What happened

Shares of Insys Therapeutics (NASDAQ:INSY) were plunging 25.5% as of 3:30 p.m. EDT on Wednesday. The biotech submitted its Form 10-K to the Securities and Exchange Commission (SEC) earlier in the day. In this filing, Insys stated, "We cannot be sure that our existing cash and cash equivalents or investments will continue to be adequate to fund our operations."

So what

Unfortunately, Insys Therapeutics' regulatory filing isn't being overly pessimistic. As of Dec. 31, 2018, the company's cash, cash equivalents, and short-term investments totaled $104.1 million. However, Insys lost more than $228 million last year.

Businessman looking at red line plunging through floor

Image source: Getty Images.

The biotech said that it expects continued negative cash flows. In addition, Insys' expenses are increasing as its pipeline candidates advance into later-stage studies. The company also potentially faces higher legal costs related to its past promotional activities for the opioid Subsys.

There are typically two primary routes that an unprofitable company can take to raise capital. One is borrowing. Another is issuing new shares. Insys noted that it's considering both approaches. However, it also stated in its Form 10-K that "there are no assurances that such additional funding will be obtained and that the company will succeed in its future operations."

Insys is also taking one other step that's akin to passengers of a sinking hot-air balloon throwing a heavy object out of the basket to stay aloft. The company is trying to sell Subsys and get out of the opioid business altogether to focus on cannabinoids. CEO Saeed Motahari said in the company's Q4 conference call last week that Insys is "in the middle of active negotiations" related to the divestiture of Subsys.

Now what

As Insys noted in its regulatory filing, there is "substantial doubt about the company's ability to continue as a going concern." However, the company engaged Lazard Freres to help evaluate its financial alternatives. Going out of business would certainly be the option of last resort for Insys.

The company's troubles have been apparent for quite a while. The latest news only adds to the list of woes. Investors would be better off staying away from this beaten-down biotech until it can clearly demonstrate that it will survive and thrive.