Dow Jones 10115.26 - 30.45  4:08 pm EST, Tues., February 26, 2002  NASDAQ  1766.96  -  2.92  For info, visit access.smallcapnetwork.com .  S & P 500  1109.39  -  0.04  To be removed, please click here .  Russell 2000    471.42 +  3.23  VOLUME 02: ISSUE 14   "Diomed In The Rough" We are very excited about our most recent profile. Medical device maker Diomed (DIO) is a "picks & shovels" company in the photodynamic therapy industry also referred as PDT.  The company supplies lasers and fiber optics to PDT companies which in turn use them in conjunction with their drugs to treat patients for cancer.  Just this past week the Wall Street Journal featured an article on PDT: In the article, which you can view by clicking here, it states:  "Another promising area of treatment involves so-called photodynamic therapy, or PDT. Some light-sensitive drugs, many from a chemical class known as the porphyrins, are naturally drawn into rapidly dividing tumor cells. Laser light of a particular frequency can trigger a sequence of chemical events involving the drugs in those cells that kills tumors while leaving most healthy tissue unharmed. Fiber-optic lines can deliver laser light to internal tumors via endoscope. While such therapy for cancer is close to a decade old and has been approved in the U.S. for esophageal and lung cancers, it is only now attracting wider attention. One reason is that conservative doctors have been slow to adopt "hybrid" treatments that involve both drugs and medical devices. In addition, the first PDT practitioners hadn't yet worked out ways of delivering exactly the right "dose" of laser light to tumors, says Kenton Gregory, director of the Oregon Medical Laser Center in Portland, which is studying the use of PDT to treat prostate and breast cancer. Once light dosage is optimized, "you have a beautiful therapy," he says. "Unlike radiation, you can use it over and over," without damaging the patient." Investors that do not read the SmallCap Digest have no idea that Diomed is a supplier of the laser light and fiber-optic lines that are mentioned in the Wall Street Journal. The four big PDT drug companies are currently QLT Inc (QLTI), Pharmacyclics (PCYC), Axcan Pharmaceuticals (AXCA), and DUSA Pharmaceuticals (DUSA).  Between the four companies, there are scores of drugs and applications that will be making its way through the FDA process.  This doesn't even account for the large drug makers that will eventually enter the PDT industry by developing their own drugs or just buying out one of the incumbents.  Diomed is partnered with all four of these companies. Each new PDT drug that is developed and approved increases the demand for Diomed's lasers and fibers.  Just last week Axcan reported better than expected earnings.  According to a report issued by J.P. Morgan, Axcan will be filing a new drug application also known as an NDA with the FDA for the use of Photofrin in the treatment of Barrett's Esophagus.  The application is estimated to be filed in March of 2002.  Photofrin is already FDA approved for other treatments, thus Barrett's Esophagus will experience a shorter FDA process.  FDA approvals expected in Sept. of 2002.   What this means is that in quarters 3 and 4 of 2002 Diomed should expect to have substantial upside to revenue estimates from PDT.  Remember that each new drug approval means more money to Diomed's bottom line.  The best part is that the drug makers are spending all the money for the FDA approval process while Diomed sits back and waits without having to spend any money.  It is an incredible position for a company to be in. PDT is an exciting industry but investors in Diomed should realize that the company is also the first to receive FDA approval for EVLT (treatment of varicose veins).  Diomed is no one trick pony.  By being both a leader in the PDT industry as well as EVLT, Diomed is in a unique position where it is diversified across two very different areas within the sector.  This is a rarity amongst biotech companies and the beneficiaries are the shareholders. The company's unique business model offers shareholders substantial protection from the risks normally associated with owning biotech stocks.  Unlike the "approval or bust" companies that place their entire future on the hopes of one drug, Diomed is focused on maximizing revenues and earnings from its partners. The stock closed today at $7.30 which is up 5% from when we profiled the company.   It has pulled back from the $8.50 level which is a great opportunity for investors who were waiting for a nice entry point.  We feel that Diomed should be accumulated up to $8 per share and over the course of this year has the potential to reach $12. D I S C L A I M E R : The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a registered investment advisor or broker-dealer. All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward  maximizing the upside potential for investors while minimizing the downside risk, whenever possible.  Moreover, as detailed below, this publication accepts compensation from third party consultants and/or companies which it features for the publication and circulation of the SmallCap Digest or representation on SmallCapNetwork.net.  Likewise, this newsletter is owned by TGR, LLC.  To the degrees enumerated herein,  this newsletter should not be regarded as an independent publication. Click Here to view our compensation on every company we have ever covered, or visit the following web address:  http://access.smallcapnetwork.com/compensation_disclosure.html for our full compensation disclosure and http://access.smallcapnetwork.com/short_term_alerts.html for Trading Alerts compensation and disclosure. 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