Insys Therapeutics (NASDAQ:INSY) might have a problem on its hands. This week, the FDA requested that Endo International (NASDAQ:ENDP) remove its opioid medication Opana ER from the market, and that news raises the question: Who's next? If Insys Therapeutics' fentanyl spray Subsys ends up on the chopping block, it could have a negative impact on the company's plans to research new marijuana drugs.

Troubled waters

Insys Therapeutics has been marketing Subsys for years, but in 2015 the company became the center of investigations into whether executives were illegally juicing Subsys prescriptions for off-label use by paying doctors kickbacks.

A worried business man chews on his fingernails.

Image source: Getty Images.

The debacle couldn't have come at a worse time for Subsys, because at the same time that investigations were ramping up, doctors were becoming increasingly reluctant to prescribe opioids due to growing concern over the nation's opioid epidemic.

As doctors distanced themselves from Subsys specifically, and reined in use of opioids generally, Subsys sales have crashed, putting pressure on the company's cash flow. Adding to the company's woes has been a revolving door in the executive suite that's arguably distracted it from making headway on research and development programs, including epilepsy research into the use of cannabidiol (CBD), one of marijuana's most common chemical cannabinoids.

Mounting financial risk?

Insys Therapeutics' board of directors recently installed industry veteran Saeed Motahari as its latest CEO, and that's helped restore some credibility. Motahari made a big splash during the company's first-quarter earnings conference call in May when he suggested he's working toward resolving the outstanding Subsys investigations and that he remains committed to kick-starting research, including efforts to develop CBD for use in epilepsy.

If the FDA puts Subsys in its crosshairs next, it could throw a wrench into Motahari's plans.

Despite rolling out a second commercial drug (Syndros) this year, Subsys is the company's sole source of revenue right now, and that revenue has been in a free fall. In Q1, Subsys sales fell to $36 million from $60 million a year ago, and that's already straining the company's financials. Last quarter, the company went from generating quarterly profits to losing money. 

INSY Revenue (Quarterly) Chart

INSY Revenue (Quarterly) data by YCharts.

Uncertain outcome

Subsys is highly potent, and some industry watchers are concerned over the risk of its abuse, but that doesn't mean that the FDA will force it from the market.

Opana ER is approved for use in patients with chronic pain who need 24-hour pain control, and that's a very different market than the breakthrough cancer pain market that Subsys serves. While there are multiple alternative medications addressing chronic pain, there aren't as many options for late-stage cancer patients who require pain relief and easy dosing.

Assuming the FDA recognizes the ongoing need for cancer pain drugs like Subsys and keeps it on the market, it should continue producing sales that can fund the company's research and development, albeit at a lower rate than a few years ago.

Such funding is critical if Insys Therapeutics wants to remain debt-free, and Motahari seems to recognize that. This week, he highlighted how Insys Therapeutics hopes to be part of the solution to the opioid epidemic, not the cause of it. To that end, he mentioned the company's research into the use of CBD for opioid dependence and its use as an alternative to opioids for pain. I'm sure investors hope this convinces the FDA that Insys Therapeutics is more of a friend than a foe in this crisis.