Inspire to raise $100 million

Demand for stock unexpectedly strong

Staff WriterAugust 6, 2009 

What does the CEO do after her Durham drug company attracts up to $100million in much-needed cash on Wall Street?

She relaxes at the beach, naturally -- but with her BlackBerry on.

Inspire Pharmaceuticals CEO Christy L. Shaffer was on vacation with her family Wednesday morning when her publicly traded company announced that it wanted to sell more stock than it had initially planned. The company reported late Tuesday that it expected to raise $80 million with what is called a secondary stock offering, but demand was stronger than expected, so it increased the size to $100 million.

The money will be used to pay for further research on promising experimental treatments for cystic fibrosis, glaucoma and dry-eye disease. All three drugs require additional, expensive clinical testing on patients. And it will be several years before Inspire could win regulatory approval.

The company had $42.5 million in cash and investments as of June 30, enough money to last into 2010. But Inspire officials said last week that they would need more capital.

"You never want to get down to the last penny," said Inspire spokeswoman Jenny Kobin. "You want to look at market conditions for the right timing to raise more money. Investors obviously think this is an exciting time for the company."

Shaffer also announced plans last week to step down as CEO once Inspire's board can hire her replacement. One reason she cited for leaving: She wants to be able to vacation without her BlackBerry.

"I have several important things to do before my departure," Shaffer wrote in an e-mail message on Wednesday. "One was accomplished this morning. This totally eliminates any financial overhang and puts us in the position to fully execute our strategic plan."

Inspire expects to sell more than 22 million shares at $4.50 each. The deal, which will actually close next week, should bring Inspire as much as $100 million after investment-banking fees.

The haul will put Shaffer's total Wall Street fundraising above $400 million during her 11-year career as Inspire's CEO. That includes $76 million raised in August 2001 with Inspire's IPO.

One drawback to the latest stock offering: New shares dilute the value of existing ones for a publicly traded company. Inspire's stock fell 37 cents to close at $4.60 on Wednesday.

Investors have been worried about the risks involved in getting new drugs to market, as well as Inspire's ongoing losses and shrinking stash of cash. The company reported last week that it lost $9.5 million during the second quarter.

Still, Wall Street is severely undervaluing Inspire, said Liana Moussatos, an analyst with Wedbush Morgan in San Francisco. For starters, Inspire is getting increasing revenue from several drugs it sells now, including a pinkeye treatment.

And investors are overlooking the potential for the company's three promising experimental medicines, Moussatos said. With positive results from clinical studies of the glaucoma drug alone, Inspire's stock could easily double by later this year, she said.

The money Inspire announced Wednesday is "game-changing," she said: "It will get them to profitability. Once it sinks in, investors will realize that this company has enough cash and a big pipeline of products."

Moussatos has an "outperform" rating on the stock and predicts it could reach $21 a share. or 919-829-4572

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