Image source: Insys Therapeutics.

The $150 million market for Marinol (dronabinol), a fixed-dose pill derived from a marijuana cannabinoid that's used to treat nausea and vomiting in cancer patients and anorexia in AIDS patients, could change dramatically in the coming year. The FDA approved a new liquid formulation of dronabinol made by Insys Therapeutics (INSY) earlier this month, and Insys Therapeutics' management thinks that its version, which will be sold under the brand name Syndros, will capture market share rapidly. If so, Syndros could provide Insys Therapeutics' investors with a profit-friendly boost over the coming months.

Improving care

Marinol is a synthesized formulation of THC, the most common cannabinoid found in marijuana. It won FDA approval for use in treating cancer and AIDS patients in 1985, and prior to losing patent protection, the drug hauled in more than $100 million per year.

Today, the market for dronabinol is dominated by low-cost generic capsules, and because the addressable patient population has expanded, sales eclipse $150 million per year. In 2011, doctors wrote 243,000 prescriptions for dronabinol and in 2015 they wrote 273,000 scrips.

While doctors may continue to favor low-cost dronabinol capsules, Insys Therapeutics thinks Syndros matches up favorably to generics. Syndros' liquid formulation makes it easier to adjust dosing to each individual patient. It also makes Syndros far easier to dose in patients who have difficulty swallowing. Further, Insys Therapeutics suggests Syndros offers faster bioavailability of its active ingredient than Marinol.

Crossing the finish line

The company's original FDA application was kicked back to management in 2014 after the FDA determined the application lacked adequate data on how Syndros affects children.

After collecting the necessary pediatric information, Insys Therapeutics resubmitted its Syndros application in 2015, clearing the way for a FDA decision in April 2016. However, Insys submitted additional information to the FDA earlier this year regarding the scheduling of Syndros under the Controlled Substances Act, and in March, the FDA determined that it needed more time to review that information before issuing its decision.

The FDA finally granted Insys Therapeutics a green light on Syndros on July 5 and now that the company has the FDA's blessing, it's awaiting final scheduling of the drug by the DEA. Once it has that scheduling in hand, the company will begin marketing Syndros to the 9,500 doctors who are responsible for writing 70% of all Marinol prescriptions every year.

Expanding its business

Approval of Syndros is important for Insys Therapeutics because until now, Insys Therapeutics' only commercial drug has been Subsys, a fentanyl formulation that's approved to treat breakthrough pain in cancer patients.

Subsys generates about $240 million in annualized sales. However, Subsys demand is waning in the wake of allegations of improper off-label marketing to non-cancer patients, and growing worries about opioid abuse. In the first quarter, Subsys sales dropped 12% year over year to $62 million.

Despite slowing Subsys sales, Insys Therapeutics remains profitable, but investors have remained skeptical of the company because of the risk that improper marketing in the past could result in hefty fines or penalties in the future. Getting investors to look beyond that risk will depend on restoring confidence with investors, doctors, and insurers, and launching additional revenue-generating products like Syndros. 

Looking ahead

A one-month supply of dronabinol capsules costs less than $300 and Syndros will cost more than that. At trailing prescription trends and estimated brand pricing, Insys Therapeutics has estimated the addressable opportunity available for Syndros at $500 million. Because of that, management thinks that Syndros could generate $200 million in sales someday.

Achieving that goal, however, will depend a lot on whether or not doctors view Syndros' advantages as significant enough to shift them away from their longstanding reliance on Marinol capsules. It will also depend on insurers' willingness to pay a premium for Syndros. Because doctors may be slow to switch and payers may resist paying more for Syndros, investors may want to take a wait-and-see approach before buying shares.