1040416--3/15/2010--INSPIRE_PHARMACEUTICALS

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{stock, price, operating}

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{condition, economic, financial}

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{competitive, industry, competition}

{property, intellectual, protect}

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Risks Related to Product Commercialization Failure to adequately market and commercialize will negatively impact our revenues. is not successfully commercialized by Allergan, our revenues will be negatively impacted. When a generic form of or an over-the-counter form of epinastine ophthalmic solution is introduced into the market, our agreement with Allergan to co-promote will no longer be in effect, and our revenues from sales of If we do not successfully market and promote , our revenues will be negatively impacted. We rely on third parties to distribute and sell our products and those third parties may not perform. We depend on three pharmaceutical wholesalers for the vast majority of our sales in the United States, and the loss of any of these wholesalers would negatively impact our revenues. Risks Related to Manufacture and Supply If we are unable to contract with third parties for the manufacture of active pharmaceutical ingredients required for preclinical testing, for the manufacture of drug products for clinical trials, for the large-scale manufacture of any approved products, or for the manufacture of related devices, we may be unable to develop or commercialize our drug products. Reliance on a single party to manufacture and supply either finished product or the bulk active pharmaceutical ingredients for a product or product candidates could adversely affect us. The third-party vendor that manufactures denufosol and the API related to both and Santen s DE-089 does not presently have the capacity to manufacture the projected commercial quantities of API for these products, if any is approved. Risks Related to Product Development If the FDA does not conclude that our product candidates meet statutory requirements for safety and efficacy, we will be unable to obtain regulatory approval for marketing in the United States. Since some of our clinical candidates utilize new or different mechanisms of action and in some cases there may be no regulatory precedents, conducting clinical trials and obtaining regulatory approval may be difficult, expensive and prolonged, which would delay any commercialization of our products. We may need to develop alternate dosing regimens for our product candidates. Estimated development costs are difficult to project and may change frequently prior to regulatory approval. Clinical trials may take longer to complete and cost more than we expect, which would adversely affect our ability to commercialize product candidates and achieve profitability. If we fail to reach milestones or to make annual minimum payments or otherwise breach our obligations under our license agreements, our licensors may terminate our agreements with them. Risks Related to Governmental Regulation Failure to comply with all applicable regulations, including those that require us to obtain and maintain governmental approvals for our product candidates, may result in fines, corrective actions, administrative sanctions and restrictions, including the withdrawal of a product from the market. Medicare prescription drug coverage legislation and future legislative or regulatory reform of the health care system may affect our or our partners ability to sell products profitably. We are subject to fraud and abuse and similar government laws and regulations, and a failure to comply with such laws and regulations, or an investigation into our compliance with such laws and regulations, or a failure to prevail in any litigation related to noncompliance, could harm our business. Failure to adequately ensure compliance with applicable laws and regulations may subject us to whistleblower and government actions. Risks Associated with Our Business and Industry If we do not receive timely regulatory approvals of our product candidates and successfully launch such products, we may need substantial additional funds to support our expanding capital requirements. Our co-promotion and royalty revenues are based, in part, upon Allergan s revenue recognition policy and other accounting policies over which we have limited or no control. Revenues in future periods could vary significantly and may not cover our operating expenses. If we are unable to make the scheduled principal and interest payments on our term loan facility or maintain minimum liquidity levels or compliance with other debt covenants as defined in the loan and security agreement, we may default on our debt. If we continue to incur operating losses for a period longer than anticipated, or in an amount greater than anticipated, we may be unable to continue our operations. The current stock market and credit market conditions are extremely volatile and unpredictable. It is difficult to predict whether these conditions will continue or worsen, and, if so, whether the conditions would impact us and whether such impact could be material. Our dependence on collaborative relationships may lead to delays in product development, lost revenues and disputes over rights to technology. Failure to hire and retain key personnel may hinder our product development programs and our business efforts. We may not be able to successfully compete with other biotechnology companies and established pharmaceutical companies. If our intellectual property protection is inadequate, the development and any possible sales of our product candidates could suffer or competitors could force our products completely out of the market. Use of our products may result in product liability claims for which we may not have adequate insurance coverage. Insurance coverage is increasingly more costly and difficult to obtain or maintain. Risks Related to Our Stock Our common stock price has been volatile and your investment in our stock may decline in value. Warburg is able to exercise substantial control over our business. Our existing principal stockholders hold a substantial amount of our common stock and may be able to influence significant corporate decisions, which may conflict with the interest of other stockholders. Future sales and issuances of securities may dilute the ownership interests of our current stockholders and cause our stock price to decline. Our Rights Agreement, the provisions of our Change in Control Severance Benefit Plans, the anti-takeover provisions in our Amended and Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws, standstill agreements, and our right to issue preferred stock, may discourage a third party from making a take-over offer that could be beneficial to us and our stockholders and may make it difficult for stockholders to replace our Board of Directors and effect a change in our management if they desire to do so.

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1040416--3/15/2010--INSPIRE_PHARMACEUTICALS_INC