BioCryst Pharmaceuticals (NASDAQ:BCRX) believes it's not the potency of your drug, but the size of your needle that really matters in this world. Investors weren't so convinced, giving the stock a 30% haircut earlier this week.

The company's peramivir drug for treating influenza failed its phase 2 clinical trial, but the company thinks it knows why. In the entire treated population, peramivir reduced the duration of flu symptoms by just under a day compared to placebo, which wasn't statistically significant. But in patients with increased creatine kinase levels -- a measure of muscle injury -- the decrease in symptoms was a more substantial 2.6 days. Thus, the company thinks that the patients who didn't respond to the drug didn't receive the drug in the muscle where it's supposed to be, but instead it was injected into the fat between the skin and muscle.

BioCryst switched from the 1.5-inch needle it used in a phase 1 trial to a one-inch needle to be more patient-friendly. I think the patients would rather have had the extra half an inch of needle in their body if it meant reducing their flu symptoms by an extra day or more.

Post hoc on the post hoc
I do have one problem with the post hoc analysis, though. BioCryst arrives at the 2.6-day difference by comparing those who got an adequate dose of peramivir with those subjects who received an intermuscle injection of placebo. But that placebo population had a considerably longer time to alleviation of symptoms than the entire placebo-receiving population -- there's no reason to think that getting placebo shot into the muscle should make the symptoms last longer than getting the placebo shot into the fat. If you compare the high creatine kinase level patients to the total population of subjects receiving placebo, I calculate the decrease in duration of symptoms at a less impressive 2.1 days.

Still, that number is better than the 1.3-day decrease in symptoms that Roche's Tamiflu reports or the 1 to 1.5 days of improvement reported by GlaxoSmithKline's (NYSE:GSK) Relenza. If the numbers hold up, the drug should be able to compete well in the flu market.

Going forward
There seem to be two main arguments for why BioCryst's explanation didn't fly with investors. Apparently, some people think that the post hoc analysis is bunk and that the difference in creatine kinase levels could be due to any number of things. Since the company didn't do tests to determine the level of the drug in the subjects' body, there's no way to know if the issue was due to a lack of drug getting to the place it needs to go.

While the argument is sound, the point remains that the drug seems to be working really well in a subset of patients. If BioCryst is wrong about the problem being that the drug isn't getting into the muscle, then there's still something causing high creatine kinase levels to be associated with a decrease in duration of symptoms.

The second argument is that BioCryst won't be able to design a trial to ensure that the drug gets into the muscle. That just seems ludicrous since there are plenty of other drugs that are injected intermuscularly -- Biogen Idec's (NASDAQ:BIIB) AVONEX and Allergan's (NYSE:AGN) BOTOX, just to name a few.

Really, only another trial with needles that can reach the muscle will tell if BioCryst is right about the variation being caused by the needle size. The company plans to enroll the first subjects in phase 3 trial by year-end. Depending on how quickly it gets the trial set up and the severity of this year's flu season, the company might be able to get the expected 1,000 patients enrolled this flu season. Otherwise, it will have to head south -- just like its stock price did -- to finish up the trial.

Still in development
Peramivir is also being tested in a phase 2 trial for treating life-threatening influenza. In that trial, the patients are in the hospital and the drug is administered intravenously, so there shouldn't be an issue with the size of the needle or whether the drug got into the patient. Results from the trial could help clear up the needle issue. Unfortunately, though, the trial just began, so data won't likely be available until after this flu season, at the earliest.

With the results of both peramivir trials fairly far off, BioCryst's near-term fate may lie in its lead drug, Fodosine for treating T-cell leukemia. Its current phase 3 trial has received a Special Protocol Assessment (SPA) from the FDA, so if this pivotal trial is successful, the drug has a high chance of being approved.

Personally, I think investors may have overreacted to the peramivir news. BioCryst is still in good shape, with Roche funding some of its early stage compounds and a recent cash infusion of $65 million to add to the $31 million it had at the end of last quarter. This drop in stock price might be a good time to pick up the stock before it's cured of its illness.

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