Even with a market cap of under $250 million, BioCryst Pharmaceuticals (NASDAQ:BCRX) has a varied drug pipeline that just might be worth a look. Of particular interest is a compound that you might say is for the birds.

Peramivir, a treatment for influenza, has taken on phoenix-like characteristics after fears of bird flu arose last year. In June 2002, the company had announced that a phase 3 study of peramivir as an oral drug failed to reach its primary endpoint, and in its 10-K filing that year, BioCryst disclosed that it had terminated its development efforts on the compound.

But it turned out that peramivir was also a pretty powerful inhibitor of bird flu. A 2001 study had revealed that peramivir was found to be more potent than GlaxoSmithKline's (NYSE:GSK) Relenza or Roche's Tamiflu against a range of avian influenza strains in cellular assays.

In the case of a virus capable of becoming resistant, having more than one type of drug available may be beneficial. And sure enough, the chemical structure of peramivir is substantially different from those of Relenza or Tamiflu. So with bird-flu fears fresh on everyone's minds, the Department of Health and Human Services back in January awarded BioCryst a $102.6 million four-year contract to develop the drug. Two phase 3 studies are planned.

To be clear, there is a substantial difference between activity in cellular assays and activity in animals. In short, metabolism can be tough. Peramivir was shown to be comparable to Relenza and Tamiflu against H5N1 avian flu in mice, but the initial clinical development of the drug involved oral administration. The current development, in contrast, is focused on intramuscular delivery, and the results of a phase 1 study, announced on June 18, showed that the drug was bioavaliable. So it could well be that the drug works but that it's degraded in the stomach. The intramuscular administration gets around that problem.

BioCryst has two other notable compounds under its roof. Its most advanced product is Fodosine, an inhibitor of purine nucleoside phosphorylase (PNP), which is an enzyme required by rapidly proliferating cells, such as cancer. The company announced on Monday that it has reached an agreement with the FDA on a pivotal clinical trial for an oral form of Fodosine. The trial is scheduled to start this quarter.

That's a positive step after a troubling setback for Fodosine. In March, BioCryst said it was suspending a phase 2b study of an intravenous formulation of the drug. According to a press release, "recent stability results detected particulate matter in clinical batches of the IV formulation of Fodosine, and preliminary findings have suggested that the particulates are associated with the vial stoppers used in clinical packaging."

Such issues with chemical and manufacturing controls do occur, and it's always a serious matter. As a chemist, I believe there is no excuse for this type of problem. Fixing it, however, is a lot easier than fixing problems with a drug's lack of efficacy. And in this case, the drug does seem to be effective. In a phase 1 study, three of 34 patients with refractory chronic lymphocytic leukemia showed complete responses to the drug, and 14 of 34 had partial responses.

But wait -- there's more! Also on Monday, Biocryst and Roche announced that they had begun a phase 2 study to evaluate BCX-4208 in patients with severe plaque psoriasis.

It's important to realize that any clinical trial is risky. For example, a 1995 paper showed that only 31.9% of drugs in phase 2 end up getting FDA approval. So while phase 2 still represents risk, having multiple drugs at that stage reduces the risk. BioCryst has just such an advantage.

Based only on its pipeline size, BioCryst should be valued higher. But make no mistake: This is a risky stock, and sales still lie off in the distant future. And none of the company's drugs is likely to achieve blockbuster status. BioCryst is a small company, but it could be worth a lot more than its current value if any of its pipeline drugs pan out.

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Fool contributor Andrew Vaino has no position in any company mentioned in this article. Email your comments to arv.biotech@gmail.com.