The Unfortunate Hype
Theranos is a company that is focused on a hugely important medical need for underserved and overcharged customers. However, the company – led by media darling Elizabeth Holmes – has apparently oversold itself and, in the process, tarnished its credibility and its future prospects.
Rolling back to 2014 we can see Elizabeth Holmes on a TEDMED stage holding a miniaturized future. A tiny pill-like vessel aptly named the nanotainer, to house a minute finger-stick blood sample, represented a testing platform for some 240 lab tests. As a key part of this vision, Theranos tests were to be accessible without a medical prescription and to cost a fraction of the costs currently reimbursed by insurance agencies. As CEO of Theranos Inc., Ms Holmes was promising massive, necessary, healthcare change. Things were going well for the unicorn start-up as it continued to market itself, raise financing, and grow.
Moving to the present we see a company that has raised over $400 million in financing and persuaded a $9 Billion dollar valuation with key, scalable, partnerships in place. However, as the company began serving its customers the accuracy of its blood tests and the credibility of its technology have come under heavy scrutiny from customers, regulators, and its own employees.
In October of 2015, a news article broke from the Wall Street Journal which crystalized initial concerns with the company for only using its devices for a handful of the 240 tests and for the accuracy of the testing conducted on both its own machines and machines purchased. The article brought to light that outside verification of test accuracy was not conducted given that, under the company’s current business structure, no outsider verification was required. Additionally, the fact that the company was conducting tests on purchased technology drew into question what innovation the company was really introducing. At just about this same time, the FDA forced the company to stop collecting nanotainer sized samples for all but one of the tests within the 240 test-range envisioned.
In response to the allegations and scrutiny, Ms Holmes went on WSJDLive to respond to the first Theranos article published in the Wall Street Journal and she mentioned that “We [Theranos] think it was false, and we think it was misleading.” She acknowledge the FDA limitations imposed as a “pause period” for the company as it transitions itself to an FDA framework and quality system for eventual FDA approval of its proprietary technology.
Suspicion and scrutiny continued to mount following the initial articles and FDA imposed restrictions. Such heightened concerns led to reactions from key Theranos partners. In late October, Walgreens stated that it would not open any new Theranos blood-testing centers until the company resolved questions about its technology. In early November, it became clear that Safeway was working to dissolve its partnership with Theranos. And this move came after Safeway Inc. spent about $350 million to build clinics in more than 800 of its supermarkets to offer Theranos blood tests. Finally, in late December, it surfaced that the U.S. health regulators were taking action to investigate former employee complaints about laboratory and research practices at Theranos. One complaint was rooted in claims of testing despite knowledge of major device “stability, precision and accuracy” problems. The other complaint was based on knowledge of research protocol breech tied to the regulatory submission which the FDA used to approve the company’s herpes test – the only Theranos test which the company is currently allowed to conduct with the proprietary nanotainer and finger-prick technology.
Taking a step back and looking at the decisions Theranos has made along with the leadership team it has formed gives rise to additional, fundamental, concerns. Firstly, the company has never attempted to produce peer-review literature regarding the accuracy and benefits of its technology. Given that many paradigm shifting changes in medicine often embrace peer-review publication as a means of turbo-charging clinical adoption, it’s incredibly strange that a company with access to over $400 Million in capital didn’t choose to form a team to make this happen. Finally, it’s even stranger that a medical technology company led by a young, first time, entrepreneur didn’t surround itself with medical thought leaders. Instead of bringing on seasoned medical entrepreneurs or distinguished scientists to vouch for the technology and the formation of its underlying business strategy, Ms Holmes sought out a board of directors perhaps better suited to lead a political campaign – a decision which all but reinforces the company’s current state of overselling and under-delivering.