8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported)               February 15, 2007

INSPIRE PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Charter)

     Delaware                                    000-31135                            04-3209022
(State or Other Jurisdiction(Commission        (IRS Employer
of Incorporation)                            File Number) Identification No.)

4222 Emperor Boulevard, Suite 200, Durham, North Carolina            27703-8466
(Address of Principal Executive Offices)(Zip Code)

Registrant's telephone number, including area code          (919) 941-9777

_____________________________________________
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On February 16, 2007, Inspire Pharmaceuticals, Inc. ("Inspire") issued a press release, attached to and made part of this report, announcing that it had licensed AzaSite™ for ocular infections. Inspire and ISV Vision Incorporated ("ISV") entered into a license agreement dated February 15, 2007 (the "License Agreement") pursuant to which Inspire received exclusive rights to commercialize AzaSite™, a topical anti-infective product candidate currently in late stage development for the treatment of bacterial conjunctivitis, as well as other potential topical anti-infective products containing azithromycin for use in the treatment of human ocular or ophthalmic indications. AzaSite™ is ISV's proprietary blend of azithromycin formulated with DuraSite®, ISV's patented drug-delivery vehicle. The License Agreement grants Inspire exclusive rights to develop, make, use, market, commercialize and sell the products in the United States and C anada and their respective territories (collectively, the "Territory").

Under the terms of the License Agreement, Inspire has paid to ISV an upfront license fee of $13,000,000 and will pay an additional $19,000,000 upon regulatory approval of any subject product by the U.S. Food and Drug Administration. Inspire will also pay a royalty on net sales of AzaSite™ in the United States and Canada, if approved by regulatory authorities. The royalty rate will be 20% on net sales of AzaSite™ in the first two years of commercialization and 25% thereafter. Inspire is obligated to pay royalties under the License Agreement for the longer of (i) eleven years from the launch of the first product, and (ii) the period during which a valid claim under a patent licensed from ISV covers a subject product.

Under the License Agreement, ISV is responsible for obtaining regulatory approval of AzaSite™ in each country in the Territory. No more than twenty-five days after obtaining regulatory approval for each country in the Territory, ISV will be responsible for transferring regulatory documentation regarding Azasite ™, including the New Drug Application and Canadian equivalent, to Inspire. Thereafter, Inspire will be responsible for all regulatory obligations and strategies relating to the further development and commercialization of products in each country in the Territory. Inspire will also be responsible for all commercialization in the Territory.

The License Agreement also provides Inspire with an exclusive option to negotiate a license agreement with ISV for AzaSite Plus™, a combination antibiotic/corticosteroid product formulated with DuraSite® technology.

Contemporaneously with the License Agreement, ISV entered into an exclusive license agreement with Pfizer for certain Pfizer patent rights relating to the treatment of ocular infection with azithromycin for certain products. Under the terms of the License Agreement, Inspire obtained from ISV a sublicense to such Pfizer patent rights, in addition to the license to the ISV patent rights, subject to certain limitations. Also, Inspire and Pfizer have entered into a related agreement that provides for the continuation of Inspire's sublicense rights under the Pfizer patent rights upon a termination of the license agreement between ISV and Pfizer. The agreement between Inspire and Pfizer also provides to Inspire the opportunity to cure any breaches by ISV of the license agreement between ISV and Pfizer and the opportunity to maintain and enforce such Pfizer patent rights under certain circumstances.

Inspire and ISV have also entered into a supply agreement dated February 15, 2007 for the active pharmaceutical ingredient azithromycin (the "Supply Agreement"). Previously, ISV has entered into a third party supply agreement for the production of such active ingredient. Under the Supply Agreement, ISV has agreed to supply Inspire's requirements of active ingredient, pursuant to certain forecasting and ordering procedures. The initial term of the Supply Agreement is until 2012, subject to certain customary termination provisions, such as termination for material breach of the agreement. Either Inspire or ISV may terminate the Supply Agreement upon 180 days notice to the other party. After 2012, the Supply Agreement automatically renews for successive three-year periods unless terminated pursuant to such termination provisions. The Supply Agreement requires that ISV produce for Inspire a specified stockpile of active ingredient. The Supply Agreement also contains certain p rovisions regarding the rights and responsibilities of the parties with respect to manufacturing specifications, delivery arrangements, quality assurance, and regulatory compliance, as well as certain other customary matters.

ISV previously entered into an agreement with Cardinal Health PTS, LLC ("Cardinal") for the manufacture of the finished product AzaSite™. Under the terms of the License Agreement, the parties have agreed to arrangements intended to facilitate Inspire's access to finished product manufactured by Cardinal on an interim basis and to facilitate execution of a longer term arrangement for finished product supply.

Item 9.01       Financial Statements and Exhibits.

Exhibits

No.            Description

99.1           Press Release dated February 16, 2007

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

                                                                         Inspire Pharmaceuticals, Inc.

                                                                         By: /s/ Christy L. Shaffer                        
                                                                               Christy L. Shaffer,
                                                                               President and Chief Executive Officer

Dated: February 16, 2007

EXHIBIT INDEX

No. Description

99.1 Press Release dated February 16, 2007

EX-99.1

For Immediate Release

Investor Contact:
Inspire Pharmaceuticals, Inc.
Jenny Kobin
VP, Investor Relations and Corporate Communications
(919) 941-9777, Extension 219

Media Contact:
BMC Communications
Dan Budwick
(212) 477-9007, Extension 14

INSPIRE LICENSES AZASITE^™ FOR OCULAR INFECTIONS
- - Leverages Commercial Infrastructure with Novel Ocular Anti-Infective Product -
AzaSite™ New Drug Application Currently Under Review by FDA with PDUFA Date in April -
- - Conference Call Scheduled Today at 10:00 AM ET -

DURHAM, NC - February 16, 2007 - Inspire Pharmaceuticals, Inc. (NASDAQ: ISPH) announced today the signing of an exclusive licensing agreement with InSite Vision Incorporated (AMEX: ISV) for the U.S. and Canadian commercialization of AzaSite^™ (1.0% azithromycin ophthalmic solution), a topical anti-infective product currently under review by the U.S. Food and Drug Administration (FDA) for the treatment of bacterial conjunctivitis.

Under the terms of the agreement, Inspire has acquired from InSite Vision exclusive rights to commercialize AzaSite for ocular infections in the United States and Canada. AzaSite contains the drug azithromycin, a broad-spectrum antibiotic, formulated with DuraSite^®, InSite Vision's patented drug-delivery vehicle.

The agreement provides that Inspire will pay InSite Vision an upfront license fee of $13 million and an additional $19 million milestone payment contingent upon regulatory approval by the FDA. Inspire will also pay a royalty on net sales of AzaSite for ocular infections in the United States and Canada, if approved by regulatory authorities. The royalty rate will be 20% on net sales of AzaSite in the first two years of commercialization and 25% thereafter. Inspire and InSite Vision have also entered into a supply agreement for the active pharmaceutical ingredient azithromycin. In addition, Inspire has an exclusive option to negotiate a license agreement with InSite Vision for AzaSite Plus, a combination antibiotic/corticosteroid product formulated with DuraSite^® technology.

Christy L. Shaffer, Ph.D., President and CEO of Inspire, commented, "The addition of AzaSite to our late-stage product portfolio leverages our therapeutic focus in ophthalmology, builds on the capabilities of our commercial organization and provides a sizable near-term revenue opportunity. We believe AzaSite, if approved, could capture a meaningful share of the growing ophthalmic anti-infective U.S. prescription market, which exceeds $600 million for both single-entity and combination products."

"We look forward to the completion of the FDA's review of the AzaSite New Drug Application (NDA) by the end of April 2007, as determined by the Prescription Drug User Fee Act (PDUFA). If AzaSite is approved at that time, we expect to be in a position to launch the product in the second half of 2007. Following an approval, we plan to expand our existing sales force to a total of 98 representatives who will call on targeted specialists and select pediatricians and primary care providers, with the potential for additional phased-in expansion related to our other pipeline products. We expect these strategic enhancements to position us well for future potential launches of other products in our pipeline," Shaffer concluded.

Terrence P. O'Brien, M.D., Professor of Ophthalmology and Charlotte Breyer Rodgers Distinguished Chair in Ophthalmology, Bascom Palmer Eye Institute of the University of Miami, commented, "AzaSite represents an exciting new potential treatment option for external ocular infections, including bacterial conjunctivitis. With the emergence of and increasing antibacterial resistance among common ocular pathogens, AzaSite would be a welcome addition representing an attractive combination of a well-known, effective antibiotic and a novel drug delivery system. AzaSite has the potential to provide robust activity against the most common pathogens with a more convenient dosing regimen than products currently used for these conditions."

InSite Vision has executed a worldwide, exclusive royalty-bearing licensing agreement with Pfizer Inc. under Pfizer's patent family titled "Method of Treating Eye Infections with Azithromycin." Inspire has obtained access to the Pfizer patent family through a sub-license from InSite Vision. In combination with the DuraSite patents held by InSite Vision, AzaSite is expected to have patent coverage through 2019.

Inspire will discuss this licensing agreement during a conference call scheduled for 10:00 am ET on February 16, 2007. To access the conference call, U.S. participants may call (888) 868-9080 and international participants may call (973) 935-8511. The conference ID number is 8460144. A live webcast and replay of the call will be available on Inspire's website at www.inspirepharm.com. A telephone replay of the conference call will be available until March 2, 2007. To access this replay, U.S. participants may call (877) 519-4471 and international participants may call (973) 341-3080. The conference ID number is 8460144.

About AzaSite™

AzaSite is azithromycin 1.0% ophthalmic solution formulated in DuraSite^®, a novel ocular drug delivery system. Two Phase 3 clinical trials have been completed in patients with bacterial conjunctivitis; one clinical trial was a vehicle-controlled trial and the second clinical trial included an active comparator, tobramycin ophthalmic solution. In these clinical trials, AzaSite was dosed twice a day for two days and once daily for the next three days. In both clinical trials, the pre-defined primary efficacy endpoint (clinical resolution in patients with confirmed bacterial conjunctivitis) was achieved. Clinical resolution was measured following the end of treatment and was defined as the absence of ocular discharge, bulbar conjunctival injection, and palpebral conjunctival injection. Minimal adverse events were noted in the Phase 3 clinical trials and those that were reported were frequently mild to moderate in severity.

About Azithromycin

Azithromycin is a semi-synthetic antibiotic that is derived from erythromycin and has been available under the trade name Zithromax® by Pfizer Inc. since 1992. Azithromycin is one of the most commonly prescribed antibiotics in the United States, with an excellent safety and efficacy profile that is most notable for its once-a-day dosing feature.

About Bacterial Conjunctivitis

Bacterial conjunctivitis is a common ocular surface microbial infection characterized by inflammation of the conjunctivae, which are the mucous membranes covering the whites of the eyes and the inner side of the eyelids. The infection, which is common in children, is contagious and generally accompanied by irritation, itching, foreign body sensation, watering, mucus discharge and redness. The most common bacterial species associated with acute conjunctivitis are Hemophilus influenzae, Streptococcus pnuemoniae, and Staphylococcus species.

About Inspire

Inspire is a biopharmaceutical company dedicated to discovering, developing and commercializing prescription pharmaceutical products in disease areas with significant commercial potential and unmet medical needs. The research and development programs of Inspire are driven by extensive scientific experience in the therapeutic areas of ophthalmology and respiratory/allergy, and supported by expertise in the field of P2 receptors. Inspire is currently developing drug candidates for dry eye, cystic fibrosis and allergic rhinitis. Inspire's U.S. specialty sales force promotes Elestat^® (epinastine HCl ophthalmic solution) 0.05% for allergic conjunctivitis and Restasis^® (cyclosporine ophthalmic emulsion) 0.05% for dry eye, ophthalmology products developed by Allergan, Inc. Elestat and Restasis are trademarks owned by Allergan. AzaSite™ and DuraSite^® are trademarks owned by InSite V ision Inc. For more information, visit www.inspirepharm.com.

Forward-Looking Statements

The forward-looking statements in this news release relating to management's expectations and beliefs are based on preliminary information and management assumptions. Specifically, the achievement and timing of regulatory review and approval by the FDA and Canadian regulatory authorities, sales estimates, the timing of a product launch, the timing and scope of an expansion to Inspire's sales and marketing force, the nature of the target physician group for the product if approved, Inspire's expectations regarding the impact of any sales force enhancement on its ability to co-promote existing products and position the Company for future potential launches of product candidates and the timing and effectiveness of patent coverage, are forward-looking statements involving risks and uncertainties. Such forward-looking statements are subject to a wide range of risks and uncertainties that could cause results to differ in material respects, including those relating to product development, rev enue, expense and earnings expectations, adverse developments in ongoing trials, successful manufacture of any approved product, Inspire's ability to launch any product, adverse litigation developments, adverse developments in the U.S. Securities and Exchange Commission (SEC) investigation, competitive products, results and timing of clinical trials, success of marketing efforts, dependence on development and commercial acceptance of AzaSite, changes in the competition in the ocular infection market, general lack of experience in managed care and government contracting, the unpredictability of the duration and results of the FDA's review of regulatory submissions, changes in current and future pricing levels, changes in federal and state laws and regulations, the need for additional research and testing, delays in manufacturing, funding, and the timing and content of decisions made by regulatory authorities, including the FDA. Inspire can make no assurance that the FDA or the Canadian regulatory autho rities will approve AzaSite or, if approved, the timing of such approval. If AzaSite is approved, Inspire will be subject to various regulatory requirements, including requirements relating to pricing, managed care, reimbursement, rebates, adverse event reporting and manufacturing, that have not previously been applicable to Inspire. In addition, Inspire will be responsible for manufacturing, supply, labeling and distribution in relation to the product, if approved. Inspire will need to create appropriate infrastructure to meet these regulatory and business requirements. If AzaSite is approved, Inspire expects to market the product to primary care physicians, which Inspire has not previously done. There is significant competition amongst biotechnology and pharmaceutical companies for the time and attention of primary care physicians. Further information regarding factors that could affect Inspire's results is included in Inspire's filings with the SEC. Inspire undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof.

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