Inspire Pharmaceuticals is cutting 27 percent of its work force and halting its efforts to develop a treatment for cystic fibrosis in the wake of the experimental drug's disappointing test results.
The Durham company's restructuring, announced Thursday, will reduce its work force from 240 to 175. The cuts fell heaviest at its Durham headquarters, where 55 of the 115 workers are departing.
The goal of the restructuring is to get the company to profitability as quickly as possible, CEO Adrian Adams said in an interview. The cutbacks leave the company focused on its eye-care business, including its anchor drug AzaSite, which is used to treat eye infections.
Analysts predicted last month that the company would scrap the development of denufosol, an experimental treatment for cystic fibrosis, after a two-year clinical trial failed to show improvement in patients' health.
"It impacts people who have put a lot of effort, time and passion into the business," Adams said. "There is a human side to this, a people side to this, that is very challenging to the organization."
Adams also expressed regret that the company had disappointed cystic fibrosis patients, some of whom had high hopes for denufosol that were dashed by last month's test results.
"It's sad that Inspire won't be able to do any further development with this drug," he said. Inspire invested $120 million and 10 years in developing denufosol.
Wedbush Securities analyst Liana Moussatos said that the cuts were needed given denufosol's failure.
"It's a small company and they need to survive," she said.
The cuts will produce $10 million in savings on compensation and $30 million in reduced R&D spending this year, the company said. However, it also will take a restructuring charge of $10 million to $13 million in the first quarter, which will include write-offs and severance costs.
Inspire also released fourth-quarter and year-end results Thursday that exceeded analysts' estimates.
"They have been managing their costs pretty well," Moussatos said. She projects that the company will become profitable in 2015.
In the fourth quarter, Inspire reported a loss of $4.3 million, or 5 cents per share, versus a loss of $2.6 million a year earlier. Revenue totaled $30.3 million, up 2 percent from a year ago.
Fourth-quarter revenue included $13.2 million from sales of AzaSite, up 9 percent.
For all of 2010, Inspire lost $35.4 million, or 43 cents per share, compared with a loss of $40 million in 2009. Revenue for the year totaled $106.4 million, up 15 percent.
The company ended the year with $94.3 million in cash.
Inspire shares closed Thursday at $4.33, up 11 cents. The company's shares fetched more than $8 at the end of December.
Inspire is testing AzaSite as a treatment for blepharitis, or inflammation of the eyelids. "If they could get it to work, it would double the market potential of AzaSite," said Moussatos.
In addition, the company is seeking to expand its product portfolio by acquiring other eye-care drugs.
The company's 92-person eye-care sales force isn't affected by the cutbacks.
"The sales force has been extraordinarily successful," said Adams. "That's why we have confidence in the strategy of focusing on the eye-care business."
Employees affected by the cutbacks were notified Wednesday after an "all-hands meeting" during which Adams outlined the rationale for the staff reduction. The last day for most of the employees will be Feb. 28.
"All these people are talented people," Adams said.
