Development-stage drugmaker Panacos (NASDAQ:PANC) released more phase 2 results for lead drug bevirimat late Monday, and with its share price dropping more than 50% Tuesday, you can guess how the news was received.

Panacos' lead drug is the first of a new class of anti-HIV therapies called maturation inhibitors. Since 2006, Panacos has been testing bevirimat in a slowly progressing phase 2 study in which it escalates the dose of the drug until gains in safety or effectiveness diminish. The results announced on Monday were from the latest group, given 350 milligrams of the liquid form of the drug.

The good news for languishing Panacos investors is that the company released these results more than a month ahead of schedule.

The bad news is that the results from this group were not very compelling. Just because of small patient numbers and randomness, there will be differences in bevirimat's effectiveness in each group, but patients treated in this 350-mg group fared worse than patients treated in the 300-mg group.

The nine patients treated with bevirimat for 14 days experienced a mean reduction in their HIV viral load of 0.62 log10 in this latest group, compared with 1.02 log10 in the 300-mg group. Even worse, only three patients experienced a viral load reduction greater than 1 log (an important signal that an anti-HIV drug is effective) in this patient group, compared with five out of eight in the 300-mg group.

The ugly news is that the company does not know what is causing this variability in patients who respond to bevirimat and those who do not. In 2006, with the tablet dose of bevirimat, Panacos blamed the tablet's variability for the unpredictable patient response, and now the company is blaming patient variability for liquid bevirimat's unpredictable response in patients. With so few patients tested in these groups, it's almost impossible to examine the cause of these differences.

With its share price so low, Panacos can't get cheap capital if it needs to raise more cash. At the end of the third quarter, the company had $48 million in cash and investments on its balance sheet, but now, any share offerings next year would be highly dilutive to shareholders.

As Fool Bob Fiore noted for Rule Breakers subscribers, the competition is starting to catch up to Panacos. Last week, fellow newsletter recommendation Myriad Genetics (NASDAQ:MYGN) filed an Investigational New Drug application to start human clinical trials for its own maturation inhibitor. Other drugmakers, like Merck (NYSE:MRK), have also had no problem ushering their novel anti-HIV therapies through clinical trials and regulatory approval: Two months ago, the Food and Drug Administration approved Merck's integrase inhibitor.

Amid these uninspiring study results and murky outlook, Panacos finds itself in a three-way duel with the competition and with dwindling cash. Results from the next group in this phase 2 study are expected before the end of the first quarter, and extended dosing with a new liquid formulation is scheduled to begin in the summer.

With the unknowns accompanying any new formulation and the unexplained differences in how patients respond to the latest dosage of bevirimat, an investment in Panacos is looking more and more like it may end up the way Clint Eastwood's rivals did in The Good, the Bad, and the Ugly.

Panacos and Myriad are picks of our Rule Breakers newsletter. Check out all our other recommendations with a 30-day free trial.

Fool contributor Brian Lawler just finished watching an old spaghetti Western and, unfortunately, owns shares of Panacos, but no other company mentioned in this article. The Fool has an A+ disclosure policy.