officials are still at it.
The company is taking a defiant tone after an advisory panel to the
Food and Drug Administration
on July 22
unanimously rejected Sunrise's application for its farsightedness laser.
On a conference call Friday, the company said the panel didn't think there were any safety questions with the technology and that the company already had supplied enough data to prove the laser effective. The company went so far as to suggest to listeners that the FDA would agree.
Some professional investors were aghast. In fact, the panel had safety concerns about astigmatism, and it asked Sunrise to provide more data on side effects. The panel had efficacy concerns as well, which were shared by the FDA's presenter.
Nevertheless, Sunrise has its own version of the events. Don Sanders, an eye doctor, investigator and major investor in Sunrise, said on the Friday call that the FDA "usually consider
s it just as much their failure" when a panel rejects a technology. "They have the opinion that it's approvable; otherwise they don't allow it to go to panel." He added, "And they are anxious to remedy it," speaking of the panel outcome.
An FDA spokeswoman says, "The FDA holds a panel when we have questions or are looking for additional expertise, for a variety of reasons."
Also on the call, a consultant to Sunrise, Doyle Stulting, explained, "Functionally, an application that is disapproved for reasons and an
application that's approvable with conditions are really the same."
Wrong. A panel thumbs-down just ain't the same -- even "functionally" -- as an approval with conditions. While panel verdicts aren't binding, the FDA more than often pays heed.
Sanders also said that there were "no significant safety concerns. Never were, really."
"Any time you get personal, I think you're looking for trouble. They're clowns," says a short-seller.
And the company attacked certain panel members by name, according to investors who listened to the call. At the end of the call, the company said that it would be "a good day for America" when the committee tenure of Marian Macsai, a doctor from
West Virginia University
and one of the panel reviewers of the data, was up at the end of the year, according to four hedge-fund investors.
listened to the replay of the call, but the entire recording wasn't available. According to
, the Web site that hosted the call, the recording was "truncated at the request of the company."
Sunrise declined to comment Thursday at the panel and didn't return a call seeking comment for this story.
It's never a good idea to get ornery with the agency. And it's not like Sunrise has a great rapport with regulators. In its most recent registration statement with the
Securities and Exchange Commission
, the company tells investors: "We received in early September 1998 a letter from the FDA stating that recent press releases contained certain prohibited representations."
"That call is going straight to the FDA," speculates one short-seller. "And the agency won't be happy. That's so stupid. You name names
of panel members? I think it's unprofessional. Any time you get personal, I think you're looking for trouble. They're clowns."
Fleeing the Ship?
Sunrise has a registration statement on file with the SEC for 12.4 million shares. Among those registered are Sunrise's scientific investigators Alan Aker (and his wife), who registered 1.29 million shares; David Brown, who was offering 943,000; Manus Kraff, 287,000; Donald Sanders, 285,000; Robert Gale Martin, 200,000; Sandra Belmant, 7,500; Paul Ernest, 5,000; and Peter McDonnell, 5,000. Ed Coghlan, the investor relations head, registered 125,000.
On a conference call Monday, CEO Russ Trenary assured listeners that "going into the panel, none of the insiders traded any stock." He said he couldn't ascertain definitely whether any investigators sold afterward. Then he listed most of the top executives of the company and said, "I know nobody sold going in and nobody sold going out."
A Peek Inside the Game
Last Thursday, after the panel, a collection of Wall Streeters were having a drink while waiting for their car to
Washington National Airport
. A guy walked up to them and announced that he'd spoken to one of their drivers and would be sharing their car to the airport.
He caught the jovial mood immediately and asked, "You guys shorts?" There were some affirmative murmurs. "Thank god I sold my calls, or I really would have be killed. I still have 15,000 shares."
"Were you guys in
?" he asked, apropos of shorting. The investors respond with agonized recollections and some triumphal memories of the stock scandal that went from 2 to 200 in 1996 and fell back to the single digits almost as fast.
"How'd you get into this stock?" he was asked. He said he was a doctor and knew Alan Aker, the lead investigator.
And then the doctor dropped a bombshell: his name, Alfred Chapman. One of the investors asked, "Chapman? Do you know Donald Chapman?" He smiled: "That's my father."
We are in the presence of the son of the man who short-sellers think is one of the finest promoters in the game. Chapman, a retired broker from Jensen Beach, Fla., was an early investor and pusher of Presstek. And
, a stock that shot to a high of 50 7/8 in 1996 before collapsing to below 3. And now Sunrise. His father, he said, "has about 1.5 million shares of this. He's been selling 10,000 eeeeevery morning and 10,000 eeeeeevery afternoon." But Alfred adds that Donald won't sell his remaining 300,000 or so. Dad believes in the company, Chapman the Younger says. Donald Chapman didn't immediately return calls seeking comment.
Maybe Donald Chapman believes in Sunrise, but the FDA panel sure didn't.