RALEIGH, N.C. ( TheStreet) -Shares of Inspire Pharmaceuticals ( ISPH) were cut in half Monday morning after the company reported that its experimental cystic fibrosis drug failed to improve lung function in a late-stage clinical trial.

Inspire didn't say whether it would continue to develop the drug known as denofusol as a potential treatment for cystic fibrosis. A previous phase III study of denofosul, conducted in 2008, yielded positive results.

Inspire shares were down 54% to $3.82 in Monday's premarket trading session. Inspire closed Friday at $8.40 a share.

The phase III study enrolled 466 patients with cystic fibrosis, more than 80% from the U.S., who were treated with either denofosul or a placebo. After 48 weeks, denofusol-treated patients reported a 40 ml improvement in lung function as measured by a forced air exhale test, compared with a 32 ml improvement for patients treated with a placebo. While numerically better, the benefit derived from denofusol fell far short of statistical significance.

"The analysis of the primary endpoint, key secondary endpoints and select subgroup populations in TIGER-2 indicates an absence of meaningful treatment benefit in this patient population," said Inspire chief medical officer Charles Johnson, in a statement.

Inspire said it plans to provide a corporate update, including future plans for denofusol, in February.

The first phase III study of denofusol in cystic fibrosis met its primary endpoint of improving lung function, although that study treated patients for 24 weeks compared to the longer, 48 weeks of treatment in the second phase III study.

--Written by Adam Feuerstein in Boston.

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