Alizyme, the drug development company chaired by Sir Brian Richards, the founder of British Biotech, has produced a pill that helps obese people to lose weight.
The company yesterday released the successful outcome of a trial of the drug on 372 patients weighing between 17 and 40 stone, sending its shares up almost 40 per cent.
The pill works by preventing the digestion of fat, which cannot then be absorbed into the body. Alizyme said that the trial showed a significant weight reduction among patients taking its drug, codenamed ATL-962, compared to those on a placebo.
And Richard Palmer, Alizyme's chief executive, said the data proves ATL-962 can become a significant competitor to the only similar drug on the market, Xenical from Roche of Switzerland, which has sales of £5m a week.
The product showed a dramatic reduction in side effects - which include explosive diarrhoea - compared with similar trials of Xenical.
Dr Palmer said Alizyme would now seek a second big pharmaceutical industry partner to help fund the drug in the final stage of human trials, which would involve at least 2,000 patients and, therefore, be beyond the financial means of the company alone.
He said: "There has been a lot of interest in this drug and potential partners have been waiting for this data. The data de-risks their investment. It also shows that a UK biotech company can do these things right."
Takeda licensed the rights to ALT-962 in Japan last month and successful trial results will trigger a milestone payment estimated at £2m.
Alizyme shares had already surged on the Takeda deal and yesterday's rise of 114.5p to 34.25p means they have more than trebled this year.
The company now has three promising drugs ready to go into Phase III trials, the other two being a treatment for colon ulcers and a pill for irritable bowel syndrome.
Dr Palmer said: "Getting licensing deals for them is the next big step for the company, because that is where our shareholders get paid."
Sam Fazelli, analyst at Nomura, said the trio of drugs going into Phase III trials makes Alizyme the most exciting of the small UK biotech companies.
He said: "Is this the little sleeper that finally delivers for us?
"The management has gone step by step and methodically and, even with the luck of UK biotech, it looks like at least one of their products will get to market."