China's conditional approval of a novel Alzheimer's drug in November may be driven by the urgent need to provide a treatment domestically, but concerns about the drug among the medical community and investors suggest more testing is needed for it to enter the global market.

The China-developed drug, called GV-971, aims to tackle Alzheimer's disease — a type of dementia that causes problems with memory, thinking and behavior — is expected to face further market scrutiny, especially if the drug is put forward for regulatory approval in other parts of the world, according to experts speaking to S&P Global Market Intelligence.

"I am surprised the regulator approved [the drug]," Ke Yan, Singapore-based co-head of research at Aequitas Research, said, adding that the drug needs to provide more evidence it can effectively treat Alzheimer's.

Treating Alzheimer's disease has eluded pharmaceutical companies around the world, including Roche Holding AG of Switzerland as well as Biogen Inc. in the U.S. and Japan's Eisai Co. Ltd. Biogen and Eisai recently announced that they will refile a co-application in 2020 to the U.S. Food and Drug Administration for aducanumab, a drug that aims to correct the beta amyloid plaque buildup in the brain, which is a characteristic of the disease. GV-971 is the first Alzheimer's drug in 17 years to receive regulatory approval anywhere in the world.

Privately held Shanghai Green Valley Pharmaceutical Co. Ltd. and two institutions — state-backed Chinese Academy of Sciences and Shandong-based Ocean University of China — developed GV-971 to treat patients with mild to moderate Alzheimer’s disease.

A study by Geng Meiyu, a key researcher of the drug at the Chinese Academy of Sciences, found an imbalance in the digestive system can lead to inflammation of the central nervous system, which could lead to Alzheimer’s disease.

The main ingredient in GV-971 is a compound known as oligomannate, derived from marine brown algae. The compound works by rebalancing microbes, including bacteria and viruses, in a person's digestive system.

China's National Medical Products Association awarded the seaweed-derived drug conditional approval following a 36-week late-stage study in China on 818 people diagnosed with mild to moderate Alzheimer's disease.

More data needed

However, Ke said that while GV-971 was able to improve patients' ADAS-cog score, one of the indicators for cognitive ability, it missed other indicators usually assessed in Alzheimer’s disease studies such as ADCS-ADL for daily activity capability.

A conditional approval is given when data from local trials for the drug has not been submitted to the regulator or when a company has not provided certain supporting documents with its drug application. The approval can be revoked if further studies fail to prove efficacy or safety of the drug.

The Chinese regulators may have issued the drug's conditional approval too hastily, Derek Lowe, a U.S.-based drug discovery researcher and founder of medical blog In the Pipeline, said, adding that China's regulatory process is not as transparent compared with those in other countries.

GV-971 is expected to receive final approval if researchers can show the drug does not directly cause cancer and data from a 104-week study in mice is expected to be submitted to regulators soon, Green Valley Pharmaceutical said in a statement to Market Intelligence. The company added that it will conduct a larger trial after the drug is released.

More evidence may be needed to show that manipulating gut microbiome can help reduce the symptoms of Alzheimer's disease and lead regulators outside China to begin their own approval processes, which may not happen for some time.

"For any potential drug to gain a stamp of approval by regulators in the U.K., we'll need to see larger trials in countries around the world to back up the evidence from China," Carol Routledge, Director of Research at Alzheimer's Research UK, said in a statement.

Beyond the regulatory process, the overarching aim of the drug is also under scrutiny. Only a handful of studies in mice show that modifying gut microbiome can help ease Alzheimer's-like symptoms, said Sarkis Mazmanian, a professor of microbiology and principal investigator at the California Institute of Technology, who has been conducting basic research exploring links between gut microbiome and Alzheimer's disease, funded by the National Institutes of Aging in the U.S.

However, the connections between microbiome and Alzheimer's are still speculative at this stage. "We simply don't know what role the microbiome is playing, if any, in Alzheimer's," Mazmanian said.

Urgent need

GV-971 may have received conditional approval because a treatment for Alzheimer's disease is desperately needed in China, Zhao Bing, Shanghai-based healthcare analyst with Huajing Securities, said.

China is expected to have 40 million Alzheimer’s patients by 2050, compared to 10 million today, according to Green Valley Pharmaceutical.

In 2017, China unveiled guidelines to accelerate the approval process for drugs that can treat or halt severe life-threatening diseases.

Alzheimer's disease likely falls under the guidelines as there is no effective treatment, Zhao said.

Green Valley has two products on the market: GV-971, and a cardiovascular disease therapy that contains extracts of alvia miltiorrhiza, also known as red sage.

Both drugs require prescriptions. Around 20 years ago, Green Valley Pharmaceutical's parent, Green Valley Group, also sold an anti-cancer therapy, a capsule containing extracts from ganoderma, a type of fungi.

Green Valley Group said the capsule could cure cancer but a local court in Shandong province later found the claims made in the company's advertising campaigns were false, state-backed media outlet People's Daily reported in 2002.

Green Valley Group stopped selling the product and the Shaanxi subsidiary that produced the therapy was closed, according to a Green Valley Pharmaceutical statement.