I don't believe this has been posted to this thread. CCSI's response (which WAS previously posted to this thread) is also below:
Wall Street Whistleblower: More News from Chromatics Color Sciences
By Gregg Wirth and Jesse Eisinger
7/1/98 7:07 PM ET
Chromatics Color Sciences (CCSI:Nasdaq), in a strongly worded press release yesterday, rebutted comments made in this column last week. Chromatics, faithful readers will recall, is the New York company that received Food and Drug Administration approval last year for its Colormate TLc-BiliTest, a noninvasive infant jaundice monitor. The product has yet to be shipped. The company said in April and reiterated in June that it was in late-stage negotiations for global distribution of Colormate, which measures bilirubin to determine whether an infant suffers from jaundice, but no pact has been signed. Doctors typically test for infant jaundice by drawing blood with a prick of the heel known as a "heel stick."
To prudent investors and Chromatics' true-believing fans, these facts are what's known as "red flags." Products that address sizable and lucrative markets tend to attract big partners quickly (if the little company wants one) and get launched quickly. Serious delays, in contrast, often generate concern.
Since exuberant short-seller Manuel Asensio issued his first report on the company June 8, the stock has fallen 60% to close at 4 1/4 today. The stock was as high as 18 in April. Several class action lawsuits have been filed against Chromatics.
Chromatics took issue with TSC's discussion of the stock-touting site Stock Genie and its association with Chromatics. In addition, the company said, "detailed substantive commentary in [the June 11 release rebutting short-seller Manuel Asensio's reports] was provided largely by leading medical experts in the field of bilirubin infant jaundice." Chromatics quotes one expert extensively, Dr. Jeffrey Maisels, a professor of pediatrics from William Beaumont Hospital in Royal Oak, Mich.
Wall Street Whistleblower got in touch with Maisels for an interview. Perhaps most illuminating was a fact the press release omitted: Maisels wouldn't use the Colormate today, even if it were launched.
Maisels told TSC, "Anybody in the medical field would agree, you want to test further. I don't know whether that would be before using it, but further tests are being done."
Here's the kicker: "I would collect data, personally, before using it," he said. "The fact that it's FDA approved doesn't mean it's proven. CCSI is doing tests to confirm its reliability. Do I believe it works? From the data I've seen, yes. But it's only one study."
The study to which Maisels refers is the pivotal trial conducted by Dr. Ian Holtzman, of Mount Sinai Hospital in New York, who was the lead investigator on the pivotal trial of Colormate in about 2,500 patients upon which the system got FDA approval, he said. Maisels conducted his own study of the Colormate in 43 babies, but that was a small study, he cautioned.
Maisels is a paid consultant to Chromatics who said he has received "on the order" of several thousand dollars from the company, but less than $5,000. He said he owns no stock or options in the company. Maisels is on the company's advisory board. In an interview today, Chromatics CEO Darby Macfarlane said Maisels had received $5,900 since 1997 for setting up the protocol on the multisite trial and also received traveling expenses.
Macfarlane said, "What's he's talking about is that the company is in the midst of multicenter trials. For the ultimate acceptance of the product, for the pinnacle, you always do multicenter trials." She said multicenter trials are done in medical devices and are "not required. But they are respected by the medical community. It makes the marketing effort easier."
"They are solely for marketing purposes to the medical community,"
Macfarlane went on. "It's the same thing other medical devices do. I'm not a medical company here. I'm learning from my distributors," whom she said told her this type of trial would be required for market
penetration. She said that the company is conducting a trial at Parkland Hospital in Dallas that will probably end in August. The company, along with its potential distributors, will decide on other hospitals to add to the study.
Colormate was approved under a 510(k) application, which allows the marketing of products that are substantially similar to other products already on the market. For a full-blown premarket approval application, the product has to be tested far more extensively. Asked directly why Maisels would be waiting for more data, she said, "I think you should clarify that. Dr. Maisels has it in his hospital."
This afternoon, Maisels and Macfarlane called back for a conference call. During that call, Maisels clarified his earlier statements. He said of Colormate, "I think it is safe and efficacious as a bilirubin monitor," adding, "depending on the circumstances, you could use Colormate and not a blood test."
When asked why his afternoon statement appeared different from the morning's, he said, "The company has not told me to say something different. I want to make sure I say what I meant to say. What you read to me is essentially correct. I don't want to back off that statement. This is the normal way to test for this kind of technology.
"This will be used as an adjunct to heel sticks. I am confident that it will replace the overwhelming majority of heel sticks."
Macfarlane said that Maisels did not currently have a Colormate in his nursery but that he would have one within the week. The doctor had one in his office from February to May of this year.
Asked about the progress of the Colormate launch, Macfarlane said, "The product is launched to the medical community. We are taking orders and giving demonstrations. We will be shipping at the end of the summer. Or the first part of the fall." She added, "We're shipping no matter what. We will have a distributor by that time."
Maisels stood by his critique of short-seller Asensio's reports on Chromatics. The doctor said, "The statements he made were incorrect, were false." He adds, "I never said in the statement that I was willing to use it. I simply responded to Asensio's statement, which had numerous inaccuracies." The inaccuracies were enumerated in the June 11 press release.
Maisels said of Asensio, "He doesn't know what he's talking about. It was necessary to respond because as it is, it adds up to a misleading
picture."
Asensio stood by his report and said, "As a matter of fact, they compounded misstatements. Clearly, that doctor went overboard."
Maisels said, "In my view, the availability of a noninvasive system for [infant jaundice] measurement would be a tremendous boon." Is Colormate it? In the morning interview he said, "I think it has the potential for being it."
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What about CCSI's rebuttal about its hanging around with Magic Moe?
Macfarlane stated in the press release: "Chromatics has had no contact with Stock Genie, nor have we paid or authorized any payment for any profile which may have been posted on their site."
As Whistleblower stated last week, Stock Genie's most recent profile, emailed June 13, highlighted several past "successful" picks the Genie had made. Among them it mentions Chromatics, referring to a July 1997 profile it said it had done on the company. Stock Genie states on its site that it receives a fee in cash and/or stock from most of the companies it profiles; the site also stipulates that "all information is provided by the companies profiled."
However, Macfarlane told TSC in a separate interview yesterday that she had "never heard of the Stock Genie." She also says that an internal investigation did not find any record of payment to Stock Genie. The timing of the profile dovetails with approval the company received from the FDA, Macfarlane said.
"It would have had to come across my desk," she said. While she conceded the possibility that an outside interested party could have paid for the profile, she is not aware of any such arrangement.
Chromatics put out the press release to quell shareholders' concerns over the company's involvement with Stock Genie, Macfarlane said, adding that Chromatics' efforts to locate Stock Genie and find the source of this profile has been so far unsuccessful.
In addition, the attempts of Whistleblower to find Magic Moe also failed to turn up anything. Stock Genie did not respond to an inquiry emailed to the address on its site. A search into the Internic Web directory turned up a post office box in Port Washington, N.Y., but according to the phone company, there is no such listing in that town. A lawyer on Long Island contacted by Whistleblower said he had done some legal work for Stock Genie, adding he would forward our request and have them contact us.
We're still waiting.
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Chromatics' responses to the above:
Message 5082385 |
