The marijuana industry was practically unstoppable in 2018, with numerous long-term barriers being cast aside. We witnessed the legalization of recreational marijuana in Canada, saw President Trump legalize hemp and hemp-based cannabidiol with the signing of the Farm Bill into law, and observed as the U.S. Food and Drug Administration approved the first-ever cannabis-derived drug.

And yet marijuana stocks delivered a miserable 2018 for investors, with 10 popular names declining by at least 50%. Whether it was a "sell-the-news" type of event or a lack of tangible operating results, pot stocks went up in smoke during the fourth quarter.

A person holding up a cannabis leaf in an indoor grow farm.

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A nearly perfect month for marijuana stocks -- save for these two companies

But let's just say, what a difference a month can make. With the door now closed on January, the Horizons Marijuana Life Sciences ETF, which holds a basket of more than four dozen direct and indirect pot players in various weightings, gained 48% last month. Of the four dozen cannabis stocks that I regularly track, 42 out of 48 rose by a double-digit percentage in January. The industry just couldn't be stopped.

Well...almost.

Of the four dozen direct and ancillary marijuana stocks on my watch list, two managed to brush off the industry's bullishness and end the month lower.

Insys Therapeutics

There's no amount of caution tape that would be sufficient to wall off Insys Therapeutics (NASDAQ:INSY) from unsuspecting investors. This drugmaker, which focuses part of its research and product line on cannabinoids or synthetic cannabis compounds, wound up losing 1.1% in January and has shed well over 90% of its value in the past 3.5 years.

Insys' problems primarily tie in to its fentanyl-based sublingual medicine known as Subsys. Once a drug that fetched $330 million in full-year sales, Subsys is just a shell of its former self. That's because the company's co-founder and a number of former executives have been implicated in and arrested for a kickback scheme that essentially bribed physicians to prescribe Subsys for off-label use. Although the drug is approved by the Food and Drug Administration (FDA) as a treatment for breakthrough cancer pain, it's alleged that 80% of Subsys's sales came from off-label use.

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Although the company agreed this past August to pay $150 million to settle this U.S. kickback probe, the damage is far from over. The backlash from the ongoing trial of its former executives continues to hurt sales of its once-prized drug. With consumer, physician, and insurer trust lost, Insys managed only $17.7 million in net revenue from Subsys during the third quarter, with no signs of the decline abating. Though Insys has suggested it might sell its opioid franchise, including Subsys, it almost certainly won't be able to get a fair value for its assets given the concerns surrounding opioid- and fentanyl-based treatments.

Just to make matters worse, the company's oral dronabinol solution Syndros -- dronabinol is a synthetic form of THC, the cannabinoid that gets a user high -- has been a complete disaster. Launched more than a year ago as a treatment for chemotherapy-induced nausea and vomiting and to treat anorexia associated with AIDS, Syndros has racked up just $2.61 million in sales through the first nine months of 2018. It's unclear whether Syndros has just been marketed poorly or if Insys' reputation is the issue.

The key takeaway here is that Insys' existing product portfolio is a train wreck, and it's burning through what cash it does have on hand. That looks to have been more than enough reason for investors to push its stock lower in January.

22nd Century Group

Amazingly, there was another ancillary pot stock that did even worse than Insys in January. 22nd Century Group (NYSEMKT:XXII), which is best known for its plant biotechnology, shed 10% of its value last month.

Things actually looked promising for a little over a week after the year began. 22nd Century Group announced on Dec. 27 that it had filed its long-awaited modified-risk tobacco product application with the FDA. This application is for the company's proprietary Very Low Nicotine Content (VLNC) cigarettes. These cigarettes contain 95% less nicotine than the average of the 100 most popular cigarette brands in the United States. Since the FDA outlined its tobacco harm-reduction initiative in 2017, 22nd Century Group's VLNC cigarettes would appear to move the needle in the right direction (i.e., away from nicotine dependence).

A young man sitting down and smoking a cigarette.

Image source: Getty Images.

However, the wheels fell off the wagon by mid-month, and the momentum that 22nd Century Group has enjoyed for years -- its share price tripled between the beginning of 2016 and Nov. 2018 -- came to a crashing halt for two reasons.

First, the company is facing a barrage of lawsuits, many of which claim that 22nd Century Group misled investors by failing to disclose that it had paid for stock promotion services. Regardless of whether this is true, it's not illegal to pay for stock promotion services. However, it must be disclosed by the publicly traded company if that's the case. Legal costs are a drag for a company that's not currently cash flow positive.

The other possible issue here is that the company's VLNC product may not find much demand from the public. Cigarette users smoke tobacco for a nicotine high and would seem unlikely to try 22nd Century's low-dose nicotine product.

We've also heard very little about the company's cannabis and hemp technology, which could produce hemp plants containing zero THC and high levels of cannabidiol and could improve the ability of hemp plants to adapt to their growing environments.

With losses expected for the near to intermediate future, 22nd Century Group looks to be a stock best left out of your portfolio.

Sean Williams 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.