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To: Jacob Snyder who wrote (584)	5/9/2002 5:37:06 PM
From: Sam Citron	Read Replies (2) \| Respond to of 13403

OT DGX, LH, Clinical lab biz My guess is that the biggest barrier to entry is that the big labs like DGX and LH have pretty powerful economies of scale and scope going in their favor which make it difficult for smaller specialty labs to compete. Their exploding stock ensures easy access to capital to buy the other 50% of the lab business that they do not yet control. And stock options provide a nice incentive for recruiting and maintaining top personnel. So it's a consolidation story where the big keep getting bigger and the smaller fish who manage to adapt get swallowed up. What are some possible limits to growth? Here's my stab at it? (1) Gov regulation/legislation as politicians are driven to try to reign in escalating healthcare costs...levers: antitrust, investigations of billing improprieties, collusive agreements, doctor ownership issues; (2) Corporations putting pressure on HMOs and PPOs to control premium rises caused in part by excessive testing. (3) A resurgent tech sector, if and when it happens, would cause this defensive sector to lose some of its luster with investors and decrease access to capital (4) Excessive valuations? PEs seem a bit high, but not astronomical considering the growth prospects and risks in this environment. Sam