INSY stock is having the worst day after Insys Therapeutics Inc. (NASDAQ:INSY)’s warning that the company was seeking bankruptcy protection after losing millions of dollars in legal payments.
Chapter 11 Expected
On Friday after the market closed, the company stated that at the end of the first quarter it had cash and cash equivalents of around $87.6 million and $240.3 million in liabilities. The company also said that it was not in a position to finalize the $150 million settlement it was supposed to make for illegal marketing of Subsys.
In a press release released Friday, May 10, the company said that it was in a situation where its ability to continue is a growing concern. The company is likely to file for bankruptcy liquidating all its assets and in the process; INSY stock investors may lose part or all of their investment in the company. However, the company has not stated when it will file for Chapter 11 with no guarantee that they will follow it through.
The announcement is seen as the start of the end of the Arizona based opioid maker. At the beginning of this month, four former executives and the founder of Insys John Kapoor were guilty of engaging in racketeering activities where they bribed doctors to prescribe Subsys and then deceiving insurers to cover their shady dealings.
INSY stock tumbled to its all-time low of $0.82 earlier in the session. At the time of writing, the stock is down 74.16%, selling at $0.93.
INSY Stock Affected by Growing Legal Costs
The company is also settling legal expenses under an indemnity agreement that requires Insys to cover defense, investigation, settlement as well as appeal related expenses of the former managers and Kapoor. In 2018 the company said that it had spent $28 million already in Kapoor’s defense.
On Friday, INSY’s officials stated that indemnity defense expenses have increased to $25.7 million in Q1 2019 up from $10.3 million last year. The cost includes the over $18 million paid to Kapoor’s lawyers for his defense during the trial.
Last year, the company agreed to a $150 million settlement related to the Subsys probe but it’s unlikely that the company will fulfil that obligation as a result of declining cash reserves.
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