NEW YORK (CNNMoney.com) - Schering-Plough, once the troubled child of the drug industry, is making a comeback with a hot new drug.

The drugmaker, based in Kenilworth, N. J., has armed itself with a fast-growing cholesterol treatment, Vytorin, and appears to have left its woes in the dust.

"We think the worst for Schering-Plough is behind them," said Albert Rauch at A.G. Edwards & Sons, who rates the stock a "buy," with a 12-month price target of $25, versus its current price of about $18.42.

Schering-Plough (Research) (not to be confused with the German drugmaker Schering, a separate company) watched its stock tank in 2003 after it lost patent protection on Claritin, an allergy drug that peaked at $3 billion in annual sales. The company still makes money off related products like Clarinex, but sales are in the hundreds of millions, not billions.

But since then, Schering-Plough joined forces with Merck (up $0.19 to $35.35, Research), another New Jersey-based drug giant, to produce Vytorin, launched in the third quarter of 2004. Vytorin is a combination of two other cholesterol drugs: Merck's Zocor and Schering-Plough's Zetia.

Schering-Plough said that sales for its cholesterol franchise, including Vytorin and Zetia, totaled $2.4 billion in 2005, a figure that is split between Schering-Plough and Merck. Zocor had sales of $4.4 billion last year but Merck's patent on the drug expires in June.

Trevor Polischuk at OrbiMed Advisors, which owns Schering-Plough shares, said Vytorin is so effective at lowering cholesterol that sales could more than double by 2009, hitting $6 billion to $7 billion a year.

Baby boomers are getting older and America is getting fatter, fueling a $20 billion industry for cholesterol drugs. The lion's share goes to the world's top-selling drug, Pfizer's Lipitor, with its record-breaking 2005 sales of $12.2 billion worldwide.

Rauch projects that Vytorin will reach $2 billion in sales this year and top $3 billion in 2010, finally filling the revenue vacuum left by Claritin.

But the cholesterol market is competitive and contentious.

Lipitor's sales growth slipped toward the end of 2005 and that trend has continued early this year, leading some analysts to wonder if the market has peaked. Drug companies are fighting over market share, and a group of drug studies announced this week at the American College of Cardiology conference in Atlanta took on a feud-like quality.

Schering-Plough and Merck unveiled a study, funded by the two companies, demonstrating that Vytorin lowers LDL better than Lipitor, the competing drug from Pfizer.

At the same conference, drug maker AstraZeneca (down $0.67 to $50.34, Research) said its study on cholesterol drug Crestor demonstrated superiority to Lipitor.

For its part, Pfizer (up $0.14 to $26.09, Research) revealed its own study, demonstrating the benefits of Lipitor when combined with another drug, torcetrapib, saying that the combination raised "good" cholesterol while reducing "bad" cholesterol.

John Tsai, Pfizer's "team leader" for Lipitor, told CNNMoney.com that, in addition to its cholesterol benefits, only Lipitor has been proven to reduce the risk of heart attacks and strokes, given it an edge over the competing drugs.

Schering-Plough and Merck said that a separate study showed that Vytorin significantly cuts cholesterol when compared to Zocor alone. Vytorin reduced LDL, or "bad" cholesterol, by 52.5 percent, compared to 38.0 percent for Zocor, according to the study.

This is an important distinction to make, because the price of Zocor is expected to plummet when it loses patent protection this year. The study's findings might prevent cholesterol patients from flocking to the cheapest drug.

Schering-Plough had a 2005 P/E ratio of 49, the highest in Big Pharma. This is primarily because earnings took a huge hit after Claritin went off patent in 2003.

But that's expected to change. Ryan projects that Schering-Plough's earnings will grow to 98 cents a share in 2008, nearly triple the 36 cents a share the company earned last year, driven primarily by fast-growing Vytorin sales. Ryan is forecasting 56 cents a share in earnings for this year.

David Moskowitz, analyst for Friedman, Billings, Ramsey, project earnings to grow quickly as well, to $1.41 a share in 2008, from his 2006 estimate of 65 cents.

Sales are also looking up. Schering-Plough's sales grew 15 percent to $9.5 billion last year, not including revenue from Vytorin and Zetia, while sales for industry leaders Pfizer and Merck fell slightly, to $51.3 billion for Pfizer and $22 billion for Merck.

But Schering-Plough's strongest point, Vytorin, could also be its weakest link, because the drugmaker's financial health depends so heavily upon it.

"When you have fewer products that you're depending on, that risk goes up a little bit," said Moskowitz of Friedman, Billings, Ramsey.

The analysts interviewed for this story do not own shares in the companies mentioned here.

To read more about Vytorin, click here and here.