The famous US biotech start-up Theranos has confirmed its business is to be dissolved and this article is going to explain why. The company had already been facing serious legal challenges and In an email to investors, CEO David Taylor said the troubled blood-testing company would fold. This close down was part of the company’s agreement with Fortress Investment Group, which provided it with a last-minute loan in late 2017 to save it from bankruptcy on the condition that it had the legal right to foreclose and take ownership of its assets should Theranos’s balance fall below an agreed amount. Unfortunately, the minimum parameters in the agreement weren’t metand Theranos will return all remaining cash to its creditors, completing the spectacular fall of what had been one of California’s brightest prospects.
This didn’t come as a surprise to people who know a thing or two about the business world as the company had been going through rocky ground since founder Elizabeth Holmes and chief operating officer Ramesh “Sunny” Balwani were charged by Department of Justice prosecutors in June for two counts of conspiracy to commit wire fraud and nine counts of wire fraud. The charges were very harsh and If convicted, they stood to face a maximum of 20 years in prison and a fine of $250,000 (£195,000) per count(totalling in over almost 3 million dollars if convicted on all charges)
The two of tgem had already faced accusations by the Securities and Exchange Commission (SEC) of deceiving investors as part of a “elaborate, years-long fraud” operation. These accusations arose just after an investigation into claims Theranos had misrepresented the capabilities of its blood-testing equipment, which proposed to do away with the hypodermic needle. The issues with the SEC were resolved but at a great personal cost for Holmes.
The company was founded by Holmes and she was just 19 and a student at Stanford University when she conceived the idea for what would become the firm’s Edison “fingerprick” technology. Their lead product was a wearable patch that, she hoped, could analyse a patient’s blood from just a few drops, removing the need for a painful piercing of the skin, a traumatic phobia for many.
Theranos was eventually founded in 2004. It immediately gained some high-profile investmens from the likes of Rupert Murdoch, Carlos Slim, Larry Ellison, Robert Kraft, Henry Kissinger and George Schultz. They even received investments from the current Trump administration, the education and defence secretaries Betsy DeVos and Jim Mattis.
At the company’s peak, it was valued at $9bn (£7bn), according to The Financial Times, employing more than 800 people. The succeeded in convincing the pharmaceutical chain Walgreens to roll out “wellness centres”, in-store clinics demonstrating its product, across the country. The company gained a lot of traction and hype when it started, most of which was attributed to the star power of Holmes, who wore a black polar neck jumper like her Silicon Valley idol, Steve Jobs, and was profiled by the country’s major business journals.
The then-vice president Joe Biden visited one of its facilities in Newark, California, in 2015 and hailed what he saw as ”the laboratory of the future”. However, the company’s future started taking a dark route in October of 2015 when John Carryrou of The Wall Street Journal wrote an article claiming Theranos had been forced to use conventional blood testing methods in its research because its own Edison technology was providing erratic and inconsistent results. Even though the newspaper was run by Rupert Murdoch, one of Theranos’ formidable investors, Carryrou was nonetheless allowed to pursue the story. He discovered that the company’s apparently innovative tech was nowhere near ready for use and had been rushed into development to meet the expectations of its influential investors. It became clear that the equipment Biden had been shown was not actually operational.
This created issues for the company as in August 2016, Theranos’ request for emergency clearance on behalf of its product for use against the Zika virus was withdrawn after it failed to pass a federal inspection. An inside interview was carried out by Theranos’ whistleblower, Tyler Schultz – grandson of George Schultz, board member, and former US secretary of state. During the interview with Carryrou in November 2016, George alleged that the company simply cast aside inconvenient Edison test results, giving the product an accuracy rating closer to 65 percent when it had claimed 95 percent.
Carryou recently wrote a book detailing the entire scandal titled Bad Blood: Secrets and Lies in a Silicon Valley Startup (2018). The book tells about other behind-the-scenes disasters, from samples being refrigerated at incorrect temperatures at Theranos plants in California and Arizona to patients being placed in “immediate jeopardy” as a result of false readings. The book makes it a point to outline the company’s obsessive culture of secrecy, in which anyone who questioned its veracity, quality control or ethics was dismissed, and the cultish manner in which Holmes operated as leader, threatening anyone investigating Theranos with lawsuits. Carryou concludes that Holmes and her company overpromised and then cut corners when they couldn’t deliver.
Proof of the horrible happenings in the company come in form of one of the most tragic aspects of the affair was the case of Ian Gibbons, the company’s chief scientist. Gibbons attempted to take his own life in May 2013 after receiving a subpoena requiring him to testify as to the technology’s workability. Even though his suicide failed, Gibbons didn’t last long after as he died later in the hospital.