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Investing $1,000 Into This Marijuana Stock in 2016 Would Leave You With Pennies on the Dollar Today

Sean Williams, The Motley Fool

The cannabis industry has been an absolute beast for investors since Marijuana Mania kicked into high gear at the beginning of 2016. Had you had the foresight, luck, and intestinal fortitude to buy into either Aurora Cannabis, Canopy Growth, or Cronos Group at the beginning of 2016, you'd have been rewarded with returns of close to 2,000%, nearly 3,500%, and over 7,000%, respectively.

While not all cannabis gains have been this impressive, the fact is that you could nearly have thrown a dart at any marijuana company with a share price of $1 or higher in 2016 and come out substantially ahead today.

A cannabis bud lying atop a messy pile of hundred dollar bills.

Image source: Getty Images.

This pot stock has cost investors, dearly

Of course, this isn't the case with all marijuana stocks. Pot stocks with a sub-$1 share price haven't fared so well over the past three-plus years. Penny stocks are often penny stocks for a reason -- i.e., they carry higher inherent risks, relative to better capitalized and/or more established businesses. Quite a many penny stock and microcap in the cannabis landscape has gone up in smoke.

There is, however, one marijuana stock with a respectable market cap ($300 million, currently) that has been an absolutely train wreck for investors since the start of 2016. Whereas most non-penny pot stocks would have made investors quite a bit of green, this particular marijuana stock has left long-term investors with just pennies on the dollar following an 86% loss since Jan. 1, 2016, and a 91% loss since late July 2015.

Ladies and gentlemen, and pot enthusiasts alike, say hello to the nightmare of all marijuana stocks: Insys Therapeutics (NASDAQ: INSY).

A Subsys sublingual spray cartridge next to its packaging.

Image source: Insys Therapeutics.

Insys' once mighty drug becomes its downfall

At one time, Insys wasn't a train wreck. In fact, it was the talk of the investment world by mid-decade. Following the approval of sublingual fentanyl-based spray Subsys in early 2012 for breakthrough cancer pan, the sky appeared to be the limit for Insys. In just a few short years, sales of its then-little-known pain medicine would soar from $0 to $330 million by 2015. Considering that Insys had a long line of prospective products in its pipeline, including a dronabinol-based oral solution (dronabinol is synthetic tetrahydrocannabinol (THC), the cannabinoid that gets a user high) for the treatment of chemotherapy-induced nausea and vomiting (CINV), as well as anorexia associated with AIDS, everything was looking up.

Then, almost as quickly as things went right for Insys, they started to go very wrong. The biggest issue was with its lead drug, Subsys. Allegations were made that company salespersons, with executive knowledge, were bribing physicians to prescribe Subsys for off-label use, as well as lying to insurers in order to have them cover the costs of the prescriptions. These damning allegations suggested that 80% of Subsys prescriptions were written for pain, but not breakthrough cancer pain. Ultimately, five executives were arrested, including billionaire founder John Kapoor. Kapoor and his cohorts were found guilty of racketeering in a Boston courthouse on May 2, 2019. 

Since word of the potential wrongdoing emerged, sales of Subsys have cratered from $330 million a year to just $78.8 million in 2018. Worst of all, Subsys' sales still haven't found a floor, and it's unlikely the company's key drug will anytime soon, with Capitol Hill waging war on fentanyl- and opioid-based medicines, and all trust being lost in management.

A physician with a stethoscope around his neck holding a cannabis leaf between his hands.

Image source: Getty Images.

This game-changing "marijuana drug" creates plenty of buzz, but few results

To compound the company's problems, Syndros, as its dronabinol-based oral solution for CIMV would be known following its approval by the Food and Drug Administration (FDA), has been a complete and utter flop.

Following its FDA approval in July 2016, Syndros was touted as a drug that could bring in as much as $300 million a year, at its peak, for Insys. That's because there was no other synthetic THC-like drug on pharmacy shelves to treat CINV or anorexia associated with AIDS.

Unfortunately, it was all downhill before sales even began. Insys had to wait more than year between its approval date and the official launch of Syndros, because the drug had to be scheduled by the U.S. Drug Enforcement Agency, and the company's packaging and marketing labels had to be OK'd by the FDA.

Once sales did begin, it became quickly clear that Syndros was suffering from a lack of marketing effort and investment, as well as trust issues from patients, physicians, and insurers. Syndros' first full year of sales in 2018 produced a meager $3.3 million in revenue, with less than $4.8 million collected in lifetime sales since the drug was launched in the summer of 2017. Prescriptions written for Syndros have been more or less flat since its launch on a quarterly basis.

A small pile of hundred dollar bills on fire, with hundred dollar bills being used as wallpaper in the background.

Image source: Getty Images.

Losses, CRLs, and going concerns -- oh, my!

And yet, the train wreck moves on. With Syndros flopping and Subsys sales rapidly shrinking, Insys pushed from regular profits in 2015 to pretty substantial losses as of today. In 2018, the company wound up losing $124.5 million, with an operating loss of $127.7 million. Although $70.8 million in expenses were tied to legal costs or litigation last year, and these expenditures should wane in 2019 and beyond, big losses are still highly likely for the company in the near term. 

Were this not enough, Insys' luck worsened in July 2018, when the FDA sent the company a Complete Response Letter (CRL) regarding its buprenorphine new drug application. A CRL is fancy way of saying that the FDA rejected Insys' experimental drug. According to the CRL, while the company's buprenorphine sublingual spray for moderate-to-severe acute pain met its primary endpoints in clinical studies, "some of the data suggested potential safety concerns." So, chalk up another drug development that won't pan out. 

Lastly, as the icing on the cake, Insys 2018 annual report also featured a going-concern warning. This warning is included in annual reports by auditors who don't believe a company has the capital to keep the lights on the next 12 months.

The marijuana industry may be booming, but Insys is the bust of all busts among pot stocks.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.