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Theranos

Theranos was a failed blood analysis company that became notorious for gaining a $10 billion valuation without actually having proven, functional technology.

Theranos was founded by entrepreneur Elizabeth Holmes. Its name is a combination of therapy and diagnosis. Holmes founded the company in 2003, dropping out of Stanford University as a sophomore to do so.

The company announced that it would leave the clinical laboratory business in 2016 after becoming the target of a major expose by the Wall Street Journal, CMS sanctions, and numerous lawsuits. Theranos was ultimately dissolved in 2018 by David Taylor, its CEO at the time.

Theranos claimed it could perform hundreds of laboratory tests using a finger-stick collection and a micro-specimen vial instead of a needle and several vacutainers of blood. The company said it could return results in four hours for about half of the typical Medicare Part B lab test fees. This would have been exponentially less painful, faster, and cheaper than conventional blood testing performed by clinical laboratories. Theranos partnered with Walgreens in late 2013, with 41 Walgreens testing centers participating in this partnership at one point.

Theranos problems began with an in-depth investigative report by The Wall Street Journal in October 2015. This report was the result of information provided by whistleblowers whose concerns were ignored by both Holmes and Theranos’s President and Chief Operating Officer, Ramesh “Sunny” Balwani.

The Journal’s report revealed aspects of Theranos that the secretive company had kept from public view. Based on interviews with several employees and others with knowledge of events at Theranos, the Journal disclosed that the company ran only a handful of tests using its proprietary technology, relying on traditional testing for most of its specimen work. Following this exposé, Theranos quickly lost its role as the darling of the media and Silicon Valley.

In July 2016, the U.S. Centers for Medicare and Medicaid Services applied the most stringent sanctions it could to Theranos for problems it reported at the company’s lab in Newark, Calif., including a two-year prohibition on Holmes owning any CLIA-certified lab.

As a result of in-depth investigations, the U.S. Security and Exchange Commission (SEC) filed charges on March 14, 2018, stating that Theranos, Holmes, and Balwani allegedly raised more than $700 million from investors through an elaborate, years-long scheme that involved exaggerating or making false statements about the company’s technology, business, and financial performance.

To settle the SEC’s charges, Holmes agreed to pay a $500,000 fine and to surrender almost 19 million shares of Theranos stock and voting control of the company, the SEC said. Also, she was barred from running a public company for 10 years. At the time, Holmes did not admit to nor deny the charges. Balwani said he would contest the charges.

Three months later, the federal U.S. Department of Justice filed indictments against Holmes and Balwani.

Holmes’ trial was delayed multiple times due to the COVID-19 pandemic and her pregnancy. On January 3, 2022, Holmes was found guilty on three counts of defrauding investors and one count of wire fraud. She is scheduled to be sentenced in September 2022.

Balwani’s trial concluded on July 7, 2022, with him being found guilty on two counts of conspiracy and ten counts of wire fraud. Balwani is scheduled to be sentenced in November 2022.

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AMONG THE BEST-KEPT SECRETS at Theranos during its glory days of 2013, 2014, and 2015—when the news media hailed now-disgraced founder and ex-CEO Elizabeth Holmes as a business genius to match Apple founder Steve Jobs—was the actual revenue the company was generating from its clinic…

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