Compound fractures are a nasty business, but so are biotech trial disappointments. Small biotech OrthoLogic (NASDAQ:OLGC) delivered one of the latter this morning, and Wall Street responded by snapping the valuation nearly in half.

The study in question was a 503-patient phase 3 study of the company's Chrysalin drug, used to treat unstable displaced wrist fractures. Although Phase 2 results had been encouraging, the data from this study was decidedly not as promising.

There was no statistically significant benefit in the time to removal of immobilization (the primary endpoint of the study). Furthermore, the drug also failed to demonstrate statistically meaningful benefits in all but one of the secondary endpoints. Even that one -- radiographic time to radial cortical bridging -- was barely significant, since the reported p-value was just 0.049 -- and 0.05 is generally considered "borderline."

While OrthoLogic drew from the tried-and-true book of biotech management cliches ("conducting a full examination of these results in order to guide our program"), I wouldn't hold out much hope for this particular application of Chrysalin.

Making matters worse, this was the company's only advanced clinical study currently under way. OrthoLogic is working on a formulation of Chrysalin for the treatment of diabetic wounds, and it recently acquired a preclinical compound that might be useful in vasospasm, the prevention of keloid scarring, and asthma -- but both of those compounds are many years away from approval (assuming they work).

The good news, such as it is, is that OrthoLogic has a pretty decent chunk of cash on the balance sheet. Presuming, for the moment, that the company will abandon studies of Chrysalin in fracture care, it should have at least a few years of cash burn before it would have to raise money again. On the down side, I'm not sure there's much for investors to look forward to -- aside, perhaps, from the initiation of clinical studies on a gel formulation of Chrysalin for foot ulcers (and eventual results of such studies).

Not to beat a dead horse, or a half-dead company, but here again we're reminded of the risks of one-trick biotech ponies -- other examples are Axonyx (NASDAQ:AXYX) and Pharmos (NASDAQ:PARS). Biotech investing is hard enough on its own, so don't make it even harder by depending upon risky concepts. Instead, look for stocks like NeurocrineBiosciences (NASDAQ:NBIX), DOV Pharmaceuticals (NASDAQ:DOVP), and Acadia (NASDAQ:ACAD) to enjoy the fruits of companies with multiple irons in the fire.

For more Foolish thoughts on biotechs:

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