Industry Outlook 1999/Fund Managers

Are small-cap stocks stuck in a temporary down cycle? Or are they being hurt by structural changes in the investment community? True, investment funds have increased in size to such a degree that it has become financially impossible for most of them to invest in small cap companies. But small companies have things that large companies don't--innovative and differentiable products that are so crucial to the growth of large companies. {IN VIVO} talks with top-ranked health care analyst Dan LeMaitre of Cowen & Co. about the pressures on large and small device companies.

Technology innovation and product differentiation: that in a nutshell, says Dan Lemaitre, Global Sector Head, Health Care, for SG Cowen Securities Corp. and one of the device industry's leading experts, is the key to success in medical devices. From implantable cardiac defibrillators (ICDs) 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.

But what ismeaningful technological innovation and differentiation? With customers concerned about rising prices and competitors flooding the market, is the...

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