Tar Heel biotech stocks have a life of their own.

Author:Williams, Christopher C.

Biotechnology is not a quick-buck business. It takes years and hundreds of millions of dollars to discover a drug, guide it through clinical trials and the federal approval process and market it before seeing revenue, much less profit.

Two small companies in the Triangle, a hotbed of biotech start-ups, have taken a similar route to reduce that risk. Barebones corporate structures, Medco Research Inc. (MRE-AMEX) and Intercardia Inc. (ITRC-NASDAQ) buy or license cardiovascular drugs that others discover, then farm out manufacturing, sales and distribution.

But both are paying for the uncertainty of getting their products to market with sluggish stock prices. Analysts, however, expect the stocks to rise as their drugs approach approval.

Medco, which went public in 1984 and moved to RTP in 1993, acquires drugs in late-stage testing, directs clinical trials, guides the drugs through Food and Drug Administration approval and licenses out manufacturing and marketing for a 25%-30% royalty on sales. It employs only 25 full time.

One of its drugs awaiting approval is ViaScint, which helps identify patients who would benefit from bypass surgery. Approval, possibly in a year, would give Medco a shot at a large market. About 700,000 bypasses are performed each year in the United States and Europe.

Another Medco drug is BiDil, for treating congestive heart failure. It could also be approved in a year and generate $60 million to $80 million in annual sales, says analyst John R. Boettiger of Harris Webb & Garrison in Houston.

Medco already receives royalties from two drugs. Adenocard, introduced in 1989, treats irregular or rapid heartbeat. Adenoscan, which hit the market in July 1995, is for patients who can't use a treadmill during cardiac stress testing. Both drugs, manufactured and marketed in the United States and Canada by Fujisawa USA Inc., generated nearly $50 million in sales in 1995 (Medco pays half its Adenocard royalties to a University of Virginia foundation). Adenoscan sales could reach $200 million to $300 million in a year or two, Boettiger says.

Medco expected to turn a full-year profit for the first time in 1996. Boettiger projected earnings of 40 cents a share on royalty of $18 million to $20 million, compared with a loss of 32 cents a share on almost $10 million a year earlier. "On a pure product basis, it's ideally positioned for cardiovascular diagnostic work," he says, "and from a pure financial standpoint, it's debt-free, with...

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