Medstone Founder Quits as CEO : Biotechnology: Freeman Rose, who helped build a device to break up kidney stones without surgery, will return to product development. He will remain as chairman.
Freeman Rose, who helped to build a device that disintegrates kidney stones without surgery, resigned Monday as chief executive of Medstone International Inc. to return to the creative field of developing new biotechnology products, the Irvine company said.
Rose, a company founder, will remain as chairman. Richard Ferrari, who joined the company in April as president and chief operating officer, will take over as chief executive.
Ferrari also said that Medstone will soon discontinue its agreement with a General Electric Co. subsidiary in Paris to distribute Medstone’s products in Europe, Africa and the Middle East. He said GE has focused on its own non-competing systems while carrying Medstone products.
Ferrari said he believes that exclusive distributorships will give Medstone a better chance at developing a market for its products, especially its lithotripters, which are sophisticated shock-wave devices designed to break up kidney stones without surgery.
He would not say how much of Medstone’s revenue is attributed to sales overseas, but he said that setting up its own distribution network should not be a financial burden. The company already is working on a network with a London firm, he said.
Rose, trained as an engineer, will continue to develop new products, and Medstone will retain the first right of refusal on anything he designs, Ferrari said.
Rose’s resignation is the latest in a series of problems at the company over the last year.
In August, company co-founder Richard Penfil resigned. Penfil and Medstone’s vice president for regulatory affairs, P. Joshua Burke, left the company amid continuing problems in gaining Food and Drug Administration approval to use Medstone’s lithotripters as a non-surgical alternative for treating gallstones. The FDA has approved the machines only for treating kidney stones.
In its first quarter, ended March 31, Medstone lost $602,471 on revenue of $4.2 million, contrasted with earnings of $385,534 on revenue of $4.1 million in the year-earlier quarter.
Rose blamed the lower earnings on efforts to reduce corporate expenses and on legal costs associated with a pending class-action shareholder lawsuit against Medstone. The suit alleges that Medstone withheld adverse information about its prospects in order to inflate its stock prices.
Ferrari said Monday’s changes are the last part of a corporate restructuring. No further changes are planned, he said.
