Thursday, May 15, 2014

The New York Times pile onto Insys

The New York Times picks up where this blog leaves off, piling onto Insys Therapeutics. To quote:

Interviews with several former Insys sales representatives suggest the company, based in Chandler, Ariz., has aggressively marketed the painkiller, including to physicians who did not treat many cancer patients and by paying its sales force higher commissions for selling higher doses of the drug. 
Under F.D.A. rules, manufacturers may market prescription drugs only for approved uses. But doctors may prescribe drugs as they see fit. Over the last decade, pharmaceutical companies have paid billions of dollars to settle claims that they encouraged doctors to use drugs for nonapproved treatments, or so-called off-label uses, to increase sales and profits. 
Drug-safety experts said the range of medical professionals who appeared to be prescribing Subsys was troubling, particularly given concerns about the widespread use — and abuse — of narcotic painkillers. In December, Insys disclosed that it had received a subpoena from the federal health department’s Office of the Inspector General for documents related to its sales and marketing practices. The company has said it is cooperating with the investigation.

Marketing the drug off-label is a criminal offence and as the drug has near substitutes it will not be much if any loss to consumers if this company were closed.

The Feds are clearly interested having indicted a doctor who was allegedly prescribing large quantities of the drug off-label.

Can somebody please explain to me why this company is trading at 21 times historic earnings and almost 7 times historic sales? Because I don't quite get it.





John

4 comments:

mokwit said...

Re: Can somebody please explain to me why this company is trading at 21 times historic earnings and almost 7 times historic sales?

You are barking in the wrong forest looking at comparative valuation metrics with this type of stock. Not everyone buys or doesn't buy on comparative valuations - the public buys future prospects stories/incremental good news and some do not even look at those metrics.

It got ramped up there on a tight float/promotion. Kapoor according to Reuters held 31.69m/92.67% of the shares with a possible double counted Kapoor Childrens Trust holding 4.2m 12.27% (=106% of outstanding in total) leaving a float of max 2.5m shares. So that is how it got there. With maybe Max 2.5m share free easy to get it up there - not so easy to get the market to digest 32m shares at those levels but around twice that number have changed hands. Nice bit of gradient work. Maybe the 3:2 split on Mar31 was to facilitate this. Not sure how many shares Kapoor holds now.

Can send you the charts and a 1880's telegraph operators green visor to wear while looking at them if you want.

Anonymous said...

@mokwit
can you provide a link to the Reuters article

Anonymous said...

According to Bloomberg data, Kapoor owns 23.4m shares. The total share count is 34.2m and the float is 10.5m. And current short interest is 23.13% of the free float

Anonymous said...

o/t, John, but tangentially related - did you ever blog about Ranbaxy, the Indian generics company?

http://features.blogs.fortune.cnn.com/2013/05/15/ranbaxy-fraud-lipitor/

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