Staff Writer

Inspire Pharmaceuticals Inc. stopped development of its nasal spray epinastine for seasonal allergies, after a Phase III study showed it did not work better than placebo.

In the study of 798 patients, epinastine 0.10 percent and 0.15 percent was evaluated at two spray volumes compared to placebo in patients with documented seasonal allergic rhinitis during mountain cedar season in south central Texas. The epinastine treatment groups did not achieve statistical significance compared to placebo, based on scores for runny nose and itchy nose and sneezing.

However, the drug was well tolerated, and there were no safety concerns in the trial, according to Inspire.

The results were somewhat surprising, since the Durham, N.C.-based company had reported positive results from an earlier study of the drug, Leerink Swann analyst Joseph Schwartz said in a research note. But in some ways, the halted program is good news, he said, since epinastine was not likely to be a key driver for the company and had made up 20 percent of research and development expenses.

Now that the epinastine nasal spray program is being discontinued, Schwartz said, Inspire can shift focus on its biotechnology pipeline. And as the company "evolves into more of a biotech company," he said, its shares stand to appreciate.

Currently, Inspire has specialty pharmaceutical products on the market: AzaSite (azithromycin) ophthalmic solution 1 percent for bacterial conjunctivitis, Elestat (epinastine hydrochloride) ophthalmic solution 0.05 percent for allergic conjunctivitis and Restasis (cyclosporine) ophthalmic emulsion 0.05 percent for dry eye.

Its pipeline includes Phase III candidates denufosol for cystic fibrosis and Prolacria (diquafasol) for dry eye. A series of glaucoma drugs also are emerging in Phase I proof-of-concept studies, Schwartz said.

The FDA has issued two approvable letters for Prolacria, and the company expects to report on the status of the dry eye program by the third quarter.

Inspire has completed enrollment in the first of two planned pivotal Phase III clinical trials for denufosol tetrasodium (INS37217 Respiratory) for cystic fibrosis (CF) Phase III. It expects to report top-line efficacy results in mid-year 2008. In February, Inspire initiated the second pivotal Phase III trial with denufosol. And a required two-year inhalation carcinogenicity study in one species is expected in the second half of 2009.

"We believe that the current valuation does not account for much that could go right in the company's pipeline, and that the shares currently reflect the value of marketed products plus roughly $100 million of cash ($1.93/share) on the balance sheet," Schwartz wrote in a research note. "Warburg's ownership of 25 percent of the shares at an average cost of $6 may also add support from a large investor who is focused on realizing shareholder value."

"We do not plan to allocate any future resources to this program and will focus on our commercial products and progressing our high-priority development programs," said Christy L. Shaffer, president and CEO, said in a statement.

The company did not return calls seeking further comment.

In 2006, Inspire acquired certain exclusive rights from German drugmaker Boehringer Ingelheim International GmbH to develop and market epinastine nasal spray in the U.S. and Canada for the treatment of rhinitis.

Shares in Inspire (NASDAQ: ISPH) fell 5 cents, or 1.4 percent, closing at $3.53.