(FORTUNE Magazine) – On the surface Sterling Drug seems a bit lackluster. Earnings from abroad, where Sterling does one-third of its business, are getting hammered when translated into strong U.S. dollars. At home, sales of two of Sterling's biggest moneymakers, Bayer Aspirin and Panadol, are theatened by the recent introduction of nonprescription ibuprofen, a competing pain reliever. But down in Sterling's development pipeline is a potential remedy for those headaches. It's a new drug called milrinone, currently being tested for treatment of congestive heart failure, a debilitating heart condition that afflicts over two million Americans. If the tests prove successful, and milrinone is approved by the Food and Drug Administration, it could have a blockbuster effect on earnings, analysts say. Congestive heart failure is a deterioration of the heart's ability to pump blood to the body's tissues. In its advanced stages, it makes a simple exercise like breathing a struggle. One well-known sufferer: William Schroeder, recipient of an artificial heart. While it is not yet known whether milrinone is able to reverse the deterioration, early tests indicate that it can increase the heart's ability to contract and thereby significantly improve the patient's day-to-day existence. Digitalis is the most popular current treatment for congestive heart failure but is dangerously toxic if taken in large doses. Analysts who've studied the heart-care market estimate that Sterling could easily charge a dollar per day, or more, for treating patients with milrinone, vs. the approximately 3 cents per day charged for digitalis. David Crossen, a drug stock analyst at Sanford C. Bernstein & Co., estimates that by the third year of marketing, milrinone could generate as much as $400 million in sales. Assuming a 50% pretax profit margin, the after-tax effect on profits would be, in Crossen's words, ''profound.'' By 1989, he says, milrinone could generate as much as $3 per share in earnings--25% more than all of Sterling is expected to earn in 1984. So why aren't investors loading up on Sterling stock? One reason may be investor skepticism over Sterling's ability to gain FDA approval. The company held similarly high hopes for amrinone, another drug to treat congestive heart failure, but unpleasant side effects discovered during testing caused the company to drop its quest for approval of an oral dosage. So far, tests of milrinone have revealed no side effects. And Mary Greenebaum, an analyst at Michael A. Steinberg & Co., a small New York investment house, points out that the downside risk in the stock appears limited. Sterling's current price of $28.63, or 12.2 times expected 1984 earnings of $2.35, only slightly reflects milrinone's potential earnings power. All that could change sometime during 1985, figures Bernstein analyst David Crossen. Though milrinone probably wouldn't receive final FDA approval until 1986, and wouldn't show up in earnings until 1987, Crossen thinks that Sterling stock could start to move as soon as the company files for approval with the FDA, perhaps later this year. Recent rumbles in Sterling's stock, he adds, are probably not the result of milrinone, but of takeover speculation, rampant for the last six months. Betting on a new drug is always risky. But based on milrinone's positive results so far, and the limited downside risk in Sterling's stock, analysts think it's a bet worth making.

CHART: TEXT NOT AVAILABLE Sterling's Laggard Pulse Sterling Drug has been trailing the S&P 400, but a new drug in the works could pep up the stock.