This small-cap ASX stock just rocketed 39%. What's doing?

A stock no one has heard of is lighting up trading screens on Wednesday. You might hear this name more in the future.

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A little-known small-cap stock has rocketed on Wednesday morning after coming out of a two-day trading halt.

PharmAust Limited (ASX: PAA) had requested a halt to trading of its shares before the market opened on Monday.

On Tuesday evening the company released its phase 1 study results for its monepantel drug that aims to treat motor neurone disease (MND), also known as Lou Gehrig's disease.

PharmAust reported that its product showed "a superior safety, tolerability to the leading FDA approved drug Relyvrio".

As soon as the stock was free to be traded on Wednesday, the market went into a frenzy.

The PharmAust share price surged 39.5% within the first few minutes of trading.

The $147 million business, in a matter of minutes, all of a sudden became a $205 million player on the ASX.

Adapting an existing drug for different uses

Incredibly, the small cap had already soared 375% over the last 12 months even before Wednesday's pile-on.

Monepantel is a drug that's already commercially used to treat sheep for worm infestations.

PharmAust has patents for repurposing this product with the goal of treating serious diseases in humans and cancer in dogs.

Motor neurone disease currently has no cure.

The PharmAust website explains that in mammals, monepantel is "a potent inhibitor of the mTOR pathway". 

"The mTOR pathway regulates the cellular 'cleaning process', where toxic protein is broken down into macromolecules to be reused.

"This autophagic process is disrupted in most neurodegenerative diseases, including motor neurone disease."

The Perth company is led by chair Dr Roger Aston and chief executive Dr Michael Thurn.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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