La Jolla Pharmaceutical Co said its lead experimental drug to treat chronic kidney disease met the main goal of improving kidney function in a mid-stage study, sending the company's shares up about 40 percent in extended trading.
The company said the trial tested two doses of the drug, codenamed GCS-100, and the lower dose showed an increase in the rate of blood filtering through the kidneys, compared with a placebo.
La Jolla said the lower dose also reduced the levels galectin-3, a protein associated with tissue scarring.
The higher dose did not show a statistically significant increase in the rate of blood filtering or reduction of the levels of protein, compared with a placebo.
"There's a biologic feedback at the higher doses that neutralized the effect of the drug," Chief Executive George Tidmarsh said at an investor conference.
"It could be that if you inhabit galectin-3 too much, there's a feedback loop to start synthesis again. So the higher dose is too high," Wedbush analyst Liana Moussatos said.
La Jolla was likely to conduct another mid-stage study to test doses below the higher dose level to determine the drug's response, Moussatos said.
The drug, if approved, could be a blockbuster chronic kidney disease drug — a large market without any approved treatments, analysts said.
"Even with a modest penetration, we estimate the drug could have over $2 billion in peak sales in 2024, and that's a conservative estimate," Chardan Capital Markets analyst Ling Wang said.
La Jolla said the drug was well-tolerated and there were no serious adverse events in the lower dose group.
There were two serious adverse events each in the placebo group and the higher dose group.
The company said the events in the higher dose group were not related to the drug.
The trial enrolled 121 patients with moderate to severe chronic kidney disease.
Chronic kidney disease is a gradual loss of kidney function, mainly caused by diabetes and high blood pressure. It affects about 26 million adults in the United States, according to the National Kidney Foundation.
La Jolla's shares, which were halted prior to the news, closed at $10.90 on the Nasdaq on Monday.
The stock has risen 38 percent since March 5, when La Jolla said it would provide an update on the trial at an investor conference on Monday.
(Reporting by Vrinda Manocha in Bangalore; Editing by Kirti Pandey and Joyjeet Das)