We are short shares of Principia Biopharma. Last week, Sanofi, the large pharma company that has licensed Principia’s BTK inhibitor SAR442168 for use in multiple sclerosis, announced that the drug met the primary endpoint of its Phase 2 trial. In our original report on Principia, we noted the severe flaws in the design of this clinical trial and predicted that “[a]ny data are bound to be noisy and inconclusive.” But Sanofi circumvented this problem by simply not providing any granular data at all: its press release and subsequent management commentary contained no numbers or other specifics, deferring such details to “an upcoming medical meeting” in the second quarter. (In a striking contrast, Sanofi’s press release just a week earlier about clinical-trial results for a different drug included many concrete figures, including quantification of statistical significance.) For now, all we have to go on is Sanofi’s enthusiasm – yet the market has viewed this big-pharma thumbs-up as strong enough evidence of long-term efficacy to drive Principia’s stock price even higher.

We think this blind faith is a mistake. Here we explain further why the Phase 2 trial – which stands out from other recent multiple-sclerosis Phase 2 trials by being unusually brief, small, and uninformative – seems almost engineered to shed no real light on how well (or poorly) SAR442168 works. In particular, while Sanofi has claimed success on the basis of “reduction of new active gadolinium (Gd)-enhancing T1-hyperintense brain lesions after 12 weeks of treatment,” such lesions counts often drop significantly during clinical trials even in patients on placebo, as initially intense disease activity (perhaps what drove patients to enroll in the trials in the first place) naturally subsides and fluctuates. In other words, a decrease in lesion counts is unsurprising even on an ineffective drug – underscoring the importance of a true control group, which Sanofi’s trial lacked. Nonetheless, at a time when Sanofi’s new CEO is reportedly eager to regain the company’s “lost…mojo,” act less “defensive,” and “play to win,” Sanofi has rushed forward on the basis of this flimsy and unreliable evidence into Phase 3 trials that we expect to fail.

Read our full update here.