Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, October 1, 2008

Inspire Pharmaceuticals and Former Officers Settle Disclosure Charges

The SEC settled charges against Inspire Pharmaceuticals, Inc. (Inspire), the company's Chief Executive Officer, Christy L. Shaffer (Shaffer) and former Senior Vice President, Communications, Mary B. Bennett (Bennett), concerning disclosures that Inspire made about the details of a clinical trial required by the U.S. Food and Drug Administration (FDA) for approval of Inspire's dry-eye drug, diquafosol tetrasodium (diquafosol).

The Order finds that Shaffer and Bennett were responsible for Inspire's disclosure decisions concerning the details of the diquafosol program, and that Inspire's Forms 10-Q for the first three quarters of its fiscal year 2004 described the clinical trial as "confirmatory" and stated that diquafosol had to "replicate" the efficacy demonstrated in an earlier clinical trial. In the context of other public statements made by Inspire and Shaffer concerning diquafosol, these statements created the impression that the particular standard by which diquafosol had to demonstrate efficacy in the new clinical trial, the primary endpoint, was the same as a primary endpoint that diquafosol had successfully achieved in a previous clinical trial. In fact, the primary endpoint was different from the primary endpoints of previous clinical trials for diquafosol. On February 9, 2005, Inspire announced that diquafosol had failed to achieve the trial's primary endpoint, which the company specifically identified for the first time. Inspire's stock closed at $8.88 per share, representing a drop of more than 44 percent from the previous day's close of $16 per share.

Inspire, Shaffer, and Bennett consented to the issuance of the Order without admitting or denying any of the findings.

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