In one of the biggest one-day drops for a biotechnology stockthis year, SyStemix Corp. shares fell $9.25 a share, or 28percent, on Monday, following a downgrading by a MerrillLynch analyst.

Switching his recommendation to underperformer fromneutral, analyst Stuart Weisbrod wrote: "The company iscontinuing to fall behind schedule in almost all of its productdevelopment projects.

"At this point we are losing confidence that the company hasany viable products," he wrote. "We are beginning to believethat the company is simply becoming a basic R&D unit forSandoz," the Swiss chemical giant that agreed to pay $392million for a 60 percent stake in SyStemix last December.

The bottom-line impact is that SyStemix of Palo Alto, Calif., willnot turn a profit until 1996, when Weisbrod predicts it willearn $1.15 a share. He previously projected 1994 profits of 70cents a share.

Merrill Lynch was a lead underwriter on SyStemix's $33.5million initial public offering in August 1991, when it sold 2million shares at $18 each.

The company said that the downgrading stemmed from aconference call to analysts last Friday. Linda Sonntag,SyStemix's president and chief executive, said the only projectdiscussed was the company's stem cell therapy product. Shesaid the FDA has indicated it will be regulating the stem celltherapy area and that SyStemix is not prepared to enter clinicaltrials until it has completed negotiations with the agency aboutthe regulations. The company's "long-term relation with FDA iscritical," she said.

SyStemix (NASDAQ:STMX) closed Monday at $23.75 a share, itslowest closing since shortly after its IPO last August. The stockhas traded in a range of $19 to $60.50 a share during the past52 weeks.

Weisbrod suggests the stock could be valued at about $18 ashare, adjusted to reflect the relative market valuations of 15similar development-stage companies that went public duringthe last year. His calculation takes into account SyStemix'shefty cash holdings, equivalent to $13 a share, and adds a"technology value" based on an average market value, lesscash, of the 15 other companies, all but two of which have atleast one product in clinical trials.

Weisbrod specifically referred to lagging progress on fourSyStemix projects: a self-renewing stem cell purificationprocess, megakaryocyte progenitor purification process and thecloning and development of stem cell factor andmegakaryocyte growth factor.

Weisbrod said SyStemix's recently announced collaborationwith Sandoz to develop a hemoatopoietic stem cell growthfactor "will provide STMX with up-front licensing fees,milestone payments and R&D revenues."

As a result, Weisbrod reduced his forecasted losses for thecurrent year ending Dec. 31 to 45 cents a share from a $1.15-a-share loss previously predicted; and for 1993, which he nowpegs at 80 cents a share.

The agreement by which Sandoz agreed to acquire a 60 percentinterest in SyStemix last December restricts Sandoz frommaking any open-market purchases of SyStemix stock abovethat figure for seven years and from making a tender offer forthe remaining SyStemix shares for three years.

-- Ray Potter Senior Editor

(c) 1997 American Health Consultants. All rights reserved.

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