The now cash-rich marijuana grower appears likely to buy a biotech. This one could check off several boxes.
What does the top marijuana grower in the world do with a cash stockpile of more than $4 billion? Sit on it? Not a chance.
Canopy Growth Corporation (NYSE:CGC) announced last week that big alcoholic-beverage maker Constellation Brands (NYSE:STZ) had invested another $4 billion in the company. Canopy’s executives weren’t bashful about stating what they would likely do with a significant chunk of that money.
In Canopy Growth’s quarterly conference call, chairman and co-CEO Bruce Linton mentioned the possibility of the company acquiring a bottling operation in Canada and greenhouses in other countries. He also stated that Canopy “will probably find a little down-on-their-luck biotech company.” I think THIS STOCK is an intriguing acquisition candidate that could check off some boxes for Canopy…
Definitely down on its luck
Insys Therapeutics (NASDAQ:INSY) definitely fits Linton’s description of down on its luck. The biotech’s share price is down 20% so far in 2018 and nearly 78% over the last three years.
The biggest challenge for Insys has been that sales of its top product Subsys have been sinking like a brick. Subsys is a transmucosal immediate-release fentanyl (TIRF) drug. TIRFs are opioids and have fallen out of favor among physicians and patients due to the opioid epidemic in the U.S.
Insys does have another product, though. The company launched its first cannabinoid drug Syndros in July 2017. Momentum for Syndros has been very sluggish so far: Insys reported sales of only $1 million in its Q2 results announced earlier this month.
However, Insys’ bad luck could be changing. The U.S. Department of Justice (DOJ) has been investigating Insys since late 2013 over its past sales and marketing practices related to Subsys. Insys announced on Aug. 8, 2018 that it had reached an agreement in principle with the DOJ to settle the civil and criminal investigation for $150 million over five years. Also, for the first time in seven quarters, Subsys gained quarter-over-quarter market share in Q2.
A good fit?
Of course, there are plenty of beaten-down biotechs out there. What makes Insys a good fit for Canopy Growth…
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