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FDA Asks for More Data on Durham, N.C.-Based Drug Maker's Dry-Eye Treatment

Posted on: Saturday, 3 December 2005, 00:00 CST

By Sabine Vollmer, The News & Observer, Raleigh, N.C.

Dec. 3--Inspire Pharmaceuticals' experimental dry-eye treatment has come up short of regulatory approval again, raising the possibility that work on the drug will be halted.

Christy Shaffer, Inspire's chief executive, reported the Food and Drug Administration's request for more test data on diquafosol in a conference call Friday. Answering analysts' questions, Shaffer for the first time acknowledged that dropping diquafosol is an option.

Shares dropped 34 percent to close at $4.90 Friday. Shares had been driven up in recent days by investor anticipation.

The stock has lost nearly 70 percent since Feb. 9, the day Inspire announced that diquafosol had failed the second trial.

Burying the drug would be a blow to the Durham drug development company, said Ian Sanderson, an SG Cowen analyst. Stopping development of diquafosol would call into question the scientific underpinnings of Inspire's drug development pipeline, which includes experimental treatments for cystic fibrosis, a hereditary lung disease that affects about 30,000 Americans, and cardiovascular diseases caused by blood clots. The cystic fibrosis drug and the clot buster have a similar mechanism of action as diquafosol.

"You need diquafosol to validate the technology," Sanderson said. "It has the best chances of success."

Diquafosol is also Inspire's most advanced drug. But after four Phase III clinical trials involving more than 2,000 patients, test results are mixed on whether the drug works better than saline solution. The drug's spotty record -- it failed two of the four trials -- prompted several shareholder lawsuits in February, and the Securities and Exchange Commission started a formal probe in September. The SEC has not said what it is concerned with, but Inspire has suggested the regulators are looking into stock trades after the failed trial.

Flush with more than $100 million in cash reserves, Inspire pressed on despite diquafosol's failures. In June, the company submitted more study data for the FDA to reconsider approving the experimental drug.

Investors and analysts had hoped Inspire would be able to bring diquafosol to market and turn a profit next year. Now, it looks like the company may have to run a fifth Phase III clinical trial to show that its lead drug works well. Talks with the FDA, which are expected in January or February, will determine whether diquafosol is dead, Shaffer said.

"It would depend on the size and scope of the trial if we decide to continue," she told analysts.

Each of the four Phase III trials costs about $5 million, she said. "That's not a lot of money." Rather than cost, FDA requirements for the trial design and the trial's failure risk will determine diquafosol's fate, she added.

Diquafosol has strong support among eye doctors, who treat about 1 million Americans suffering from dry-eye disease and would like more options.

Restasis, the first and only dry-eye treatment to pass regulatory muster, fell short of approval three times. The anti-inflammatory was developed by California-based Allergan, Inspire's partner. Inspire's salespeople market Restasis, as well as Elestat, Allergan's eye treatment for allergies.

Sales for both drugs increased faster than expected this year, prompting Inspire to raise annual revenue projections in the second and third quarters.

Asked whether he thinks diquafosol is dead, Sanderson said, "No." But he acknowledged he is speculating.

"The FDA's ophthalmology group is notoriously difficult to pass," he said. The group thinks that patients shouldn't pay more for something marginally better.

Diquafosol is projected to cost $3 to $3.50 per day, compared with Restasis' $4 daily cost. Generic saline solution is available for half that price.

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ISPH,

Source: The News & Observer

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