What happened
Shares of Insys Therapeutics (INSY) were plummeting 73.9% as of 11:35 a.m. EDT on Monday. The biotech reported its first-quarter results after the market closed on Friday. Those results weren't great, but the bigger news was that Insys stated that it might have to file for bankruptcy.
So what
Insys Therapeutics' latest update contained nothing but bad news for investors. The company stated that its available liquidity is down to $87.6 million in cash and cash equivalents as of March 31, 2019. Insys also anticipates continuing to lose money and have negative cash flow for the foreseeable future.
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This wasn't Insys' first time to specifically state that it could run out of cash. The biotech said in its previous quarterly update in March that "we cannot be sure that our existing cash and cash equivalents or investments will continue to be adequate to fund our operations."
It's not all that unusual for unprofitable companies to include language in their quarterly updates that raises questions about their ability to continue as a going concern. But in most of those cases, the company has reasonably good options available, including issuing more stock to raise cash. Insys has some options, but there's no guarantee that they will work.
Insys already announced that it plans to try to sell its opioid drug Subsys, as well as formulations of opioid addiction drug buprenorphine and the combination of buprenorphine and naloxone. Selling off these drugs is easier said than done, though.
The company isn't even sure that it will have enough money to fulfill demands from the U.S. Department of Justice (DOJ) connected with a settlement agreement over allegations of improper marketing practices in the past. Insys hopes to reach an agreement with the DOJ, but there's no certainty that will happen.
Now what
It's possible that Insys will find a buyer for Subsys. It's possible that the company could raise enough cash to keep moving forward. But the biotech faces serious challenges.
Investors should stay away from the stock of any company that could realistically face bankruptcy in the not-too-distant future. Insys itself stated that "trading in our securities is highly speculative." That's an understatement. Shares are likely to be extremely volatile in the coming months.
