legally access marijuana are slowly taking root in the South. Out of 28 states that allow medical marijuana, only two of those states are in the south. Arkansas and Florida voters approved theirs through November’s ballot. A law signed in Louisiana last year, also not yet in effect, does not allow the vaping or smoking of marijuana.

This year’s renewed push in South Carolina is supported by some of the state’s most conservative legislators, such as Bedingfield, whose opinions have shifted due to personal losses or the pleadings of parents and pastors in their districts. Three years ago, state legislators passed a very narrow law permitting patients with severe epilepsy, or their caregivers, to legally possess cannabidiol (CBD), a non-psychoactive oil derived from marijuana. Bedingfield voted against that idea.

Bill Davis, a Christian author who leads a Bible study for people fighting drug addiction, said he was bedridden before trying marijuana. Diagnosed two years ago with idiopathic pulmonary fibrosis, a lung disease with no cure, he was put on an experimental drug with “horrible side effects.” Davis said, “I had to decide whether I wanted to die of lung disease or kidney or liver failure.” Then he started vaping marijuana, which he says allows him to control the amount of CBD and THC he receives. He said, “I’m praying this state will allow me to be treated legally for me to live” using “a plant that God made.”

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