BIOMEDICINE : Medstone, Suffering from Marketing, Suit Setbacks, Reports $2-Million Loss

Medstone International’s hopes to market a technology for removing gallstones so far have been dashed by the firm’s inability to prove the product’s effectiveness to the Food and Drug Administration’s satisfaction.

Last October, an FDA advisory panel refused to recommend Medstone’s lithotripsy technology for gallstone treatment. As a result, the Irvine biomedical company currently can sell its technology only for shattering kidney stones, and that market is generally considered saturated.

Medstone has also been hit by a shareholder lawsuit alleging that the firm concealed adverse information about its prospects to inflate its stock price. Medstone went public at $13 a share in June, 1988, and the stock soared to $39.75 that August on expectations that its product would have dual usage for gallstones and kidney stones.

But the stock has plunged dramatically as those expectations have been slow to be fulfilled. Medstone’s stock closed Wednesday at $4.75, down 25 cents.

On Wednesday, Medstone reported a net loss of $2.1 million for 1989, contrasted with earnings of $8 million in 1988. For the fourth quarter ended Dec. 31, the company lost $633,000, contrasted with earnings of $2.2 million for the same period of 1988. Revenue for the latest quarter was $4.7 million, down from $6.7 million for the year-ago period.