High-Tech Research Firm Doctors Drugs to Remove Harmful Side Effects : Medicine: Sepracor hasn’t turned a profit in its 10-year history but is close to marketing products that could change its fortunes.

You might call Tim Barberich the Mr. Fixit of the drug industry.

Barberich is the founder of Sepracor Inc., a small, high-tech research firm with a unique goal: to fix what’s wrong with some of medicine’s best-known drugs by chemically extracting their harmful side effects.

“We use pharmacology to find out what’s causing the side effects and how to eliminate them,” said Barberich, a 47-year-old chemist.

Glamorous work it’s not. Most researchers would probably rather be searching for the cure for cancer or AIDS.

But if Barberich’s hopes pan out, in a few years Sepracor will have a stable of blockbuster medications to rival those from the world’s pharmaceutical leaders. He will transform his obscure company into the undisputed leader of a new niche industry.

And patients will have a little more peace of mind, knowing the pills they are taking won’t do them more harm than good.

Consider these possibilities:

* A powerful over-the-counter version of a prescription painkiller called Orudis that doesn’t upset your stomach like aspirin or Advil, and doesn’t cause liver damage that some doctors blame on Tylenol.

* A new version of the popular allergy drug Seldane that dries your sinuses without putting you to sleep and doesn’t interact with other drugs to cause potentially fatal heart arrhythmia.

* An asthma inhaler with the generic drug albuterol that stops attacks but is free of molecules believed to cause “hyperreactivity,” a condition that makes asthma attacks more frequent, intense and potentially deadly.

For now, Sepracor’s hopes for these drugs and others remain in its laboratories.

In the company’s 10-year existence, it hasn’t earned a profit. Its first medicine is at least two years away from your corner pharmacy.

As a result, Wall Street has largely ignored the company, bundling it with hundreds of fledgling biotechnology firms whose drug prospects are iffy at best.

However, stock analysts who have looked more closely are telling their clients to buy Sepracor. Sepracor’s drugs have already been proven effective and safe for most people, they argue. All it’s doing is making them safer.

“They’re strategy is smart,” said David Steinberg, with Volpy, Welty & Co. in San Francisco. “They’re trying to maximize the value of the drug. Every drug out there has something that could be improved.”

The key to Barberich’s plan is a chemical concept called chirality, a characteristic shared by the vast majority of today’s drugs.

Chiral chemicals consist of two molecules, known as isomers, that share the same chemical structure but in a mirror image--just like left and right hands. The term chiral is derived from the Greek kheir , for hands.

Often only one isomer is responsible for a drug’s desired results. The other may be inert, or it can interact elsewhere in the body with disastrous effects.

The best known example is Thalidomide, a drug given to pregnant women in the 1950s. One isomer cured morning sickness. The other caused severe birth defects.

Serious side effects often fail to turn up until after a drug is already on the market, being taken by millions. But Barberich says no drug maker wants to pull its drugs back into the lab to fix them, for fear of inadvertently discovering still more side effects. “They’d rather work on a new compound that was better than the first one,” he says.

Barberich founded Sepracor as a business that separates chemical components and purifies chemicals for use by other drug companies. He soon came to believe he could use these technologies to extract the bad isomers, or other molecules, and repair these drugs for a fraction of the cost and time it takes to develop new ones.

That’s a timely theory, with cost-conscious, managed health care programs growing rapidly across the country. Health maintenance organizations demand that drugs be cost-effective as well as good for you, and have extracted deep price discounts from drug companies.

In the late 1980s, Barberich gambled $10 million on preliminary research and by 1990 had patents pending on 40 of the best drug repair candidates. Ten of those patents have since been granted and six drugs are in human testing.

Barberich has secured critical financial help by signing partnership deals with two major drug companies. These partners will promote and sell some of the drugs--jobs Sepracor is too small to do--and pay Sepracor royalties of about 4% to 12% of sales.

Sepracor’s version of the painkiller Orudis is licensed to Sterling Winthrop Corp., which is looking for a solution to waning sales of its Bayer aspirin line.

The new Seldane has been licensed back to its original inventor, Marion Merrell Dow Inc., which is helping to pay for Sepracor’s research on the drug.

Sepracor’s research has also uncovered some potential new uses for old drugs. For example, the isomer in Orudis that would upset your stomach if you took it in a pill can be added to a toothpaste to treat periodontitis, a degeneration of the gums caused by bacteria and inflammation, said research director Gunnar Aberg. And the popular antidepressant Prozac may be useful in preventing migraine headaches, Aberg said.

Sepracor’s success is far from guaranteed. The company acknowledges that it must prove decisively that its drugs have significantly lower side effects--and work just as well.

“Marginal benefits won’t be accepted in the marketplace today,” said company pharmaceutical manager David Barlow.

In order to focus Sepracor squarely on this business, Barberich engineered the partial spinoff of two subsidiaries to shareholders last year. BioSepra Inc. is a drug and chemical purification company. HemaSure Inc. is developing ways to purify blood destined for use in transfusions.

Analyst Stephen Handley of Smith Barney in New York estimates that, if all goes well, Sepracor’s first batch of drugs could bring in nearly $3 billion in annual sales within three years.

Sepracor’s royalties from those sales would cause its revenues to zoom from $15 million last year to $300 million, Handley predicts.

More importantly, they would transform Sepracor’s roughly $20 million loss in 1994 to a $70 million profit by the year 2000, he estimates.

Handley’s assessment? “I feel it has the earmarks, in terms of its stock, of being a home run.”