U.S. Markets close in 5 hrs 31 mins

Insys stock plunges 70% after Friday disclosure of company's woes

Sarah Toy

Shares of Insys Therapeutics Inc. plunged 70% Monday morning, a fall sparked by the biotech's Friday disclosure that mounting legal expenses and declines in the market for fast-acting fentanyl could lead it to file for bankruptcy. Insys said on Friday it was uncertain of its ability to complete a final settlement with the U.S. Justice Department to resolve an investigation into sales practices related to its fentanyl spray Subsys -- Insys reached a deal last August to pay at least $150 million to settle claims that it paid doctors kickbacks to prescribe the drug. The company also disclosed that it had just $87.6 million in cash, cash equivalents and investments at the end of March and expected continued negative cash flows from its operations. "These factors raise substantial doubt about the company's ability to continue as a going concern within one year of the issuance date of the unaudited condensed consolidated financial statements," the company said in a statement Friday. "If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited consolidated financial statements, and it is likely that investors will lose all or a part of their investment." Insys is also looking at a way to sell or license its assets. If it can't find a way to do that, or if the company is unable to reach an agreement with the Justice Department, its "liquidity, financial condition and business prospects will be materially and adversely affected. Accordingly, it may be necessary for the company to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring," Insys said. Earlier this month, a federal jury in Boston convicted five former executives and managers, including co-founder John Kapoor, of engaging in a racketeering conspiracy to bribe doctors to prescribe Subsys in order to boost profits. The company's first-quarter revenue fell to $7.63 million from $23.91 million, while net loss widened to $123.8 million after a loss of $20.37 million a year ago. The beleaguered biotech reported an adjusted loss of 55 cents a share on Friday, missing FactSet analysts' prediction of a loss of 22 cents. Shares of Insys have fallen 69% so far this year, while the S&P 500 has gained 13%.