Insys Therapeutics Inc. reported on May 10 that biting litigation had left it cash-strapped and staring at big loses and may be unable to complete its settlement agreement with the Justice Department.
The U.S. Justice Department launched a probe into the company’s sale of opioid medication which highly cost the company to settle the legal costs.
Investors may be the greatest losers if the company does not succeed in its plan to sell off the opioid product Subsys. Insys intends to sell its assets as per the price quoted in its audited financial statements. However, this may be impossible.
In its attempt to salvage the situation, the company wanted to pay $150 million or more to the Department of Justice investigations in order to dismiss the allegations at hand. It is alleged that Insys bribed doctors so that they could prescribe Subsys to patients.
Subsys is an under-the-tongue spray containing fentanyl and is a type of opioid believed to be 100 times stronger than morphine.
The Department of Justice demanded that Insys agrees to the execution of a security deal that relates to its assets to act as collateral. Insys, however, said it may not be able to meet those demands.
The Arizona-based company said that up to March 31, its available liquidity could not exceed $87.6 million. This is collectively from cash, cash equivalents as well as investments. Judging from its progress, the company predicts a period of losses.
Last week, the founder of Insys John Kapoor who is a billionaire together with his four former colleagues at Insys was convicted of bribing and giving kickbacks to doctors so that they would prescribe Subsys.
Subsys was approved by the U.S. Food and Drug Administration in 2012 to treat cancer patients with severe pain. Surprisingly, prosecutors discovered that Insys bribed doctors who then prescribed the drug to patients who never suffered from cancer so as to multiply the drug sales.
The company posted its quarter one earning which declined by 68% to $7.6 million. Compared to the previous year’s $20.4 million loss, the company continued to suffer closing with a net loss of$123.8 million.