Insys Therapeutics Inc INSY, a pharmaceutical company that focuses on a sublingual fentanyl spray for breakthrough cancer pain (BTCP) in opioid-tolerant patients called Subsys, reported its fourth quarter results Thursday which prompted Piper Jaffray to downgrade the stock.
The Analyst
Piper Jaffray's David Amsellem downgraded Insys Therapeutics' stock from Neutral to Underweight with a price target lowered from $5 to $4.
The Thesis
Heading into Insys' fourth quarter print, weakness from the company's key top-line driver Subsys was expected given the pressure facing its TIRF (transmucosal immediate-release fentany) market, Amsellem said a note. As expected, sales did fall short of expectations as evident by a revenue miss but the bigger takeaway is management's guidance for a relatively stable total sales in 2018 compared to 2017.
Management's commentary naturally implies stability in the TIRF market but "this has no basis in reality" given the ongoing opioid crisis and TIRF products have been "among the most controversial agents" within the opioid space, the analyst said. Management's guidance also "flies in the face of reality" and should "raise real questions" relating to the company's judgment and credibility.
The "weak roll out" of the company's Syndros doesn't inspire any confidence in management's guidance, Amsellem said. While the company may deserve some credit for advancing its pipeline the fact is the "relatively poor execution" on Syndros casts some doubt on management's ability to successfully commercialize new products.
Price Action
Shares of Insys Therapeutics were trading lower by 3 percent Friday at $7.45.
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