Debra Borchardt
Insys Therapeutics (INSY), once an up and coming cannabis biotech company has gone down in a blaze of scandal. The company’s stock stopped trading last week when former executives were arrested (again).
Insys Therapeutics says it has addressed the issues that caused the NASDAQ exchanged to place a hold on the trading of its stock and is waiting to hear from the exchange as to whether it will begin trading again. The stock last traded at $5.74, down from its 52-week high of $15.06. In 2015, the stock hit a high of $44, but persistent negative headlines have caused the stock to crash. Revenues have plunged and earnings are in the negative territory.
On October 26, former Chief Executive Officer and founder John Kapoor was arrested and charged with RICO conspiracy, conspiracy to commit mail fraud and conspiracy to violate the Anti-kickback law for the company’s promotion of its fentanyl drug Subsys. Other former executives that were arrested included the former CEO and President Michael Babich and several in the sales department including:
- Former Vice President of Sales – Alec Burlakoff
- Former Director of Sales – Richard Simon
- Former Vice President of Managed Markets – Michael Gurry
- Former Sales Representatives – Sunrise Lee, Joseph Rowan
The company had been accused as early as December of 2016 for bribing medical practitioners to write prescriptions for Subsys and also misleading insurance companies in order to get coverage for non-cancer patients in an off-label use. Several of these same players were arrested back then, but these charges are above and beyond what happened last December.
The company insists that all the bad players are gone and it is trying to move forward. However, even after all the charges from last December, Kapoor remained on the board of directors and only resigned on October 29th. “I am confident that I have committed no crimes and believe I will be fully vindicated after trial,” Kapoor said in a statement on Sunday.
The company has also set aside $150 million according to a September filing for liability payments that it could be forced to make over the next five years. In a company statement, Insys Therapeutics said, “This estimate reflects a minimum exposure at which management has determined a willingness to settle these matters. The DOJ has not accepted management’s offer, and there can be no assurance that future discussions with the government to resolve these matters will be successful, that the approvals we need will be obtained or that any potential settlement will be agreed to on terms and conditions acceptable to us or the DOJ.”
Even if the company’s stock begins trading again, it will be a difficult road back. The current executives have shown poor judgment in allowing the founder to remain on the board during these charges. In addition to that, it’s main drug is still fentanyl, which is closely associated with the opioid epidemic. Its cannabis-related drug Syndros, which is a dronabinol was only just launched this past summer. In addition to that, the company is facing numerous lawsuits ranging from patent issues regarding Syndros to a case filed by former board members.
It’s a messy situation that investors should use extreme caution when considering an investment.
