Source: Insys Therapeutics

Marijuana has a long history of use in the treatment of illness, and the stigma associated with the drug is waning as more states embrace legalization of medical marijuana and many barriers to access disappear.

Continued momentum in the mainstreaming of medical marijuana could be good news for Insys Therapeutics (NASDAQ:INSY), a biotech company that is awaiting Food and Drug Administration approval of a new formulation of a long-standing marijuana treatment for chemotherapy-induced nausea or anorexia caused by HIV.

Marijuana innovation
The marijuana chemical cannabinoid THC has been available for use by cancer and HIV patients for over 20 years as the FDA-approved drug marinol. Even though the drug has been available since the 1980s, and despite the fact that the market is now dominated by low-price generic formulations, U.S. spending on the marinol still totals roughly $150 million annually.

That's an attractively-sized market that Insys Therapeutics believes it can disrupt with oral dronabinol, a faster-acting, liquid formulation of marinol that can be more precisely dosed.

Overcoming a delay
Insys Therapeutics originally received a refuse-to-file from the FDA when it applied for approval of oral dronabinol last year. The FDA kicked it back to Insys because the company's application failed to include an adequate plan for studying the drug in children.

After meeting with the FDA to discuss the agency's concerns, Insys believes its new filing will pass muster. If so, then the FDA's acceptance of the application should be forthcoming, leading to an agency decision on oral dronabinol 10 months later. Based on that timeline, Insys Therapeutics could be competing in the oral marinol market in about a year.

Duplicating its model
If the drug is approved, Insys Therapeutics will likely hit the ground running. That's because the company already markets marinol capsules and because Insys has already successfully commercialized one reimagined drug therapy.

In 2012, Insys won approval for Subsys, an oral formulation of the opioid fentanyl that can be sprayed under the tongue to treat breakthrough cancer pain. Despite competing against other fentanyl products, Insys has successfully won more than $200 million in fentanyl market share annually.

Last year, Insys Therapeutics' sales of Subsys jumped by 123% to $220 million. In the first quarter, Subsys revenue reached $66 million, up 69% from a year ago.

Looking ahead
If the FDA gives Insys Therapeutics the go-ahead and oral dronabinol is a success, the company will have gained momentum for its efforts to develop additional marijuana-derived drugs.

The company is evaluating the nonpsychoactive cannabinoid CBD as a potential treatment for two rare forms of epilepsy. Trials evaluating its CBD in both Dravet syndrome and Lennox-Gastaut syndrome are under way, and the results could support the initiation of late-stage phase 3 trials by year's end. If Insys Therapeutics can deliver on that timeline, then it could conceivably file for FDA approval of these other marijuana-based drugs in the next year or two.

Assuming legalization efforts continue to demystify medical marijuana, Insys Therapeutics' timing for these marijuana-based medicines could be perfect. For that reason, Insys remains one of my favorite small biotech companies.