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Flurry of Major Changes Planned for Cytocare : Corporations: The medical device maker aims to replace its chairman, spin off companies and revert to its old name.

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TIMES STAFF WRITER

Cytocare Inc., a tight-lipped maker of medical devices, plans to overhaul its top management team today, pursue plans to spin off two subsidiaries, and resume its original corporate name, Medstone International Inc.

Shareholders at the company’s annual meeting today will be asked to approve the nomination of David Radlinski as the board chairman, succeeding Errol G. Payne, a founding scientist. Radlinski, 50, who is president of the company’s core business unit, would also replace Payne as chief executive.

Payne, 57, said he’s leaving to start another company next year.

Shareholders also will vote on the name change, but company officials said the proposed spinoffs won’t require shareholder approval.

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The company--whose officials have avoided talking with Wall Street analysts since a shareholder lawsuit was filed six years ago--now aims to proceed with a long-awaited corporate restructuring. It wants to refocus on its basic operation of making and selling devices which produce shock waves that pulverize kidney stones.

Last year, the company reported earnings of $4.4 million on revenues of $16.3 million. It doesn’t disclose separate results for the core business, which had retained the Medstone name and had been merged into the main company three months ago.

Cytocare also aims to spin off two operations involved in treatments for urologic conditions, creating two new companies: One, called Endocare, sells and develops medical devices; the other, Urogen, is trying to develop biologically based drugs. Cytocare hopes to divest both by the year’s end, giving stockholders one share in each of the new companies for every Cytocare share they hold.

Payne’s departure surprised the only analyst who follows the company.

Mark Matheson, the analyst at Crowell, Weedon & Co., said Wednesday he’d thought Payne would stay because of his young age. But Matheson added, “I think the reason he’s leaving is that he’s never enjoyed the scrutiny of being a public company. With all the lawsuits, that’s been an unpleasant experience for him.”

Shareholder lawsuits, filed in 1989 and 1990, allege the company and certain principals, including Payne and Radlinski, concealed adverse information concerning its prospects when it went public in 1988. A recent company filing with securities’ regulators characterizes the litigation as an “abusive” diversion that costs the company “resources that could otherwise be used for technical innovation, capital investment and job creation.”

The company is appealing unfavorable portions of a federal appeals court ruling to the Supreme Court.

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Matheson predicts Cytocare will come out of its shell under Radlinski.

“Radlinski knows the business, he’s a very detail-oriented, hands-on manager. He’s been running [the company] for quite a while under Payne and I think he’ll do great,” Matheson said.

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