Some people picture rows of cannabis plants growing in a greenhouse when they think of marijuana stocks. While that's an appropriate image to have in mind for many marijuana stocks, it's a different story for others. 22nd Century Group (NYSEMKT:XXII) and Insys Therapeutics (NASDAQ:INSY) are good examples.

Both companies are biotechs with ongoing cannabis-related development. Both also have stocks that have been beaten down so far in 2018. 22nd Century Group's share price has fallen nearly 20% year to date, while Insys stock has plunged more than 35%. Which of these two stocks is the better buy now?

Man with hand on chin standing in front of chalkboard drawing of scales

Image source: Getty Images.

The case for 22nd Century Group

22nd Century Group can legitimately be tagged as a marijuana stock, because the company is developing cannabis plants that have no THC -- the primary psychoactive compound in cannabis. It's also genetically engineering cannabis plants that have optimized levels of cannabidiol (CBD) and other cannabinoids. However, there's another plant that's the main focus for 22nd Century Group.

The company has used its genetic-engineering expertise to grow tobacco with very low levels of nicotine. Thanks to Uncle Sam, 22nd Century Group's tobacco technology could soon become very important. The U.S. Food and Drug Administration (FDA) is moving forward with plans to require tobacco cigarettes sold in the U.S. to have minimal or nonaddictive levels of nicotine.

It's not a done deal yet for the FDA's plans. The agency is taking public comments on its proposal through June 14, 2018. After reviewing those comments, the FDA could issue a final regulatory change with an effective date far enough in the future for tobacco companies to comply. Another possibility is that the proposed regulations could be modified, which would push implementation back to again allow for public comments and review. There's also a chance that the FDA could scuttle the whole idea -- but that seems unlikely.

22nd Century Group stands a chance of benefiting from two out of three of these scenarios. While there are other ways of lowering nicotine levels in tobacco, including chemical extraction, genetically engineered tobacco with low nicotine levels could be appealing to major tobacco growers. 

The company could also attract interest for its cannabis technology. Marijuana has become a big business. 22nd Century Group's zero-THC and optimized CBD marijuana seem like a great fit for medical marijuana growers especially.

22nd Century Group isn't profitable yet. Even if all goes well, it could be a few years before FDA changes go into effect. However, with a market cap of less than $300 million, the stock is a speculative play that just might pay off in a big way down the road.

The case for Insys Therapeutics

Insys Therapeutics launched its first cannabinoid product, Syndros, last year. The company's pipeline includes several cannabinoid programs, including a late-stage clinical study evaluating CBD in treating infantile spasms. Insys CEO Saeed Motahari has publicly stated that his goal is for Insys to become "the top cannabinoid company in the U.S." 

The problem for the biotech, though, is that its opioid breakthrough cancer pain drug, Subsys, still generates nearly all of its revenue. And sales for Subsys continue to drop with physicians, payers, and patients leery of opioids in the midst of the U.S. opioid epidemic. On top of all that, Insys remains under a dark cloud due to an ongoing U.S. Department of Justice (DOJ) investigation into its past marketing practices for Subsys.

So why consider buying Insys stock? First, Subsys sales should stabilize at some point. The drug became the preferred TIRF (transmucosal immediate-release fentanyl) product for two large pharmacy benefits managers and a big insurer in January. Second, Syndros should gain momentum, although it will take a while to do so. Third, Insys is cooperating with the DOJ and hopes to reach a settlement that will allow it move on from its mistakes of the past.

There's also another reason to consider Insys that is perhaps the most important: the biotech's pipeline. Insys could win FDA approval for its buprenorphine sublingual spray in treating acute pain by late July. The company's goal is to file for approval for one new drug each year through 2021. 

Insys' market cap currently stands close to $450 million -- a little over three times sales. Even a little good news would go a long way in helping the stock rebound.  

Better buy

I think it's quite possible that 22nd Century Group stock could soar over the next couple of years if the FDA requires tobacco companies to lower nicotine levels in cigarettes. However, I think that Insys is the better choice between these two stocks.

My decision was based largely on the old adage that "a bird in the hand is worth two in the bush." Insys has two "birds in the hand" with both Syndros and Subsys on the market already. Granted, one is still new and not contributing much revenue, while sales for the other product continue to fall. However, Insys still generated more than $140 million in sales last year.

Also, although it's not an old adage, it stands to reason that a bird nearly in the hand is worth more than two in the bush. Insys could have its third product on the market later this year if its buprenorphine sublingual spray wins FDA approval.

Insys' comeback might not happen in full force this year. In my view, though, the beaten-down biotech stock is a "bad-news buy" that should perform much better over the long run than it has lately.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.