Comprehensive Orthopaedics Industry Report Published by U.S. Bancorp Piper Jaffray.

MINNEAPOLIS--(BUSINESS WIRE)--July 29, 1999--

Orthopaedic products will generate roughly $10.5 billion in worldwide revenues in 1999, says a newly published report, "Orthopaedics Overview," authored by U.S. Bancorp Piper Jaffray Senior Research Analyst Thomas Gunderson. The orthopaedic sector is second only to the cardiovascular sector within medical devices, and operating profits are robust, says Gunderson.

The report offers analysis of key trends in total joint reconstruction, total hip replacement, total knee replacement, sports medicine, trauma, the spinal market and biotechnology. Among the companies cited in the report are: Stryker Corporation+ (NYSE: SYK, 61), Biomet, Inc.+ (Nasdaq:BMET-37 9/16) Johnson & Johnson+ (NYSE:JNJ-95 3/4), Medtronic+ (NYSE:MDT-73 5/16) Innovasive Devices+ (Nasdaq:IDEA-4 1/8), Exogen, Inc.--+ (Nasdaq:EXGN-5), Bristol-Myers+ (NYSE:BMY-68 15/16) and Sulzer Medica+ (NYSE:SM-18 13/16).

"This industry overview piece is designed to build on the introductory piece we published last year, serve as an overview and prime investors for current and future orthopaedic company opportunities," says Gunderson.

For the near term, Gunderson expects unit growth of the hip and knee replacement market, which represents a majority of the orthopaedic industry, to be 2 percent to 4 percent. "While growth in the industry has slowed from the torrid pace of the 1980s, the price concessions of the early 1990s have subsided and the risk-reward equation is, in our opinion, favorable again," he says. After surprisingly robust results of the first quarter of 1999, U.S. Bancorp Piper Jaffray believes that pricing increases, especially in the lucrative hip and knee segments are adding to growth. "We estimate that higher pricing is adding roughly 4- 5 percentage points of growth to the U.S. hip and knee businesses in 1999. With improving market dynamics, we continue to believe that selective investment in orthopaedics will offer superior returns to the astute investor."

The report points to several trends creating opportunities for investors in the orthopaedic industry:

-- Consolidation: U.S. Bancorp Piper Jaffray expects consolidation

to continue in 1999, providing aggressive competitors with the

opportunity to gain share and accelerate revenue and earnings

growth;

-- Acquisition: Product line acquisition that allow entry into new

businesses and those acquisitions that strengthen distribution

offer the most short-term accretive opportunities;

-- Growth in niche markets: U.S. Bancorp Piper Jaffray expects much

of the growth in orthopaedics to come from the niche businesses:

more than 20 percent growth in the evolving sports medicine

implantables; 15 to 20 percent growth in the spinal markets; more

than 20 percent growth in the bone graft substitute markets; and

finally, 8 percent to 12 percent growth from trauma, with much

faster growth within certain niche areas of trauma;

-- Stabilized U.S. hip and knee implant pricing;

-- Biotech or "Orthobiologics": The next big opportunity in

orthopaedics will center on biotech ventures reaching maturity,

projects Gunderson, adding that the addition of biotech-derived

products will offer a long-awaited incremental boost in total

revenues;

-- Increased International Sales: Orthopaedic companies are

currently deriving, on average, about 30 to 40 percent of their

sales from international markets. Though the dollar continues to

be strong, a weaker dollar in the future could have positive

foreign exchange impact.

The industry report also identifies risk factors for companies in the industry including managed care and reimbursement, consolidators with contracting clout, global economic risk and patent and product liability risk.

"Orthopaedics Overview" is available to clients of U.S. Bancorp Piper Jaffray and to the media. Please order it through your U.S. Bancorp Piper Jaffray Representative. Members of the media may also receive the report by calling Elizabeth Child, 612/342-6594 or Katherine Schulz, 612/342-5680. If you need more information, call the Research Report Hotline, [phone], extension 8850.

U.S. Bancorp Piper Jaffray, a subsidiary of Minneapolis-based U.S. Bancorp, provides a full range of investment products and services to businesses, institutions and individuals. The company's investment banking business has grown exponentially in the last several years by focusing on the needs of growth companies in the health care, technology, financial institutions, consumer and industrial growth sectors. U.S. Bancorp Piper Jaffray has a national reputation for its expertise in fundamental research and equity and debt financing. U.S. Bancorp offers a comprehensive range of financial solutions through U.S. Bank, First American Asset Management, U.S. Bancorp Libra Investments and U.S. Bancorp Piper Jaffray. For more information, visit our Web site at www.piperjaffray.com.

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