Scios Is Taking Heart

By Mara Der Hovanesian

Biotechs are back: The Amex Biotech Index has soared 20% since Apr. 1, after floundering for much of the year. Small-cap Scios (SCIO ) has been swept upward, too. And with good reason: The company is about to introduce one of the first new drugs in a decade for acute congestive heart failure, says Rachel Leheny of Lehman Brothers. Even though the disease afflicts 5 million Americans a year, current treatments are "suboptimal," she says. Leheny views Scios' Natrecor as a blockbuster. The Sunnyvale (Calif.) company looks to Natrecor to pump up revenues by a modest $14 million this year and by $72 million in 2002.

The Food & Drug Administration's initial rejection of Natrecor in April, 1999, had been depressing the stock. Scios traded at a 52-week-low of about $3 in May, 2000, but climbed to $30.50 last month, before sliding to $26. Leheny tags Scios a "strong buy," with a $38, 12-month target. In April, another analyst, Needham's Dr. Mark Monane, raised his yearend target to $37.

An FDA committee will review Natrecor on May 25 and give it a nod or a nix by mid-July. The company and analysts are optimistic. Meanwhile, Scios will lose money as it beefs up for the hoped-for rollout. The net loss was $1.15 a share last year, and Leheny expects a $1.39 loss in 2001--vs. First Call's consensus of a $1.47 loss. Monane projects Scios will earn 50 cents a share by December, 2003, and $1.90 by 2004, when he estimates sales of Natrecor will reach $219 million. Scios is not a one-trick pony, however: Analysts say trials of SCIO-469, a treatment for rheumatoid arthritis, look promising. Research pacts with Chiron and Eli Lilly will help fill the pipeline.

Gene Marcial is on vacation.

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