Medstone Names New President in Wake of $1.65-Million Loss

Medstone International Inc. said Thursday that it lost $1.65 million on only $1.2 million in sales for the fiscal third quarter and named a representative of its largest stockholder as president and chief operating officer.

Taking the helm is Jack Olshansky, a founding partner of Montgomery Medical Ventures, a venture capital firm which owns a 12% stake in Medstone. Medstone’s president and vice president of regulatory affairs had both resigned in August.

An analyst said Medstone’s loss was not unexpected, and the company’s stock moved up 75 cents to close at $7.25.

For the nine months ended Sept. 30, Medstone lost $1.5 million on revenue of $9.8 million compared to a profit of $5.8 million on revenue of $17.6 million in the same period a year earlier. In the third quarter last year, Medstone earned $2.6 million on revenue of $8.4 million.

“No fund manager is going to want to sit and watch his investment head south,” said an analyst who asked not to be identified. “His appointment indicates the seriousness of Medstone’s problems.”

Vice President David Radlinksi said: “That’s certainly one interpretation. The other interpretation is the position has been vacant for a while and Mr. Olshansky is filling that.”

Medstone blamed the third-quarter loss on the fact that it had voluntarily stopped selling its lithotripters--which use shock waves to crush kidney stones--until it could address some concerns the Food and Drug Administration had about recent changes to the machine. The company said it resumed sales in early October.

The company said it would pursue regulatory approval of its lithotripters for treatment of gallstones. Medstone recently failed to win a critical recommendation from an FDA panel to market the lithotripter for the gallstone treatment.

Medstone also announced Thursday that it had sold two lithotripters to an Iowa-based health care concern.