Inspire second-quarter total revenue increases 18% to $27.3 million

Inspire Pharmaceuticals, Inc. (NASDAQ: ISPH) announced today financial results for the second quarter ended June 30, 2010, reporting a net loss of $8.8 million or ($0.11) per share, an improvement from the second quarter of 2009 during which the Company incurred a net loss of $9.5 million or ($0.17) per share.

“We are continuing to make measured investments in important areas of the business and, with recent organizational changes, we are structuring the organization with a view toward success and shareholder value creation as we journey toward potentially exciting and transformational milestones, in particular related to our denufosol cystic fibrosis program.”

Total revenue for the second quarter of 2010 was $27.3 million, as compared to $23.1 million for the second quarter of 2009, reflecting an increase of 18%. Revenue from AZASITE^® (azithromycin ophthalmic solution) 1% totaled $9.6 million in the second quarter of 2010, an increase of 27% compared to $7.6 million recognized in the second quarter of 2009.

Total product co-promotion and royalty revenue, comprised of royalty revenue from net sales of RESTASIS^® (cyclosporine ophthalmic emulsion) 0.05% and co-promotion revenue from net sales of ELESTAT^® (epinastine HCl ophthalmic solution) 0.05%, was $17.7 million for the second quarter of 2010 compared to $15.5 million in the second quarter of 2009, reflecting an increase of 14%. Royalty revenue for the second quarter of 2010 from RESTASIS was $11.2 million as compared to $8.9 million in the second quarter of 2009. Co-promotion revenue from ELESTAT in the second quarter of 2010 was $6.5 million as compared to $6.6 million in the second quarter of 2009.

Total revenue for the six months ended June 30, 2010 was $49.3 million, which represented a 32% increase over total revenue of $37.4 million for the same period in 2009. Total revenue for the six months ended June 30, 2010 was comprised of $31.0 million of co-promotion and royalty revenue on net sales of RESTASIS and ELESTAT and $18.3 million of AZASITE revenue, as compared to $23.6 million and $13.8 million, respectively, recognized for the six months ended June 30, 2009.

Operating expenses for the second quarter of 2010 totaled $35.9 million, as compared to $31.9 million for the same period in 2009, reflecting an increase of 12.5%. The increase in second quarter 2010 operating expenses, as compared to 2009, was primarily due to management changes and the related compensation charges, as well as an increase in cost of sales, primarily associated with increased AZASITE sales volume.

Operating expenses for the six months ended June 30, 2010 were $72.4 million, as compared to $64.9 million for the same period in 2009. The increase in six month 2010 operating expenses, as compared to 2009, relates to increased administrative expenses associated with management changes and the related compensation charges, including CEO transition costs of approximately $5 million, as well as an increase in cost of sales primarily resulting from increased AZASITE sales volume.

For the second quarter ended June 30, 2010, the Company reported a net loss of $8.8 million, or ($0.11) per common share, as compared to a net loss of $9.5 million, or ($0.17) per common share, for the same period in 2009. The net loss for the six months ended June 30, 2010 was $23.6 million, or ($0.29) per common share, as compared to a net loss of $28.9 million, or ($0.51) per common share for the same period in 2009. Cash, cash equivalents and investments totaled $106.2 million at June 30, 2010, reflecting a $9.0 million utilization of cash and investments during the second quarter of 2010 and a $22.9 million utilization of cash and investments during the first half of 2010.

"We are pleased to be able to deliver another solid quarter from an overall financial perspective and remain focused on executing with excellence against our core 2010 objectives, in particular in the Commercial and Research and Development areas," said Adrian Adams, President and CEO of Inspire. "We are continuing to make measured investments in important areas of the business and, with recent organizational changes, we are structuring the organization with a view toward success and shareholder value creation as we journey toward potentially exciting and transformational milestones, in particular related to our denufosol cystic fibrosis program."

Recent Updates Include (May 3, 2010 through August 5, 2010):

Ophthalmic Research & Development

• Amended the Development, License and Supply Agreement with Santen Pharmaceutical Co., Ltd., related to diquafosol in the Japanese market and nine other Asian countries; Inspire will now be relieved of its supply obligations and will be entitled to receive payments based upon a tiered royalty rate on net sales of DIQUAS™ Ophthalmic Solution 3% (diquafosol tetrasodium) in Japan, with a minimum rate in the high single digits and a maximum rate in the low double digits.

Pulmonary Research & Development

• Initiated a small safety and tolerability clinical trial of denufosol tetrasodium in cystic fibrosis (CF) patients ages 2-4 years old (Trial 08-116);
• Presented data at the American Thoracic Society (ATS) 2010 International Conference suggesting that denufosol, based on its potential to reach the small airways in the lungs, may hold promise as an early intervention treatment for CF; and
• Presented data at the 33^rd Annual European Cystic Fibrosis Society (ECFS) Conference discussing denufosol's potential benefit to adolescent CF patients and patients on minimal pharmacotherapies.

Commercial Operations

• Increased second quarter 2010 AZASITE prescription volume by approximately 32% over the second quarter of 2009.

Corporate

• Initiated a series of planned organizational changes, including revised job responsibilities, and the addition of experienced senior leadership positions in key areas that are designed to position the organization for short, medium and long-term success; and
• Entered into a lease for a new corporate headquarters in Raleigh, North Carolina.

Revised Financial Outlook for 2010

• Inspire expects to record 2010 aggregate revenue in the range of $100-$111 million, which is unchanged from previous guidance.
• Total 2010 operating expenses are now expected to be within the narrower range of $145-$159 million, reflecting a reduction from previous guidance, which was $145-$169 million. Specific operating expense category guidance is expected to be as follows: cost of sales of $13-$18 million, which is unchanged from previous guidance; research and development of $48-$60 million, which was previously $60-$70 million; selling and marketing of $48-$53 million, which is unchanged from previous guidance; and general and administrative expenses of $27-$32 million, which is unchanged from previous guidance. Included within this operating expense guidance are projected stock-based compensation costs of approximately $8-$12 million, which is unchanged from previous guidance.
• Cash utilization is now expected to be in the range of $53-$65 million, reflecting a reduction from previous guidance, which was $58-$73 million. Cash utilization guidance continues to incorporate $20 million of principal debt repayment.

SOURCE Inspire Pharmaceuticals, Inc.