Many marijuana stocks sizzled in 2016. However, a handful of stocks did more fizzling than sizzling. Here's why Insys Therapeutics (INSY +0.00%), Cara Therapeutics (CARA +0.00%), and Arena Pharmaceuticals (ARNA +0.00%) ranked as the worst marijuana stocks of the year among companies with market caps of at least $200 million.
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Sub-par Subsys
Insys Therapeutics was once a high-flying stock. However, that changed beginning in mid-2015. This year was horrible for Insys, with shares plunging over 50%.
Sales tanked for Subsys, the company's sublingual fentanyl spray for breakthrough cancer pain. Part of the problem stems from public concerns about the opioid epidemic in the U.S. that are lowering demand for transmucosal immediate release fentanyl (TIRF) drugs like Subsys. The other major issue is that some pharmacy benefits managers have excluded Subsys from their drug formularies.
Help could be on the way for Insys. The company won U.S. regulatory approval in July for its first cannabinoid product, Syndros, in treating anorexia associated with weight loss in patients with AIDS, and nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional treatments. Because Syndros is the only approved oral dronabinol solution, the drug should be able to pick up market share pretty quickly.
For now, though, Insys still awaits scheduling of Syndros by the U.S. Drug Enforcement Administration. The company projects peak annual sales of over $200 million. Piper Jaffray analyst David Amsellem thinks peak sales of $300 million to more than $400 million are realistic for Syndros.
Held back
For much of 2016, Cara Therapeutics might have been the worst marijuana stock of all. The company's shares dropped more than 70% in March. However, Cara began to rebound somewhat later in the year. The stock is now down over 40% year to date.
Cara received bad news in February when the U.S. Food and Drug Administration (FDA) placed a clinical hold on a late-stage study of I.V. CR845 for treating postoperative pain after some patients experienced elevated serum sodium levels. That clinical hold was lifted in April. Cara resumed enrollment in the study in June.
Results from several clinical studies of I.V. CR845 are expected in the first half of 2017. For now, the experimental drug remains the best shot at success for Cara Therapeutics. However, the company also has a cannabinoid receptor agonist, CR701, in pre-clinical development.
Looking beyond Belviq
Arena Pharmaceuticals shareholders experienced an up-and-down year that seems to be ending on the downside. The biotech's stock is down around 20% year to date.
The company had turnover in its executive ranks, with new CEO Amit D. Munshi taking the helm in May and Kevin R. Lind starting as CFO in June. Arena also cut back its workforce during the year.
Weight-loss drug Belviq continued to underwhelm in 2016. The poor performance of Belviq resulted in Arena shifting its focus more to pipeline candidates. Experimental ulcerative colitis drug etrasimod and ralinepag, a prostacyclin receptor agonist targeting treatment of pulmonary arterial hypertension, are in mid-stage clinical studies.
Arena qualifies as a marijuana stock, though, with pipeline candidate ADP371. The company completed an early stage study of the cannabinoid receptor type 2 (CB2) agonist in treating pain, but hasn't announced further plans for ADP371.
Fizzle to sizzle in 2017?
Note that these worst marijuana stocks of 2016 didn't turn in horrible results because of marijuana-based products. The cannabinoid products for Insys, Cara, and Arena are all still in the pipeline.
Actually, I suspect that Insys could have the best shot of making a comeback next year thanks to its cannabinoid Syndros. Still, though, all three stocks remain quite risky, including Insys. Investors should be very cautious when it comes to buying marijuana stocks. What sizzles one year might fizzle the next -- and what what fizzles one year could keep right on fizzling.
