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) October 31, 2008

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 October 31, 2008, Inspire Pharmaceuticals, Inc. issued a press release announcing its financial results for the third quarter ended September 30, 2008 and confirming the prior financial guidance for fiscal year 2008. 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.

(d) Exhibits

No.	Description
99.1	Press Release dated October 31, 2008

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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: October 31, 2008

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EXHIBIT INDEX

No.	Description
99.1	Press Release dated October 31, 2008

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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	(973) 271-6085
(919) 941-9777, Extension 219
Thomas R. Staab, II
Executive Vice President and Chief Financial Officer
(919) 941-9777, Extension 267

INSPIRE REPORTS THIRD QUARTER 2008 FINANCIAL RESULTS

- Q3 2008 Revenue Increased by 63% over Q3 2007 -

DURHAM, NC - October 31, 2008 - Inspire Pharmaceuticals, Inc. (NASDAQ: ISPH) announced today financial results for the third quarter ended September 30, 2008, reporting a net loss of $9.6 million, or ($0.17) per share.

Total revenue for the third quarter of 2008 was $20.0 million, as compared to $12.2 million for the third quarter of 2007. Revenue from AzaSite^® (azithromycin ophthalmic solution) 1%, a bacterial conjunctivitis treatment launched in August 2007, totaled $4.7 million in the third quarter of 2008, as compared to $1.1 million in the third quarter of 2007.

Total co-promotion revenue, comprised of revenue from net sales of Restasis^® (cyclosporine ophthalmic emulsion) 0.05% and Elestat^® (epinastine HCl ophthalmic solution) 0.05%, was $15.2 million for the third quarter of 2008 and increased approximately 37%, as compared to the third quarter of 2007. Co-promotion revenue for the third quarter of 2008 from Restasis was $7.8 million and from Elestat was $7.4 million, as compared to $6.5 million and $4.6 million in the third quarter of 2007, respectively. During the third quarter of 2008, the Company recognized $2.6 million of previously deferred Elestat co-promotion revenue in association with its achievement of the 2008 minimum net sales target level.

Operating expenses for the third quarter of 2008 totaled $29.0 million, a 9% increase compared to $26.6 million for the same period in 2007. The increase in third quarter 2008 operating expenses, compared to 2007, was primarily due to an increase in research and development expenses and AzaSite cost of sales, partially offset by a reduction in sales and marketing expenses.

Total revenue for the nine months ended September 30, 2008 was $51.6 million and represented a 48% increase over the total revenue of $34.8 million for the same period in 2007. Operating expenses for the nine months ended September 30, 2008 were $92.4 million, as compared to $82.0 million for the same period in 2007. The increase in nine month 2008 operating expenses,

as compared to 2007, was primarily due to increased sales and marketing expenses plus an increase in AzaSite cost of sales partially offset by a decrease in research and development expenses as a result of a one-time $13 million upfront AzaSite licensing fee paid in the first quarter of 2007.

Total stock-based compensation expenses were $1.1 million and $3.3 million for the third quarter and nine months ended September 30, 2008, as compared to $901,000 and $2.0 million, respectively, for the same periods in 2007.

For the third quarter ended September 30, 2008, the Company reported a net loss of $9.6 million, or ($0.17) per share, as compared to a net loss of $13.7 million, or ($0.32) per share, for the same period in 2007. The net loss for the nine months ended September 30, 2008 was $41.9 million, or ($0.74) per share, as compared to a net loss of $45.7 million, or ($1.08) per share for the same period in 2007. Cash, cash equivalents and investments totaled $79.1 million at September 30, 2008, reflecting a $15.3 million and a $60.6 million utilization of cash and investments during the third quarter and nine months of 2008, respectively.

Christy L. Shaffer, Ph.D., President and CEO of Inspire, stated, “We delivered strong financial results in the third quarter and advanced our clinical pipeline programs. We achieved several recent milestones that drive value for our stockholders, including securing patent coverage for Elestat, presenting data at the North American Cystic Fibrosis Conference and making excellent progress in TIGER-2 enrollment, continuing to increase AzaSite market share and prescription growth, and initiating a Phase 1 glaucoma trial.”

Recent Updates Include (July 1, 2008 through October 31, 2008):

Ophthalmology Research & Development

• Submitted a clinical protocol and request for Special Protocol Assessment to the U.S. Food and Drug Administration for a pivotal Phase 3 environmental trial with Prolacria™ (diquafosol tetrasodium ophthalmic solution) for the treatment of dry eye disease;

• Filed an Investigational New Drug (IND) application and initiated a Phase 1 clinical trial with INS117548 Ophthalmic Solution for the treatment of glaucoma; and

• Obtained additional positive results in the AzaSite Phase 4 program related to lid margin disease.

Pulmonary Research & Development

• Presented additional data from Inspire’s first Phase 3 trial with denufosol tetrasodium (TIGER-1) for the treatment of cystic fibrosis (CF) at the North American Cystic Fibrosis Conference;

• Modified TIGER-2, Inspire’s second Phase 3 CF trial, and reported updated enrollment of 133 patients, as of October 17, 2008; and

• Published two papers related to the denufosol clinical development program in peer-reviewed journals.

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Sales and Marketing

• Announced that the U.S. Patent and Trademark Office had issued a method of treatment patent related to Elestat that expires on November 29, 2020;

• In collaboration with Allergan, Inc., increased prescription volume of Restasis, whereby Allergan reported net sales of Restasis of $107 million for the three months ended September 30, 2008, representing a 21% increase in revenue over the same period in 2007. On October 29, 2008, Allergan increased its 2008 revenue guidance for Restasis to be in the range of $440-$450 million; and

• Increased third quarter 2008 prescription volume and associated net revenues of AzaSite by approximately 20% and 16% over the second quarter of 2008.

Corporate

• Announced the conclusion and settlement of the Securities and Exchange Commission investigation relating to a Phase 3 clinical trial of the Company’s dry eye product candidate.

Financial Outlook for 2008

Based upon current AzaSite, Restasis and Elestat trends, the Company is re-confirming its previously provided expectation to record 2008 aggregate revenue in the range of $62-$76 million and 2008 total operating expenses to be in the range of $109-$129 million. Cost of sales, which includes the amortization of the AzaSite approval milestone and royalty obligations to InSite Vision Incorporated, is expected to be in the range of $5-$8 million and is included as a component of total operating expense in 2008. Total estimated selling and marketing and general and administrative expenses are estimated to be in the ranges of $50-$57 million and $14-$18 million, respectively, in 2008. Research and development expenses are estimated to be in the range of $42-$54 million in 2008. Included within this operating expense guidance are projected stock-based compensation costs of approximately $5 million. Cash utilization in 2008 is expected to be in the range of $50-$80 million, which incorporates $14 million of principal repayment on the Company’s outstanding debt. Based on current operating plans, the Company expects its cash and investments to provide liquidity through 2009.

Inspire will host a conference call and live webcast to discuss its third quarter 2008 financial results on Friday, October 31, 2008 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 68985448. 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 14, 2008. 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 68985448.

About Inspire

Inspire is a biopharmaceutical company dedicated to discovering, developing and commercializing prescription pharmaceutical products for ophthalmic and pulmonary diseases. Inspire is currently developing products for dry eye, cystic fibrosis and glaucoma. Inspire employs a U.S. sales force for the promotion of AzaSite^® (azithromycin ophthalmic solution) 1%

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for bacterial conjunctivitis, Elestat^® (epinastine HCI ophthalmic solution) 0.05% for allergic conjunctivitis and Restasis^® (cyclosporine ophthalmic emulsion) 0.05% for dry eye. Elestat, Restasis and Prolacria are 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: the duration of the new Boehringer Ingelheim patent pertaining to Elestat and the impact, if any, of such patent on the Company’s co-promotion of Elestat; the ability of recent milestones, including Boehringer Ingelheim’s patent coverage for Elestat, increases in AzaSite market share and prescription growth, and initiating a Phase 1 glaucoma trial, to drive value for Inspire’s stockholders; 2008 aggregate revenues; 2008 total operating expenses; 2008 cost of sales; total 2008 selling and marketing expenses; total 2008 general and administrative expenses; total 2008 research and development expenses; total 2008 stock-based compensation costs; cash utilization by the Company in 2008, including the amount of principal repayment on the Company’s outstanding debt; potential changes in the Company’s current operating plans; and the ability of the Company’s cash and investments to provide liquidity through 2009. 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, 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 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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INSPIRE PHARMACEUTICALS, INC.

Condensed Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Revenues:
Product sales, net		4,721		$	1,122			11,076		$	1,122
Product co-promotion		15,231			11,091			39,313			33,656
Collaborative research and development		—			—			1,250			—
Total revenue		19,952			12,213			51,639			34,778
Operating expenses:
Cost of Sales		1,624			603			4,274			603
Research and development		9,796			8,071			34,401			38,811
Selling and marketing		13,817			14,313			42,937			32,181
General and administrative		3,748			3,614			10,787			10,380
Total operating expenses		28,985			26,601			92,399			81,975
Loss from operations		(9,033	)		(14,388	)		(40,760	)		(47,197	)
Other income/(expense):
Interest income		534			1,584			2,431			3,472
Interest expense		(1,120	)		(890	)		(3,565	)		(1,935	)
Loss on investments		—			—			—			(26	)
Other income/(expense), net		(586	)		694			(1,134	)		1,511
Net loss		(9,619	)	$	(13,694	)		(41,894	)	$	(45,686	)
Basic and diluted net loss per common share	$	(.17	)	$	(.32	)	$	(.74	)	$	(1.08	)
Weighted average common shares used in computing basic and diluted net loss per common share		56,621			42,413			56,592			42,364

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INSPIRE PHARMACEUTICALS, INC.

Selected Balance Sheet Information

(in thousands)

	September 30, 2008		December 31, 2007
Cash, cash equivalents and investments	$	79,129	$	139,724
Trade receivables		18,112		12,974
Inventories, net		772		1,280
Total assets		122,563		180,503
Working capital		62,147		107,651
Deferred revenue		—		371
Debt, including current portion		48,006		57,701
Total stockholders’ equity		52,567		91,693
Shares of common stock outstanding		56,622		56,501

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