Hedge Funds Target Big Pharma

FOIAengine: Requests to FDA Reveal What the Funds Are Watching

New data reveals that big hedge funds were unusually active in making information requests about pharmaceutical companies to the Food and Drug Administration in the month just ended.    

The funds’ Freedom of Information Act requests in May 2023 – at least 48 in all, from an assortment of financial players – send signals about which pharma stocks may be favored, or not, by the biggest players in the current frothy market.  Because the funds sometimes lumped a dozen or more pharma companies into a single ask, the breadth and depth of the latest FOIA tally is even more noteworthy.   

Some of the funds, such as Point72 and Balyasny Asset Management, are longtime active requesters and, as such, are well known to FOIAengine and readers of this space.  Others, such as ExodusPoint and Farallon, showed up this month after seldom making FOIA requests.  Ghost Tree Capital and Styrax Capital were among hedge funds that were newcomers to FOIA, having never before showed up in FOIAengine.

We’ll break it down further, below. 

The timing of the hedge funds’ heightened efforts to seek a trading advantage by vacuuming up non-public information is significant.  It comes at a time when those funds, and other speculative investors, are said to be in a bearish mood overall, positioning themselves for a drop in the broader market even as they prepare for a rally in AI-focused technology stocks.  Earlier this week, the Wall Street Journal, citing data from the Commodity Futures Trading Commission compiled by Bespoke Investment Group, reported that hedge funds are more bearish than at any time since 2007, and have built up big futures bets in anticipation that the S&P 500 will decline. 

A number of the pharma companies targeted in the FOIA requests already have seen significant drops in their share price, a possible indication that the hedge funds are betting against them. 

FOIA requests to the federal government can be an important early warning of bad publicity, litigation to come, or major share-price moves.  That is why PoliScio Analytics’ competitive-intelligence database FOIAengine tracks FOIA requests in as close to real-time as their availability allows.  Of particular interest are requests that may significantly affect stocks and markets once the stories hit. 

As we reported in March, FOIA’s market-moving importance was demonstrated by professors from the University of Maryland and the University of Melbourne (Australia) who studied the FOIA process in 2014.  The scholars concluded that self-interested financial players – in their research, they focused on securities analysts and hedge funds – could use FOIA to make better buy/sell/hold recommendations (the analysts) and generate abnormally large investment returns (the hedge funds).  The behavior they studied was both entirely lawful – anyone can file a FOIA request – yet opaque to the broader market.  In other words, having special FOIA knowledge gives an advantage only to those traders who possess it. 

The May FOIA requests by hedge funds to the FDA, which were posted late last week and are the most recent available, mainly ask for FDA warning letters or inspection reports that could lead to reputational damage to a pharma company or signal bad news for a product under development.  Some requests seek to uncover as much information as possible about a drug company’s “adverse events” – a term of art at the FDA that covers the spontaneous reporting by doctors or patients about deaths or harm caused by a medication. 

Highlights from the most recent hedge fund FOIA requests follow.  A list of all hedge funds making requests to the FDA in May 2023 appears at the end of this article.  Email us at support@PoliScio.com to request more information or to query the FOIAengine database as a beta tester.  Or click here to send us a message.

Point72:  Point72 has $140 billion in assets under management, according to its most recent 2023 SEC filing, making it one of the world’s biggest.  Two-thirds of that total is for non-U.S. clients.  Steven A. Cohen’s huge, market-moving fund filed 10 FOIA requests throughout the month. 

On May 1, a Point72 analyst asked for detailed adverse-event reports about Syfovre, a newly approved drug for age-related macular degeneration. Syfovre is manufactured by Apellis Pharmaceuticals (NASDAQ:APLS).  Apellis’ stock has been on a tear, more than doubling in price during the past two months.  But around the time of Point72’s request, the share price plunged dramatically, fully recovering soon thereafter.  The stock hit a new all-time high this week  There were multiple other requests from other hedge funds for the same information about Syfovre. 

On May 22, a Point72 requester sought details on a site-inspection warning letter issued to California-based Immunity Bio (NASDAQ:IBRX).  The warning letter, from a February FDA inspection, is known as a “Form 483” in FDA vernacular.  Immunity Bio makes a bladder-cancer drug called Anktiva.  The company revealed in April that its manufacturing facility had failed a crucial pre-license inspection.  Immunity Bio’s stock has since taken a wild ride, from a low of about $1 per share in March to a May high of about $7 per share.  The share price recently fell back to about $3.  Trading volume in the stock remains unusually high. 

On May 24, a Point72 requester asked for Form 483s and related warning letters issued to Integra Lifesciences (NASDAQ:IART) and its subsidiary, TEI Biosciences.  The day before Point72’s request, Integra announced a huge recall of surgical-tissue products made at Boston facility.  Its stock then dropped 35 percent and has continued to hover around lows that the share price hasn’t seen since 2016.  Trading volume is high.   

Point72 also showed that it is closely following FOIA requests made by others.  On May 25, it asked for FDA Form 483 warning letters issued to InMode (NASDAQ:INMD), a company that seeks to develop radio-frequency platforms to assist in surgical procedures.  InMode says it is seeking to “capitalize on a multi-billion market opportunity” in fields such as plastic surgery, gynecology, dermatology, and ophthalmology.  Point72’s request came months after an investigative news group, Capitol Forum, wrote negative articles about the company last December 9, 2022 and March 10, 2023.  

Capitol Forum, which publishes reports about antitrust and corporate compliance, dug deeper after publishing those reports, making its own request to the FDA about InMode in April.  The next month, Point72 took note and asked for the same documents.  Another hedge fund, Exodus Point, also referenced Capitol Forum’s request when, on May 7, it made a FOIA request for the same documents.     

Exodus Point:  This hedge fund, helmed by Michael Gelband and Hyung Lee, began managing investor capital in 2018.  Its most recent filing with the Securities and Exchange Commission reports $90 billion under management, two thirds of which is for clients outside of the U.S.  The firm has 615 employees in offices throughout the world. 

Exodus Point’s May requests to the FDA showed that its analysts are closely watching requests made not just by other hedge funds, but also by companies engaged in regulatory surveillance and corporate intelligence.  Exodus Point’s May 8 request asked for FDA documents from 13 FOIA requests previously made by others.  Those previous requesters included hedge fund Balyasny Management, a frequent FOIA requester, as well as a private investigative and compliance company, Redica Systems, which serves clients in the pharmaceutical industry.  Redica’s requests in April sought FDA documents concerning medical device inspections of Germany’s Siemens (OTC:SIEGY) and U.S.-based Abbott Molecular (NYSE:ABT).  When Redica’s requests became public the next month, Exodus Point referenced them and asked for the same documents. 

Following is the complete list of hedge funds and asset managers making document requests to the FDA during May 2023. (Note: a single request may seek documents pertaining to many pharma companies):  Acuta Capital Partners (3 requests in May); Balyasny Asset Management (16); Farallon Capital Management (10); Emerald Asset Management (1); Exodus Point Capital (3, 2 of which were made by an Exodus Point portfolio manager who kept her affiliation out of the request); Ghost Tree Capital (1); Madison Avenue Partners (1); Magnetar Capital (1); Point72 (10); Styrax Capital (1); and Triple Gate Capital (1).  

Postscript:  Requests to the FDA from all sources totaled 1,072 during May.  Among the requests was one from the conservative group Judicial Watch, still pushing its vaccine-safety agenda.  The group’s request sought “all documents” submitted by Pfizer and Moderna as part of the two companies’ license applications for their respective Covid-19 vaccines.  As we’ve previously reported, Judicial Watch is a frequent FOIA litigator with vast resources to spend on its lawsuits.    

Next:  Check back here for updates on some of the things we’re continuing to look into:  Bloomberg’s many requests to the NLRB; the ongoing feud between Elon Musk and Aaron Greenspan; and the latest requests by short-seller Hindenburg

John A. Jenkins, co-creator of FOIAengine, is a Washington journalist and publisher whose work has appeared in The New York Times Magazine, GQ, and elsewhere.  He is a four-time recipient of the American Bar Association’s Gavel Award Certificate of Merit for his legal reporting and analysis.  His most recent book is The Partisan: The Life of William Rehnquist.  Jenkins founded Law Street Media in 2013.  Prior to that, he was President of CQ Press, the textbook and reference publishing enterprise of Congressional Quarterly.  FOIAengine is a product of PoliScio Analytics (PoliScio.com), a new venture specializing in U.S. political and governmental research, co-founded by Jenkins and Washington lawyer Randy Miller.  Learn more about FOIAengine here.  To review FOIA requests mentioned in this article, subscribe to FOIAengine.