Chairman of Medical Technology Company Resigns : Management: The co-founder of Medstone International Inc. leaves amid controversy over the effectiveness of a machine he helped invent to remove gallstones.
Freeman Rose, co-founder of troubled Medstone International Inc., has resigned as chairman and director of the medical technology company, Medstone announced Thursday.
Rose’s resignation came amid continuing controversy over the effectiveness of the lithotripter machine he co-invented that uses shock waves to remove gallstones. A study published Thursday in the New England Journal of Medicine found that lithotripters, when combined with a gallstone-dissolving drug, were not as effective as hoped in removing gallstones. But another recent study by Munich researchers produced more favorable results for lithotripter use.
Medstone officials said Rose’s resignation was unrelated to the new findings. Chief Financial Officer David Radlinski declined to comment on the studies.
Errol Payne, Medstone’s former chairman and chief executive officer, was named to fill the chairman’s post on an interim basis.
The Irvine company had counted on gaining federal approval to use its lithotripters to treat gallstones. The U.S. Food and Drug Administration rejected the use of lithotripters as a non-surgical alternative for gallstone removal. The machines, however, have proven highly effective for treatment of kidney stones.
But the promise of FDA approval once made Medstone a darling on Wall Street. After the company went public in June, 1988, its stock shot up to a high of $39.50 per share. The stock has fallen sharply aas the prospects of FDA approval waned and the company faced management turnover and legal troubles. It closed Thursday at $1.375.
Medstone was hit by a shareholder suit in October, 1989, alleging that officers withheld unfavorable information about the company’s business prospects. The suit is still pending.
For the nine months ended Sept. 30, Medstone lost $3.7 million on revenue of $8.6 million. The company attributed the loss to a lack of orders for its lithotripters, higher operating expenses and legal expenses associated with the shareholder suit.
Hospitals have been reluctant to buy lithotripters, which cost about $1.4 million each, without FDA approval for treating gallstones. The FDA has said it is not convinced that lithotripters have a clear advantage over drugs or surgery in treating gallstones.
The study published in the New England Journal of Medicine concludes that combining shock-wave techniques with a bile-acid drug called ursodiol--used to increase the machine’s effectiveness--dissolved single gallstones within six months for only 35% of patients.
The study also noted that advances in gallbladder-removal surgery have proven permanently effective and shortened the recovery period from about a month to a week.
Another study by researchers in Munich found that increasing the power of the shock-wave treatment improved the success rate to 75%, said Dr. Leslie J. Schoenfield of Cedars-Sinai Medical Center in Los Angeles. Schoenfield wrote the study published in the New England Journal of Medicine.
He said the Munich study offers encouragement to lithotripter manufacturers.
“There will always be a place for a non-surgical, non-anesthetic type of treatment for gallstones” for patients who prefer not to face the risks associated with general anesthesia and surgery, Schoenfield said.
It is estimated that of the 1 million adults who report gallstones in the United States each year, only about 20% would benefit from shock-wave therapy.
Lithotripters are used successfully in treating kidney stones about 130,000 times a year in the United States, and Medstone has about a 5% share of that market, Radlinski said. Three other companies have approval to sell the machines in this country to treat kidney stones.
“There’s still significant opportunity in the renal market as some of the older machines get phased out, and there’s a significant international market opportunity in renal,” said Jack Olshansky of Montgomery Medical Ventures of San Francisco, whose firm was an early investor in Medstone.
