We may all have Alzheimer's by the time

American Home Products

(AHP)

actually completes a

merger.

Fortunately, these days the New Jersey pharmaceuticals firm says it isn't looking to deal. Indeed, it and Irish neurotech company

Elan Pharmaceuticals

(ELN)

are working on a novel vaccine for the degenerative brain disease that could catapult them into a strong position in a fast-growing, lucrative market.

A success in such a closely watched yet largely untapped area could be just the fuel American Home needs to restart its stagnant stock, say analysts. They note that despite a strong drug pipeline, the company and its shareholders continue to suffer from the stigma of American Home's recent deal-making woes.

Gold Rush

The market opportunity for Alzheimer's is enormous. Some 15 million people suffer from the age-related disease and current treatments, mainly

Pfizer's

(PFE) - Get Report

Aricept

, are inadequate at best. About one in 10 people over 60 get the disease, costing an estimated $100 billion a year in direct and indirect treatment costs. Translation: a potential gold mine.

Analysts say it's difficult to assess prospects for new products that have just entered the clinic. But given the paucity of treatments, American Home's Alzheimer's vaccine, AN-1792, is certainly worth a shot.

"It's a huge opportunity," said C.J. Sylvester, analyst with

PaineWebber

, which has an outperform rating on the stock. "There's nothing out there that slows the progression of the disease."

Early Promise

The American Home approach to treating the disease has shown promise in lab animals. Alzheimer's, which causes extreme forgetfulness and confusion, is thought to result from a buildup of "amyloid plaque" that gums up the brain's electrical systems. The vaccine seems to reduce that buildup, at least in animal studies.

"This is the first real treatment that could interrupt the progression of the disease," declared L. Patrick Gage, head of research at

Wyeth-Ayerst

, American Home's drug division. "This approach gets at the basic pathology of the disease."

Hype? Perhaps. But in the drug-development lottery, anything's possible. After all, the approach dazzled scientists when it was published in the science journal

Nature

in July 1999. If all goes according to plan, Gage said he hopes to seek regulatory approval for the vaccine in 2003.

That's a big if. The road to new Alzheimer's treatments, as with many central nervous system afflictions, has been littered with failure. This year alone, both

Bayer

(BAYZY)

and

Aventis

(AVE)

scrapped two major Alzheimer's drugs in late-stage development.

"It has huge promise," says Barbara Ryan, a drug analyst with

Deutsche Banc Alex. Brown

, who cautions nonetheless of a "long and tortuous process" to come up with a successful vaccine: "It's just way too early to tell."

As with most major opportunities, other drug companies are making inroads into developing products. Novartis, for instance, is in the early stages of marketing Exelon, a drug that's in the same class of drugs as Aricept, called acetylcholinesterase inhibitors. And

Bristol-Myers Squibb

(BMY) - Get Report

,

Eli Lilly

(LLY) - Get Report

and others are trying other approaches. All aim to break off a chunk of a market that could be worth billions of dollars as the population ages.

The Fat of the Land

American Home desperately needs new success stories. The company has been saddled with huge legal problems after its fat-fighting drugs

Redux

and

Pondimin

were yanked from the market - adding to woes stemming from its

Norplant

contraceptive, which is still on the market. The company has ponied up billions to settle the diet drug cases, but some plaintiffs want more.

Meanwhile, over the last three years American Home notably failed to complete three separate megamergers, with

SmithKline Beecham

(SBH) - Get Report

,

Monsanto

and

Warner-Lambert

(WLA)

. All three have since tied up with other partners. Smaller deals haven't exactly met with untrammeled success, either: Last month, American Home finally off-loaded its

Cyanamid

agrochemicals unit to

BASF

for $3.8 billion, less than half the amount it paid in 1994.

So, with the stock lagging behind the

S&P 500

in recent months and barely above year-ago levels, rumors are flying that new American Home suitors include outfits such as Novartis,

Pharmacia

(PHA)

and

Schering-Plough

(SGP)

.

But American Home officials insist they don't need a merger anymore. They point to the apparent success of its drug pipeline, highlighted by the antidepressant

Effexor

and the high-tech arthritis drug

Enbrel

-- both of which are well on their way to blockbuster status. And, aside from the boardroom bumbling, development seems to proceed apace at American Home.

"Right now, they are comfortable they will have a great year," said Alex. Brown's Ryan. "Stripping out the ag biz, they will show 20% operating

profit growth this year, which is at the top of the class with Pharmacia and Pfizer."