By David Stipp

(FORTUNE Magazine) – hq: new york city founded: 1995 sales: n.a. employees: 37 stock: privately held web address:

Of more than 15,000 Websites on health, one stands out as the niche's probable future Yahoo: Medscape. You wouldn't know it at first glance. Aimed at doctors, the site bristles with jargon--its home page leads with a teaser of the day like: "Is it possible to diagnose MI in the presence of LBBB?" (Answer: Yes.) Yet Medscape is fast acquiring the kind of buzz that Wall Street dreams are made of: Its backers include cybercelebrity Esther Dyson, its recently named CEO helped spearhead Dow Jones' acclaimed Internet offerings, and it boasts more than 600,000 "members."

Those are people who register by answering a few questions about their identities, including medical specialty, if any. After signing in, they can access voluminous reports on everything from AIDS to women's health. "When we started, people said doctors won't type, much less use computers," says Peter Frishauf, founder and chairman. "Now a doctor joins every seven minutes"--more than 130,000 so far. Another surprise: About 150,000 laypeople have joined. "Most patients don't want dumbed-down information," says Frishauf. (The other 320,000 are nurses and other medical professionals.)

If Medscape has Yahoo potential, it's not because it will attract a zillion eyeballs--it's because doctors like it, and their eyeballs are golden. Pharmaceuticals companies spend some $8 billion a year promoting drugs in the U.S., says CEO Paul Sheils, formerly vice president of Dow Jones Interactive Publishing. "All that money is chasing about 300,000 physicians who regularly prescribe drugs. No other business on the planet has that kind of promotional budget."

No other Web player is set to grab a piece of it the way Medscape is, thanks to its rapidly growing roster of docs. The company doesn't divulge its members' IDs but uses them to target ads to subsets of specialists when they visit the site. Psychiatrists, for instance, might see an ad for a new drug to treat schizophrenia. Medscape also compiles lots of information that drug companies will pay handsomely for--the kind of specialists reading their ads, for instance. More than a dozen pharmaceuticals concerns have signed up as Medscape clients.

Medscape was spun off from SCP Communications, an earlier Frishauf creation that publishes medical journals. SCP's publications supply many of Medscape's 18,000 full-text medical reports--its main doctor magnet. The site also offers content from over 20 publishing partners, such as Merriam-Webster, which supplies a medical dictionary. The focus is "practical, hands-on information" rather than basic research, says Medscape editorial director Stephen Smith. In a section titled "Clinical Pearls," physicians are advised to treat persistent hiccups by "inhibiting gastroesophageal activity" with a teaspoon of peanut butter. Daniel Siegel, a dermatologist at the State University of New York at Stony Brook, says he looks at the site several times a week, often using a laptop while exercising on his NordicTrak. "Medscape is like a neighborhood newspaper for physicians," he says.

Medscape has raised $11 million from venture capitalists, including Dyson, who serves on its board. Next, says Sheils, is broadening its offerings by forging more ties with medical journals and expanding its reach by forming partnerships that put its name in front of doctors everywhere. His efforts already are bearing fruit: PhyCor, a major manager of physicians' groups and clinics, recently agreed to feature links to Medscape on its "intranet," effectively putting its 25,000 affiliated doctors a mouse click away from Medscape.

Will Medscape go public soon? "If it's right for the company," says Frishauf. "It wasn't right before we had a CEO in place who we felt could run Medscape as a public company." Translation: You bet.

--David Stipp