09/09/96 KEEP A WATCH ON THIS UGLY DUCKLIG

KEEP A WATCH ON THIS UGLY DUCKLIG

As analysts see it, Cygnus (CYGN), a biotech outfit, won't make money until 1998, and this has depressed the stock. It has slid to 16 a share, down from 25 early this year. Still, this developer of diagnostic and drug-delivery systems, primarily transdermal patches, has some die-hard fans.
Cygnus has an array of products in advanced development--chief among them GlucoWatch, a diabetes monitor-- that are ``potentially great winners,'' says Ronald Nordmann, a partner at Deerfield Management, a New York firm that invests mainly in health-care stocks. He expects GlucoWatch to be approved for marketing by the Food & Drug Administration before the end of 1997.
Worn like a wristwatch, GlucoWatch has a disposable pad next to the skin that detects the glucose level in the blood of diabetes patients. Several big drugmakers have signed pacts with Cygnus. Becton Dickinson will market GlucoWatch in the U.S. And Japan's Yamanouchi Pharmaceutical will sell GlucoWatch in Japan and Korea.
Cygnus' other products in the pipeline have also attracted some biggies: It has a deal with American Home Products to market hormone replacement patches, now in clinical trials. Another product, FemPatch, an estrogen skin patch developed in an agreement with French drugmaker Sanofi, will be marketed by Warner-Lambert. And Johnson & Johnson is selling Cygnus' Nicotrol, a smoking-cessation skin patch approved by the FDA in July as a nonprescription product.
``While we underscore the risk of development delays, the signing of world-class partners and recent upbeat discussions with management suggest an unusual investment opportunity,'' says analyst Douglas Lind of PaineWebber.
BY GENE G. MARCIAL