Editor's Note

It is never good for your stock price when insiders are arrested for illegal activities. Unfortunately for Insys Therapeutics the crack down on opioid drug use led to the arrests.


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INSY - Insys Therapeutics - Company Profile

Insys Therapeutics, Inc is a specialty pharmaceutical company that develops and commercializes supportive care products. The company markets Subsys, a sublingual fentanyl spray for breakthrough cancer pain in opioid-tolerant cancer patients in the United States. Its lead product candidate is Syndros, an orally administered liquid formulation of dronabinol. The company is also developing Cannabidiol Oral Solution, a synthetic cannabidiol for childhood catastrophic epilepsy syndromes; and other product candidates, including other dronabinol line extensions and sublingual spray product candidates.

Two former employees were arrested on June 9th for allegedly participating in kickback schemes involving doctors who prescribed the company's main drug, Subsys, a pain medication containing fentanyl. This is the drug that killed Prince, Joan Rivers and Michael Jackson. The two employees paid doctors thousands of dollars to participate in sham educational programs in order to induce the doctors to prescribe millions of dollars worth of the Subsys product. In 2014 alone the employees paid one doctor $147,000 and another $112,000 in speaker fees to give a talk at one of their "educational" programs. Those doctors were two of the largest prescribers of the drug in the USA. The scheme was discovered in November 2015. Subsys revenue in 2015 was $330 million. In 2014 a record 28,000 people died from subscription opioid addiction.

Earnings August 4th.

Clearly, this will have a long-term impact on Insys since there will be liabilities associated with the revenue generated from the scheme. The company is under attack by Preet Bharara, U.S. Attorney for New York. He has brought down dozens of other companies over the last several years for various types of misdealing.

Sell short INSY shares, currently $12.96, initial stop loss $14.25

No options recommended because of wide spreads and high prices.