Newsblurb: Inspire finally calls it quits on Prolacria

Inspire shelves dry-eye drug, shifts focus with Allergan
8/25/2010

After a decade of development and disappointment, Inspire Pharmaceuticals finally has put a stop to its efforts to win U.S. Food and Drug Administration approval of a dry eye drug now called Prolacria.
The Durham company on Wednesday unveiled a modified collaboration agreement with longtime partner Allergan (NYSE: AGN) that opens the way for Inspire to close the door on Prolacria and move its focus to pink eye treatment AzaSite and the company’s promising cystic fibrosis program.
Investors hailed the new agreement, pushing up Inspire shares by 3.88 percent, to $4.66, in mid-day trading Wednesday.
Inspire twice saw its dry eye drug fail to outperform a placebo in the last stage of human testing. The company tried changing the drug’s name and adjusted the end point of the phase III clinical trial but ended up with the same results.
After studying the potential of moving forward with Prolacria, Inspire and Allergan were ready to move on. But the complicated nature of their drug development deal – which involves another dry eye treatment, Restasis – left Inspire facing a significant and immediate revenue hit.
Inspire (Nasdaq; ISPH) receives royalties from Allergan on sales of Restasis and received payments from the Irish company for hitting development milestones on Prolacria. The previous terms called for a 30 percent reduction in Inspire’s Restasis royalty rate of 7.5 percent if the company dropped the Prolacria program and didn’t begin contributing to the marketing and promotion of Restasis.
The new terms keep Inspire’s Restasis royalty rate unchanged at 7.5 percent for 2010, before reducing it by 3 percentage points in 2011, a further 0.25 percentage point in 2013, and a final 0.50 percentage point in 2014. The rate will remain at 3.75 percent until 2020, when the contract runs out.
Restasis generated $11.2 million in royalty revenue for Inspire during the second quarter, which ended June 30. That was up from $8.9 million in the year-ago quarter.
For the quarter, Restasis accounted for more than 40 percent of Inspire’s total revenue of $27.3 million and topped AzaSite, which produced revenue of $9.6 million.
“This agreement provides clarity on the revenue stream and respective responsibilities of the parties in our ophthalmic collaboration,” said Adrian Adams, president and CEO of Inspire, which has 240 employees.