After reaching 18 in late May, shares of Sano (SANO) had plummeted to 10 by July 24. Earnings had been disappointing for the maker of patches that transmit drugs through the skin: It posted a second-quarter loss larger than the Street expected. Even so, the stock started rising again towards the end of July. By Aug. 21, it had climbed to 17. Why? Sano got a shot in the arm from Bristol-Myers Squibb.

Bristol-Myers agreed to pay Sano $40 million to produce a skin-patch version of Bristol-Myers' BuSpar, an anti-anxiety drug. BuSpar is an oral treatment for anxiety. Sano's system will deliver the appropriate dosage through an adhesive patch.

With the stock's resurgence, are investors thinking about cashing out? "We aren't selling. We are in fact buying more shares to add to the 1 million we already own," says Jim Awad, president of Awad & Associates Asset Management, a division of Raymond James & Associates. He argues that the stock is worth twice its current price, especially with its Bristol-Myers deal. Sano will receive an initial $15 million from Bristol-Myers, which has agreed to make additional payments as BuSpar completes certain clinical tests and clears regulatory hurdles.

Awad thinks Sano is ideal for Bristol-Myers--not only as a marketing partner but also as an eventual acquisition. "Think of it," he says. "Bristol-Myers has so many drugs that can use skin patches. And as Sano gets bigger, it will be a perfect team-up."

Analyst Patricia Bank of securities firm Wheat First Butcher Singer, who recommended the stock in June at 17, says Sano has a plan to commercialize a range of generic and proprietary patches. If it works, Sano could become profitable soon, she says.

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