Over the past decade Wall Street has turned to expert-network firms to gain some deep insight into the pharma business, with the top investigators among the most hotly sought-after contacts. Dr. Sidney Gilman at the University of Michigan made a handsome side business out of it, earning $1,000 an hour to advise investors puzzling out the prospects of experimental medications, according to a report in The Wall Street Journal. And the SEC says that Mathew Martoma used that relationship to get insider knowledge on a key Alzheimer's study back in 2008. That tip, the feds say, was worth $276 million for SAC Capital Advisors, the single biggest insider trading case that the SEC has brought.
Gilman is a noted neurologist well known in R&D circles. Evidently he's still on the faculty at the University of Michigan even after the scandal erupted yesterday. Now the Journal reports that the feds are concentrating on just what big investors like SAC have been able to learn from these well-paid experts. And the expert-network companies, including the one that put Gilman in touch with SAC, are in the public spotlight.
The SEC alleges that Gilman played a central role in the scheme.
"Martoma, then a portfolio manager at CR Intrinsic, an unregistered investment adviser, perpetrated the scheme with Gilman, a professor of neurology at the University of Michigan Medical School," says the SEC complaint. "Gilman served as the chairman of the Safety Monitoring Committee (the "SMC") overseeing the clinical trial (for bapineuzumab), and was selected by Elan and Wyeth to present the final clinical trial results at a July 29, 2008 medical conference, which was to coincide with the after-market hours public announcement of the trial results by the two companies (the "July 29 Announcement")."
Altogether Gilman reportedly earned $104,000 from his side job on Wall Street. The Journal lists relationships with pharma companies that date back to 1989. And he completed stints on the scientific advisory boards of Longitude Capital Management and Pequot Capital Management.
"Historically the demand for two different kinds of experts--doctors and technology specialists--has driven the growth of this industry," Michael Mayhew, chairman of Integrity Research Associates, tells the Journal.
With the SEC hot on the trail of a string of insider trading cases in biotech, it's likely that more of these relationships between experts and investors will be scrutinized closely.
- here's the complaint
- read the story from The Wall Street Journal (sub. req.)