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TWST: Will you begin by telling us what distinguishes the companies that you follow for UBS Warburg from those in other sectors of health care?

Ms. Goldwasser: I cover diagnostic products and services companies. I view these companies as safe havens for investors. They have real revenues and real earnings and are positioned to benefit from developments on the genomics side.

TWST: Tell us how these companies play into the genomics opportunities.

Ms. Goldwasser: The sequencing of the genome will lead to improved diagnosis of disease and ultimately to customized drugs tailored to individuals. The diagnostic services companies will benefit from the demand for the diagnostic tests that are available. One example is pharmacogenomic, which is the testing of an individual’s genetic variation that will influence the response to therapeutic drugs. We envision that in 10 years, a patient who is prescribed a drug will also have to go through tests to predict his or her response to the specific therapeutic.

TWST: So will diagnostic testing become much more routine in the future?

Ms. Goldwasser: Tests will go through cycles starting as esoteric and then becoming routine. Ultimately diagnostic testing could become part of disease management.

TWST: Which companies among those that you follow are best positioned to take advantage of this trend?

Ms. Goldwasser: Laboratory Corporation of America (NYSE:LH), Quest Diagnostics (NYSE:DGX), and IMPATH (Nasdaq:IMPH). IMPATH is not only well positioned to enjoy the growth in testing volumes in the future, but they already provide services to genomic companies.

TWST: Is IMPATH in a very specific area?

Ms. Goldwasser: IMPATH is focused on cancer testing.

TWST: Who reimburses these companies? How do they make money?

Ms. Goldwasser: Four different groups drive reimbursement: the government, commercial payors, patients, and clients (hospitals and physicians).

TWST: How important is it for a company to have an agreement with a managed care organization or a major group purchasing organization? Are these kinds of contracts like the Holy Grail of marketing for these companies?

Ms. Goldwasser: Contracts are important. A company that has contractual relationships with managed care organizations will take less time to collect, have lower receivable risk and a lower bad debt expense. Today the trend is toward preferred providers’ fee-for-service contracts that are on a nonexclusive basis.

TWST: Do all these companies have contracts with payors?

Ms. Goldwasser: LabCorp and Quest Diagnostics do. Being a niche player makes it more difficult for IMPATH to have contracts with managed care organizations.

TWST: How important is new product development to these companies?

Ms. Goldwasser: We put a high premium on new product development. Usually the new products are associated with higher reimbursement and better profit margins.

TWST: Does the existence of a partnership or alliance with a major pharmaceutical company improve a company’s standing with the investment community?

Ms. Goldwasser: Roche’s investment at this point is a financial investment. As far as IMPATH goes, what I would focus on is the inroads they make with their biopharma business, and how many contracts they sign with genomic and biotech companies.