Troubles mount at drug company

Inspire reports larger loss

Its eroding stock price shows the toll that Inspire Pharmaceuticals has been paying for a string of disappointments and setbacks.

Widening losses. Work on two experimental drugs scrapped. And the most advanced treatment suspended in regulatory limbo.

The Durham drug development company reported a wider quarterly loss Tuesday, giving investors little hope for improvement anytime soon. Shares dropped 6 percent to close at $4.54.

Inspire first sold stock to the public at $12 a share six years ago and traded as high as $18 in the fall of 2004.

A year ago, investors expected that Inspire would turn a profit in 2006. But the company projected that this year expenses will exceed revenue by as much as $55 million.

As it struggles to get one of its own drugs to market, Inspire is increasingly relying on promising chemicals discovered by others. Two of its remaining four experimental treatments were discovered by other companies, and Inspire is paying for the rights to develop them, a process called licensing.

Ian Sanderson, an analyst who tracks Inspire with Cowen and Co. in Boston, expects Inspire to further bolster its drug-development pipeline by licensing. Sanderson suggested that the company is realizing that its in-house science doesn't work.

"The drugs sound very interesting on paper," he said, "but they're not hitting clinical endpoints" -- the measurements by which new treatments either pass or fail tests required by the Food and Drug Administration.

Two of the experimental treatments that Inspire has discovered in its own laboratories failed the tests. In January, the company halted work on a treatment for retinal disease because the drug didn't work. A drug to reduce bleeding complications during heart surgery is also headed for the scrap heap. Inspire announced Monday that the drug caused a range of bleeding complications, and the company stopped a clinical trial involving patients.

A third drug, a dry-eye treatment called diquafosol, has come up short of regulatory approval twice. Diquafosol, which is also called by the brand name Prolacria, has progressed the furthest among Inspire's drugs. But the drug has a spotty record, failing two of four final tests designed to show that it worked better than saline solution.

Inspire is increasing its licensing activities, confirmed Mary Bennett, the company's executive vice president of operations. And with about $99 million in cash, Inspire has the means to sign new licensing deals.

"We would like a third product in the sales force," Bennett said.

Inspire generates revenue by selling the dry-eye treatment Elestat and the allergy treatment Restasis for its California partner, Allergan.

On Tuesday, the company reported that despite increased revenue in the second quarter, losses widened about 15 percent to $5.4 million.

Revenue rose about 40 percent to $13.4 million. But operating expenses rose faster; they were up about 30 percent to $19.96 million compared with a year ago.

Although Bennett declined to say how much longer diquafosol will be under regulatory review, she insisted that the drug still has a chance to win regulatory approval and come to market.

"Diquafosol is still in play," Bennett said.