There are fast-growing industries, and then there's the legal marijuana industry, which might very well be in a class of its own. According to cannabis research company ArcView, the North American legal weed market should grow by an average of 26% between 2016 and 2021, leading to nearly $22 billion in annual sales by 2021.

What's the source of this rapid and consistent sales growth? Expansion is obviously playing a role, with Mexico officially legalizing the sale of medical cannabis in June 2017, and Canada priming to legalize adult-use pot by July 2018. Doing so could add $3.7 billion to $5 billion in annual sales atop an already successful medical cannabis market. Within the U.S., voters in eight states have chosen to green light recreational weed since Nov. 2012, with the expectation that more states are on the way in the upcoming November elections.

A cannabis leaf lying atop Ben Franklin's face on a hundred dollar bill, with only his eyes visible.

Image source: Getty Images.

Favorability toward marijuana has also helped. Both CBS News and Gallup conducted surveys in 2017 that found a record number of respondents want to see it legalized -- 61% and 64%, respectively. The higher this support grows, the more likely it is that lawmakers could change their stance on cannabis in the United States. 

This marijuana stock nearly doubled in December

The result of this sales growth and favorability has been a major bull market for marijuana stocks. Well, most of them, at least. Poor Insys Therapeutics (INSY), a small-cap drug developer that devotes at least a portion of its pipeline to cannabinoid-based drugs, had lost nearly 90% of its value since 2015 as of November 2017. But things changed in a big way in December.

After ending November at $5.30 a share, Insys finished the year at $9.62, representing a one-month gain of 82%. However, if we include Insys' intraday lows and highs during December, Insys actually doubled, moving up by 100%.

Before we get into the catalysts that pushed Insys higher, let's review the issues that sank what had been a great story stock until recently.

A frustrated stock trader clasping his head while looking at stock losses on his computer screen.

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Why the wheels came off at Insys

The primary issue with Insys relates to its lead drug Subsys, a sublingual synthetic opioid containing fentanyl that is approved to treat breakthrough cancer pain and had been generating around $330 million in annual sales as of 2015. Lawsuits have been filed and arrests made, including former billionaire CEO and founder John Kapoor, suggesting that management and Insys' marketing team knowingly and willingly marketed Subsys at off-label indications in order to drive up sales of the drug. According to the allegations, up to 80% of Subsys' sales may have been derived from off-label indications.

Furthermore, the charges allege that Insys was bribing physicians in the pain-management field to prescribe Subsys. It was doing this by providing "speaker fees" to physicians, even if they weren't actually speaking at an event. In doing so, Insys was able to work around red flags that might have otherwise triggered insurers not to cover a Subsys prescription.

Though these are nothing more than allegations until proven true in a court of law, they've nonetheless wrecked Insys' top and bottom lines. What had been a drug capable of $90 million-plus in quarterly sales turned in just $30 million in sales during the third quarter, down from $57.8 million in Q3 2016. As a result, Insys has moved from being healthfully profitable to losing money on a quarterly basis. 

Explaining Insys Therapeutics' incredible December

However, if there's a bright side to this, it's that investors have a notoriously short-term memory regarding PR flubs. Though the legal ramifications from this ongoing case will likely linger for some time, there are other positive catalysts that exist beyond Subsys for investors to focus on.

A cannabis bud lying atop a doctor's prescription pad.

Image source: Getty Images.

For example, in August, Insys finally launched its second Food and Drug Administration (FDA)-approved drug, Syndros, for the treatment of chemotherapy-induced nausea and vomiting (CINV), as well as anorexia associated with AIDS. This cannabidiol-based drug is where Insys gets its association with marijuana stocks. Though CINV is a crowded indication, Syndros brings differentiation to the table like nothing we've ever seen before, which could lead to north of $200 million in annual peak sales in, perhaps, five to seven years' time.

On Dec. 7, the company also announced that the FDA has accepted its new drug application (NDA) for buprenorphine sublingual spray for the management of moderate-to-severe acute pain. Though the company notes the expectation for additional data to be added to the NDA in the first quarter of 2018, which could push back a decision date by the FDA, a buprenorphine sublingual spray would be yet another way of diversifying the company's revenue stream away from its reliance on Subsys. 

As icing on the cake, a press release this past week announced that the FDA had granted the fast-track designation to the company's cannabidiol oral solution for the treatment of Prader-Willi syndrome, a rare genetic disorder characterized by an insatiable appetite in children that can lead to complications such as obesity and type 2 diabetes. Clinical development for this program is expected to begin in the first quarter of 2018, with the fast-track designation offering the potential for an expedited review process, as well as improved communication between the FDA and Insys. There are no approved treatments on the market right now for Prader-Willi syndrome. 

This tug of war between the company's past and its future is what makes Insys my all-or-nothing marijuana stock for 2018. While volatility is likely to remain high, if we can get added clarity on the company's financial liability regarding the Subsys charges, it would go a long way to pinpointing an appropriate valuation moving forward.