According to the study published by the British newspaper "The Sun", the caffeic acid formula has achieved promising results in the treatment of neurodegenerative disorders.
The researchers hope the treatment will be used to help people in the early stages of dementia to prevent it from progressing to more difficult stages.
Lead author of the study, Jyotish Kumar, from the University of Texas, said: "None of the current treatments cure the disease; they only help manage symptoms.
The substance was extracted by heating the coffee grounds at 200 °C for 4 hours, in order to change the carbon structure of caffeic acid.
The researchers found that the substance helped remove free radicals, molecules in the body linked to a range of conditions, including Parkinson's disease, and prevented them from causing damage.
The researchers said it also prevented the buildup of the amyloid proteins that cause Alzheimer's without significant side effects.
There is currently no cure for dementia, although three promising drugs to slow its progression are currently in trials.
There's also no cure for Parkinson's disease, but if detected early, changes in diet, exercise, physical therapy, medications and brain surgery in some cases can help slow its progression.