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Sahm Adrangi’s Kerrisdale Capital Issues Negative Report on Principia Biopharma Inc. and Announces Conference Call Schedule

January 27, 2020 GMT

NEW YORK, Jan. 27, 2020 /PRNewswire/ -- Kerrisdale Capital, a private investment manager, has published a report explaining its short position in Principia Biopharma Inc. (NASDAQ: PRNB), a biopharmaceutical company whose $2 billion valuation is driven by misleading clinical data and an ineffective strategy of treating autoimmune diseases with BTK inhibitors. Kerrisdale believes that Prinicipia’s drugs don’t work and that the data from its Phase 2 trials in the autoimmune diseases pemphigus and immune thrombocytopenia (“ITP”) indicate likely failure in Phase 3. Similarly, Principia’s BTK inhibitor for the treatment of multiple sclerosis is also likely doomed to failure for the same reason that its drugs have been ineffective with pemphigus and ITP.

While drugs that inhibit the activity of BTK have enjoyed great success treating B-cell–driven cancers, Principia’s strategy of using that same approach to treat autoimmune diseases caused by errant B cells that turn on their own hosts is misguided. BTK inhibitors have repeatedly fallen short in multiple different autoimmune diseases across many years because their main effect is to prevent the development and proliferation of new B-cell lines – while leaving existing B-cell populations largely unscathed. The problem in autoimmunity lies precisely in the established subsets of misbehaving cells; new cell lines are irrelevant.

It is no surprise then that Principia’s Phase 2 trials for its drug candidate PRN1008 have yielded damning results. The trials in pemphigus and ITP included no placebo groups and patients were allowed to continue taking other effective drugs such as corticosteroids. Comparing PRN1008′s pemphigus and ITP Phase 2 data against placebo groups from the scientific literature demonstrate that the drug appears totally ineffective and a far worse option than the current standards of care.

In pemphigus, PRN1008 is no match for the B-cell–depleting therapy rituximab, recently approved for use in the disease and now regarded as the “gold standard.” While rituximab can, over time, achieve a 90% complete-remission rate with no need for ongoing corticosteroid use, Kerrisdale estimates that patients on Principia’s PRN1008 only managed an 11% complete-remission rate (recalculated using standard analyses rather than Principia’s self-serving adjustments) while still taking low doses of corticosteroids, which are themselves clearly effective in pemphigus, though less so than rituximab. With respect to ITP, many effective drugs are already available to treat the condition, with several more on the way. While Principia suggests that its drug boosts platelet counts in ITP patients, the modest and often transient increases observed are again easily explained by the fact that more than two thirds of these patients were also taking other drugs, like thrombopoietin-receptor agonists and corticosteroids, that are effective treatments in their own right.

“Principia didn’t include a placebo group in its Phase 2 trials, and when you compare the trials’ data with the scientific literature, the drug is clearly ineffective and inferior to the traditional standard of care,” said Sahm Adrangi, CIO of Kerrisdale Capital. “BTK inhibitors are an ineffective approach for autoimmune diseases, where the main culprits are existing B-cell populations, and not so much the development and proliferation of new B-cell lines.”

Principia’s other main drug, a BTK inhibitor (SAR442168, or ’168) engineered for use in multiple sclerosis, is destined for failure for similar reasons. While true B-cell–depleting therapies have a significant positive impact by killing off the established populations of “bad” cells that cause disease, BTK inhibitors have no impact because they primarily affect unrelated fledgling cells. The company’s current Phase 2 trial is likely to yield muddled, inconclusive results: rather than setting up a clean comparison between patients on ’168 and patients on placebo, the trial seems almost designed to be confusing and open to interpretation, with eight different experimental groups, each including only ~16 patients.

Finally, Kerrisdale believes Principia’s approach may even by dangerous: by halting the creation of new B cells, BTK inhibitors narrow the range of novel pathogens that patients can effectively combat, fostering greater susceptibility to potentially fatal opportunistic infections.

“The company’s valuation has ballooned to $2 billion, but this seems more indicative of misleading management commentary, a lack of critical debate amongst the sell side and buy side, and a frothy biotech market,” said Adrangi. “In reality, Principia Biopharma’s doomed pipeline renders the company worth little more than its several hundred million dollar cash balance.”

Kerrisdale’s full report can be found at https://kerr.co/prnb.

Kerrisdale has a short position in shares of Principia Biopharma Inc. and stands to benefit if its share price falls.

Conference Call Schedule
Kerrisdale will host a conference call on Monday, January 27, 2020 at 1:00pm ET to discuss the report on Principia Biopharma Inc.

To participate in the conference call, dial 866-834-3313 (domestic) or 409-981-0700 (international) and reference conference ID 8778858.

About Kerrisdale Capital

Kerrisdale Capital Management, LLC, is a fundamentally-oriented investment manager that focuses on long-term value investments and event-driven special situations.

Contact

Agnes Cao
Kerrisdale Capital
acao@kerrisdalecap.com
212-257-4385

Sahm Adrangi
Kerrisdale Capital
sadrangi@kerrisdalecap.com
212-792-9148

Kerrisdale Capital Management, LLC is a member of the Financial Industry Regulatory Authority, CRD number 160804.

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SOURCE Kerrisdale Capital Management, LLC