The Winnipeg-based company said full results from the preclinical study will be published, but did not provide a date.
DiaMedica said the study revealed DM-99 alone lowers fasting glucose values in a diabetic model.
During a tolerance test, the drug, when taken with long-acting insulin, significantly cut sugar levels immediately and well after a meal to near normal levels.
"The results from this study suggest DM-199 co-administered with basal long-acting insulin may reduce the need for short-acting insulin around meals while improving glucose control in diabetic patients," chief executive Rick Pauls said in a statement.
"Lowering the frequency and amount of daily insulin injections and reducing the risk of hypoglycemia could significantly improve the quality of life for Type 1 diabetics and possibly for Type 2 diabetics.
"Results are to be confirmed in future human studies."
DiaMedica is a biopharmaceutical firm focused on discovering and developing new therapies to treat diabetes and complications tied to the disease.
The company is also developing, DM-204, a drug used to treat Type 2 diabetes. In a pre-clinical trial, the drug revealed major improvement in blood sugar control, blood pressure and cholesterol levels, it said.
Shares in the company were trading at $1.80 on the TSX Venture Exchange. Its stock spiked to $1.94 in early morning trading.