Publisher's note: In the following story, investment site Motley Fool reports that a medical marijuana drug company - Insys - had its latest drug pushed back for approval because of, basically, a procedural issue. Insys' drug, dronabinol, plans to be used for epilepsy and seizures in children. So how is a company, trading publicly, while getting some push-back from the FDA, getting the green light from the DEA? For a cannabidiol product? Insys is not using actual cannabis to make their product, but by synthesizing it (replicating the compound synthetically). Regardless, with the FDA approving any prescription drug based on cannabis, they are tacitly endorsing the product for medicinal use. Then why is it classified as a Schedule 1 substance? Schedule 1 drugs are classified as having "no medicinal value," yet cannabidiol-based drugs are on the market for treating glaucoma, anorexia, bulimia and cancer-related symptoms. Oh the irony ...
Excitement surrounding the potential of medical marijuana drove up shares of Insys Therapeutics (NASDAQ: INSY  ) by 25% since June, but the stock slid last week when the U.S. Food and Drug Administration ruled the company needed to revise its approval application for new synthetic cannabinoid drug oral dronabinol.
Although investors' first reaction was to sell shares, that might not have been the best choice. Since hitting a low of $33, the stock has retraced most of the ground lost following the announcement. The FDA's decision effectively delays approval for oral dronabinol, so let's look at why shares are bouncing back.
Temporary derailment
Over the last 20 years, the FDA has increasingly focused attention on the safety and efficacy of medicine in children. As a result, a pediatric study plan must often be submitted prior to the agency approving new drugs for commercial use.
