A doctor testifying in the insider trading trial of former Ex-SAC trader Martoma said that he was flabbergasted that the trader appeared to already know results from a drug trial.
Joel Ross, a New Jersey doctor, told jurors in federal court that Martoma quoted ‘exact numbers’ to him during a 2008 meeting.
Martoma accused of using insider information
Martoma, a former manager at SAC’s Intrinsic unit, is accused of using insider information on clinical trials of an Alzheimer’s disease drug to earn a profit and avoid losses for a combined benefit of at least $276 million. Martoma has pleaded not guilty.
Joel Rose, the doctor involved in the clinical trial for an Alzheimer’s drug told the jurors in federal court in New York that he met with Martoma in July 2008 just after he and other doctors involved in the study were told the results of the trial. But during the meeting in the lobby of a Chicago hotel, Ross said Martoma ‘flabbergasted’ him by appearing to know almost exactly various statistics the doctor had just learned at a presentation for researchers and which would not be made public until the next day.
The doctor said: “It was like he was in the room with me, with those slides I had just seen”.
Martoma knew the results in advance
According to prosecutors, Martoma knew the results because another doctor, Sidney Gilman, had given the results to him more than a week earlier. Sidney Gilman was on a committee overseeing the clinical trials of the drug, an experimental Alzheimer’s treatment called bapineuzumab.
The prosecutors allege Martoma used confidential tips from Dr. Ross and Dr. Gilman, to make trades on Elan Corporation, plc (NYSE:ELN) and Wyeth Pharmaceuticals, which were developing Alzheimer’s drug. Both the doctors have entered into a non-prosecution agreement with the Justice Department under which prosecutors agreed not to bring charges against them in exchange for testifying against Martoma and cooperating with their investigation.
Dr. Ross told the jury that the drug didn’t work at all. This disappointing outcome would not be publicly announced until the next day after his meeting Martoma at the hotel. Later the share prices of Elan Corporation, plc (NYSE:ELN) and Wyeth Limited (NSE:WYETH) (BOM:500095) went down sharply.
According to the government, by knowing this information ahead of the public announcement, Martoma got an ‘illegal edge’ helping SAC avoid losses and make gains totaling $276 million.