Lexicon Pharmaceuticals (Nasdaq: LXRX) presented beautiful data yesterday showing a pill it gave rheumatoid arthritis patients decreased symptoms in 49% of patients.

Shares plunged, although they bounced back to end the day down just 6%.

The problem? The pill it gave patients was a dummy pill with no active ingredient. The placebo effect strikes again.

By comparison, the placebo group in a trial testing Pfizer's (NYSE: PFE) rheumatoid arthritis drug, tasocitinib, only reported a 26.7% response rate using the same measurement.

The amazing effect that taking a pill had on patients' minds even beat the lowest two doses of the drug LX2931 that Lexicon was actually testing. The 70 mg and 110 mg doses only scored 44% and 41% response rates, respectively.

The 150 mg dose did beat placebo with a 60% response rate. Looked at alone, that's not too shabby -- Pfizer's tasocitinib produced a 59.8% and 65.7% at two doses -- but given the high placebo rate, it's not clear how much of that 60% is just patients thinking they feel better.

About the only good news for Lexicon is that the side effects seem to be fairly benign. Increasing the dose further could get it over the placebo hurdle should it show up in a later trial.

But going through another phase 2 trial to work out the dose would just put it further behind. Pfizer's tasocitinib has already completed one phase 3 trial; Rigel Pharmaceuticals (Nasdaq: RIGL) and Incyte (Nasdaq: INCY) are also further ahead, having completed phase 2 trials for their respective drugs. The oral rheumatoid arthritis market is heating up, and latecomers may have trouble entering the market if more than one of those drugs gets established quickly.

Lexicon says it will start looking for a partner, but I'm not sure which big pharma company would be interested in jumping in somewhat late to the game on a drug that doesn't have clear efficacy yet. Pfizer is probably out. Similarly, AstraZeneca has dibs on Rigel's R788, and Eli Lilly (NYSE: LLY) licensed Incyte's INCB28050, so both of those probably aren't going to pick up another one.

Lexicon may end up having to run a new trial on its own before it can attract a partner. And if that's the case, a 6% decrease for the stock likely isn't severe enough.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is a Motley Fool Inside Value recommendation. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.