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Four analysts and top management from twenty sector firms examine the Medical Technology sector in this special 98-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info375.htm

TWST: Let’s start with a review of the performance of the small cap medical technology stocks in the second half of 2000 and the first half of 2001. What has been most striking about the performance of this group?

Mr. Wise: The small cap med-tech stocks have not done very well in the last nine months as they remained out of favor. Only recently, for the last month or so, have they seemed to turn the corner. We believe the turnaround is more a reflection of what appears to be a growing interest in small caps by the market in general. The universe of smaller cap companies that we follow includes companies that basically have a market cap of less than 1 billion. However, these days it is common practice to include companies with a 1-2 billion market cap in the mid- and small cap category. In our small cap coverage universe of companies with market caps under 1 billion, the average stock is down 11% over the last year and up 25% in the last six months. In the last three months, these stocks are up 13% on a rolling basis.

TWST: Have there been any fundamental issues that you would attribute this to?

Mr. Wise: A variety of factors have likely played a role in the positive turnaround. The reality is that as consolidation has continued in the healthcare industry among the consumers of health care, hospitals, group purchasing organizations, hospital purchasing groups of various stripes, and large companies have grown themselves in part by acquiring most of the mid-cap stocks in the medical device industry. As all that has happened, I think it’s left the smaller companies ever more isolated and on precarious ground in terms of competing in a rapidly changing world. If you think about it, these companies have to simultaneously meet Wall Street’s expectations about steady quarterly earnings performance. At the same time, they must go through the complex process of funding, directing, managing clinical trials that often take years to complete and bring to regulatory agencies for approval. They also have to create initiatives to gain reimbursement and coordinate very intense educational marketing efforts. I’m just touching on a few issues, but this is a challenging and expensive task. No task is ideally suited for laying out beautifully managed quarterly earnings flow.

TWST: At the beginning of our conversation you mentioned Intuitive Surgical. What is the exciting news coming out of this company?

Mr. Wise: Intuitive (Nasdaq:ISRG) has been one of our favorite emerging technology stories for a long time. They design and manufacture the da Vinci Surgical System. This is an advanced, computer-enhanced surgical system that we really think will fundamentally change the way that many surgical procedures are going to be performed. I sort of jokingly say, and I hope surgeons don’t read this, this actually is a device that improves the surgeons. It’s sort of the next step in the minimally invasive revolution because it simplifies many existing minimally invasive surgeries. A physician sits at a console and looks into the console with a clear, direct field of view, as opposed to off to the side or on a reverse field of view on a monitor. And while looking at the screen, the surgeon puts his or her fingers into little stirrups that manipulate a robotic arm that is incredibly flexible and strong. The robotic arm actually translates the surgeon’s motions into more minute, precise, controlled movements or scales them down to a smaller level than they would be able to do on their own.

This special issue includes:

1) Small-Cap Med-Tech Stocks - In an in-depth (5,000 words) Analyst Interview, Frederick Wise, Managing Director at Bear, Stearns & Co., examines the outlook for the sector and shares specific stock recommendations.

2) Medical Technology: Small Cap Stocks - In an in-depth (3,400 words) Analyst Interview, Hans von der Luft, Senior Vice President at McDonald Investments, Inc., examines the outlook for the sector and shares specific stock recommendations.

3) Small Cap Medical Supply & Devices - In an in-depth (4,100 words) Analyst Interview, Dr. David Gruber, Senior Vice President and Rosanne Ott, Research Analyst, both at Lehman Brothers, examine the outlook for the sector and share specific stock recommendations.

4) CEO interviews (average 2,500 words). Top management of twenty sector firms examine the outlook for their firm and the sector.