By Michael Berger

Insys Therapeutics, Inc. (INSY: NASDAQ) is commercial-stage specialty pharmaceutical company that develops and commercializes innovative supportive care products. INSY is one of the few companies focused on the development of medicines derived from the cannabis plant. Technical420 has a favorable view on the future outlook of INSY for the following reasons: 1) the FDA has granted them the orphan drug designation (ODD) on a variety of treatments in their extensive product pipeline, 2) they have favorable street coverage that offers significant upside potential, 3) their two marketed products can lead to exponential revenue growth, and 4) third quarter financial results showed significant improvement.

Multiple orphan drug designation granted by the FDA

Over the last few months the FDA has granted INSY the orphan drug designation (ODD) on multiple products. The orphan drug designation is granted to novel drugs that treat rare diseases or conditions affecting fewer than 200,000 patients in the U.S. The designation provides INSY with a seven-year period of U.S. marketing exclusivity upon approval, as well as certain financial incentives that can help support its development.

  • On December 9, 2014, the FDA granted them the ODD to their Liposome Entrapped Paclitaxel Easy to Use candidate for the treatment of gastric cancer. Gastric cancer is the fifth most common cancer in the world. In the U.S., it is estimated that approximately 22,000 people will be diagnosed with gastric cancer in 2014.
  • On November 24, 2014, the FDA has granted orphan drug designation (ODD) to its pharmaceutical cannabidiol (CBD) candidate for the treatment of pediatric schizophrenia.
  • On September 29, 2014, the FDA granted them ODD for their treatment of glioma. Glioma is a type of tumor that arises from the glial cells of the brain or, less commonly, the spine.

Favorable Wall Street Coverage

Insys Therapeutics is one of the few cannabis companies to have Wall Street coverage. Not only does the company have coverage, but they have favorable coverage. On December 8, 2014, Jefferies picked up coverage on INSY with a Buy rating and a $51 price target. This offers investors 30% upside to INSY’s current price. The company has also received coverage from:

  • Wells Fargo Securities: Buy rating and no price target
  • RBC Capital Markets: Buy rating and a $53 price target (35% upside)
  • Oppenheimer & Co: Hold rating and no price target
  • Piper Jaffray: Buy Rating and $51 price target (30% upside)
  • JMP Securities: Buy rating and $65 price target (66% upside)
  • EVA Dimensions: Buy rating and no price target

Overall the company has 6 Buy ratings, 1 Hold rating and no sell ratings. The average price target for shares of INSY is $55.

Upside potential through their two marketed products

INSY has two marketed products, SUBSYS and Dronabinol SG Capsule. In March 2012 the company launched Subsys, our proprietary sublingual fentanyl spray for breakthrough cancer pain. In December 2011, INSY launched the Dronabinol SG Capsule, a generic equivalent to Marinol, which is an approved second-line treatment for chemotherapy-induced nausea and vomiting. INSY submitted a New Drug Application (NDA) to the FDA for their Dronabinol solution in August 2014.

Technical420 sees upside to Wall Street estimates through the Dronabinol Oral Solution, their lead pipeline product. If the solution is approved, INSY will market it and any other future supportive care products through their commercial organization. The success of this product will lead to increased revenues and cash flow that could be used to support business initiatives.

Third Quarter 2014 financial results show significant improvement
Highlights from the quarter include:

  • They generated $58.3 Million in net revenues in 3Q14. This is nearly double what was generated in 2Q13 ($29.2 Million). Pretty much all of the revenue generated is from their Subsys product, $58.2 million. Subsys product sales were up 105% compared to 3Q13.
  • INSY generated positive net income, a tough feat for cannabis companies. Total net income was $11.5 million for the quarter.
  • Cash, cash equivalents and investments increased by $14.2 million to $89.5 million. This represents a 19% increase from the end of the 2013 fiscal year.

What to expect

Through product innovation and development, INSY has put themselves in position to capitalize on the cannabis industry. The biggest catalysts for the company would be: 1) the removal of the schedule I label from cannabis, and 2) FDA approval of their Dronabinol Oral Solution.

Safe Harbor:

This report may contain forward-looking statements regarding ­­­­ Insys Therapeutics, Inc. and its future events and results that involve inherent risks and uncertainties. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as they relate to Insys Therapeutics, Inc. or its management, are intended to identify forward-looking statements. Important factors, many of which are beyond the control of Insys Therapeutics, Inc., that could cause actual results to differ materially from those set forth in the forward-looking statements include Insys Therapeutics, Inc. ability to continue as a going concern, delays in clinical trials or flaws or defects regarding its products, changes in relevant legislation or regulatory requirements, uncertainty of protection of Insys Therapeutics, Inc. intellectual property and Insys Therapeutics, Inc. continued ability to raise capital. Insys Therapeutics, Inc. does not assume any obligation to update any of these forward-looking statements. 

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1 comment
  1. Good insights into $INSY. Thanks for posting this. I’ve been keeping up with this company but good to see it broken down by someone who really knows his stuff.

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