One of the Triangle's most promising drug-development companies suffered a major setback Monday when it announced that an experimental treatment for cystic fibrosis failed to improve patients' health in a one-year clinical trial.
Officials with Inspire Pharmaceuticals said they are reviewing strategic options. They declined to answer Wall Street analysts' questions during a teleconference. The company lost more than half its value as disappointed investors dumped its shares.
Analysts said Inspire is likely to scrap the 10-year research program in which it has invested $120 million. That would almost certainly mean major layoffs for the company which employs about 240 people, including 115 at its headquarters, which moved to Raleigh from Durham last weekend.
The cystic fibrosis treatment, called denufosol, had been hailed by CEO Adrian Adams as the company's best hope for achieving profitability by 2012.
The ineffectiveness of denufosol was widely unexpected because the experimental drug had been successful in previous clinical trials.
What's more, many had held out hopes for denufosol as a wonder drug that could extend the lifespan of patients struggling with cystic fibrosis, an incurable lung condition. The pulmonary disease causes a buildup of mucus in the lungs and slowly kills patients by infection or respiratory failure. The expected lifespan of a cystic fibrosis patient is about half that of a healthy person.
Believers "invested in it because of the potential of what it could have done," said Liana Moussatos, an analyst with Wedbush Pacgrow Life Sciences in San Francisco. "It had no side effects, and it looked like it was working."
Investors pull out
One by one, the analysts who follow the company's stock downgraded Inspire, saying that the prospects for denufosol are slim.
By the end of the day Monday, the company's stock plummeted by 58 percent, to $3.47 a share.
Denufosol was the reason most investors owned the shares, analyst Joseph Schwartz of Leerink Swann in Boston said in a research report.
"The main reason for owning the stock has changed," Schwartz wrote.
In their announcement, Inspire officials said the global clinical trial showed "an absence of meaningful treatment benefit" from denufosol. They said they would focus on the company's ophthalmology treatments and announce details about its strategy by mid-February.
Inspire's other products
Inspire's sales are primarily driven by two eye treatments: AzaSite for bacterial conjunctivitis and Restasis for dry eye. Inspire's dry eye treatment, diquafasol, is sold in Japan under the name Diquas.
Diquafasol failed in clinical tests three times before the company was forced to give it up in this country. That shows Inspire is willing to invest in further clinical testing, Moussatos said, but it's not clear if Inspire has the tens of millions of dollars necessary to finance more worldwide human testing for denufosol.
Inspire has about $70 million in cash and cash equivalents, enough to operate for about 2-1/2 years, Ian Sanderson, an analyst in Boston with Cowen & Co., estimated in a report. The company's financial position, drained each quarter by successive losses, will necessitate cost cutting, analysts said.
Yet analysts are not giving up on Inspire, as long as the company can develop new drugs. Inspire has 92 sales people dedicated to AzaSite alone, and if it cuts excess costs the company could achieve profitability in 2012, Schwartz wrote.
"It's not a one-trick pony company," Moussatos said.
