Insys Plunges as Opioid Maker Warns That It May Run Out of Cash

(Bloomberg) -- Insys Therapeutics Inc.’s auditor has raised substantial doubt about the drugmaker’s ability to continue as a going concern, the company said in a securities filing Wednesday, sending the shares down the most in more than a year.

The opioid manufacturer has spent tens of millions of dollars on the legal defense of former executives who face criminal charges for allegedly bribing doctors with sham speaker fees and dinners to induce them to write off-label prescriptions of a potent painkiller.

Insys’ negative cash flows and “uncertainty in generating sufficient cash to meet our legal obligations and settlements and sustain our operations raise substantial doubt about our ability to continue as a going concern,” the company said in a filing with the Securities and Exchange Commission. BDO USA is the Chandler, Arizona-based company’s financial auditor, according to the filing.

The shares 25 percent in New York, the biggest intraday loss since January 2018. They were trading at $4.26 at 1:48 p.m.

Insys’s billionaire founder and former Chief Executive Officer John Kapoor is on trial for racketeering and conspiracy related to sales of the company’s fentanyl spray Subsys in Boston. The company’s legal fees were about $54 million in 2018, with $25.7 million of that earmarked for Kapoor’s defense.

Company spokeswoman Jackie Marcus said that current management is working with advisers to address the legal costs and uncertain settlement exposures. In the meantime, Insys is continuing with normal business and research-and-development operations, she said.

In order to generate cash and pivot away from painkillers, the company announced in November that it would divest Subsys, a powerful sprayed version of the drug fentanyl. It plans to invest in products related to cannabis, as well as spray technology.

Insys hired Lazard Ltd. in the fourth quarter to advise it on capital planning and the evaluation of strategic alternatives. The company said it’s in active negotiations with “multiple parties” to sell Subsys, and is considering “spin-offs, strategic licensing and partnerships, joint ventures, restructurings, divestitures, business combinations and investments.”

The company said if it’s unable to obtain new funding it would have to “curtail some or all of our product development, commercialization and strategic plans.”

“If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited consolidated financial statements, and it is likely that investors will lose all or a part of their investment,” the company said in the filing.

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