Conatus Pharmaceuticals Inc said its experimental lead drug was more effective than a placebo in a mid-stage study in patients with a form of fatty liver disease.
The company's stock soared more than 50 percent before the bell on Thursday.
The drug, emricasan, was tested in 38 patients with non-alcoholic fatty liver disease, including some sufferers of non-alcoholic steatohepatitis (NASH), a more severe form of the condition, the company said.
NASH is one of the leading causes of liver-related morbidity and mortality, but no pharmaceutical therapy currently exists for it.
Several drugmakers, including Gilead Sciences Inc, Intercept Pharmaceuticals Inc and France's Genfit SA, are in the race to develop treatments.
The study determined the drug's effectiveness by measuring reductions in biomarkers associated with cell death and inflammation, considered to be drivers of progressive liver disease.
The treatment had no adverse effects on lipid levels or insulin sensitivity in these patients, who are typically at risk of cardiovascular disease, Conatus said.
Emricasan is Conatus' most advanced drug-in-development and is designed to interrupt disease progression across the spectrum of liver disease.
The treatment, which is being tested for multiple liver indications, is initially being developed for liver cirrhosis, or severe scarring that may be caused by all manner of assaults on the liver.
Conatus estimates that about 2 million people in the United States and five largest European markets have cirrhosis and varying degrees of liver impairment.
The company's shares were up nearly 42 percent at $8.16 in heavy premarket trading.