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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: Will you begin by telling me about your area of coverage at McDonald Investments?

Mr. von der Luft: I am an analyst at McDonald Investments, where I follow the medical technology industry. I currently provide research on 13 stocks within the medical technology sector. We’ve segmented coverage into groups within medical technology. There is certainly a lot of the sector to cover, so what we’ve tried to do is focus on some of the groups where there are key trends, positive growth drivers, and underfollowed situations. So we currently focus on four specific segments: ophthalmology; respiratory and home health care; infection control and surgical support; and diagnostic products and clinical labs. So that’s how we look at the space right now.

TWST: Are there any characteristics that are common to the companies that you choose to follow?

Mr. von der Luft: Yes. We look for a strong management team with good growth characteristics. These may be smaller companies, but through internal growth or external expansion and/or acquisitions, they will turn into larger organizations over time. We look for interesting trends and exciting new product opportunities. We also like situations where a company may be underfollowed or underappreciated by the Street, or where there is some type of market inefficiency and we’re perhaps telling a different story than the consensus.

TWST: What are some of the other companies that you’d like to highlight?

Mr. von der Luft: We have been very selective in how we approach medical technology and formulate recommendations. Last year was a very strong year for the sector and it was fairly easy to outperform the market. Our index of medical technology companies was up 24% in 2000, but has declined about 6% thus far in 2001. We continue to be very selective with our ratings because it’s a sector that is incredibly dynamic with many moving parts, and valuations on the whole have become somewhat expensive. The market is focusing on companies with very visible sales and earnings growth and that continues to be our emphasis. The only aggressive Buy-rated stock on our list is SRI/ Surgical Express (Nasdaq:STRC). It’s not a very well-known company among institutional investors, but we think that is quickly changing given the recent price appreciation in the stock. The company is a just-in-time provider of a comprehensive surgical supply delivery and retrieval service to hospitals. It is a very unique platform that is based primarily on reusable products, but they are now integrating disposables, instruments and other products. Because they eliminate the additional costs of using disposables — such as waste disposal, inventory carrying costs, and excess product expense — they are able to reduce a hospital’s surgical supply costs by up to 20%-40%. Each day, they deliver the required surgical packs a hospital needs to perform a surgical procedure — gowns, drapes, towels, and other reusables and disposables — and pick up the used items the next day. So it’s more of a service-oriented business. But there is a technology play there in that they are sterilizing and processing these products at their own facilities. And the company has recently signed a number of new contracts with hospital buying groups such as Novation and Health Trust, which we think validate what they are doing. Their revenues are approaching $100 million, and we think it’s a very solid recurring revenue business model that can continue to perform over the next few years.

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.