In response to the order of dismissal, plaintiffs filed an Appeal on August 24, 2007. The appeal is still pending before the United States Court of Appeals, Fourth Circuit.
Following the consolidated complaint, plaintiffs voluntarily dismissed third party defendants Morgan Stanley & Company, Inc., Deutsche Bank Securities Inc., SG Cowen & Co. LLC and Piper Jaffray & Co with prejudice. The remaining defendants filed motions to dismiss in June of 2006 and the judge granted the dismissal with prejudice on July 26, 2007. Plaintiffs have not yet filed an appeal.
According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2006, on February 15, 2005, the first of five identical purported shareholder class action complaints was filed in the United States District Court for the Middle District of North Carolina against the Company and certain of its senior officers. On March 27, 2006, following consolidation of the lawsuits into a single civil action and appointment of lead plaintiffs, the plaintiffs filed a Consolidated Class Action Complaint (the “CAC”). The CAC asserts claims against the Company and certain of its present or former senior officers or directors. The CAC asserts claims under sections 10(b) and 20(a) of the ‘34 Act and Rule 10b-5 based on statements alleged to be false and misleading regarding a Phase 3 clinical trial of Prolacria, and also adds claims under sections 11, 12(a)(2) and 15 of the Securities Act of 1933. The CAC also asserts claims against certain parties that served as underwriters in the Company’s securities offerings during the period relevant to the CAC. The CAC seeks unspecified damages on behalf of a purported class of purchasers of the Company’s securities during the period from May 10, 2004 through February 8, 2005. In May 2006, the plaintiffs agreed to voluntarily dismiss their claims against the underwriters on the basis that they were time-barred. On June 30, 2006, the Company and other defendants moved that the court dismiss the CAC on the grounds that it fails to state a claim upon which relief can be granted and does not satisfy the pleading requirements under applicable law. Briefing on that motion is now complete and it is currently pending before the court.
On March 1, 2006, the Court entered the Order consolidating all actions under Master File 1:06CV00201. Further, the Court appointed lead plaintiffs, co-lead counsel and liaison counsel.
The original Complaint alleges that defendants Inspire and certain of its officers violated federal securities laws by issuing false or misleading public statements. Specifically, the Complaint alleges that Inspire made improper statements regarding the Stage III trial of its dry eye drug, Diquafosol tetrasodium. The Complaint alleges that Inspire failed to inform investors that the study's primary endpoint mandated by the FDA had changed from corneal staining to a more stringent corneal clearing. Moreover, the Complaint alleges that during a November 4, 2004 conference call, Inspire stated that the primary endpoint was "corneal staining." When the truth was revealed on February 9, 2005, Inspire stock fell from a previous close of $16.00 per share to close at $8.88 per share on extremely heavy trading volume.