Clearer picture could pep up drug researcher.

• Author: Gibson, Dale
• Position: Money Matters - Includes Tar Heel Stock Watch - Wilmington, North Carolina-based Applied Analytical Industries Inc. - Company Profile

The executives at Wilmington-based Applied Analytical Industries Inc. take their cue from the actors working around them in the port city. They don't want to be typecast. AAI (AAII-NASDAQ) feels it gets lumped with hundreds of drug contract-research organizations. But it has two qualities to set it apart: It does early-stage research, and now it's developing its own drugs.

Most CROs shuffle paperwork and oversee drug trials, basically a Food and Drug Administration audit. AAI does some of that, boosting its clinical research in February with a deal for a Natick, Mass.-based CRO with $20 million in sales.

But mainly it handles analytical chemistry. That "is much more capital-intensive and knowledge-intensive," says Rob Rouse, an analyst with Lehman Brothers Inc. A drug maker creates a petri dish of chemical soup that acts a certain way, then pays AAI to study how to make it into a drug - the active ingredients, the right dosage, how long it lasts. That takes scientists.

TAR HEEL STOCK WATCH Expensive stocks (highest price-earnings ratios among North Carolina stocks) P/E Recent 52-week Company ratio price range RF Micro Devices 213.9 $77.00 $10.50-80.50 Haywood Bancshares 125.0 15.00 13.75-23.00 Applied Analytical Industries 86.7 26.00 9.00-28.00 Ingles Markets 49.7 11.94 10.19-14.50 Cree Research 48.8 32.69 10.50-53 25 Lowe's 43.3 59.31 23.88-60.06 Pharmaceutical Product Dev. 40.9 34.75 18.50-38.44 Quintiles Transnational 40.7 43.13 33.38-56.88 Speizman Industries 40.6 4.88 3.31-7.50 First Charter 40.6 18.69 12.50-27.00 Cheap stocks (lowest price-earnings ratios among North Carolina stocks) P/E Recent 52-week Company ratio price range Standard Commercial 4.2 $5.88 $5.63-16.13 Burlington Industries 5.0 6.19 6.06-18.88 Unifi 6.6 12,06 11.50-39.56 Market America 7.3 3.94 2.81-7.25 Midway Airlines 7.4 12.88 9.00-23.00 United Dominion Industries 7.7 19.31 16.13-35.00 Kewaunee Scientific 7.9 9.50 9.50-14.50 Old Dominion Freight Line 8.2 1.00 8.00-20.25 Reeds Jewelers 8.3 3.25 3.00-5.75 Laboratory Corp. of America 9.1 1.81 1.13-2.75 AAI got in early. "They have a very strong foothold in a niche that has clear barriers to entry," Rouse says. But it plodded along for years. After going public at $16 in 1996, its stock took a couple of dips. It traded at $9 just last September.

Now analysts think it's poised to be a star. Investors bumped it to $26 at the end of February. Analysts like the company's two-headed nature, which gives it stability and...