For reasons that defy easy explanation, there are some diseases out there that have proved to be graveyards for biotech investors' dreams. History has shown that it is incredibly difficult to design an effective drug for indications like stroke, head trauma, Alzheimer's, sepsis, and lupus. It is this last one, lupus, that tripped up the stock of biotech Human Genome Sciences (NASDAQ:HGSI) Wednesday.

The culprit in this fall is disappointing data from a phase 2 study of the company's LymphoStat-B drug for treating systemic lupus erythematosus. While a significant number of the study's 449 patients saw some real benefits, the trial missed both of its primary endpoints -- reducing signs and/or symptoms of the disease over 24 weeks, and increasing the time to first flare more than 52 weeks. In response, investors and traders took the stock down by more than one-third.

Despite the complications that will no doubt ensue from a failed phase 2 study, there are still reasons to be optimistic. A cohort making up about 75% of the total patients enrolled did show a statistically significant reduction in signs and symptoms of lupus at the 52-week follow-up. The drug also showed itself to be safe and well-tolerated, and there was a trend toward lessening reliance on prednisone for patients in that 75% group.

This was a high-risk, high-reward study for HGSI. Developing any drug for lupus is a high-risk endeavor, given the nearly unmitigated history of failure amongst drug companies looking to treat this disease. Nevertheless, there were those who felt that this trial's primary endpoint of 24-week reduction in signs or symptoms was overly ambitious and significantly upped the risk that the trial would fail.

The path from this point is still unclear. HGSI is developing this drug in partnership with GlaxoSmithKline (NYSE:GSK), so the two companies will be collaborating on future decisions. Personally, I would be very surprised if they didn't move ahead, in light of the fact that 75% of the patients showed some response at 52 weeks. That's hardly a minor point. Of course, the FDA will also have a say, and I have no idea whether the agency will approve a phase 3 study based on this data or require another phase 2 study.

There is also the matter of competition here. Genentech (NYSE:DNA) -- in conjunction with Biogen Idec (NASDAQ:BIIB) -- is testing its successful Rituxan cancer drug in lupus patients and is currently in the midst of a phase 2-3 study. Although the market is certainly large enough that two drugs could both be blockbusters, being first still matters.

Given that I don't believe we've necessarily heard the last of LymphoStat-B for lupus, today's stock reaction could well prove to be an overreaction. Of course, biotechs in general are always risky and this potential lupus drug constitutes a big part of my estimated value for HGSI. Aggressive and experienced investors might want to take a look at this one, but this is clearly not a stock for the faint of heart.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).