The FDA giveth and the FDA taketh away. On July 27, 2018, Insys Therapeutics (INSY) announced that the U.S. Food and Drug Administration declined to approve the company’s New Drug Application for Subsys, an opioid-based painkiller, on the grounds that it was potentially unsafe.
News of the denial on Friday sent Insys shares sliding by 9% to $6.62. For the last several years, Insys shares have been on the decline, due in large part to the company’s ongoing legal issues.
In 2016, seven Insys executives were arrested for conspiring to bride medical staff in several states to prescribe medication. Then, last year, INSYS founder John Kapoor was arrested in Arizona and charged with RICO conspiracy, conspiracy to commit wire fraud, and conspiracy to violate the Anti-Kickback Law for his efforts to secure prescriptions of Subsys.
Additionally, the company was sued earlier this year by the state of New York for deceptively promoting Subsys. Specifically, the state claimed that the company was engaging in a pattern of deceptive behavior by downplaying the risks of addiction by using Subsys, lying to healthcare providers to bypass the authorization process, and for bribing doctors to prescribe the medication. The suit is still ongoing.
Considering these legal issues, and the fact that an advisory committee in May recommended against approving the drug, it is less than surprising that the FDA denied approval to Subsys. In a statement, Insys senior vice president of regulatory affairs, Steve Sherman, tried to put on a good face in light of the potentially devasting news.
“Given the attributes of our proprietary buprenorphine formulation for sublingual delivery, we continue to believe that this drug-device combination could bring value to the management of pain and will assess the next steps in the context of the company’s overall mission,” said Sherman
Despite the disappointing news for investors, there are still at least three analysts that give Insys a Buy Rating, according to NASDAQ. Even after the company gets poor news on its drugs, investors seem to keep giving the company the benefit of the doubt. The stock tumbled in the summer of 2017 when its drug study didn’t go as planned and continued to fall until Insys executives kept talking up its pipeline giving some investors hope for a turnaround.