Please ensure Javascript is enabled for purposes of website accessibility

Why This Marijuana Stock Fell 16.4% in March

By Todd Campbell - Apr 4, 2017 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Insys Therapeutics dropped after it received disappointing news from the DEA regarding its marijuana drug Syndros.

What happened

News that the DEA ranked Syndros as a Schedule II drug caused Insys Therapeutics' (INSY) shares to drop 16.4% in March, according to S&P Global Market Intelligence.

So what

Demand for Insys Therapeutics' opioid spray Subsys has been sliding, so investors were eyeballing Syndros' launch as a valuable new source of growth.

Marijuana sits around an open prescription bottle.

IMAGE SOURCE: GETTY IMAGES.

Syndros is a liquid formulation of dronabinol, a THC-based drug that's been on the market since the 1980s, and that's used to treat anorexia in AIDS patients and nausea and vomiting in chemotherapy patients.

The market for dronabinol is valued at $200 million, and it's currently dominated by generics. But Syndros can be more easily dose-adjusted, and it's easier to swallow, so Insys Therapeutics believes it can capture a significant share of sales, despite its brand-name pricing.

While that may still prove to be true, word that the DEA decided on Schedule II means that prescribing it won't be as easy as prescribing dronabinol, which is a Schedule III drug. Prescriptions for Schedule II drugs require a doctor's physical signature, and they can't be faxed. Furthermore, they can't be as easily refilled as those for Schedule III drugs.

Now what

Any amount of Syndros revenue will be welcomed by the struggling drugmaker. Investigations into improper marketing of Subsys, plus an overall decline in prescribing opioids because of risks of addiction, has taken a big toll on Insys Therapeutics' top line. For example, the company's sales crashed 41% to $55 million in the fourth quarter.

The scheduling decision wasn't unexpected, but it does mean there's a bit more uncertainty to the Syndros opportunity than there would have been otherwise. The company recently announced it had completed an internal review of its practices, and it's restating some of its prior financials. It also recently hired a new CEO. That's good news because it removes an overhang, but until investors see some sales trends for Syndros, Insys Therapeutics remains a risky stock to buy.

Todd Campbell has no position in any stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

INSYS Therapeutics Stock Quote
INSYS Therapeutics
INSY

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
373%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.