Continuing the deep dive into the universe of potential investments in the emerging marijuana industry I will examine the case for Insys Therapeutics Inc. (INSY NASDAQ). The medical marijuana market is forecast to grow from $4 billion in 2015 to $22 billion in 2020.
The company is a specialty pharmaceutical company which received orphan drug status for synthetic cannabidiol – CBD- as a treatment for Glioblastoma Multiforme which is the most common and aggressive form of malignant primary brain tumour.
The company currently has only one drug on the market called Subsys which is a pain management spray for late stage cancer patients. In 2015 it generated $330 million in sales. Subsys contains Fentanyl and two former employees were arrested in connection with an alleged kickback scheme involving two doctors.
INSY has five drugs in their pipeline and analyst are waiting to see how those compounds progress through the development process.
An inspection of the charts will add another dimension to the analysis.
The three-year chart indicates that the shares topped out in August of 2015 with a 52-week high of $46.17. INSY then proceeded to breach support along the uptrend line that had started in August of 2014 when the shares bounced off $12.50. The situation since last year has been a steady decline with the stock breaking below the 50-day moving average in August and the 200-day moving average in September.
The lesson to be harvested from these observations is that when a stock breaks below its uptrend line and its moving averages its time to seriously re-examine the rationale that motivated the original buy decision. Capital preservation demands timely decision making to avoid surrendering hard earned capital to Mr. Market.
At the time of this analysis INSY has broken below support at $12.50 and touched a 52-week low of $11.45.
The six-month chart depicts a stock struggling to overcome selling pressure that has put it in a precarious situation. There is little to support a buy decision at this time. Having said that put it on a watch list to see when this one might be worthy of your capital.
Next time I will audit GW Pharmaceuticals plc ( GWPH NASDAQ) on the deep dive.
Make it a profitable day and happy capitalism!