A doctor testifying in the insider trading trial of Mathew Martoma said Wednesday he was "flabbergasted" when he realized the former SAC Capital Advisors LP portfolio manager knew confidential results of a clinical drug trial.
Joel Ross, a New Jersey doctor, said he was "shocked" when Mr. Martoma quoted "exact numbers" to him during a 2008 meeting, because Dr. Ross was one of a small group of doctors who had been given the results shortly before their meeting during a confidential presentation.
"It was like he was in the room with me, with those slides I had just seen," Dr. Ross told jurors on Wednesday on his second day of testimony.
According to prosecutors, Mr. Martoma knew the results because another doctor had given them to him more than a week earlier. That doctor, Sidney Gilman, was on a committee overseeing the clinical trials of the drug, an experimental Alzheimer's treatment called bapineuzumab.
Prosecutors allege Mr. Martoma used confidential tips from Dr. Ross and Dr. Gilman, to make trades on Elan Corp., now part of Perrigo Co. PRGO -0.20% , and Wyeth Pharmaceuticals, now part of Pfizer Inc., PFE +0.58% which were developing the Alzheimer's drug. Mr. Martoma, who worked for an affiliate of SAC called CR Intrinsic, is accused of using the information about the Alzheimer's drug trials to make what the government has called one the largest illegal trades ever, netting $276 million in profits and avoided losses.
Both doctors have entered into a nonprosecution agreement with the Justice Department, under which prosecutors agreed not to bring charges against them in exchange for testifying against Mr. Martoma and cooperating with their investigation. Dr. Gilman is expected to testify later in the trial, which is in its second week.
If convicted, Mr. Martoma faces as long as 20 years in prison on each of two counts of securities fraud, and five years for a conspiracy charge. He has pleaded not guilty.
On Wednesday, Mr. Martoma's lawyers sought to show that Dr. Ross was testifying against their client so he could stay out of jail and pointed out that the doctor had initially lied when approached by Federal Bureau of Investigation agents in 2012.
"It was the first time in my life I ever had an FBI official contact me, and I panicked," Dr. Ross said.
The testimony on Wednesday provided previously undisclosed details about the alleged interactions between the portfolio manager and Dr. Ross, who testified that he repeatedly turned over confidential clinical-trial results to Mr. Martoma.
Dr. Ross, a geriatrician and clinical associate professor at the Icahn School of Medicine at Mount Sinai in New York, worked as a "primary investigator" on trials of the drug, administering it and a placebo to Alzheimer's patients.
He told jurors that Mr. Martoma scheduled a meeting with him on the evening of July 28, 2008, at the Hyatt hotel in Chicago, right after a confidential presentation Dr. Ross was due to attend at the hotel about the results of the Alzheimer's drug trial.
Elan and Wyeth released the trial results to the general public on July 29.
Dr. Ross said he learned during the confidential presentation that a statistical analysis of the trial's results showed the drug "did not work" and testified that the mood in the room where the presentation was held "was somber" because of the disappointing news.
He went straight to meet Mr. Martoma in the Hyatt's lobby, Dr. Ross testified, and was "very surprised" that the SAC portfolio manager seemed to already know the details of the statistical analysis which he only just learned.
During their 10-to-15-minute meeting, the doctor continued to express faith in the drug because of the positive effects he had seen it have on some of his patients, but Mr. Martoma "shot back" that the statistics disproved him, Dr. Ross recalled.
What Dr. Ross didn't know, according to court documents filed by prosecutors, is that Mr. Martoma allegedly received the results well before their meeting, on July 17, from Dr. Gilman and had been dumping SAC's $700 million position in Elan and Wyeth since July 21.
By July 29, the day Elan announced the poor results, SAC had unloaded almost all of its position.
Dr. Ross emailed Mr. Martoma on July 29 reiterating his support for the drug and his hope that the companies would put the drug to market in spite of the bad news.
"I don't know or care what happens to the Elan stock, but I remain convinced this type of antibody approach is safe and valid and hopefully will be on the market by 2011 or sooner," Dr. Ross wrote in the email, which was shown to jurors Wednesday.
Elan and Wyeth's stocks tanked the next day and SAC made the $276 million in profits and avoided losses. SAC pleaded guilty to insider trading last year, agreeing to pay $1.2 billion in fines. So far, seven current and former SAC employees have pleaded guilty to or been convicted of insider trading.
Write to Christopher M. Matthews at christopher.matthews@wsj.com and John Carreyrou at john.carreyrou@wsj.com