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Insys Therapeutics: Who Needs Opioids When You Can Have Cannabinoids?


Low market expectations misprice the broadening of INSY's existing product portfolio into the high-growth medical marijuana industry.

At $15.98 per share, INSY's Adjusted ROA of 46% and Adjusted P/B of 3.2x drive an Adjusted P/E of 15.1x, an interesting undervalued idea given its fundamentals.

Investors believe that revenues from the company's flagship product "Subsys" have peaked, and are concerned about possible negative penalties resulting from lawsuits related to the product.

Market expectations ignore the company's recent pivot to offer cannabis medical solutions - a market projected to be worth $22bn by 2020.

Meanwhile, the latest FDA approval of its new product "Syndros" is projected to double INSY's revenues in the following years.

Insys Therapeutics (NASDAQ:INSY) is in the Biotechnology sub-industry of the Healthcare sector. Its stock price is $14.98 as of July 26th, 2016, with a market capitalization of $1.1bn. The firm trades on the NASDAQ stock exchange and is headquartered in Phoenix, Arizona. After careful analysis of both historical trends, as well as current valuations and analyst estimates, we believe the embedded expectations of INSY make it a very interesting value idea.

To better analyze the company's performance and valuation, we used the Valens Research database, as it is difficult to make investment decisions without using performance and valuation metrics that have been adjusted for distortions and inconsistencies in financial statement reporting under both GAAP and IFRS. For more detail, please follow this link.

At $14.86 per share, Insys Therapeutics has embedded expectations of future performance that are reasonable but not forecasting growth

To reach today's stock price of $14.98, Insys's Adjusted ROA would have to fall from last year's 52% levels to 8% over the next five years, with a five-year CAGR (compound annual growth rate) of 28%. To see this in more detail, and have the flexibility to perform your own scenario analysis, click here.

What the market is thinking and why

As of today, Insys Therapeutics generates the majority of its revenues from one product - Subsys. Subsys is a sublingual spray that provides rapid onset pain relief to patients suffering from breakthrough cancer pain (BTCP). Subsys has generated...