TWST: Could we start out with a brief overview and a little history of LVL, just to set the stage for our readers?

Mr. Lavorel: Of course. LVL Medical is a company involved in home care, which I founded more than 10 years ago, in 1989, precisely, in France. We set up the first company in Lyon, France. Then I. decided to set up more subsidiaries to cover all the territory in France, and we had a lot of internal growth, with today more than 50 branches all over France to cover the territory. Our main activity is home care, that is to say, taking care of patients at home instead of in the hospital, concerning many pathologies and many diseases. The first area we are in is the respiratory care sector, the second is all that concerns infusion therapy. And the third sector is home medical equipment, that is, the equipment for the patient's room that enables him to stay at home, as a complementary offer to enable the patients to have everything they need to be treated at home instead of in the hospital. So, that is our business, and it is really a business of, I would say, co-ordination. That is, we provide all the equipment the patient needs. We find private nurses for the home medical care. We co-ordinate all the information around the patient. That is, the prescribing doctors and the GP have to be informed about the patient and their treatment. So, we keep everyone around the patient informed, and we make sure that the treatment at home is safe and that everything is okay concerning all those therapies, like respiratory care and infusion therapy and home medical equipment.

TWST: Now, who pays for all this in France?

Mr. Lavorel: In France, all the tariffs are fixed by the Ministry of Health and after negotiation with all the professionals. The tariffs are the same for all the professionals. That is for France. We have also been in Germany for one year now, and in Germany it's rather different. It's all the same activities, but it is different because the tariffs are negotiated by each player with private insurance companies.

TWST: So, there is a difference there. How much of your business is in Germany now?

Mr. Lavorel: Now 15% of the business is in Germany, and 85% is in France. To look back at some of the history, we are listed on the second market in Paris Stock Exchange. In 1996, we aimed at developing other activities and becoming a European player. Until 1996, we only grew internally by setting up of subsidiaries. Then we made some acquisitions in France to cover the territory, and we also made an acquisition last year in Germany to enter this market with the aim to develop it by internal growth, the setting of subsidiaries, and also by acquisitions.

TWST: Who do you compete with in France?

Mr. Lavorel: In France, in the field of respiratory care, 40% of the market is still in the hand of those non-profit organisations who depend on the hospitals, who used to have 100% of the market 10 years ago, before tariffs were implemented for the private players. Those non- profit organisations still have 40% of the respiratory care market, and the private players have 60%. Of the private players, our main competitor is a subsidiary of the Air Liquide Group, which is called Vitalair.

TWST: Are you the largest player in the market, the largest factor in the marketplace?

Mr. Lavorel: It all depends on the kind of market you consider. If you look at the respiratory care market, the main players are those 33 non- profit organisations all over France.

TWST: Let's look at the private side.

Mr. Lavorel: On the private side, we are number one in the respiratory care sector. Then concerning infusion therapy, we would say that, in France and in Europe, it is simply underdeveloped compared to what exists in the US. So, it's a market which is being created, by the private players, and in this field we have, I think, the same position as our competitor, which is the Air Liquide 's subsidiary. In home medical equipment, we just focus on the equipment in the patient's room. That is, we don't want to be a leader in this market. It's just complementary.

TWST: Why?

Mr. Lavorel: For us it's just a complementary offer, so that we can say to prescribing doctors that if the patient needs a bed, we have the bed, if they need bed sore treatments, we can do that also. It's just to have this global offer now, and in the future when we have to deal with private insurance companies, who prefer those private players who can offer everything for the patient at home.

TWST: As we look out over the next two or three years, how would you describe the strategy that the company is going to follow?

Mr. Lavorel: The first point concerning the strategy is, in France, to go on gaining market share, as we have been doing since the founding of the company, in respiratory care, from those non-profit organisations. The second point in France is really to boost and develop infusion therapy, because infusion therapy is a booming market which will be a relay for growth in the years to come. If you look at what exists in the US, it's much more than twice the size of the market of the respiratory care sector. In France, for the moment, it's just a little, little, little market. So, we have everything to do in this field, and we are investing in this area because it's very important for us. It concerns chemotherapy, antibiotic therapy, palliative care, pain relief and things like that, which is a really huge market. So, we want to focus on that. That's for France. And we want to continue to grow market share and also develop other kinds of activities like, for instance, enteral nutrition, which is a new business that will be implemented in September with the new tariffs for private players, to take care of those patients, and also new treatments like home peritoneal dialysis, for instance, which also could be done by private players. So, that is the strategy for France. The third point is to become a leader in Germany, because the situation in Germany is that there is no one main competitor, I would say. It's really a fragmented market with small companies. What we want to do is create some subsidiaries and also make some acquisitions to rapidly become one national player and the leader in the field of home care, and to focus on the specific technical know- how for respiratory care and infusion therapy, for instance. Then the fourth point of the strategy for the years to come, and I would say for the months to come, is to enter other European markets. We focus now on the British market, for instance. We want to enter this market also by acquisition, so as to cope with all the regulation issues and things like that, and then boost the development by internal growth in this country So, my aim and the ambition of LVL Medical is to become a European player in the field of home care, because this player does not exist at the moment. We have to bear in mind that the European market of home care is really very underdeveloped compared to what exists in the US. Just to give you a figure, in France and in Europe (it's the same in all the countries), the budget for home care is less than 1% of healthcare expenditures, compared to more than 6% in the US. So everything is to be done in this field in respiratory care, infusion therapy, in all of what can be done at home, because it costs three to 10 times less than hospitals, and because we also have to face, as in the US, the ageing population and the fact that all of those elderly people will have more and more diseases. All of the governments will have to cope with the healthcare expenditures in the years to come, so it's really a booming market for us. And since there is no one, of European scale in this field, we want to become the one.

TWST: In the home market, how do you go about gaining market share?

Mr. Lavorel: That's a good point. If you look at France, for instance, since all the tariffs are the same for all the competitors, we have to compete on the level of quality of service, which is really an important fact -- quality of service for the patients to really take care of them, and to make sure the treatment is safe and they feel secure at home, and also quality of service for the prescribing doctors to be informed regularly, to help them take care of those patients, etc. The quality of service is part of, organisation. We have these quality standards we meet with the ISO certification, which is a good standard. But it's much more than that. It's a spirit, what we call devotion to service. All the people we employ and the people who work in the field with the patients, with the doctors, with the nurses, etc., must have the spirit of service and this devotion to service for the patient, because it's really a human business much more than a technical business. All the machines and all the equipment are all the same for all the competitors, so we just really compete in terms of this relationship we can create with the patient and the relationship we create with the prescribing doctors, because what we have to do is create confidence and make sure all the prescribing doctors have confidence in LVL Medical and the staff who take care of the patients. That's really a matter of relationships and human beings. So, we really compete in that, and we are gaining market share because we have focused on that since the beginning of the Company, with an organisation which is designed to be as close as possible to the market and as close as possible to the patient and the prescribing doctors. That is to say, we have a regionalised organisation with over 50 subsidiaries all over France, with a strong management at the local level, with all the original managers who are shareholders also in the company. So, they are really motivated both in growth and profitability, but also motivated to work for the project, what we want to for the company. That is to say, we have something like a start-up spirit in each subsidiary we have created, with the aim really of focusing on the patient and on the quality of service for the patient. What really makes the difference is, I would say, the reactivity, the proximity you have, the ability you have to react very rapidly, within two hours, with a simple telephone call, so that the doctors place greater confidence in your staff and the patients feel secure. That's really how LVL Medical is different to the industrial groups such as Air Liquide, who have industrial manners. The spirit of service is not the same as the way of managing an industrial company. So that's how we can compete and how we can make a difference. It's much more really a start- up culture and really a focus on relationships and human feelings we can create with the patients, with doctors, and this proximity, which is really, really important for us.

TWST: If we put all this together, what kind of growth should investors expect from the company over the next two or three years?

Mr. Lavorel: The same as in the past. Just to give you figures, for the current fiscal year we expect 55% growth, in terms of turnover in the company, and we expect to exceed the billion French franc turnover within two years.

TWST: Will that include some acquisitions?

Mr. Lavorel: Yes, of course. That will include acquisitions, that will include some growth also in Germany, where we really want to grow and boost the growth to become a national player, and that will include other acquisitions in other European countries like Great Britain or Spain and Italy.

TWST: Are there any restrictions on acquiring in these other countries, or can you do that with no trouble?

Mr. Lavorel: It's never with no trouble.

TWST: With no government restrictions?

Mr. Lavorel: No, not at all. This healthcare sector is really underdeveloped, so there are no regulation troubles with acquisitions or with monopolistic situations or things like that. But that's not the point concerning LVL Medical, not at all. What we really focus on concerning acquisitions is, first of all, the quality of the company. Of course, there is the know-how and the good image they have in the field of home care and what they have created with the relationships with prescribing doctors and patients. And second, there is the quality of the management, because what is very important in terms of growth, and what has been a key in the success of LVL Medical, is that we always have management which is really involved in the development and ambition of the company. So, what we want to do is find companies where the manager wants to stay with us and drive the project in the country that is concerned. That's exactly what we have done in Germany, for instance, where the local manager is in charge of developing all the business in this country. That's what we want to do in all the other countries, because once again, the key competitive advantage in the field of home care is really human resources and the motivation of the people to create a new market in Europe.

TWST: Is there anybody else trying to do what you're doing?

Mr. Lavorel: Not really. In terms of all the markets, there are some gas producers, for instance, like Air Products or Praxair or Aga Linde, all the producers like Air Liquide, which have been involved in the respiratory care sector, and who are trying to find all sorts of acquisitions to develop the home care business. Those are the main competitors who are interested in gaining market share in Europe. Another is Fresenius Medical Care, who also wants to develop home care. But I would say there is no pure service provider. They are all industrial groups who want to have some additional offer in order to be able to provide their equipment or their gas. But there is no European or French or other player that is a pure service player in the field of home care in Europe.

TWST: Do you have the management team in place to accomplish what you want over the next couple of years?

Mr. Lavorel: Yes. What we have done last year, in the current fiscal year, is really employ a lot of new people in management to cope with the growth for the year to come, and also for the two or three years to come, with more people in financing and accounting, and more people also in marketing for the new markets like enteral nutrition or dialysis. There are also a lot more people in data processing, which is really important for us, concerning information that is between the patients and the prescribing doctors. And then in terms of management, I have surrounded myself with more and more people, like my son, Stanislas, who will be in charge of all the developments in France, so that I can take care of the international developments. Then what one must understand is that we really want to rely on those local management that we find with the acquisitions we make to develop and cope with the growth. They will be the ones who will be the actors in the growth in those countries.

TWST: So, the company is organised and set up today to handle these moves into new markets?

Mr. Lavorel: Yes, of course. We are ready.

TWST: Do you have the balance sheet in place to allow you to do that?

Mr. Lavorel: Yes, we really have a good balance sheet. We have done some operations with convertible bonds which are being converted, with some equity balanced with warrants attached -- that will bring us some more cash. So, now we are able to make more acquisitions. In any case, if there is a big opportunity to enter the market with a big company, for instance, we'll be able to raise some more capital in the stock market.

TWST: So, you're ready to go then.

Mr. Lavorel: Yes, of course.

TWST: For investors keeping an eye on the company, what can they use as benchmarks over the next year or two to judge whether you're meeting your objectives?

Mr. Lavorel: I think they should focus on three points. The first point would be revenue growth. That is what is really important for us, and also growth in profitability. Because all we have done for 10 years is really developing by maintaining the profitability to be able to grow much more in years to come. So, that's really important. They can really focus on revenue, but also on profit, because we are really a profitable company, and we want to stay a profitable company. Also, they will have to focus on the ability we have and will show in the years to come to really integrate all of those acquisitions. We have made more than six or seven acquisitions in the last two years. Some of them were very big, very difficult, in France as well as in Germany. And we have proved that we have been able to do that. So, for the investors, I would say just focus on the potential of the market. Once again, it's really underdeveloped now. There is much, much more to do. So they should focus on the growth of the revenue, of size, I would say, in terms of European scale, which is really important. You can be just a French player or a regional player in Europe, but we really want to become a European player, and that will be achieved by maintaining profits for the investors and by making sure that all the acquisitions we make are always earnings enhancing immediately, or in one year at least.

TWST: Again, for that same investor looking at the company, what should they worry about? Where is the risk in the story at this point?

Mr. Lavorel: I think that the risk could be not growing as quickly as we should, because the market is ready to be created now. And in one, two or three years maybe some other company will have done it, and it will be too late. So, the main challenge for us now is really to cope with growth and to grow quickly, but not too quickly, to be able to cope with this growth and succeed in maintaining growth with profitability in this booming market. Concerning the risks, we really don't see any risk anymore because, once again, we have proved that we are able to make acquisitions, to integrate them very quickly, to make all those companies as profitable as LVL Medical is in less than one year. So, there is no problem with acquisition and external growth. We had some fear one year ago, concerning the first step in Europe and the first step in another country, Germany, which was not the easiest. But now when we look at the results of Germany, they are over all the budgets. They have big growth, good profitability, they gain in profitability every month, and so it is going very well. And we have proved that maintaining the local management and motivating it through shareholding, for instance, is really a good way to be sure that they will be interested both in growth and profitability and will be part of the project. That's what we want to do in all the other European countries, and now we really feel secure about that and we really feel ready to do that, because we have already done it once.

TWST: How do you feel about the value the market is currently putting on your company?

Mr. Lavorel: It's never enough. What is important to notice is that now, for the moment the value is a good value, but not considering the fact that we have in France some new markets which are opening, like enteral nutrition, which is a market worth more than FRF1 billion, of which we will have more than 20%. So, that's a big source of growth in the years to come in France without any investment, I would say, because we already have the team, the nurses, the technical staff, everything. We are really ready for that. That's the first point. The second point is that the valuation does not reflect, really, the huge potential of the market, considering infusion therapy, which is underdeveloped, everything is underdeveloped, everything will be created. And it is not considering the European status, we are gaining now, our good performance in Germany. It also does not consider what we will do in the months to come in all European countries. But as soon as they know they will considerate it, I'm sure.

TWST: Given this bright outlook, what is to prevent competition from coming in?

Mr. Lavorel: It all depends on the different countries. Considering France, in respiratory care, everything is done, because the market is really consolidating, and has been consolidated by LVL Medical, by those acquisitions. It is now really concentrated in the hands of two or three players, and it will be very difficult for new entrants to come in. And also because of new regulations concerning oxygen as a drug, for instance, there are a lot of barriers to entry in the respiratory care sector. So, we don't fear any entrants in these fields. We will just continue to gain share on those non-profit organisations. That's for respiratory care in France. Concerning other activities like infusion therapy, for instance, we haven't seen any new competitors coming in, because also in this field, you have to have good credibility with the hospitals and the prescribing doctors. We have the same competitors in France as in respiratory care, that is, the Air Liquide Group, LVL Medical and some small local players, who are not really important on a national scale, I would say. Maybe those gas producers or those industrial groups like Fresenius Medical Care really show a will to enter the market. Some of them, like Fresenius, have tried to enter the market for four years now, and have done nothing, because really in this business it's not the means that are important, but the rapidity and proximity and reactivity you can show, and I would say we can add the service spirit. We don't fear that kind of competitor because it's not their business. We haven't seen any new competitors entering. Maybe some American companies will be interested in the market, and we don't really understand why they haven't come, because they have the know-how, they've known this market for many years in the US. There is huge potential in developing the same kind of market in European countries. Maybe they are just waiting to find some European player to acquire or have a partnership with, because they are not interested in just being in France or Germany or Great Britain, and they consider Europe as a whole. That's also why we want to become a European player. I would say the only fear we could have would be to have a really good, pure, service player in the field of home care -- that is to say, an American player, because there is nobody else -- coming in and really implementing its know-how in this field. But for the moment they haven't looked at it.

TWST: Given that, is the company likely to become a target as it spreads its wings here?

Mr. Lavorel: No, not for the moment, because, first of all, what we really want to do is go ahead with our European project. That is, we want to truly become a European player in the global field of home care, that is, respiratory care, infusion therapy, dialysis, everything that can be done in the field of home care. It will take maybe two or three years to become this European player. Once that is achieved, maybe we will consider becoming a target for anybody, but not until then. There is too much to do.

TWST: If you were sitting down with some potential investors, what two or three reasons would you give them to go out and buy your stock today?

Mr. Lavorel: As I said, the first reason is we are in a huge market, really a booming market, considering the ageing of the population and the necessity of reducing health costs. And once again, home care costs three to 10 times less than hospitalisation. So, we are really in a market that cannot decline. The second point is we are in a market which is really very underdeveloped compared to what exists in the US and what we want to do in this field. So, the market is really interesting. The third point is that if they are interested in this market, they don't have a choice of companies to invest in. There is only LVL Medical in this market, which is listed and in which they can invest. I would say we are the only player they can rely on in this field. The fourth point is that we have really proved by the history of the company and the management culture and all the results we have had for many years that we are able to cope with big growth and also maintain profitability, which is really important for investors. All the acquisitions we've made and all the acquisitions we will make will always be earnings enhancing. Just remember that because I am also the principal owner of the company, with more than 51% of the capital and I also focus on those kinds of things, like earnings for investors. Then I would say it is the quality of the company, the quality of the management, the quality and the potential of the market, combining with the profits we show and the profits we're able to make in this market, which is really an exception in this field, in France, and also in all the other countries. So, we really have know-how in making this business profitable, which is also a very interesting point for those investors.

TWST: Is there anything else that we should have touched on and missed in our conversation?

Mr. Lavorel: What I wanted to focus on, the main point, which I think I mentioned, concerning our success and strong growth for many years, and our success in gaining market share and our future success in becoming this European player will really be due to our focus on people and human resources, our focus on management and what we call entrepreneurship. That is, we have people who are responsible for what they do, who are interested in what they do, interested in terms of shareholding, because more than 7% of the shares are among the staff. I would say that is a key point for motivating all the people to really gain market share in a booming market, this kind of start-up spirit.

TWST: That's somewhat unusual, I guess, in France.

Mr. Lavorel: Yes, that's really unusual.

TWST: Thank you.

JEAN-CLAUDE LAVOREL Chief Executive Officer LVL Medical Groupe SA 25 Rue Bossuet 69455 Lyon Cedex 06 France Tel: +33 4 26 68 6868 Fax: +33 4 26 68 6879

Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include an Investors Brief or other highlight material to be provided and sponsored by and for the company.

Copyright 2000 The Wall Street Transcript Corporation All Rights Reserved