ANYONE went into tommorows's halt long is TOAST! "Clinical Investigators Who Tested Sunrise Product Held Its Shares
By DANIELLE SESSA
Staff Reporter of THE WALL STREET JOURNAL
Sunrise Technologies International Inc. will go before a U.S. Food and
Drug Administration advisory panel Thursday, hoping to get a step closer
to having its laser treatment for farsightedness approved.
The company will present evidence from clinical trials. But one thing the
members of the panel won't necessarily hear is that at least seven of the 11
clinical investigators who performed the trials of the vision-correction
system own stock in the Fremont, Calif., company. In fact, the clinical
investigators own more stock than the nine top-level executives, or
so-called insiders, combined.
Although FDA rules require companies
applying for premarket approval to disclose
the financial interests of the clinical
investigators, the rule went into effect in
February, two months after Sunrise submitted
its application.
Two of the investigators, David Brown and Alan Aker, owned a combined
4.11 million shares, or 9.7% of the shares outstanding, currently worth
nearly $70 million, according to a form S-3 filed with the U.S. Securities
and Exchange Commission on June 16. The nine insiders, in contrast,
owned just 1.28 million, or 3% of the shares outstanding of Sunrise,
according to the company's April 7 proxy.
Sunrise acknowledges that some of the 11 clinical investigators have
financial interests in the company that would have required disclosure, the
company said in the June SEC filing. The company went on to say in the
filing: "It is not possible to predict, however, what impact, if any, the
disclosure of these interests would have on the FDA's review of the PMA
we submitted for the LTK system."
Approval for U.S. Sales
The company needs approval from the FDA for its laser thermal
keratoplasty, or LTK, treatment before it can sell the system in the U.S.
LTK has already received European marketing approval.
Russ Trenary, president and chief executive officer of Sunrise, said the
trials were conducted by investigators "who owned no stock in the
company and people who did own stock."
Dr. Brown added that the research is all in "very scientific" terms and the
FDA is very careful to monitor the data so there's "no way for anyone to
go out and make up stuff."
The clinical investigators received some stock through several private
placements of promissory notes with warrants and stock offerings since
1997, according to SEC filings. On Dec. 4, 1998, the company
announced it completed a $11.8 million private placement of stock where
the shares were offered at $3.50 a share, nearly 40% less than where the
stock finished trading that day.
Mr. Trenary said that the shares were offered at a discount because the
company was saving money by not using an investment banker for the
offering and that the company wanted it to be an easy decision for the
doctors to buy stock. He added that the stock was offered at a 20%
discount at the time.
Investors who acquire stock through private placements can register the
stock when the company files an S-3. Once the stock is registered it can
be sold on the open market; however the sales don't have to occur right
away, nor do the investors have to sell them at all.
Mr. Trenary said that he hasn't sold the shares that he registered in the
June filing and Drs. Brown and Aker haven't indicated to him that they sold
their shares either.
Timing of Aker's Purchases
Dr. Aker, an ophthalmologist, said he started buying shares of Sunrise
through private placements before he became a clinical investigator for the
company three years ago.
"You basically have to be convinced that the technology works" to invest
in a company through a private placement, Dr. Aker said. "If I had doubts
about the technology I would have never invested in the company."
Asked about his large stake in the company, Dr. Brown said: "One of the
things about my job is to be up on everything that is new and exciting in
our profession. I tend to like to pick up companies that are in the early
stages of development and have promise."
Shares of Sunrise have been soaring in anticipation of positive results from
this week's meeting. The stock has more than doubled on the Nasdaq
Stock Market since the start of the year. Shares of Sunrise fell 87.5 cents,
or 4.9%, to $17 apiece Tuesday. Sunrise has also been a hot target among
short sellers, who sell borrowed shares in hopes of replacing them later at
a lower cost, and thereby pocketing the difference. Short interest in
Sunrise has risen 35% to 4,369,160 shares in mid-June from 3,227,585
shares in May. |
