Inspire Pharmaceuticals Inc.'s decision to discontinue development of the oral antihistamine bilastine for allergic rhinitis was "no surprise" to Cowen & Co. analyst Ian Sanderson.

Durham, N.C.-based Inspire licensed U.S. and Canadian rights to the drug from Spanish pharmaceutical firm FAES Farma SA back in late 2006. The deal was worth $89 million plus royalties, although Inspire only paid $7 million up front. (See BioWorld Today, Nov. 2, 2006.)

Inspire's interest in bilastine stemmed from positive results obtained by FAES in two European Phase III allergic rhinitis studies, which indicated the drug might cause less sedation than some marketed allergy medications. But the FDA asked to see an expanded QT/QTc comparative trial prior to considering any regulatory filings, prompting the companies to restructure their licensing agreement. Under the revised deal, FAES agreed to tackle the additional clinical work needed, Inspire's financial obligations were halted and both companies retained an option to back out of the deal after December 2007.

On Monday, Inspire decided to exercise that option and terminate the deal, ending both its financial obligations to FAES and its interest in any formulations of bilastine.

Shares of Inspire (NASDAQ:ISPH) fell 20 cents to close at $5.78 on Monday. Company representatives did not return calls seeking comment, but Pacific Growth Equities LLC analyst Liana Moussatos said some investors saw Inspire's work in the crowded allergic rhinitis market as "unnecessary burn" and may be pleased with the decision to drop bilastine.

Inspire isn't giving up on allergic rhinitis altogether - the company is conducting a broad Phase III program with epinastine nasal spray, an antihistamine licensed from Boehringer Ingelheim International GmbH. The program will include two trials in seasonal allergic rhinitis and one trial in perennial allergic rhinitis. Data from the first seasonal trial are expected in the second quarter.

But the real value driver for Inspire this year, according to both Sanderson and Moussatos, will be Phase III data with denufosol in cystic fibrosis. Denufosol is designed to enhance mucous clearance by stimulating the P2Y2 receptor, and top-line results from the first of two planned Phase III studies are expected around the middle of the year. Moussatos projected the drug eventually could generate more than $300 million in peak annual revenues, making it easily the most potentially lucrative candidate in Inspire's pipeline.

Genentech Inc.'s Pulmozyme (domase alfa), which breaks up excess mucous in CF, generated $223 million in 2007. Also in the CF market is TOBI (tobramycin solution for inhalation, Novartis AG), for CF-related infections, and Gilead Sciences Inc. filed a new drug application late last year for its inhaled CF infection drug aztreonam lysine. Other mid-to-late stage programs are under way at Pharmaxis Ltd., Vertex Pharmaceuticals Inc., Aerovance Inc. and PTC Therapeutics Inc., among others.

Beyond epinastine and denufosol, Inspire is collaborating with Ophthalmic Research Associates on clinical work for Prolacria (diquafosol tetrasodium), a dry-eye treatment that has received two approvable letters due to inconsistent efficacy findings. The company also has a Phase I trial under way with INS115644 for glaucoma. (See BioWorld Today, Dec. 23, 2003, and Dec. 5, 2005.)

Inspire also markets three products: AzaSite (azithromycin ophthalmic solution) for bacterial conjunctivitis, Elestat (epinastine HCl ophthalmic solution) for itchy eyes due to allergies, and Restasis (cyclosporine ophthalmic emulsion) for dry eye. Inspire licensed U.S. and Canadian rights to AzaSite from InSite Vision Inc., while both Elestat and Restasis are partnered with Allergan Inc. Together, the three products generated $34.8 million in revenues for Inspire during the first nine months of 2007.

Moussatos said she considers Inspire undervalued based on its commercial portfolio, an issue she attributes to investor sentiment related to the past setbacks with Prolacria. However, she pointed to the $75 million investment made by private equity firm Warburg Pincus LLC last summer as validation of the company's potential. (See BioWorld Today, July 19, 2007.)

As of Sept. 30, 2007, Inspire reported $131.4 million in cash, equivalents and investments.