DURHAM, N.C. — Shares in drug development firm Inspire Pharmaceuticals (Nasdaq: ISPH) dropped 11 percent on Monday after the company disclosed it and two officers might face lawsuits from the Securities and Exchange Commission.

The stock closed at $5, down 62 cents.

Inspire said it had received a letter from the SEC on Oct. 19 notifying the firm about the possible lawsuits. Christy Shaffer, Inspire’s chief executive officer, and Mary Bennett, executive vice president for operations and communications, also received notices.

The possible lawsuits are related to the company’s Phase III clinical trial of its proposed dry-eye drug candidate Prolacria. The Food and Drug Administration has so far rejected the drug, which is Inspire’s lead candidate.

Inspire reported “mixed results” in the drug’s Phase III trial in February of 2005. The news prompted an immediate 44 percent drop in Inspire’s stock from $16 to under $9.

In September of 2005, Inspire acknowledged that the SEC had launched an investigation of trading in Inspire shares.

The company, Shaffer and Bennett have “the opportunity to respond in writing” to the SEC staff before the staff makes a formal recommendation about the lawsuits, Inspire said in a statement. The company said it might seek a further meeting with the SEC commission staff.

Inspire: www.inspirepharm.com