An experimental drug known as GS-4997 from Gilead Sciences (GILD) reduced the buildup of scar tissue in the livers of patients with nonalcoholic steatohepatitis also known as NASH or fatty liver disease, according to results from a phase II study announced Thursday.

The new GS-4997 data are hard to interpret and come from a tiny number of patients, but Gilead believes there is enough information to justify advancing the drug to phase III studies in NASH.

Gilead's stock price barely reacted Thursday, an indication that investors aren't sharing the company's enthusiasm for GS-4997 quite yet.

Inexperienced, micro-cap biotech companies are often criticised for relying on ambiguous clinical data to support big decisions about drugs in their pipelines. This week, investors have watched with a fair amount of head-scratching as Celgene (CELG) (with the Crohn's disease drug GED-0301) and Gilead do the same.

Gilead is under enormous pressure from investors to acquire companies or develop new drugs from its pipeline. The company needs to find a way to reinvigorate revenue and earnings growth now that the mega-blockbuster hepatitis C drug franchise is in decline.

Shares of Gilead are up 2% to $74.66 following the GS-4997 announcement. The stock is still down 26% for the year and is trading at levels not seen since April 2014. 

NASH is one of the diseases Gilead has targeted with its pipeline of internally developed drugs.

The phase II study enrolled 72 patients with NASH and moderate to severe liver scarring. Some of the patients were treated with high and low doses of GS-4997, while others were treated with a combination of GS-4997 and another experimental drug from Gilead known as simtuzumab. The study did not include a placebo group, although another set of patients were treated with simtuzumab alone.

After 24 weeks, Gilead says 43% of NASH patients treated with the higher dose of GS-4997, with or without simtuzumab, showed an improvement in liver scarring by at least one stage. And 30% of patients treated with the lower dose of GS-4997 (again, with or without simtuzumab) demonstrated improvement on the same liver-scarring scale.

Lastly, 20% of the NASH patients treated with simtuzumab alone had an improvement in liver scarring by at least one stage. From these results, Gilead concluded GS-49967 was responsible for a positive and dose-dependent effect on liver scarring in NASH patients.

The phase III studies Gilead intends to conduct will treat NASH patients with GS-4997 alone because the addition of simtuzumab appeared to have no effect.

To put these GS-4997 phase II data into perspective, the "FLINT" phase II study of Intercept Pharmaceuticals' (ICPT) NASH drug demonstrated a 35% response rate on the same liver-scarring improvement scale compared to 19% for placebo. That was measured at 72 weeks, not 24 weeks as in the Gilead study.

The problem with this comparison is that Intercept's study enrolled almost 300 NASH patients. Gilead's phase II study enrolled 72 NASH patients and the data released Thursday come from just 67 evaluable patients. From a statistical standpoint, the margin of error around the GS-4997 data is wide, increasing the risk that the observed benefit is a mirage.

Two additional phase II studies of GS-4997 in pulmonary arterial hypertension and diabetic kidney disease both failed, Gilead also announced Thursday. The company also announced positive results from a phase III study of a new triple-combination regimen in hepatitis C.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.