lessons for investors :from the trial of Theranos founder Elizab

 

How to spot a problem

“It’s important that we don’t assume that every company is like a Theranos, we just need to ask the right questions,” said Ruby Gadelrab, founder and CEO of MDisrupt, a medical diligence company for the health-tech industry, which aims to avoid making similar mistakes in the future.

“Health care, as a whole, is complex,” Gadelrab said. “It’s probably the hardest area to invest in.”

To help investors vet health-technology companies, Gadelrab suggests first establishing if the product is clinically and commercially viable.

https://www.cnbc.com/2021/09/10/the-lessons-for-investors-from-the-trial-of-theranos-founder-elizabeth-holmes.html

 

“Investors do technical and financial diligence using experts, in health care we need to do medical diligence using health-care experts.”

Then, determine if there’s evidence to back up the founders’ scientific claims.

The technology should be validated, Gadelrab said. “Show me the data.” For example, “does it actually pick up a disease or biomarker when its present and doesn’t pick it up when it’s not?”

“Not all data is created equal,” she added. Good data is done externally with scientists and research labs, great data is published in peer-reviewed journals and excellent data is published and replicated.

Finally, look at the team structure. “Do they have clinical experts in senior positions? On their boards, as their investors, in their C-suite?”

“Make sure health experts have a seat at the table and a voice in the process,” Gadelrab said.

The secrecy surrounding the Theranos technology and the intense attention given to its CEO was part of the mystique but also a major red flag, according to Sherman. “I hope the next time that kind of stuff happens, someone says ‘wait a sec.’”

 

Lessons learned

With any investment, you can do your due diligence, advised Winnie Sun, managing director of Sun Group Wealth Partners in Irvine, California.

For starters, Google the company and read consumer reviews, she said. In addition, check Twitter to see how customers are responding. “That’s going to factor in to whether you want to own that company,” Sun said.

If you are working with a broker or financial advisor, then you have an additional layer of protection — as long as that person meets a minimum level of credentials and background to work in the industry. (Check that financial advisors are licensed or registered with a firm through the SEC’s Investment Adviser Public Disclosure website or that the broker is listed on The Financial Industry Regulatory Authority’s resource, BrokerCheck.)