It’s every investor’s dream – to latch on to the shares of an undiscovered pharmaceutical company with a hot new drug that can catapult sales, earnings, and, of course, its stock price.

In this case, the company – Johnson & Johnson ($67.71) – is hardly undiscovered; it’s a name we all know and one of the world’s largest heath-care companies (2004 sales: $47.3 billion). What’s more, its stock is also not undiscovered, having rebounded nearly 30% from its 52-week low of $54.07 to a shade under its 12-month high of $69.99.

But what may not have been discovered by investors, some bulls suggest, is J&J’s potential to benefit from a hot new drug in its development pipeline called Dapoxetine. It’s a treatment for premature ejaculation, the most common male sexual dysfunction, and a drug described by Merrill Lynch analyst Katherine Martinelli as potentially “the next Viagra.”

An estimated 20% to 30% of American men, roughly 17 million, are afflicted by PE, making it a more common condition than erectile dysfunction. That market, spearheaded by Viagra, achieved nearly $1 billion in sales in its first 12 months. Currently, there is no approved drug specifically indicated for the treatment of PE.

American sales of Dapoxetine – which Ms. Martinelli expects to get the green light from the Food and Drug Administration in the fourth quarter-are expected to bring in $75 million next year, based on 5% of the 17 million men seeking PE treatment and a penetration rate of 10%.After that, she sees sales romping to $200 million in 2007 and to $350 million in 2008.

The analyst notes, though, that Dapoxetine’s contribution to J &J could well exceed her expectations. For example, if 10%, not 5%, of the potential 17 million users were to seek treatment and assuming a penetration rate of 50%, the drug’s sales next year could run substantially higher than she expects – between $400 million and $800 million. This projection assumes an estimated cost for a Dapoxetine pill of $10 (which is consistent with the cost of a Viagra pill).

Her estimated sales aside, how big is the actual American market for Dapoxetine? Looking at the next three years, Ms. Martinelli figures sales of $769 million in 2006, $1.3 billion in 2007, and $1.6 billion in 2008.

Also enhancing the drug’s prospects is the market’s broad age appeal. Contrary to popular opinion, PE is not primarily a dysfunction among younger males. Ms. Martinelli notes that it actually affects a broad age spectrum ranging from 20 to 60, with the average age in clinical trials at about 45.

How does Dapoxetine work? Although there is not a definitive cause, it’s postulated that PE is a neurological phenomenon, primarily involving a disruption of serotonin and receptor function. Serotonin is a clinical messenger to the brain that can delay or prevent ejaculation. Dapoxetine appears to prolong the time to ejaculation by increasing the amount of serotonin in the central nervous system. Phase 111 data on Dapoxetine will be presented in detail May 23 at the American Urology Association’s annual meeting, which, it’s thought, could be a trigger for the stock.

What does it all mean to the bottom line? Ms. Martinelli calculates that if her upside estimates are reasonable, J&J’s sales growth could accelerate next year by 1-2 percentage points and earnings could rise 3 cents to 7 cents a share. She notes, though, that the upside could be offset somewhat by direct-to-consumer marketing initiatives, which could be significant as J &J looks to expand patient and physician awareness of PE.

On the earnings front, the analyst expects a J &J per-share profit this year of $3.43, up from last year’s $3.10, and another rise to $3.75 in 2006.

As for the stock, the analyst has a 12-month target of $75, but one of Merrill’s top strategists views that as an ultraconservative forecast and be lieves a more realistic outlook is a 12-18 month rise to $80-$85.

Another analyst, Morningstar’s Tom D’Amore, is also gung ho on J &J and thinks the stock has the potential over time to reach $95, a gain of nearly 30%. Management is forecasting lower top line growth of 5% to 7% this year, but Mr. D’Amore thinks 8% is achievable if health care end markets hold up.

He also believes operating leverage should enable J &J to extend its streak of double-digit earnings per-share increases to 21 years this year.

Likewise, the analyst views the pending acquisition of medical-device maker Guidant Corporation as a decided positive as it will bring the size of J&J’s medical-device division into closer alignment with the pharmaceutical operation at about 40% of sales each. This will bring better symmetry to J&J’s stable of businesses, he said, and reduce the company’s exposure to the increasingly risky pharmaceutical business.