What happened

After the company announced its progress in developing drugs derived from marijuana cannabinoids, shares of Insys Therapeutics (INSY) shot up 81.5% in December, according to S&P Global Market Intelligence.

So what

Insys Therapeutics would probably like a do-over on the first 11 months of 2017, but shares came roaring back in December after management reported a string of advances that included progress in its medical marijuana research program.

A doctor is sitting at a desk, writing notes while looking at marijuana.

Image source: Getty Images.

On Dec. 6, Insys Therapeutics announced that the FDA had accepted its application for approval of buprenorphine sublingual spray for moderate to severe pain and set a target decision date of July 28, 2018. The company believes that its formulation of buprenorphine offers advantages over existing opioid options and if it wins approval, it will become the company's third FDA-approved commercial-stage drug.

The big news, however, came when management revealed on Dec. 19 that it's initiating a midstage clinical trial of its cannabidiol (CBD) drug in children suffering from treatment-resistant absence seizures. These seizures cause lapses in awareness and sometimes staring, and they affect 2% to 8% of the roughly 470,000 children with epilepsy in the United States.

Then, on Dec. 26, Insys announced that the FDA awarded Fast Track designation to its cannabidiol research for use in treating Prader-Willi syndrome, a rare genetic disorder characterized by insatiable appetite in children. It can lead to obesity and type 2 diabetes, and currently there aren't any approved drugs to treat it. Insys Therapeutics plans to start its Prader-Willi syndrome trials soon.

A marijuana plant sitting on top of $100 bills.

Image source: Getty Images.

Now what

The progress in research and development is good news because it may suggest an easier path forward for the embattled company. Insys Therapeutics has been under intense scrutiny ever since allegations arose that it was illegally marketing its opioid spray, Subsys, for off-label use. Lawsuits stemming from investigations into the company's marketing of Subsys led to management establishing a $150 million reserve in October 2017 for potential settlements.

The focus on Subsys has arguably delayed the company's efforts in medical marijuana, resulting in it falling behind GW Pharmaceuticals (GWPH), which has already filed for FDA approval of its own cannabidiol for use in Dravet syndrome and Lennox-Gastaut syndrome, two rare childhood-onset types of epilepsy. Therefore, news that the company's discovered a strategy that could give it a lead over GW Pharmaceuticals in treatment-resistant absence seizures and Prader-Willi syndrome is bullish.

Insys Therapeutics still has question marks because of the ongoing Subsys investigations, but it appears that it could be in the early innings of a turnaround that gets its stock back on track. If management can settle the Subsys matter and execute on its R&D strategy, 2018 could be a much better year for investors than 2017.