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Marty Chilberg is a seasoned financial professional with over 30 years of executive leadership, board, consulting and advisory experience.  He began his career as a certified public accountant (CPA). He moved to Silicon Valley in 1981 to begin his career in the software industry, working for... More
  • Insys Therapeutics: HHS Investigation Complete? 10 comments
    May 9, 2014 8:08 PM | about stocks: INSY

    Last December Insys (INSY) put out this press release:

    PHOENIX, AZ--(Marketwired - Dec 12, 2013) - Insys Therapeutics, Inc. (NASDAQ:INSY) announced today that it has received a subpoena from the Office of Inspector General of the Department of Health and Human Services ("HHS") in connection with an investigation of potential violations involving HHS programs. The subpoena requests documents regarding Subsys®, including Insys' sales and marketing practices relating to this product. Insys intends to cooperate with the investigation.

    A subsequent shareholder class action was dismissed per this press release:

    PHOENIX, AZ--(Marketwired - Feb 21, 2014) - Insys Therapeutics, Inc. (NASDAQ:INSY), a specialty pharmaceutical company with a focus on supportive care products for cancer patients, today announced that the previously reported stockholder class action lawsuit (Hillier v. Insys Therapeutics Incorporated et al) that had been filed against the Company and certain of its officers and directors in U.S. District Court for the District of Arizona was on February 20, 2014, voluntarily dismissed by the plaintiff and thereafter terminated by the court. No payment or consideration of any kind was made by any of the defendants in connection with the dismissal.

    Today INSY dropped 20% when a report came out that Dr Gavin Awerbuch was arraigned for Medicaid fraud for activities including excessive prescriptions of Insys sublingual opioid spray, Subsys.

    This timeline is interesting in that the investigation of Dr Awerbuch was for activities dating back to 2011. INSY was subpoenaed at end of 2013 and has reportedly cooperated with HHS to date. The dropping of the class action lawsuit could be evidence that there is no suggestion that HHS has concerns with INSY as a potential contributor to this fraud.

    This is a story worth watching closely. INSY is profitable and growing quickly with a very reasonable forward PE. This sell off seemingly provides potential investors with 3 reasonable outcomes:

    1. INSY had no involvement and the excessive use of Subsys did not significantly impact the reported revenues of the company. In this case, this appears to be an opportunity to pick up shares at a significant discount.
    2. INSY had no involvement but the historical revenues were materially higher than true demand. In this case forward guidance absent this incremental revenue will need to be reviewed to ascertain whether this selloff is reasonable or excessive.
    3. INSY had involvement in this fraud. This outcome seems highly unlikely, but if true it represents an opportunity to short the stock as this sell off is likely just starting.

    Insys is expected to release earnings on Tuesday May 13th. Should be an interesting conference call.

    Disclosure: I am long INSY.

    Stocks: INSY
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  • jimmymerlo
    , contributor
    Comments (6) | Send Message
     
    $INSY Some details including the number of prescriptions for Subsys (1,283) written by this doctor. This news was too obscure to warrant such a selloff. Looked like program trading to me. Waiting to see if the stock holds the open on Monday.
    http://bit.ly/1j5gByc
    10 May 2014, 02:24 AM Reply Like
  • MortyLong
    , contributor
    Comments (181) | Send Message
     
    I would like to know (yes I will be googling this doctor) what kind of doctor he is and in what timeframe this number of prescriptions were written. It seems very high and I am a user of a TIRF for breakthrough cancer pain and can't find a pharmacy that carries it. Several reasons, fear of DEA raids and cost for such a pricey specialty drug. These types of programs hurt the patients that truly need these types of medications. I must pay full price for any TIRF and at nearly $100/dose who would be filling these without noticing the quantity. I will let you know that at an average dose, each bottle contains 15 sprays, most patients require 30 sprays but likely many more to combat up to 8 doses of spray or max 2 doses per breakthrough cancer pain episode for a total of 4 a day (each dose can be repeated w/i 30 min. if pain is not relieved). Conservatively, and I am going to bet if paid via Medicaid it's more like 60-90 doses, we are looking at anywhere from $3.2M to $15M, double or triple this amount depending on the dosing. I'd want to look long and hard at that situation where one doctor is writing that many prescriptions and the fact that I can't write a check to my pharmacy for my much needed pain medication because no pharmacy is willing to carry it due to DEA scrutiny and cost. Again the abuse by some will hurt the patients this was designed to help as is often becoming the case. I will disclose I am not a fan of Insys as a medication, based on their suit against Mylan for a contract they entered into willingly with Mylan to produce Marinol , the generic Dronabinol, which is used for severe nausea, vomiting and weight loss related to chemotherapy. Insys keeps taking their own contract to court to invalidate it anyway they can so they can make their next moneymaker, basically Dronabinol or Marinol in immediate release form, not new or novel and if a patient requires this medication, they are clearly instructed to take it in advance, often days before and after chemo and consistently if weight loss is an issue to get them through the treatment phase. I currently take Mylan's Dronabinol and find it to work just fine and it's affordable. I can't see the cost/benefit ratio to the patient in this case, only the manufacturer. The court has ruled against Insys 4 maybe 5 times that I know of in favor of Mylan as Mylan is following the letter and spirit of the contract and keeping costs low for all patients. I must disclose, I personally am a patient, I use Abstral (when I can find and afford it) or should say I find it to be the best fit for me as it's a pill that dissolves in just seconds under my tongue and disposal is safe and easy, you toss the paper wrapper into any trash can whereas Subysy requires much more care and has not been as effective for me. I must disclose that I am an investor in Galena (options expire in October), but not so proud to say it as I just see this sector of Pharma all lock in step in high prices that most often exceeds $100/dose making it beyond difficult for many patients, myself included, to afford. I have a hard time supporting price points that do not involve novel compounds but I must admit, the relief is fast, often the drug is out of your system w/i 30 minutes and can end a pain cycle from escalating I'd say 80-85% of the time. I'm just tiring of the extreme profiting from the sick and suffering. It will be interesting to see where these cases go and how these medications will be made more affordable and safely available and to those truly in need. I am personally paying a portion of this potentially $15M worth of "free" medications paid courtesy of taxes yet struggle to find or afford my own, doesn't seem quite right. I am not affiliated with any drug company, PR firm and am long $GALE solely via options and getting caught in the midst of their own alleged indiscretions. 
    13 May 2014, 12:05 AM Reply Like
  • Marty Chilberg
    , contributor
    Comments (541) | Send Message
     
    Author’s reply » $INSY earnings out. Miss on revenues. Beat on earnings. Call starts at 11am EST should be interesting. They are raising next quarter Subsys revenues which seems to indicate that this is relatively immaterial to results.
    13 May 2014, 09:26 AM Reply Like
  • Marty Chilberg
    , contributor
    Comments (541) | Send Message
     
    Author’s reply » $INSY Pretty solid call. Michigan Dr decreased his prescritions levels over past few quarters. Was down to 3% of total revenue in Q1-14. Forward guidance increase in revenue incorporates his reduced/eliminated prescriptions. Per company, there is zero company involvement in the medicaid fraud per HHS/court docs.
    13 May 2014, 11:44 AM Reply Like
  • jimmymerlo
    , contributor
    Comments (6) | Send Message
     
    $INSY All things considered, this was a terrible tape today. There is no support to trade against. Although this was a well handled conference call, the damage is done. Too late to bail, too soon to buy. Any strategies out there?
    14 May 2014, 04:55 PM Reply Like
  • Marty Chilberg
    , contributor
    Comments (541) | Send Message
     
    Author’s reply » Wish I had a better answer. The damage is done and unless the company is lying, the fundamentals suggest the value is very cheap. No reason to buy until we know more about the HHS investigation, the insider selling lawsuits, etc. Valuation is cheap but that doesn't matter until the selling stops. I'm going to look at option strategies given the vol, but nothing comes to mind yet.
    14 May 2014, 07:42 PM Reply Like
  • Marty Chilberg
    , contributor
    Comments (541) | Send Message
     
    Author’s reply » NYT article
    http://nyti.ms/1nROwK4
    15 May 2014, 08:33 AM Reply Like
  • jimmymerlo
    , contributor
    Comments (6) | Send Message
     
    $INSY Typical NYT slant. Not enough volume on any option play and with IV so high the premiums are prohibitive. That's why I'm sitting with an uncovered long. Need some good news and a good quarter next quarter. Will be following.
    15 May 2014, 03:47 PM Reply Like
  • raminvestor1
    , contributor
    Comments (6) | Send Message
     
    Have you heard of any gov't updates re this? Thanks
    11 Mar, 03:10 PM Reply Like
  • Marty Chilberg
    , contributor
    Comments (541) | Send Message
     
    Author’s reply » Sorry I haven't. After a while I decided to just sell and listen from sidelines. After done any more research with so many other bios beaten up without an investigation.
    11 Mar, 03:18 PM Reply Like
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