One of the most interesting things about watching developmental-stage pharmaceutical companies is the dramatic swing in stock price that occurs after pivotal clinical trial results come out. Undoubtedly, one of the biggest winners or losers in this space this year is going to be drugmaker AtheroGenics (NASDAQ:AGIX) when it releases phase 3 study results for its cardiovascular drug AGI-1067 in March.

AtheroGenics announced its 2006 year-end financial results last week. When looking at drug developers without any actual marketed products, like AtheroGenics, the most important financial statement to consider is the balance sheet. AtheroGenics' cash on hand is down $30 million from last year, and it ended 2006 with $152 million in cash and investments on hand. Also notable is that the company has $286 million in long-term debt. This will be a significant burden for the company if AGI-1067 fails.

Whether AGIX becomes this year'sRenovis (NASDAQ:RNVS) or a highflier like Acorda Therapeutics (NASDAQ:ACOR) will depend on the top-line results it announces for AGI-1067 (from its phase 3 clinical study, called ARISE) next month. But at this point it is way too difficult even to handicap the odds of AGI-1067 meeting its primary endpoints and showing that it improves clinical outcomes for patients with heart disease.

Before launching AGI-1067 into the pivotal ARISE clinical study, AtheroGenics relied on two small clinical studies as proof of the drug's efficacy. Unfortunately, the conclusions generated from these studies are fraught with nearly every type of issue that makes biotech investors cringe. Results from the second phase 2 trial, dubbed CART-2, were based on half the total number of patients enrolled in the study, thanks to difficulties in analyzing much of the data; the trial's endpoints were also changed seven months into the study.

The results of the subgroup analysis in CART-2 can be called into question even more, considering that AGI-1067 showed a highly statistically significant reduction in atherosclerosis (hardening of arteries) for patients taking the drug, but did not show a statistically significant difference when compared to the "standard of care" group.

Most pharmaceutical companies wouldn't jump into a several-thousand-person phase 3 study based on somewhat cloudy clinical trial results. One of the axioms of scientific inquiry is that when study conditions are changed, the outcome of a test may also be different. The upcoming primary endpoints from the ARISE study are different from the CART-2 trial, and the study was modified after its start.

Shares of AGIX could easily become the biggest gainers in the pharmaceutical sector for 2007, but with all these issues -- and the added dimension that other drugs in this space have exhibited mixed and sometimes contradictory clinical trial results between studies -- I wouldn't place a bet on AGIX next month with anything more than house money.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.