It's mea culpa time.

In October 2017, I predicted that Insys Therapeutics (NASDAQ:INSY) could be the biggest comeback story of 2018. For a while, it looked like I was on the right track. Insys stock soared in the fourth quarter of 2017. By early January, it was one of the hottest marijuana stocks on the market. Then the momentum evaporated.

Insys announced its first-quarter earnings results after the market closed on Tuesday. After looking at where things now stand for the biotech, I must admit that I was flat-out wrong about this marijuana stock. To put it bluntly, a comeback probably ain't gonna happen for Insys this year. There are three key reasons why.

Man grimacing and slapping his forehead with his right hand

Image source: Getty Images.

1. Still no light at the end of the tunnel for Subsys

I thought that sales could stabilize in 2018 for Insys' transmucosal immediate-release fentanyl (TIRF) product Subsys. TIRF drugs are opioids, which have come under heavy fire due to the opioid epidemic in the U.S. To say that it's been a bad couple of years for drugmakers selling opioids is an understatement.

However, Insys CEO Saeed Motahari noted late last year that the rate of decline for Subsys sales appeared to be slowing down. That, combined with the inclusion of Subsys as the preferred TIRF product on the formularies of two of the largest pharmacy benefits managers in the country and one of the top health insurers beginning in January, made me think that sales could stabilize in 2018. 

But Insys just reported that its Q1 revenue dropped nearly 26% year over year to $38.5 million. Net revenue, which includes the impact of product returns, plunged nearly 34% below the prior-year period to $23.9 million. This net revenue total also reflected a 24% decline from 2017 Q4. Since most of Insys' revenue still comes from Subsys, it's clear that the drug's sales aren't stabilizing yet.  

2. Syndros isn't gaining momentum

Insys won Food and Drug Administration approval for its first cannabinoid drug, Syndros, in July 2016. However, the company didn't actually launch the drug until a year later after waiting on the U.S. Drug Enforcement Agency (DEA) and a final label for Syndros from the FDA.

When Insys reported its Q4 results, sales for Syndros were around $800,000. I expected that it would take a while for Syndros to pick up sales momentum. But I did expect some momentum. Based on Insys' Q1 update, though, there is little if any momentum. Motahari stated that "prescriptions of Syndros remained relatively flat in the first quarter." 

The drug is the only liquid form of dronabinol approved for treating anorexia associated with weight loss in AIDS patients and nausea and vomiting associated with chemotherapy in cancer patients. As a liquid, Syndros allows for fast absorption, flexible dosing, and is a good option for patients who have difficulty swallowing tablets or capsules.

So why hasn't the drug enjoyed greater success? The problem appears to be that payers don't want to pick up the tab. Dronabinol is available in generic form at around one-fourth the cost of Syndros. While Motahari said that Insys continues "to have discussions with managed care providers," it doesn't seem like those discussions are bearing much fruit yet. 

3. Investigation concerns still linger

Motahari listed resolving government investigations into past marketing practices for Subsys and rebuilding Insys' reputation as the company's No. 1 priority. He said the same thing in November 2017. So far, though, the investigations continue to be a dark cloud hanging over Insys.

I don't fault Insys' current management for these issues. The executives that led the company during the days when Insys allegedly engaged in illegal marketing practices are long gone now. So are most of the sales representatives who were with the company during that period. Motahari seems to have done a pretty good job of implementing processes to prevent these kinds of issues from recurring.

Still, there's no way to know how much Insys will have to pay to reach a settlement or how long it will take. The company set aside $150 million in the third quarter as a minimum liability in connection with the U.S. Department of Justice investigation. That might not be nearly enough to cover the actual cost of settling, though. 

Throwing in the towel?

I no longer think that Insys will make a significant comeback in 2018. The biotech still faces too many challenges. 

That being said, I'm not completely throwing in the towel on Insys. With new products on the way, Insys could eventually turn things around. And with more than 40% of its outstanding shares sold short, it would only take a little bit of good news to create a short squeeze scenario for the stock. 

However, I wouldn't hold my breath waiting for Insys to report good news that could provide a catalyst -- at least not this year. For now, there are better stocks for investors to buy with far fewer headwinds.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.