Side effects may not kill Isis Pharmaceuticals (NASDAQ:ISIS) and Genzyme's (NASDAQ:GENZ) cholesterol drug mipomersen, but they could severely diminish the potential patient population that would be willing to take it.

News of the side effects dampened Isis' shares yesterday, which fell more than 18%. As marketing partner Genzyme already has several drugs on the market, its shares were hardly touched by the news.

Let's start with the good news about the drug's great efficacy data. In patients who have a genetic disorder that results in high cholesterol levels even while taking cholesterol-lowering drugs -- like Pfizer's (NYSE:PFE) Lipitor, AstraZeneca's (NYSE:AZN) Crestor, Merck's (NYSE:MRK) Zetia, and Abbott Labs' (NYSE:ABT) Niaspan -- mipomersen was able to reduce cholesterol by 28%. Patients taking placebo saw their cholesterol levels go up 5%.

The bad news is that increased liver enzymes continue to plague mipomersen -- 14% of patients taking mipomersen saw liver enzyme levels at least three-times the normal level. Elevated liver enzymes are a sign of liver toxicity and a reason that many drugs die in clinical trials. Most of the patients only had one measurement that was high and there weren't other signs of liver damage, which puts the companies in an awkward position. The side effects may not be severe enough to keep mipomersen from getting approved, but only the most severe patients may be willing to roll the dice given the side effect signal.

We should know a little more when the full data set is presented at a medical meeting. Here are the two most important things to look out for:

  • The number of patients that rolled over to the open label study. After completion of the 26-week trial, both patients that got mipomersen and those on placebo are given the option of taking mipomersen, so the company can get long-term safety data from the patients. For investors, a high rollover rate indicates that doctors and patients think the benefits outweigh the risk.
  • The results of MRIs looking at fat build up in the liver. Management said that there was an initial build up of fat, but they're hoping images from later in the study show that the fat decreases over time like it does with other cholesterol drugs.

After the first trial, I said that investors might be overreacting. Now that we've had two trials with increased liver enzymes, I'd say a little paranoia is justified. The data to date is likely good enough to get past the FDA, but if mipomersen can only be used on the most severe patients, sales will be limited.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is a Inside Value selection. The Fool has a disclosure policy.