Federal investigators suspect that pharma M&A has been a playing field for insider trading. Sources tell the Wall Street Journal that authorities are looking into drugmaker deals--including Merck's ($MRK) 2009 buyout of Schering-Plough; Pfizer's ($PFE) 2009 purchase of Wyeth; and AstraZeneca's ($AZN) takeover of MedImmune in 2007--as part of a broader probe of several hedge funds.
The feds are looking at funds that boosted their holdings in one or more of the three acquired companies, during the quarters in which those deals were announced. SAC Capital Advisors, Diamondback Capital Management, Jana Partners and Balyasny Asset Management all bought up the stocks in question, the WSJ says, but it's not clear whether the funds purchased shares before the mergers went public.
But statistics suggest that some purchasers definitely bid up those stocks ahead of the deal announcements. MedImmune shares had been trading heavily for six weeks before the announcement, gaining some 50 percent in value over that period; the stock rose by 18 percent on the day the AZ buyout was announced. Likewise, Wyeth shares had gained more than 20 percent in the six weeks before Pfizer publicized its takeover; the stock leapt by 12 percent the day of that announcement.
The funds didn't comment much for the WSJ, and wouldn't say whether they bought their holdings in these companies before or after the deals went public. The stock buys could have been innocent, the paper notes; made for arbitrage purposes post-announcement, or on a speculative basis as rumors of pharma consolidation swept the industry at the time.