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) November 7, 2007

INSPIRE PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	000-31135	04-3209022
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer 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 2.02 Results of Operations and Financial Condition.

On November 7, 2007, Inspire Pharmaceuticals, Inc. issued a press release announcing its financial results for the third quarter ended September 30, 2007 and confirming the prior financial guidance for fiscal year 2007. The press release issued in connection with such announcement is attached hereto as Exhibit 99.1.

The information in this Current Report on Form 8-K, including the accompanying exhibit, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

Exhibits

No.	Description
99.1	Press Release dated November 7, 2007

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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, Ph.D.,
	President and Chief Executive Officer

Dated: November 7, 2007

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EXHIBIT INDEX

No.	Description
99.1	Press Release dated November 7, 2007

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EX-99.1

Exhibit 99.1

For Immediate Release

Investor Contact:	Media Contact:
Inspire Pharmaceuticals, Inc.	BMC Communications
Jenny Kobin	Dan Budwick
VP, Investor Relations and Corporate Communications	(212) 477-9007, Extension 14
(919) 941-9777, Extension 219
Thomas R. Staab, II
Chief Financial Officer
(919) 941-9777, Extension 267

INSPIRE REPORTS THIRD QUARTER 2007 FINANCIAL RESULTS

-Third Quarter Revenue Up 26% -

DURHAM, NC - November 7, 2007 - Inspire Pharmaceuticals, Inc. (NASDAQ: ISPH) announced today financial results for the third quarter ended September 30, 2007, reporting a 26% increase in third quarter revenues as compared to 2006 and a net loss of $13.7 million, or ($0.32) per share.

In August 2007, Inspire launched AzaSite™ (azithromycin ophthalmic solution) 1% in the United States for the treatment of bacterial conjunctivitis.

Total revenue for the third quarter of 2007 was $12.2 million, as compared to $9.7 million for the third quarter of 2006. AzaSite revenue totaled approximately $1.1 million in the first fifty days of its launch. An additional $1.1 million has also been recorded as deferred revenue until certain criteria are met related to AzaSite sale transactions with special launch provisions. Co-promotion revenue on net sales of Restasis^® (cyclosporine ophthalmic emulsion) 0.05% for the third quarter of 2007 was $6.5 million, a 52% increase compared to $4.3 million recognized in the third quarter of 2006. Continued prescription growth, an increase in Inspire’s entitled co-promotion percentage and the normal annual price increase generated significant growth in this revenue stream. Due to an increasingly competitive market environment, co-promotion revenue from net sales of Elestat^® (epinastine HCl ophthalmic solution) 0.05% for the third quarter of 2007 was $4.6 million, a decrease from $5.4 million recognized in the third quarter of 2006.

Total revenue for the nine months ended September 30, 2007 was $34.8 million and was comprised of $33.7 million in co-promotion revenue from Elestat and Restasis and $1.1 million revenue recognized on sales of AzaSite. Total revenue for the nine months ending September 30, 2007 reflected a $6.2 million increase over $28.6 million for the same nine-month period in 2006, for which total revenue was comprised of both co-promotion and collaborative research and development revenue.

4222 Emperor Boulevard, Suite 200 • Durham, North Carolina 27703

Telephone 919.941.9777 • Fax 919.941.9797

Operating expenses for the third quarter of 2007 totaled $26.6 million, a 47% increase compared to $18.1 million for the same period in 2006. The increase in operating expenses, as compared to the third quarter of 2006, was primarily due to increased operating costs associated with launching AzaSite, whereby sales and marketing expenses increased $8.1 million and the Company recorded cost of sales of $603,000.

Operating expenses for the nine months ended September 30, 2007 were $82.0 million, compared to $58.7 million for the same period in 2006. The increase in the nine-month 2007 operating expenses, as compared to the same period in 2006, was primarily due to a $12.4 million increase in sales and marketing expenses associated with the launch and commercialization of AzaSite during the third quarter and a $12.3 million increase in research and development expenses, which reflected a $13.0 million milestone payment in the first quarter of 2007 upon the Company’s licensing U.S. and Canadian commercialization rights of AzaSite. Stock-based compensation expenses were $901,000 and $2.0 million for the third quarter and nine months ended September 30, 2007, as compared to $417,000 and $1.1 million, respectively, for the same periods in 2006.

For the third quarter ended September 30, 2007, the Company reported a net loss of $13.7 million, or ($0.32) per share, as compared to a net loss of $7.2 million, or ($0.17) per share, for the same period in 2006. The net loss for the nine months ended September 30, 2007 was $45.7 million, or ($1.08) per share, as compared to a net loss of $26.6 million, or ($0.63) per share, for the same period in 2006.

Cash, cash equivalents and investments totaled $131.4 million at September 30, 2007, which reflected a $29.1 million net increase of cash and investments during the first nine months of 2007, as a result of an increase in net borrowings of $17.9 million and net proceeds from the sale of Exchangeable Preferred Stock to Warburg Pincus of $73.6 million. The Company utilized $10.8 million of cash in the third quarter for its operations, excluding any proceeds from the sale of equity.

Christy L. Shaffer, Ph.D., President and CEO of Inspire, stated, “Over the past several months, we have accomplished several important milestones. First, we enhanced our balance sheet with a significant investment from Warburg Pincus, enabling the progression of our commercial and clinical development plans. Second, we completed the expansion of our commercial team and launched AzaSite, a new product for the treatment of bacterial conjunctivitis, adding a new ophthalmic product for our core customers. Finally, we are making progress in our clinical pipeline, including completion of enrollment in TIGER-1, our first Phase 3 trial of denufosol for cystic fibrosis with top-line results expected by mid 2008, preparation for a Phase 3 trial of epinastine nasal spray, and initiation of additional clinical work on Prolacria™.”

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422 Emperor Boulevard, Suite 200 · Durham, North Carolina 27703

Telephone 919.941.9777 · Fax 919.941.9797

Recent Updates Include (August 9, 2007 through November 6, 2007):

Ophthalmology Research & Development

• Initiated additional clinical work in dry eye program under recent agreement with Ophthalmic Research Associates (ORA) to study Prolacria using ORA’s proprietary dry eye model, including conducting preliminary clinical work to determine an appropriate trial design to be used in a potential pivotal trial; based on current plans, Inspire expects to report on the status of the dry eye program by the third quarter of 2008.

Respiratory/Allergy Research & Development

• Completed patient enrollment in TIGER-1, Inspire’s first of two planned pivotal Phase 3 clinical trials with denufosol for the treatment of cystic fibrosis (CF);

• Initiated plans for TIGER-2, the second planned Phase 3 clinical trial with denufosol; announced plans to begin a staged approach in terms of enrollment in TIGER-2, with select U.S. and Canadian sites enrolling patients in the early part of 2008 and additional international site enrollment expected to begin in the second half of 2008; and

• Inspire scientists and collaborators presented scientific and clinical information from four denufosol-related abstracts at the North American Cystic Fibrosis (NACF) Conference.

Sales and Marketing

• Launched AzaSite™ in the United States on August 13^th;

• In collaboration with Allergan, Inc. increased prescription volume of Restasis^®, the only approved prescription treatment for dry eye in the United States; Allergan reported third quarter net sales of Restasis of $88.2 million, representing a 27% increase over the same period in 2006; and

• Reported approximately 9% market share for Elestat^® in the total branded U.S. allergic conjunctivitis market for the three months ended September 30, 2007, based on prescription data from IMS Health.

Corporate

• Received stockholder approval for the exchange of 140,186 shares of Series A Exchangeable Preferred Stock, sold to the Warburg Pincus Private Equity IX Fund, into 14,018,600 shares of common stock. In conjunction with this exchange, Inspire will record an $8.3 million deemed non-cash dividend in the fourth quarter of 2007 associated with an embedded beneficial conversion feature in the Series A Exchangeable Preferred Stock.

The Company believes that the 2007 operating guidance issued previously on August 8, 2007 continues to be appropriate. Accordingly based upon current revenue trends, Inspire expects to record aggregate revenue in the range of $47-57 million. In addition, Inspire continues to believe that total operating expenses will be in the range of $115-130 based upon remaining 2007 operating plans and activities. The expected cash usage for the remaining three months of 2007 is expected to be in the range of $10-20 million.

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422 Emperor Boulevard, Suite 200 · Durham, North Carolina 27703

Telephone 919.941.9777 · Fax 919.941.9797

Inspire will host a conference call and live webcast to discuss its third quarter 2007 financial results on Wednesday, November 7^th at 10:00 a.m. ET. To access the conference call, U.S. participants may call (877) 648-7970 and international participants may call (706) 902-0415. The conference ID number is 21783509. 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 November 21, 2007. To access this replay, U.S. participants may call (800) 642-1687 and international participants may call (706) 645-9291. The conference ID number is 21783509.

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. Inspire employs a U.S. sales force for the promotion of AzaSite^™ (azithromycin ophthalmic solution) 1% for bacterial conjunctivitis, Elestat^® (epinastine HCI ophthalmic solution) 0.05% for allergic conjunctivitis and Restasis^® (cyclosporine ophthalmic emulsion) 0.05% for dry eye. Inspire is focused on the therapeutic areas of ophthalmology and respiratory/allergy, and is developing products for dry eye, cystic fibrosis, allergic rhinitis and glaucoma. Elestat, Restasis and Prolacria are registered trademarks owned by Allergan, Inc. AzaSite is a trademark owned by InSite Vision Incorporated. 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, no assurances can be made with respect to: future revenues and expenses associated with the commercialization of AzaSite including the Company’s ability to meet the criteria related to recording the deferred AzaSite revenue and the timing such deferred revenue will be recorded, if ever; the general ability of the Company to leverage its clinical and commercial successes; the general progress of the Company’s development pipeline; the timing or outcome of any preliminary clinical work to determine appropriate trial design regarding the Prolacria program; any additional clinical trial and toxicology work, or discussions with the FDA regarding the epinastine nasal spray program; the timing or outcome of the TIGER-1 clinical trial, including the timing of announcement of top-line results; the timing, outcome, length or size of the TIGER-2 clinical trial, including the sites and the timing of enrollment; the amount of net sales of Restasis recorded by Allergan in 2007; and the Company’s 2007 financial results, including, without limitation, aggregate revenue, total operating expenses, as well as the use of cash in 2007. 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, revenue, expense and earnings expectations, the seasonality of Elestat, intellectual property rights, 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, the need for additional research and testing, delays in manufacturing, funding, and the timing and content of decisions made by regulatory authorities, including the U.S. Food and Drug Administration. Further information regarding factors that could affect Inspire’s results is included in Inspire’s filings with the SEC. Inspire undertakes no

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422 Emperor Boulevard, Suite 200 · Durham, North Carolina 27703

Telephone 919.941.9777 · Fax 919.941.9797

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.

— Financial tables follow —

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422 Emperor Boulevard, Suite 200 · Durham, North Carolina 27703

Telephone 919.941.9777 · Fax 919.941.9797

INSPIRE PHARMACEUTICALS, INC.

Condensed Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenues:
Product sales, net	$	1,122		$	—		$	1,122		$	—
Product co-promotion		11,091			9,702			33,656			27,357
Collaborative research and development		—			—			—			1,250
Total revenue		12,213			9,702			34,778			28,607
Operating expenses:
Cost of sales		603			—			603			—
Research and development		8,071			8,209			38,811			26,491
Selling and marketing		14,313			6,210			32,181			19,763
General and administrative		3,614			3,633			10,380			12,413
Total operating expenses		26,601			18,052			81,975			58,667
Loss from operations		(14,388	)		(8,350	)		(47,197	)		(30,060	)
Other income (expense):
Interest income		1,584			1,203			3,472			3,596
Interest expense		(890	)		(28	)		(1,935	)		(86	)
Loss on investments		—			—			(26	)		(29	)
Other income, net		694			1,175			1,511			3,481
Net loss	$	(13,694	)	$	(7,175	)	$	(45,686	)	$	(26,579	)
Basic and diluted net loss per common share	$	(0.32	)	$	(0.17	)	$	(1.08	)	$	(0.63	)
Weighted average common shares used in computing basic and diluted net loss per common share		42,413			42,238			42,364			42,223

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422 Emperor Boulevard, Suite 200 · Durham, North Carolina 27703

Telephone 919.941.9777 · Fax 919.941.9797

INSPIRE PHARMACEUTICALS, INC.

Selected Balance Sheet Information

(in thousands)

	September 30, 2007		December 31, 2006
Cash, cash equivalents and investments	$	131,391	$	102,281
Trade receivables		13,518		8,245
Inventories, including consignment		910		—
Working capital		109,299		89,655
Total assets		172,951		116,699
Deferred revenue		1,059		—
Debt, including current portion		39,260		21,357
Total stockholders’ equity		35,052		78,371
Shares of Series A Exchangeable Preferred Stock outstanding		140		—
Shares of common stock outstanding		42,414		42,238

# # #

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422 Emperor Boulevard, Suite 200 · Durham, North Carolina 27703

Telephone 919.941.9777 · Fax 919.941.9797