A doctor who supervised testing of an Alzheimer’s disease drug said he was “flabbergasted” and “shocked” at the precise information that former SAC Capital Advisors LP fund manager Mathew Martoma had about the drug trial results.
Joel Ross, 58, a New Jersey geriatric specialist, testified in Martoma’s insider-trading trial yesterday about a July 28, 2008, meeting with the fund manager in the lobby of a Chicago hotel. Moments earlier, the physician had left a meeting in which researchers learned of the trial’s results.
“It was like he was in the room with me, with the slides I had just seen,” Ross told jurors in Manhattan federal court.
Ross, who testified over the last two days, is one of two doctors who prosecutors say passed confidential data to Martoma, 39, about a Phase 2 clinical trial of the drug bapineuzumab. At the time of Martoma’s meeting with Ross, former University of Michigan neurologist Sid Gilman had already given him the results, prosecutors say.
Prosecutors also plan to present testimony from Gilman, who was chairman of the trial’s safety committee and who presented the results to the public the day after Ross’s meeting with Martoma. Both doctors are testifying in return for immunity from prosecution.
Ross told jurors he conducted paid consultations with Martoma, giving him secret information about the number of subjects enrolled in the trial and an adverse reaction one patient had to the drug. Ross said he initially charged $1,500 an hour for consulting with investors, later raising his fee to $5,000.
Martoma used confidential data from Ross and Gilman to benefit SAC by $276 million in trades of Wyeth and Elan Corp., the companies developing bapineuzmab, prosecutors say. Martoma denies wrongdoing.
After Martoma was tipped, he briefed SAC founder and owner Steven Cohen, prosecutors say. SAC then reversed a bullish stance on the drugmakers, liquidating a $700 million position and selling the stocks short, they say.
In November, SAC agreed to plead guilty to securities fraud and end its investment advisory business as part of a record $1.8 billion settlement of a U.S. investigation of insider trading at the Stamford, Connecticut-based firm. The accord must be approved by a judge.
Cohen hasn’t been charged with wrongdoing.
Under questioning by Assistant U.S. Attorney Eugene Ingoglia, Ross said he discussed the secret test results with Martoma in the Hyatt Regency, which is connected to Chicago’s McCormick Place Convention Center. The site was hosting the annual International Conference on Alzheimer’s Disease. Ross and the other researchers briefed on the results, who had already signed secrecy agreements, were given a reminder by Elan that they were not to repeat what they were about to hear.
“All information you receive tonight is highly confidential,” read the document, which was introduced in evidence.
Ross said he met with Martoma for 10 to 15 minutes after leaving the session in which he and others learned that the study had failed to show the drug’s effectiveness. The results were to be released publicly the next day.
The group was “somber” and “a little depressed,” Ross testified.
Meeting with Martoma in the lobby, Ross was surprised that Martoma was discussing the study’s “p-values,” a statistical measure of the likelihood that particular findings were the result of chance.
“I think he knew the exact numbers,” Ross testified.
Ross told jurors that his first contact with the government in the case came in a phone call from an agent of the Federal Bureau of Investigation in June 2012. Ross said he lied, claiming that neither he nor Martoma had done anything wrong.
“I panicked and thought that the fastest way to end the phone call was to deny and contact my attorney,” he said.
On cross-examination, Roberto Braceras, one of Martoma’s lawyers, sought to show the information Ross provided about side effects and the number of subjects in the tests was already known publicly. Martoma’s lawyers have also claimed that Ross agreed to incriminate their client to avoid prosecution.
Ross said he no longer treats patients, instead concentrating on pharmaceutical testing. Under questioning from Braceras, Ross said he had lost business and was struggling to keep from firing employees.
“My client’s life is at stake here and you’re complaining about losing money?” Braceras asked.
U.S. District Judge Paul Gardephe sustained prosecutors’ objection to the question.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).