Medstone Plans to Reorganize in Wake of Resignations
Medstone International Inc., the Irvine-based maker of equipment that shatters kidney stones, said Wednesday that it would reorganize operations in the wake of the resignation of two of its top officials.
Dr. Richard L. Penfil resigned Tuesday as president and director of Medstone and P. Joshua Burke stepped down as vice president of regulatory affairs.
Company officials said the resignations were not related to reports that Medstone’s “lithotripsy” machines, which use an X-ray imaging system in crushing kidney stones, had failed to meet U.S. Food and Drug Administration radiation-control requirements.
Freeman Rose, Medstone’s chairman and chief executive officer, said that Penfil, a radiologist and founder of Medstone, is resigning from the company in part to spend more time with his family. He said Penfil will continue as a company consultant for at least a year. Burke is leaving Medstone to take a job with a pharmaceutical firm, Rose added.
Neither vacated position will be filled, Rose said, because the company is planning to restructure. “I will assume most of the duties of president until we make an organizational decision,” Rose said.
The resignations came as news emerged that the company had not met FDA criteria for the operation of X-ray imaging systems in its lithotripsy machines. The machines use shock waves to crush the kidney stones, thus making surgery unnecessary.
Rose said the hazard posed by the imaging problem is “not significant” and will not stop the continued operation of approximately 30 Medstone lithotripsy machines installed at hospitals and universities. He said a plan to correct the problem has been given to the FDA, which must approve any technological adjustment.
The problem comes as the company is struggling. In the first half of 1989, Medstone’s income fell to $175,000 from $3.2 million for the first half of 1988. Rose said the drop reflects in part a beefing up of the company’s international sales and marketing staff. In the same year-to-year period, sales dropped, although less sharply, to $8.6 million from $9.2 million.
He said the company has expanded its marketing staff in preparation to reap a substantial increase in sales if the FDA approves the lithotripsy machine for the treatment of gallstones. The company this week submitted documentation to the FDA for approval to use the machines to remove gallstones.
Rose acknowledged that the company’s sales are being depressed by the hesitation of many hospitals to buy lithotripsy machines, which sell for almost $1.4 million each, until they know whether the same machines that treat kidney stones can also be used to treat gallstones.
Physicians point out that in recent years numerous manufacturers have been approved by the FDA to sell lithotripsy machines and that the number of such machines has proliferated faster than new kidney stones. The result, they say, is that purchase of lithotripters has become less financially attractive to hospitals.
“There are too many lithotripters basically to do kidney stones, and so the purchase of new lithotripters by hospitals is not financially feasible,” said Dr. Malcolm Sperling, a general surgeon at Fountain Valley Regional Hospital and Medical Center, where he is conducting trials on a gallstone lithotripsy machine made by Edap, a Medstone competitor.
Dr. Mark Sullivan, a Mission Viejo urologist, said that currently about 12 companies manufacture lithotripsy machines to treat kidney stones. In Orange County, he said, five hospitals have lithotripters, of which only one, Hoag Hospital in Newport Beach, has a Medstone machine.
Rose said, by contrast, that the number of patients who could benefit from lithotripsy treatment for gallstones is several times larger than the number of kidney stone patients. He added that lithotripsy is hoped to be effective in treating at least 20% of kidney stone sufferers.
