Theranos Lays Off More Staff, Voids More Lab Test Results

Once again, a stream of bad news about problems puts beleaguered lab firm in the national headlines

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ONCE AGAIN, the controversial lab testing company, Theranos, Inc., found itself the subject of negative news stories. In recent weeks, The Wall Street Journal reported that the beleaguered lab testing company in Palo Alto, Calif., laid off 155 staffers, voided more laboratory test results, and cut ties with its high-profile lawyer.

This round of bad news followed earlier stories reporting that some big investors in Theranos may not recoup the funds they put into the company and that patients were not told for months that their lab test results were unreliable.

Last week, Christopher Weaver reported for The Wall Street Journal that the company was paying so much in legal fees to defend itself that it was laying off 155 employees on Jan. 6. The brings to 495 the number of positions Theranos had eliminated since October.

“Theranos faces steep legal and other costs amid challenges from regulators, lawsuits by shareholders, and criminal and civil federal probes,” Weaver reported.

Posted on the company’s website on Friday, Jan. 6, under the headline, “Company Re-Engineers Operations,” was this statement: “Theranos Inc. announced further re-engineering of the company’s operations as it works towards commercialization of the miniLab testing platform and its related technologies. In the streamlined organization, teams have been aligned to meet product development, regulatory, and commercial milestones.” The company had what it called a “core team” of 220 professionals to execute its business plans. The journal stated that the 220 number was about one quarter of the number of employees it had in August.

The miniLab is designed to process and analyze small samples of blood in a portable device, the company said. “Think of it as being a huge diagnostics lab that has been condensed down to the size of a microwave,” Theranos said. In August, at the American Association of Clinical Chemistry annual meeting, Theranos CEO Elizabeth Holmes unveiled the miniLab and discussed how it operated.

More patient results Voided

The Journal also reported that Theranos had notified an additional group of patients in late December that it had voided their test results. “The company sent out newly corrected results saying some tests done in 2015 and 2016 for hemoglobin A1c, a protein doctors measure to help diagnose diabetes, shouldn’t be relied upon, according to copies of the corrected reports,” Weaver wrote.

One of those patients who received a corrected result had a diabetes test result from Theranos that showed she was becoming diabetic. That patient is a plaintiff in a legal action that alleges the company misled patients.

Another one of those patients who got a corrected result was Journal reporter John Carreyrou. He had blood drawn in April 2015, also for a Theranos diabetes test. The doctor who ordered the test told him last week that Theranos had voided the result.

addressing Shortcomings

In a statement to the Journal, Theranos said it was “absolutely committed to assessing and addressing negative patient impact that may have resulted from any shortcomings at the [Theranos clinical] labs.” The lab company also said it would continue to review and void blood tests as appropriate until “we have taken all necessary remedial action.”

In November, the Journal reported that Theranos’ chief outside counsel, David Boies, and his law firm, Boies, Schiller & Flexner LLP, were no longer working for Theranos. The split came after Boies and Theranos disagreed about the strategy to be used for responding to government investigations of Theranos, Carreyrou wrote.

The lab company is the subject of criminal and civil investigations by the U.S. attorney’s office in San Francisco and by the Securities and Exchange Commission. The investigations center on whether the company misled investors and regulators about its technology and operations, the Journal reported, adding that Theranos said it is cooperating.

Carreyrou reported that the nature of the disagreement with Boies and his law firm was not clear. He wrote that the lab company’s general counsel, Heather King, who had previously been a partner at Boies Schiller, left Theranos in early September. At that time, she returned to Boies Schiller.

“People familiar with the matter said Ms. King left Theranos after she and Mr. Boies disagreed with Ms. Holmes about Theranos’ legal strategy,” Carreyrou reported.

In late November, Carreyrou and Weaver wrote that Theranos has gotten funding from private investors, including large investments from families and individuals, such as Rupert Murdoch, the executive chairman of News Corp and 21st Century Fox, and Riley Bechtel, chairman of the construction company Bechtel Group. These investors might see their investments “wiped out by the blood-testing company’s regulatory and technological troubles,” they wrote.

Several large investments from families and individuals helped infuse Theranos with $632 million in its latest funding round, which stretched from 2014 to 2015, according to those familiar with the matter and documents filed by Theranos in Arizona and Delaware, the Journal reported.

patients Get Bad News

In late October, Weaver detailed how some patients’ received dubious test results. “Theranos failed to maintain basic safeguards to ensure consistent results, according to regulators, independent lab directors, and quality-control experts,” he wrote.

“A review of regulatory records and interviews with patients shows the Palo Alto, Calif., company didn’t just burn investors who bought into its promise to revolutionize the world of blood testing. It also left a trail of agonized patients who had been drawn to Theranos by its claims of convenience, low cost, and reliability.”

In recent months, the Journal also revealed the name of one whistleblower who had provided internal documents and information about the problems within Theranos. It was Tyler Schultz, grandson of George Schultz, who had been a director at Theranos. The younger Schultz is cooperating with federal investigators conducting multiple probes of Theranos.

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