The 9 Fiascos That Have Pretty Much Doomed Theranos
At this time last year, the blood testing startup Theranos hit its zenith. The company was worth $9 billion, it had just received FDA clearance for one of its proprietary devices, and its founder, Elizabeth Holmes, was the model of a young, talented, disruptive CEO.
And then ... well, many things happened, beginning with sobering revelations published in one of the nation's top newspapers, followed by months of regulatory referendums, internal shakeups, and lawsuits. Now, federal regulators have essentially banned Holmes from the blood testing business and yanked the certification from its flagship laboratory. Theranos is at its nadir.
The First Cut
On October 16, John Carreyrou of the Wall Street Journal published an investigative coup. By probing former employees, disgruntled customers, and federal documents, Carreyrou found evidence that Theranos' finger prick blood testing technology—which Holmes had used to raise hundreds of millions in funding—didn't work. Instead, Theranos purportedly diluted blood samples and analyzed them using the same machines as competitors.
Getty ImagesThe feds get fed up ...
Theranos protested Carreyrou's reporting, but a week and a half later the Center for Medicare and Medicaid Services released a heavily redacted warning letter outlining problems with Theranos' laboratory practices.
Talia Herman for WIRED
... And even more fed up ...
Then in March 2016, more bad news from CMS (the federal agency charged with regulating labs that develop proprietary tests): Another letter, threatening to shut down Theranos' California lab and ban Holmes from the blood testing business for up to two years.
Drew Kelly... And even more fed up
By now, the Theranos pot was starting to simmer. The company wasn't just in regulatory trouble for violating lab practices. It was selling those tests to people on Medicare and Medicaid. If the tests did not work as advertised, the company was, by extension, defrauding the government. In April, the Journal reported that federal investigators had opened a case on Theranos. Remember, Holmes had raised a lot of money from investors based on the promise that its technology worked. Now all that seemed uncertain. So, the US Securities and Exchange Commission also started looking into the company for investor fraud.
U.S. Securities and Exchange Commission
Sunny days are gone
Theranos is Holmes' baby. But integral to the company's quick rise was a Silicon Valley veteran named Sunny Balwani, who became the company's president and COO in 2009. In May, however, Theranos announced that Balwani was retiring. The company denied that it was an indictment of Balwani's leadership, but was instead part of a broader restructuring.
TRIPPLAAR KRISTOFFER/SIPATwo years of testing, gone
And still, in the midst the shake up, Theranos had to deal with the problems outlined in the CMS warning letter, or face stiff penalties. So, in what must have been a jagged pill to swallow, Theranos voluntarily voided two years of blood tests.
Drew Kelly
The people versus Theranos
This admission of faulty tests opened the company to class action lawsuits. Right now, the company is facing no fewer than eight lawsuits—at least one of which names long-time Theranos partner Walgreens as a co-defendant.
Getty ImagesWalgreens terminates partnership
Since the two paired up in September 2013, Walgreens had installed Theranos Wellness Centers in more than 40 locations. This was important on two fronts: It gave Theranos direct access to customers, as well as credibility. But after half a year of regulatory turbulence—and the two years of voided tests—Walgreens ended the partnership.
KAREN BLEIER/AFP/Getty Images)
The end?
On July 8, CMS announced that Theranos had failed to salve its concerns about how the company was running its labs. The punishment: Elizabeth Holmes is banned for two years from operating any blood testing laboratory. And Theranos' California lab—the seat of its experimental drop of blood testing technology—must close.
And yet, the company fights on. Holmes will stay on as CEO. "The clinical lab is just one of Theranos’ many opportunities to provide access to high-integrity, affordable and actionable health care information, and the company will continue to carry out its mission under the leadership of its founder and CEO, Elizabeth Holmes," the company said in a statement. Theranos has indicated it will appeal CMS's decision. But if that doesn't work out, the company will probably attempt to survive by leasing or selling its intellectual property to its former competitors.
Jeff Chiu/AP
