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...