GAITHERSBURG, Md. -- Five giddy Wall Street guys are sitting in the bar in the Hilton. It's 6 p.m. or so and they start to pour a couple back. They've won.
device for treating farsightedness has just been rejected by a
Food and Drug Administration
panel, and these men were short the stock. As the day turned steadily bleaker for the surgical-device concern, one man with a New York hedge fund kept saying, "I should have pressed the bet. I should have pressed the bet."
In a unanimous decision Thursday, the FDA's Ophthalmic Devices advisory committee voted not to recommend approval of Sunrise's laser to correct farsightedness, saying it didn't work well enough. (
looked at the laser's prospects
"The data showed the laser had even less efficacy than we had thought," said Stephen Sabba, an analyst for
Sturza's Institutional Research
, a boutique shop that has a sell rating on Sunrise. (It won't disclose its position in the company.) Sturza's is one of two research firms being sued by Sunrise for
defamation. "Given the low efficacy and the newly revealed safety concerns, we are even more certain that it will never reach the market, never mind being a major player."
Sunrise officials declined to comment, though in a press release the Fremont, Calif., concern said it was "prepared to work closely with the FDA to pursue approval" of the device, known as the Laser Thermal Keratoplasty system. The stock was halted Thursday ahead of the panel's decision. It closed Wednesday at 15, down 2.
The Sunrise data were riddled with problems, not least of which was that the company wanted to exclude the first 50 patients treated in the study. The first 46 patients in the Sunrise study used a different eye-drying technique than the rest, a divergence that the company maintained lowered the effectiveness of the laser. How the company got to 50 was that it rounded up. Hmm, not exactly kosher statistically.
The real problem was that the laser didn't show great results -- and those that it did show largely disappeared after time. The average patient started out at plus 1.69 diopters, a measure of seeing ability. (Zero represents perfect vision; negative numbers describe nearsightedness, positive figures farsightedness.) In two years, patients lost on average 1.5 diopters of effect. Essentially, the average patient ended up roughly where he started. The company had maintained that the patients didn't regress too severely, but the data didn't lie.
And then there was the safety issue. Sunrise had boasted of how safe the procedure was. But the FDA reviewers clearly had concerns about patients' sensitivity to light and about their complaints of double vision, which could lead to astigmatism. At 12 months, 8.2% of patients had "photophobia" and 14.7% had double vision. At 24 months, 11% had astigmatism, according to the presentations. "What's disconcerting is that it appears to be increasing over time," said panel member Marian Macsai of
West Virginia University
So the laser was a no-go. Now the company will have to go back to study the laser some more. A lot more.
The panel said it would like to see data on 300 eyes over 24 months, updated for lots of things that the company didn't have Thursday. It wants the measurements taken after a patient's own focusing muscles have been paralyzed, so that the patient isn't adjusting his vision on his own. It wants sex breakdowns and updated data on the problems with double vision and light sensitivity. Short-sellers estimated that the company wouldn't be before the panel for at least 18 months.
Even if Sunrise does get back, the technology may simply never be good enough. "I don't think it's going to be an optimal thing. The transient nature of the technology is a weakness," said Mark Bullimore, an optometrist at
who served on the panel, told
. At the close of the meeting, he said, "I have difficulty convincing myself that I would recommend this to a patient."