Last year the FDA [i] alerted Endo that risks of Opana outweighed its benefits and [ii] asked the company to remove the opioid from the market due to its public health consequences of abuse. The company has $1.3 billion of cash on hand, but its debt load is at 7.5x run-rate EBITDA. A legal pay out would hurt its cash flow needed to service its $8 billion debt load.
Insys
Over 95% of Insys’s $33 million in quarterly revenue is derived from subsys, which delivers fentanyl; fentanyl is an opioid analgesic used for the treatment of breakthrough pain caused by cancer (“BTCP”) in opioid-tolerant patients. It is considered one of the strongest opioids on the market. Fenanyl and fenantyl analogs (synthetic opioids) accounted for over 20,000 of drug overdose deaths in 2016 – over 30% of total drug overdoses that year.
For full-year 2015 subsys generated $329 million in revenue; it fell to $129 million in 2017, a decline of over 55%. The company believes subsys is the leading branded transmucosal immediate release fentanyl (“TIRF”) product. However, past subsys sales may have been driven by prescriptions for indications other than for critical care cancer patients. The reduction of prescriptions for non-cancer patients could stymie subsys sales for some time.
Insys has cash of only $163 million. It is already under a Department of Justice (“DOJ”) investigation pursuant to its role in the opioid crisis. Insys has reserved $150 million for potential DOJ claims. Given its paltry liquidity it might not be able to cover additional legal claims proposed by President Trump.
Conclusion
MNK, INSY and ENDP are particularly vulnerable to potential opioid-related lawsuits proposed by the president. Avoid all three stocks.
What about Purdue, the greatest offender.
Are you not interested because they are not public?
Joe Smoe,
Agreed. Purdue is one of the biggest offenders. Since it is not publicly-traded the Shock Exchange rarely writes about it. He usually only covers publicly-traded companies.
Jo Smoe,
The Shock Exchange is interested in Purdue. He rarely writes about it since it’s not publicly-traded. Purdue is likely the king of opioids and trumps Endo, Mallinckrodt, Allergan, J&J, Teva, Depomed, and Insys.