Insys Therapeutics Inc (NASDAQ:INSY) Is Setting Itself Up For A Long Term Recovery

When we looked at Insys Therapeutics Inc (NASDAQ:INSY) back in in February, the company had just run up on some news related to its epilepsy asset. We suggested that there was likely some longer term strength ahead for the company, and that its then-current market capitalization was an inaccurate representation of its true value, with the discrepancy rooted in the impact of the Subsys debacle on wider market sentiment.Since then, Insys has taken a hit, and currently trades in and around $10 a share (it was up at around $13 a share mid Feb). A few developments have hit press over the last few weeks, each of which plays into our thesis going forward. So, with that noted, here's a look at what's happened, and how it affects our expectations for the stock.For those new to this one, the company is a healthcare play with a focus on the development of supportive care therapies. It's got two approved products right now. One, the above mentioned Subsys, is a sublingual formulation of an opioid called fentanyl. The other is a dronabinol oral solution called Syndros targeting a host of conditions including chemo induced nausea, weight loss in AIDS patients and anorexia.We're not going to go into Subsys in any real detail here. Suffice to say, it's been the subject of some investigation surrounding prescription practices, and it's the primary driver behind some revenue restatements, which we'll look at in a second.The first of our developments, then, comes from a DEA scheduling of Syndros. The drug initially picked up approval in July 2016, but Insys hasn’t been able to sell it because it needed the DEA to schedule it. On March 23, the DEA scheduled it as Schedule II, and this is the first major hurdle in getting the drug on shelves and – by proxy – generating revenues from the asset. The second hurdle is labeling, and that’s something the company has to hammer out with the FDA. Management expects to have this complete, and the launch to commence, during the second half of this year.The second and third developments are sort of related, so we'll address them together. The first is the appointment of Saeed Motahari as the company's new President and Chief Executive Officer, and a member of the Board of Directors. This is a major development for us, as it allows the company to start putting the last twenty-four months behind it, and start looking forward. The second development plays into this, and it's what has caused the company to decline over the last week or so. The company said last week that it was going to restate some numbers, and then a few days later put out fourth quarter and year end 2016 results. The numbers weren't great – Insys reported revenues of $54.9 million for the fourth quarter of 2016, down from $93.9 million a year earlier, and a net loss of $3.7 million, compared to a net income of $18.1 million for the same periods.The decline, of course, came on the back of weak prescriptions for Subsys. That's no surprise. That market's have dipped on the figures also isn’t too much of a surprise, but we think there's plenty of scope for a quick recovery.Why? Because the appointment of a new CEO, the just reported financials and the potential for an H2 launch of Syndros marks the beginning of what we see as a fresh start for the company. We'd rather the new CEO come out and give us an honest picture of the financials at the start of his tenure (as he has done) than try to falsely buoy near term PPS by fluffing the numbers. We also think that the decline in Subsys sales can easily be offset by the potential for Syndros income.With cash at December 31 coming in at $237 million, there's plenty on hand to support a commercialization push while maintaining the ongoing development programs – each of which have potential to totally revalue this company in their own right.We will be updating our subscribers as soon as we know more. For the latest updates on INSY, sign up below!Disclosure: We have no position in INSY and have not been compensated for this article.