(FORTUNE Magazine) – When it was introduced last month, the emergency contraceptive Preven made the evening news and the front pages. The attention is easy to understand: American women have an estimated 2.7 million unintended pregnancies every year, and Preven has the potential to, well, prevent many of them. Surprisingly, though, the drug didn't come from a giant like Merck or Pfizer; it came from a tiny, privately held company in Belle Mead, N.J., named Gynetics--a fact that speaks volumes about the culture of the drug industry.

The ingredients of Preven are nothing new: Medical experts have used the basic recipe for emergency contraception since at least the mid-1970s. Emergency contraception pills, or ECPs, are simply high doses of the hormones found in regular birth-control pills, taken in two steps within 72 hours of sex. In contrast to "morning after" pills such as RU-486, which induce abortion by causing a fertilized egg to detach from a woman's uterus, ECPs actually prevent pregnancy. "Most people have no idea that's possible, because when Mom or Dad took us behind the barn, they usually left us with a misunderstanding of the basic facts of life," says Dr. Anita Nelson, professor of obstetrics and gynecology at UCLA. "It actually takes a few days for an egg to get fertilized and lock itself onto a uterus. And ECPs work to stop ovulation from taking place, stop the sperm from coming down the tube, or stop a fertilized egg from becoming implanted." As a result, in 98% of cases, pregnancy is averted.

Few doctors have told patients about emergency contraception, however, and until Gynetics, no U.S. firm applied for FDA approval to market ECPs. This upset the FDA, which issued a 1996 notice encouraging drug companies to make ECPs available and lobbied birth control pill manufacturers to distribute ECPs. "We were annoyed as hell," says a former FDA official. "All they had to do was take something they were already making, put it in another package, and market it. They wouldn't do it."

Why not? For one thing, ever since the Dalkon Shield horrors of the late 1970s bankrupted A.H. Robins, liability issues have made American firms leery of the contraceptive business. There also isn't much money in prescription contraceptives: Total sales amounted to about $1.8 billion last year; Prozac alone sells more than that. Finally, any contraceptive, particularly one that is easily confused with an abortion pill, could become a political disaster. "The drug companies said they were afraid of demonstrations," says the former FDA official. "They didn't want their products boycotted."

So the FDA went to Roderick Mackenzie, 64, a contraceptive chemical engineer who had headed Ortho Drug in Canada and the U.S. In 1995 he was in the process of selling Gyno-Pharma, a company he had started to market intrauterine devices, to Johnson & Johnson. "I was wondering what I was going to do next," Mackenzie recalls. "So it was fortuitous that the FDA came to me and asked me to help make emergency contraceptives happen."

Mackenzie funded Gynetics entirely on his own until last year, when he began seeking other investors. It is still a closely held private firm, and Mackenzie offers little in the way of financial details, but analysts say initial sales of Preven may total $300 million a year. That's pocket change if you're trying to develop the next Viagra, but not bad for a company that has Gynetics' minuscule overhead: a dozen employees; cheap, off-patent ingredients; and outsourced manufacturing.

Clinically, the drug has been a success. A recent study found that when ECPs were made available to women for home use, 98% used them correctly, the drugs were taken in emergencies rather than repeatedly, and use of other contraceptives did not fall off. ("People really should not be surprised that women are responsible people," Mackenzie says dryly.) In one pilot program, pharmacists dispensed ECPs to 2,700 women over a four-month period; 42% of the participating women said they would not have taken any action had ECPs not been available. Other experts estimate that widespread use of ECPs could reduce the rate of unintended pregnancies in the U.S. by 50%--and stop more than 800,000 abortions a year.

"I started working in the oral contraceptive field at the very beginning of its existence," Mackenzie says. "It was very exciting, because despite getting adverse publicity, we felt a tremendous sense of doing good. And we built great businesses."

--Peter Keating

PETER KEATING is a staff writer at Money magazine.