At a recent CFA Society gathering in Seattle, Christopher Henney, a biotech pioneer who co-founded three of biotech companies in the Northwest, listed the top five red flags investors should watch for when evaluating possible biotech investments.

His first warning was top management without a scientific background. “It’s not impossible for a biotech to succeed with a non-scientist at the helm, Henney said, but a smart investor must ask this non-scientific manager where the science comes from at the company. ‘The good answer would be, ‘It comes from my team of wonderful scientists who I recruited.” A bad answer would be something like, ‘It comes from my scientific advisory board, which has two Nobel Laureates.’ Henney added, ‘If you need to make an appointment to meet the guy who’s bringing you your science, then you don’t have much of a business.’”

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