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Why Insys Therapeutics Fell More than 70% Yesterday


May. 14 2019, Published 12:21 p.m. ET

Liquidity position

In its first-quarter earnings press release, which it published on May 10, Insys Therapeutics (INSY) highlighted the possibility of its being unable to continue as a going concern. While the company reported cash and cash equivalents worth $87.6 million on its balance sheet at the end of the first quarter, it estimated that the liability arising from the settlement of ongoing litigations would exceed $240.3 million.

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Insys Therapeutics’ revenue fell 68.2% YoY (year-over-year) to $7.63 million in the first quarter of 2019. However, its legal expenses associated with the US Department of Justice’s civil and criminal investigation and other litigations rose 148.30% YoY to $25.67 million. Potential contingent losses associated with litigations and settlements jumped 9,881.49% YoY to reach $73.86 million in the first quarter.

According to its first-quarter earnings press release, Insys Therapeutics has been considering strategic alternatives such as the sale or licensing of its portfolio of opioid-related assets to meet its operating cash flow requirements. However, in the event that it fails to implement the strategy or complete the settlement with the Department of Justice, Insys Therapeutics has stated that it could have to file for relief under Chapter 11 of the United States Bankruptcy Code.

Share price movements

In response to this announcement, Insys Therapeutics stock fell 73.61% and closed at $0.95 on May 13, 71.64% lower than its 52-week low of $3.35 and 91.84% lower than its 52-week high of $11.65. The company’s market cap is $79.94 million. Since its market cap is lower than $300 million, it’s a micro-cap stock and can prove to be a riskier investment than the broader market.

Insys Therapeutics’ price-to-sales and price-to-cash ratios are 0.97x and 0.84x, respectively. The company’s 14-day relative strength index is currently 12.99. Its number of outstanding shares is 84.14 million, while its short float ratio is 42.73%.


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