This might go down as one of the nearest near-misses in my investing career. I've written favorably on DOVPharmaceutical (NASDAQ:DOVP) in the past, and despite some lingering concerns (more on those later), I was about to buy shares. Honest: I was actually going to be buying shares Tuesday morning.

Then lightning struck.

DOV reported that the phase 3 trial of bicifadine for treating chronic lower back pain had failed. Not just failed at one dose, but failed period. In short order, the stock was crushed -- dropping 42% that day on extreme volume.

It didn't help matters that management lacked more detailed information. All it was really able to say is that it thought there was an unusually high placebo response rate, and that it believed patients' compliance (taking the medicine when, and how, they were supposed to) might have been a problem. And while I respect the company's decision to get this news out as soon as possible (the data apparently came in on Friday), Wall Street hates uncertainty, and there's now an extreme amount of that.

Bicifadine is supposed to be the real near-term value driver here. It's a non-opioid painkiller that was effective in some earlier studies in different pain models and had not yet been outlicensed to a large marketing partner. Unfortunately, placebo response is a common problem in pain trials, so now there are these questions about the drug: Was this just a bad trial, is the drug not effective in chronic use, or does the drug simply not work at all?

That's not the only issue here. DOV has yet to put a compound of its own discovery into clinical studies (today's pipeline was in-licensed primarily from Wyeth (NYSE:WYE)), and there are questions about the extent to which the current pipeline is adequately covered by patents.

So where do go from here? Assuming that bicifadine still actually works, I think the drug is worth at least $4.50 a share. And though indiplon (hopefully to be marketed soon by Pfizer (NYSE:PFE) and NeurocrineBiosciences (NASDAQ:NBIX)) won't be a major contributor, it still has a positive value. Also, don't forget DOV's depression pipeline (already tied in with Merck (NYSE:MRK)).

Though there are risks aplenty here, there could still be value. If bicifadine works, I think DOV stock may be worth at least $14. If it doesn't, well, it's still worth a bit more than it's trading for today. That said, this is a high-risk bet, and as yesterday's action proves, you can see a quick and brutal haircut when things don't go as planned.

For past Foolish thoughts on biotech:

Pfizer is a Motley Fool Inside Value recommendation and Merck is an Income Investor recommendation. The Fool has a newsletter for almost every type of investor.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).