Among many other names, the Egyptian goddess Isis was known as "Mother of Green Crops." It's only fitting that the company bearing her name, Isis Pharmaceuticals (NASDAQ:ISIS), bears a bumper crop of potentially fruitful drugs, including an experimental cholesterol drug with blockbuster sales and partnership potential.

Last week, Isis reported a GAAP quarterly loss of $13 million, compared to a loss of $17 million in the year-ago period. Lower diagnostic contract revenues, higher costs associated with increased drug-development activities, and non-cash stock option compensation charges all contributed to the quarterly loss.

In January, Isis announced a convertible notes offering, allowing the company to repurchase all of its outstanding notes that were financed at a higher interest rate and due to mature in 2009. Management now estimates that the company has adequate liquidity to fund operations through mid-2010, at which time Isis is expected to become profitable.

The new cholesterol drug, dubbed ISIS 301012, will be a key element to Isis's future profits; it's currently in phase 2 clinical trials. In March, Isis presented results at a cardiology conference in which ISIS 301012 demonstrated significant lipid-lowering activity, both as a single agent and when combined with statins or other lipid-lowering medications. The drug worked well in both routine high-cholesterol patients and those with a genetic predisposition to high cholesterol, known as homozygous familial hypercholesterolemia (or FH for short).

Ongoing studies for ISIS 301012, evaluating the drug candidate in combination with statins for a three-month period, are due out later this year. These studies involve routine patients with high cholesterol, and two different subgroups of FH patients. From data gathered to date in about 200 subjects, Isis plans to pursue a simplified dosing regimen of 200 mg, injected subcutaneously once a week, in its future pivotal clinical trials in FH patients, plus a longer-term phase 2 study of patients with routine high cholesterol levels.

Further highlighting the potential of the company's robust pipeline of 17 compounds, last week Isis signed a drug development and discovery deal with Bristol Myers (NYSE:BMY). The deal, which could bring in $200 million for Isis, involves an early-stage program targeting PCSK-9, which regulates the amount of cholesterol in the blood. Isis received an up-front payment of $15 million, in addition to research funding of about $3 million annually over the three-year collaboration.

As with most small cap biotech stocks, skeptics abound regarding Isis and its leading cholesterol drug's future potential. Currently, short interest stands at just less than 9 million shares -- roughly 10% of all the outstanding shares of Isis common stock. Concerns have also been raised about liver enzyme elevations observed in the ISIS 301012 clinical trials. Though it's designed to treat a chronic condition with a potentially large patient population, the drug has only been tested in about 200 subjects for relatively short time periods. The company has countered liver toxicity concerns by stating that no other symptoms or lab tests have indicated liver damage in patients treated with ISIS 301012.

Other Isis skeptics contend that the company's financial arrangements and potential for future dilution make owning the common stock a poor investment choice. Some analysts predict that the company will dilute that common stock from just more than 80 million shares today to as many as 110 million shares by the time of expected profitability in 2010.

In addition, in a deal with Symphony Capital Partners last April, Isis received $75 million to create Symphony GenIsis, which owns the rights to ISIS 301012 and was created to fund the drug's clinical development through phase 2b trials. In order for Isis to regain exclusive rights to ISIS 301012, it must pay Symphony $195 million over four years, with one-third of the total payable in Isis common stock.

However, bullish investors on Isis point out that the deal allows Isis to fund current clinical trials of ISIS 301012 while entertaining offers from big pharma on its experimental cholesterol drug. The company has previously reported strong interest in ISIS 301012, and it's beginning to formally evaluate all offers in order to select the most beneficial deal for shareholders. Companies like Pfizer (NYSE:PFE) and Merck (NYSE:MRK), who already have a large presence in the cholesterol field, could be potential partners.

I am expecting Isis to report successful future clinical trial results for ISIS 301012. I predict no evidence of true liver toxicity, and continued effectiveness at lowering bad cholesterol and other harmful lipids without harming good cholesterol levels. If Isis establishes a clean safety profile for ISIS 301012, the drug's impressive effectiveness should lead to a lucrative partnership deal with a big pharmaceutical. Better yet, Isis has a robust pipeline and already-commercialized diagnostics division, which should provide additional upside for the company.

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Fool contributor Mike Havrilla, R.Ph., B.S., Pharm.D., is a Rite Aid pharmacist who lives, writes, works, and enjoys running on the streets and trails in the small Pennsylvania town of Portage. He invites your comments and feedback. Mike does not have a position in any company mentioned in this article. Pfizer is an Inside Value pick. The Fool has a disclosure policy.