SAC Capital Advisors loaded up on shares of InterMune, a pharmaceutical company, when it looked like the company’s hotly anticipated new drug would get approval from the Food and Drug Administration. But when the FDA rejected the drug and the stock plunged 80% in one day, the prognosis for that investment did not look good.
SAC had plenty of company, with several other big-name hedge funds—including Citadel, D.E. Shaw Group and Millennium Management—holding shares in InterMune, which develops drugs for pulmonary and liver diseases and which has a market cap of $573 million. If InterMune’s new drug pirfenidone had gotten regulatory approval, it would have been the first drug to treat idiopathic pulmonary fibrosis, a fatal lung disease that afflicts some 130,000 Americans.
SAC founder Steve Cohen, in particular, owned a significant portion of the company, piling into the stock earlier this year when it was flying high. As of March 30, SAC Capital owned 1,940,393 shares of InterMune, according to regulatory filings, and by April, Cohen, through a combination of the fund and other holdings, owned 4,465,400 shares, or 8.2%, of the Brisbane, Calif.-based company. The stock rose to $45 in late March as an advisory committee to the FDA voted nine to three to approve pirfenidone, whose proposed trade name is Esbriet. But on May 4, InterMune’s stock plummeted after the drug failed to secure the FDA’s blessing, ending the day at $11.38—down from $45.44 at the trading day’s open.
The price has since stagnated, hovering around $10. Cohen aggressively dumped InterMune shares between the end of the first quarter and the second. As of June 30, SAC Capital only owned 10,983 shares. Many other big-name funds held large positions in the first quarter, though a handful had cut those positions by the end of the second quarter. It’s unknown whether these funds cut their stakes before the stock’s bloodbath. Funds that owned InterMune stock on June 30 include Citadel (13,739), Millennium (40,193) and D.E. Shaw (1,125,910). All three funds reduced their exposure from the first quarter. On March 30, Citadel owned 245,112 shares, Millennium 700,000, and D.E. Shaw 2,407,414.
Balyasny Asset Management and Visium Asset Management, which on June 30 owned 1,885,000 and 2,312,500 shares, respectively, had increased their exposure from the first quarter. On March 30, Balyasny owned 350,000 shares, while Visium owned 2,250,303 shares. Duquesne Capital Management, Kingdon Capital Management, Renaissance Technologies and Soros Fund Management were each invested in the first quarter, but all had sold their holdings by the second quarter.
Analysts have mixed opinions on the stock, with some saying pirfenidone is unlikely
to get the green light before 2011 and others saying InterMune could gain if the European pharmaceutical regulator approves the drug.
Suzy Kenly
