Insys Therapeutics Inc. (NASDAQ: INSY)

02/24/2017 Focused Stock Trader

INSY 3 --

Company Description:

Insys Therapeutics aims to take the rough edges off of chemo and cancer pain. The commercial-stage drug development company is focused on treating side effects of chemotherapy, as well as therapies for pain management. Its first product is Subsys, which brings in virtually all of its revenue; it is a fast-acting oral spray version of cancer pain drug Fentanyl. Syndros (dronabinol), which was approved by the FDA in mid-2016, is a generic liquid formulation of Marinol (a synthetic version of the active chemical in marijuana) for treatment of chemotherapy-induced nausea and vomiting. All of the company's drug candidates are re-formulations of already-approved therapeutic ingredients.

 

Investment Thesis:

Breaking News. Long-term safety study completed-

Insys announced that the company is providing for the use of Cannabidiol Oral Solution at doses up to 40 mg/kg/day in compassionate use studies in subjects with refractory pediatric epilepsy following completion of 48 weeks of treatment in the ongoing long-term safety study. The long-term safety study permitted subjects who had completed the initial safety and pharmacokinetic (PK) study to receive Cannabidiol Oral Solution at doses up to 40 mg/kg/day for up to 48 weeks. In the initial safety and PK study, 61 subjects with refractory epilepsy, between the ages of one and 17 years, received total daily doses of 10 mg/kg, 20 mg/kg or 40 mg/kg. In 9 of the 61 subjects where Delta-9-THC was measured, no quantifiable plasma levels of Delta-9-THC were detected. Cannabidiol Oral Solution was generally well tolerated. From the initial safety and PK study, 53 subjects continued into the long-term safety study, of which 15 subjects have completed 48 weeks of treatment with Cannabidiol Oral Solution across multiple investigative sites in the United States. 

Upcoming catalysts-

A potential settlement with the DOJ regarding Subsys and Syndros scheduling remain important upcoming catalysts. Additionally, the company provided broadening development pipeline has many much anticipated development milestones in 2017.

Cash levels very strong-

The company remained cash flow positive in 3Q16, generating ~$23.5 million in cash during the quarter and ending the period with $217.0 million of cash on hand.

Valuation-

We think INSY is worth at least $20. This valuation is expected by several covering analysts and is based upon an NPV analysis of Subsys, Syndros, cannabidiol, the sublingual spray pipeline, and a terminal value.