Insys Therapeutics, Inc. (NASDAQ: INSY) Reports Strong Financials

Insys Therapeutics, Inc. (NASDAQ: INSY) reported fourth quarter and year-end financial results. The market has reacted poorly to this announcement and the stock is trading in negative territory.

Highlights from the fourth quarter include:

• Net revenue increased to $66.5 million versus $40.2 million in the fourth quarter of 2013.

• INSY generated $66.2 million in revenues from Subsys, up 69% over fourth quarter of 2013 sales of $39.2 million;

• The company spent $44.5 million in operating expenses, which is up from $20.6 million in the fourth quarter of 2013. The reason for the increase was higher marketing costs for Subsys, general and administrative costs, and increased investment in research and development.

• INSY saw gross margins increase during the fourth quarter. 91% vs 87% in the fourth quarter last year. The increase was due primarily to a shift in sales mix toward Subsys, which has higher margins than Dronabinol SG Capsule.

• Generated $16.1 million in income from operations ($14.4 million in the fourth quarter of 2013)

• The company generated less income compared to last year. INSY generated $9.3 million in net income, compared to $24.1 million in the fourth quarter of 2013. The 2013 period includes the impact of a $9.7 million income tax benefit due to the reversal of deferred tax asset valuation allowance versus tax expense of $6.9 million in the fourth quarter of 2014;

• Non-GAAP adjusted net income (excludes the tax benefit and expense) was $19.5 million, versus $17.1 million in the fourth quarter of 2013; and,

• Cash, cash equivalents and investments increased by $16.6 million during the fourth quarter of 2014 to $106.1 million as of December 31, 2014.

Highlights from all of 2014

• INSY generated $222.1 million in net revenue during 2014, an increase of $122.8 million as compared to $99.3 million during 2013.

• Gross margin for 2014 was 90%, compared with 87% for 2013. The increase in gross margin was due primarily to a shift in sales mix toward Subsys, which has higher margins than Dronabinol SG Capsule.

Revenue from Subsys more than doubled in 2014
“Subsys revenues more than doubled in 2014 over the prior year, enabling us to execute our strategy to develop important new products and new indications for Subsys to further expand our revenue stream,” said Michael L. Babich, President and Chief Executive Officer. “We believe that our noteworthy progress last year in advancing our pipeline will enable us in 2015 to initiate pivotal Phase III clinical trials with three of our sublingual spray product candidates, and to initiate a Phase III clinical trial of our pharmaceutical cannabidiol (CBD) candidate in Lennox-Gastaut and Dravet patients.”

Shuman Law Firm is investigating claims against officers and directors of INSY

INSY is facing a minor headwind after the Shuman Law Firm announced yesterday that it is investigating potential claims against certain officers and directors of INSYS Therapeutics, Inc. (INSY).

The firm’s investigation relates to allegations of off-label drug marketing of one of the company’s products, a painkiller called Subsys. These allegations were raised in a May 13, 2014, New York Times article titled “Doubts Raised About Off-Label Use of Subsys, a Strong Painkiller.” The article states that while the F.D.A. approved Subsys only for cancer patients who are already using round-the-clock painkillers by oncologists and pain specialists, just 1% of the total Subsys prescriptions are written by oncologists and about half are written by pain specialists. In December of 2014, INSYS confirmed that it had received a subpoena from the U.S. Department of Health and Human Services’ Office of the Inspector General relating to the Company’s sales and marketing practices. Following these announcements, the Company’s stock price fell and multiple class action lawsuits were filed against INSYS.

When these allegations were raised in 2014, the company saw its stock price fall after receiving the subpoena. Nothing of material concern came out of the subpoena or the lawsuits filed, but that doesn’t mean that the situation is cleared up. Technical420 will be monitoring these events going forward, but it does not seem to effect the stock price as of right now. We do not expect this situation to get ugly like the Medbox (MDBX) situation did.

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Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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