Updated with new stock price.

BEDMINSTER, N.J. ( TheStreet) -- NPS Pharmaceuticals ( NPSP) shares moved higher Monday after the company announced that patients with short bowel syndrome were able to significantly reduce intravenous feeding following treatment with the experimental drug Gattex, according to positive results from a pivotal phase III study.

Based on results from the study, NPS intends to seek U.S. approval for Gattex in the second half of the year, the company said.

NPS shares were up 25% to $9.55 in early Monday trading.

Sixty-three percent of patients with short bowel syndrome responded to treatment with Gattex after six months compared to 30% of similar patients treated with a placebo. This outcome -- the study's primary endpoint -- was highly statistically significant. The phase III study of Gattex, dubbed STEPS, enrolled and treated 86 patients.

Response in this phase III study was defined as a greater than 20% reduction in weekly volume of parenteral nutrition at weeks 20-24 compared to baseline.

Short-bowel syndrome (SBS) is a chronic and disabling condition that strikes people, who for various reasons including Crohn's disease, have about 50% of their lower intestines surgically removed. A large majority of patients can adapt or regenerate new bowel to lead normal lives. A smaller group of SBS patients never recover full functionality of their lower intestines, and a result, must spend the rest of their lives attached to an intravenous parenteral nutrition bag that provides the liquid nutrients they need to survive.

"The STEPS results suggest teduglutide Gattex helps restore normal intestinal nutrition in patients with short bowel syndrome, thereby reducing dependence on parenteral nutrition and potentially improving their quality of life," said Dr. Palle Bekker Jeppesen of the University Hospital Copenhagen and an investigator in the Gattex study, in a statement.

Gattex is a recombinant, humanized and longer-acting form of GLP-2, a naturally occurring protein that is secreted by the bowel to enhance the absorption of nutrients and increase blood flow to the gut.

Patients with SBS typically require about 12 liters of parenteral nutrition per week. In the phase III study, patients treated with Gattex, given as a daily shot under the skin, were able to reduce the parenteral nutrition volume by an average of 4.4 liters per week compared to a reduction of 2.3 liters for placebo patients, NPS said.

No SBS patients stopped parenteral nutrition altogether in the study although some Gattex-treated patients continued to reduce intravenous feeding even as the six-month study ended and a long-term follow-up study began, said NPS chief executive Francois Nader, in an interview.

"The extension study could bring more reductions in parenteral nutrition for these patients," said Nader, adding that this may include some patients who no longer need intravenous feeding at all.

In all, 97% of the patients in the STEPS study elected to transition into the long-term follow-up study. "That's a testament to the drug's safety, which makes us very pleased," said Nader.

Four patients in the study discontinued due to adverse events, but only one of those patients was treated with Gattex.

Monday's Gattex results were stronger than data generated from an older, failed phase III study in which a 46% of patients responded to Gattex compared to a placebo response rate of 6%. That difference was statistically significant but the study was deemed a failure because a higher dose of Gattex also tested in the trial performed less well.

NPS learned its lesson from the first failed Gattex study and made some changes to the design of the STEPS trial to boost the odds of success, including allowing doctors and patients more flexibility in lowering levels of weekly parenteral nutrition.

NPS conducted the STEPS study of Gattex with the Swiss drug firm Nycomed, which holds marketing rights to the drug outside North America. Nycomed intends to seek European approval of the drug in the first half of the year.

NPS estimates there are approximately 15,000 SBS patients eligible for Gattex in the U.S., meaning the condition qualifies for orphan drug status (and potential premium pricing.) Gattex pricing hasn't been disclosed but NPS says the drug's peak sales potential is in the $350 million range.

Analysts who cover NPS with buy ratings, generally, carry peak sales estimates for Gattex in SBS in the $200 million-plus range. NPS plans to sell Gattex on its own in the U.S. and will receive royalties in sales of the drug in Europe.

--Written by Adam Feuerstein in Boston.

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