Shares of Prana Biotechnology Ltd rose as much as 31 percent after the company said its experimental brain disorder drug improved cognitive function in a study on patients with Huntington's disease.
The mid-stage trial tested two doses of the drug, PBT2, in 109 patients with the degenerative brain disorder, with a higher dose improving executive function as measured on a clinical scale.
"In a small trial, you don't expect to hit statistical significance on a secondary endpoint of efficacy," MLV & Co analyst Graig Suvannavejh told Reuters. "You would hope at best to see positive trends."
Prana said on Tuesday that the drug met the main goals of safety and tolerability in the trial, and that there were no substantial differences in adverse events in patients treated with the drug, and those on placebo.
Suvannavejh said the drug could generate $500 million in annual sales if approved.
Lundbeck's Xenazine, the only approved treatment for Huntington's disease, recorded sales of about 1.2 billion Danish crowns ($220 million) in 2012.
The drug only treats involuntary movements associated with the disease and side-effects include depression, suicidal thoughts and actions.
Huntington's disease is estimated to affect about one of every 10,000 Americans, according to Huntington's Disease Society of America, a voluntary health organization. Every child of a person with the disease has a 50 percent chance of inheriting the gene that causes it.
Prana said it would start a late-stage study of the drug to treat Huntington's disease. The company is also testing the drug in a mid-stage study for Alzheimer's disease.
The Australia-based company's shares touched a high of $9.46 on the Nasdaq. Over 10 million shares changed hands by 1100 ET, about nine times their 10-day moving average.
($1 = 5.4456 Danish crowns)
(Reporting By Vrinda Manocha in Bangalore; Editing by Sriraj Kalluvila)