What happened

Shares of INSYS Therapeutics (NASDAQ:INSY) are down 12.5% at 3:25 p.m. EDT Friday after jumping 34% higher yesterday on word that the U.S. Food and Drug Administration (FDA) had granted Fast Track designation to the company's epinephrine nasal spray.

So what

Fast Track designation is certainly useful for drugmakers to have, since it provides additional access to the FDA and theoretically a faster approval process. But it's hard to argue that the designation is worthy of a 34% increase in INSYS Therapeutics' stock price, especially for a company with a market cap north of $500 million.

As fellow Fool Keith Speights hypothesized yesterday, the increase was likely due to a short squeeze, where a small increase in the share price due to the designation is perpetuated by short-sellers buying to cover their short positions. With temporarily more buyers than sellers, the price has to go up to bring the two into equilibrium.

But shorts weren't buying based on any underlying valuation. Once the temporary situation is over, with the shorts covering their positions, the stock price often retreats. It's higher today than it was on Wednesday, but nowhere near the level seen yesterday, which seems about right.

U-turn painted on the ground

Image source: Getty Images.

Now what

Rather than paying attention to the daily gyrations of INSYS' share price -- as fun as that may be when it's headed in the right direction -- investors should be focused on how INSYS is going to make up for declining sales of its opioid pain drug Subsys. The epinephrine nasal spray could help, and it has a few other drugs in phase 3 development, but investors shouldn't expect things to turn around overnight.