SUBLEASE AGREEMENT

Exhibit 10.12

SUBLEASE AGREEMENT

This Sublease Agreement (“Sublease”) dated this 22 day of September, 1997, by and between ICAgen, Inc., as sublessor (“Sublessor”) and Inspire Pharmaceuticals, Inc, as sublessee (“Sublessee”).

WITNESETH:

WHEREAS, pursuant to a Lease Agreement dated December 17, 1992, and amended by First Amendment of Lease dated August 26, 1996 between Sublessor as Tenant, and Imperial Center Partnership and Petula Associates, Ltd., as tenants in common operating as a joint venture, as Landlord, (the “Lease”), attached hereto as Exhibit A and made a part hereof, Sublessor has leased from Landlord certain building space located at 4222 Emperor Boulevard, Suite 500, Durham, North Carolina containing approximately 2,372 square feet, such premises being shown on the floor plan attached hereto as Exhibit B (the “Premises”); and

WHEREAS, Sublessee desires to sublease from Sublessor the Premises on the terms and conditions set forth herein; and

WHEREAS, Landlord has consented to the sublease of the Premises and all of the terms and conditions of this Sublease as indicated by Landlord’s Certificate to be delivered within ten (10) days of the execution of this Sublease.

NOW THEREFORE, for and in consideration of the payments referenced herein, and other mutual good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

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then and in any such event after the expiration of any applicable cure periods, Sublessor, without excluding other rights or remedies that it may have, shall have the right of reentry and may remove all persons and property from the Premises and dispose of such property pursuant to summary or other legal process and without being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned hereby. If Sublessor should elect to reenter as herein provided and take possession pursuant to legal proceedings, it may either terminate this Sublease, or it may from time to time without terminating this Sublease make such alterations or repairs as may be necessary in order to relet the Premises and relet the Premises for such term and at such rentals and upon such other terms and conditions as Sublessor may deem advisable. No such reentry or taking possession of the Premises by Sublessor shall be construed as an election to terminate this Sublease unless a written notice of such intention be given to Sublessee by Sublessor at the time of such reentry, but, notwithstanding such reentry and reletting without termination, Sublessor may at any time thereafter elect to terminate this Sublease for such previous breach. In the event of any termination by Sublessor, whether before or after reentry,

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Sublessee shall remain obligated through the term of the Lease to continue to make monthly payments of Base Rent and any additional rent pursuant to Section 3 hereof (except that the amount of such continuing payments shall be reduced by the amount of any rental payments received by Sublessor from a new subtenant in connection with the reletting of the Premises), and Sublessor may recover from Sublessee damages incurred by reason of such breach. Notwithstanding the foregoing, such damages shall not include the cost of any upfitting of the Premises required to relet the Premises to the extent that such costs are paid by the new subtenant. Sublessor agrees to use its reasonable good faith efforts to have such costs of upfitting paid by such new subtenant. As a remedy upon occurrence of any default only in the event that Sublessee fails to make timely and continued monthly payments, Sublessor may accelerate the Base Rent to accrue during the remainder of the Term and declare the same immediately due and payable. No remedy herein or otherwise conferred upon or reserved to Sublessor shall be considered exclusive of any other remedy but the same shall be distinct, separate and commutative and shall be in addition to any other remedy given by Sublessor by this Sublease and may be exercised from time to time as often as occasion may arise or may be deemed expedient. No delay or omission of Sublessor to exercise any right or power arising from any delay on the part of Sublessee shall impair any right or power or shall be construed to be a waiver of any such default of any acquisition thereto. Sublessee shall pay all costs, expenses and reasonable attorney’s fees that may be incurred or paid by Sublessor in enforcing the covenants, conditions and agreements of this Sublease with the remedies provided hereunder whether incurred as a result of litigation or otherwise.

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If to Sublessor:

ICAgen, Inc.

4222 Emperor Boulevard, Suite 460

Durham, NC 27703

If to Sublessee:

Inspire Pharmaceuticals, Inc.

4222 Emperor Boulevard, Suite 480

Durham, NC 27703

[Signature Page Attached and Incorporated herein By Reference]

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IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals as of the day and year first written above.

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CONSENT TO SUBLEASE AGREEMENT

As of this 21st day of November, 1997, Imperial Center Ltd. Partnership, a North Carolina limited partnership (hereinafter, whether one or more, referred to as the “Landlord”); ICAgen, Inc., (hereinafter, whether one or more, referred to as the “Tenant”); and Inspire Pharmaceuticals, Inc., (hereinafter, whether one or more, referred to as the “Subtenant”) do hereby enter into this Consent to Sublease Agreement.

WITNESSETH:

WHEREAS, Landlord and Tenant entered into a Lease Agreement dated December 17, 1992, amended August 26, 1996, (hereinafter the “Amendment”), for the leasing of all of that real property and all improvements located thereon, located at 4222 Emperor Boulevard, Durham, Durham County, North Carolina, being more particularly described in paragraph 1 of the First Amendment of Lease and on Exhibit A attached thereto (hereinafter the “Premises”); and

WHEREAS, Tenant and Subtenant have entered into a Sublease of the Premises of even date herewith and in the form attached hereto and, by this reference, incorporated herein (hereinafter the “Sublease”);

NOW, THEREFORE, Landlord does hereby consent to the Sublease in the form attached hereto, contingent and conditioned upon the following terms and conditions:

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by hand and under seal affixed hereto as of the date first written above.

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COUNTY OF Polk

I, Rachel J. Mischke, a Notary Public in and for said County and State, do certify that Ronald B. Franklin personally came before me this day and acknowledged that he/she is Vice President & Secretary of Petula Associates, Ltd., a Corporation, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by its Vice President, sealed with its corporate seal, and attested by him/herself as its Vice President & Secretary.

WITNESS my hand and notarial seal this 19^th day of November, 1997.

My Commission Expires:

RACHEL J. MISCHKE

MY COMMISSION EXPIRES May 19, 2000

(NOTARIAL SEAL OR STAMP)

COUNTY OF DURHAM

I, W. E. Walker, a Notary Public in and for said County and State, do certify that Mary Ann Windon personally came before me this day and acknowledged that he/she is                      Secretary of ICAgen, Inc., a Corporation, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by its              President, sealed with its corporate seal, and attested by him/herself as its                      Secretary.

WITNESS my hand and notarial seal this 20th day of October, 1997.

My Commission Expires:

7/14/02

(NOTARIAL SEAL OR STAMP)

INSPIRE

PHARMACEUTICALS, INC.

February 14, 2000

ICAgen, Inc.

4222 Emperor Boulevard, Suite 460

Durham, NC 27703

RE: Extension of Sublease Agreement

This letter serves as notice that, in accordance with Section 1. Sublease Term of the Sublease Agreement (“Sublease”) between ICAgen, Inc. (“Sublessor”) and Inspire Pharmaceuticals, Inc. (“Sublessee”) dated September 22, 1997, Inspire Pharmaceuticals, Inc. wishes to extend the Sublease for one (1) additional term of three (3) years.

Please contact our Director of Finance, Roger Francis, should you have any questions or need additional information.

Best Regards,

4222 Emperor Boulevard, Suite 470  •  Durham, North Carolina 27703

Telephone ###-###-####  •  Fax ###-###-####

ICAgen Inc.

Tuesday, March 14, 2000

Ms. Christy L. Shaffer

President and CEO

Inspire Pharmaceuticals, Inc.

4222 Emperor Boulevard, Suite 470

Durham, NC 27703

RE: Sublessors’ Notice

This letter will serve as notice for the change in the sublease rent for the sublease for Suite 500, in accordance with the Sublease Agreement (“Sublease”) between ICAgen, Inc. (“Sublessor”) and Inspire Pharmaceuticals, Inc. (“Sublessee”) dated September 22, 1997.

The base rent as proposed by the Sublessor’s Landlord are as follows:

In addition we propose to keep the CAM charges the same at $398.02 and the management fee of $1,000 per year, due on each anniversary date.

Please let me know if you have any questions.

Sincerely,

4222 Emperor Boulevard, Suite 460  •  Durham, NC 27703

Phone: 919 ###-###-####  •  Fax: 919 ###-###-####

SECOND AMENDMENT TO SUBLEASE AND CONSENT

THIS SECOND AMENDMENT TO SUBLEASE (the “Agreement”) is dated as of August 13, 2003, by and among ICAgen, Inc. (the “Sublessor”), Inspire Pharmaceuticals, Inc. (the “Sublessee”) and Imperial Center Partnership and Petula Associates, Ltd. as tenants in common, operating as a joint venture (“Landlord”).

WITNESSETH:

WHEREAS, Sublessor and Sublessee entered into that certain Sublease Agreement dated as of September 22, 1997 (the “Sublease”), pursuant to which Sublessee leased from Sublessor approximately 2,372 square feet located at 4222 Emperor Boulevard, Suite 500, Durham County, Durham, North Carolina 27713 (the “Premises”). (Terms used and not otherwise defined herein shall have the meaning ascribed to them in the Sublease); and

WHEREAS, by letter dated March 14, 2000 Sublessor and Sublessee extended the term of the Sublease to July 31, 2003; and

WHEREAS, Sublessor and Sublessee desire to amend the Sublease by extending the term of the Sublease and adjusting the rent; and

WHEREAS, Landlord, Sublessor and Sublessee entered into that certain Consent to Sublease dated November 21, 1997, pursuant to which the Landlord consented to the Sublease; and

WHEREAS, Landlord desires to consent to the extension of the term and this Agreement.

NOW, THEREFORE, in consideration of the premises, which are incorporated herein by reference, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Sublessor and Sublessee hereby agree as follows:

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized representatives as of the day and year first written.

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