Eager to join the pharmaceutical elite, Hoechst needs to cut costs without creating more labor unrest. As it merges with Rhône-Poulenc into Aventis, HMR is outsourcing all US development to the CRO, Quintiles, looking to cut costs by $100 million over five years and provide a benchmark for the rest of HMR's worldwide development program. Moreover, both Quintiles and HMR hope to use the collaboration, perhaps in tandem with outside investors, to fund additional development projects; Quintiles would be assured the development work, and receive some of the drug's upside; HMR would be able to delay its own buy-in decisions until the projects had generated more actionable data. But the deal raises conflict-of-interest questions: will Quintiles' other clients shy away from a company with extra incentives to develop particular drugs-either those in which it has an equity interest or those of a client with whom it has a special relationship?

Technology innovation and product differentiation are the keys to success in medical devices, says Dan Lemaitre, Global Sector Head, Health Care, for SG Cowen Securities Corp. and one of the device industry's leading experts. From implantable cardiac defibrillators to cardiovascular stents, Lemaitre argues, the record is clear: the winners are those companies that can develop new technology with meaningful clinical benefits. The losers not only lose their technological edge, but often resort, futilely, to pricing strategies to try to hold their markets.