Over five years ago, months before most had heard of "expert networks", soon to be the fixture in the biggest FBI/DOJ/SEC crackdown against hedge fund insider trading in history, and years before it would become clear to everyone that the now defunct SAC Capital was nothing but a fund making billions by trading on inside information, we quietly exposed just how it was that Steve Cohen's hedge fund would almost as if by magic, always buy (or short) biotech companies, just ahead of successful (or not) Phase 1, 2 or 3 studies.
We did this all the way back in November 2010, when we looked at SAC's trades in three specific biotech names, CYBX, ITMN and MYGN, and asked three very specific questions:
- Did SAC short CYBX in the days immediately preceding the adverse CYBX statement from August 12, 2004. And did it subsequently go long ahead of the favorable 8K from February 3, 2005. If so, what was the investment thesis/catalyst for such decision. Did SAC consult with an expert network or an outside consultant on any of the trades?
- Did SAC go long ITMN in the days immediately preceding the favorable ITMN statement from March 9, 2010. And did it subsequently sell all of its holdings in advance of the adverse news from May 4, 2010. If so, what was the investment thesis/catalyst for such decision. Did SAC consult with an expert network or an outside consultant on any of the trades?
- Did SAC sell its 700,000 shares in advance of the adverse MYGN news release from May 4, 2010. And did it subsequently sell all of its holdings in advance of the adverse news from May 5, 2010. If so, what was the investment thesis/catalyst for such a decision. Did SAC consult with an expert network or an outside consultant on any of the trades? Furthermore, what catalyzed the decision to reenter the stock.
Today, more than five years later, we have a follow up question for Mr. Steve Cohen, and his "new" family office, Point72, regarding the firm's most recent investment in microcap biotech company Celator, which as of Tuesday is not so micro anymore:
Why did SAC go long Celator Pharmaceuticals (CPXX) in the days immediately preceding the company's March 14 favorable Phase 3 trial result of Vyxeos for Acute Myeloid Leukemia? What was the investment thesis/catalyst for this decision. Did SAC consult with an expert network, an outside consultant or company insider when deciding to put on the trade?
We ask this because yesterday afternoon, Point72 and its New York trading proxy EverPoint filed a 13G dislosing that as of the close of business of March 14, Steve Cohen had become the beneficial owner of an 8.3% stake in CPXX, amounting to 2,855,000 shares. As is traditional with 13G filings, it means Cohen acquired his threshold stake in one (or all) of the 10 calendar days preceding March 14 - the filing does not give the breakdown of how much, and on what days he did so, at a price of around $2/share.
What makes Cohen's acquisition particularly questionable, is that also on March 14, Celator issued a press release reporting a successful Phase 3 trial for an AML drug, Vyxeos:
Celator Pharmaceuticals, Inc. (Nasdaq: CPXX) today announced positive results from the Phase 3 trial of VYXEOS™ (cytarabine: daunorubicin) Liposome for Injection (also known as CPX-351) in patients with high-risk (secondary) acute myeloid leukemia (AML) compared to the standard of care regimen of cytarabine and daunorubicin known as 7+3. The trial met its primary endpoint demonstrating a statistically significant improvement in overall survival.
The result was a spectacular move in the stock following the announcement, one which sent it over 400% higher in the afterhours session, hitting a price of $10 earlier today before closing at $9.38, and netting a profit to Steve Cohen of approximately $20 million assuming he acquired the stake when the stock was trading at $2/share over the past ten days, spending approximately $6 million to build up his reportable position. To be sure, we don't know his cost basis, something many other 13G filings disclose, and as such we can only speculate, as well as wonder why Cohen decided not to provide this information.
But more to the point, and as noted above, we were hoping that Mr. Cohen, who surely would not want his name dragged back into another insider trading scandal as he prepares to move back to managing other people's money which he will be allowed to do again in 2018, now that the SEC has granted him a reprieve from the isolation of a family office, will provide us with the required information, the same information which several years ago was material enough for the Feds to unleash the most historic crackdown on a legendary hedge fund in modern capital market history.
Because the alternative is all too obvious: Steve Cohen is back to his "neither admit nor deny criminal guilt" days of investing in biotech stocks on "hot tips" acquired by insiders through "expert networks" or otherwise. Then again, we doubt even he would be so bold as to file a 13G on the same day a company has soared by 400% on a successful Phase 3 trial.
Or maybe he would, and if so did Steve merely suffer a relapse to his old, more "criminal" days we wonder?