The Theranos Story, ch. 43: Walgreens settles, $54 M in cash draining away

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]While your Editor was on leave last week, it appears that Theranos may have grasped the thorn of Walgreens Boots Alliance’s lawsuit and settled. The Wall Street Journal (subscriber access only, largely reported on Fox Business) reported that Theranos told investors of a tentative settlement with Walgreens for less than $30 million. 

Walgreens’ lawsuit, filed last year, was intended to recoup their $140 million investment in the company and store location payments. It surprised many observers that Walgreens would be content with 21 cents returned for every dollar of its investment, but since the original contribution took place over several years from 2010, much of this has likely been written down on Walgreens’ books as adjustments for bad debt. 

But this seeming win for Theranos further rips the veil off their dire financial situation. Theranos also told investors recently that it is down to $54 million in cash, according to the WSJ/Fox Business. This is much reduced from their last report of $150 million in March [ch. 41]. With a monthly burn of $10 million a month, this would leave $120-130 million if the March estimate was correct. Part of the settlements, including Walgreens, may be covered by insurance policies. However, what has transpired since then may further account for the discrepancy.

  • In May, Theranos settled with Partner Fund Management (PFM) for an undisclosed amount which WSJ sources estimated at $40-50 million. They sought to claw back their $96 million investment. (more…)

The Theranos Story, ch. 32: 155 employees out in latest layoffs, 220 left to go

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/04/Yak_52__G-CBSS_FLAT_SPIN.jpg” thumb_width=”150″ /]Endlessly, flatly spinning, towards Ground Zero…. As a marketing person made redundant (US=laid off) for various reasons by companies (moving out of area, acquisition, dissolution, etc.), this Editor has zero joy in reporting that 155 Theranos employees will be discharged as it “re-engineers its operations” “towards commercialization of the miniLab testing platform and its related technologies” “aligned to meet product development, regulatory and commercial milestones.” Their Friday press release successfully buried itself on a weekend, aided by a tragic Heaping Helping of Bad News out of Fort Lauderdale. The rationale is that this is justified to better position itself to commercialize the miniLab and “related technologies”. The miniLab reportedly is a compact, microwave-sized lab that automates small volume samples by sending them for analysis to a central server which would do the full analysis, thus driving down cost and time.

Theranos is a company flailing. This Editor notes in its string of releases an endless emphasis on compliance, regulation and operational expertise, the kind of attitude and caution that should have been present years ago. The layoffs follow on last October’s involuntary exits of 340 employees and lab closings (Chapter 21). Run the numbers and there are 220 employees left to go. Will the miniLab, seemingly hastily concocted, be their salvation? Flip back to our Chapter 18 about the October AACC meeting.  Chemical laboratory professionals were distinctly underwhelmed by the miniLab and CEO Elizabeth Holmes’ presentation. Also not boding well was Theranos’ withdrawal of a miniLab Zika test FDA emergency clearance in late August, at the height of the crisis. What may be wafting is the aroma of performing seals on a hot day.

Speaking of leadership, is Ms Holmes among the fired or demoted? Highly unlikely as she controls all $9 of the company’s formerly $9 bn Unicorn Worth. Is she even taking a pay cut? Will you see her out in front of Palo Alto HQ mowing the long grass?

To nearly 500 people now wondering about their livelihood in one of the most expensive areas of the US, how damaged they will be by their association with Theranos? Despite the ‘fail fast’ mantra of Silicon Valley, there’s little tolerance by employers for those at the operational level having a failed company in their past. These people should have our empathy, not ‘guilt by association’, and as appropriate, respect for their skills which were badly used in their last situation.

One also wonders how long it will take before there is another Chapter in The Theranos Story, one that they will file via one of their multitudinous law firms–Chapter 11. Consumerist (Consumer Reports), Yahoo News.

See here for the 31 previous TTA chapters in this Continuing, Consistently Amazing Saga, including the resignation of General Mattis from the BOD (Ch. 31), Theranos’ annus horribilis (Ch. 30) and the law firm feeding frenzy (Ch. 29).

‘Silicon Valley Tech Press’ blamed in the Theranos buildup; WSJ threatened

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/04/Yak_52__G-CBSS_FLAT_SPIN.jpg” thumb_width=”150″ /]A fascinating view from an ironic source. Vanity Fair’s short article tags the buildup of Theranos and its founder/CEO Elizabeth Holmes to a purposefully gullible Silicon Valley Tech Press and their moneymaking conferences. While not naming specific publications, it cites TechCrunch’s Disrupt as an early builder-upper of Ms Holmes (drawing blood onstage, how daring!). The operating thesis here is that the tech press vetted her with uncritical and fawning coverage, which led to profiles and shiny articles in the New York Times, the New Yorker and ….Vanity Fair, which also featured Ms Holmes at their 2015 New Establishment Summit. It’s a classic PR strategy to me, one that any skilled marketer has in their playbook (Ed.–it also works in reverse, having mainstream press vet a technology sold B2B), and one that evidently worked.

One would think that writers and editors with some biotech and science knowledge would raise more questions. The author, Nick Bilton, critically outlines the ‘Game of Access’ underpinning the tech press and blogger business model: you say nice things and play ball, you get a preview of the latest gadget or a sitdown with the CEO. If you don’t, you’re shut out. So writers don’t ask tough questions, probe hard enough, or tell the truth about where the facts are leading them, because if they do, there goes the access and the sponsorships, as well as your job. While the former doesn’t apply to your Editors, many of us who write also hope that we uncover a technology that benefits people, or is even revolutionary. We like a bracing story.

However, Mr Bilton, perhaps mindful of the cart he rode in on, doesn’t scoop an equal share of blame onto the ‘mainstream’ press. To this Editor’s mind, the Ken Auletta profile in the New Yorker should have been stopped by the New Yorker’s EIC and sent back to Mr Auletta with a blue-penciled “DIG DEEPER”. This excerpt is from the VF article:

Auletta acerbically noted that the technology behind Theranos was “treated as a state secret, and Holmes’s description of the process was comically vague.” She told him, for instance, that one process occurred when “a chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.”

Say wot? Sheer gobbledygook. For the WSJ investigative reporter John Carreyrou, who read this and eventually blew the lid off Theranos, this was caviar on toast too delicious to pass up. (Vanity Fair, on the other hand, was too busy making Ms Holmes one of its New Establishment, but investigative reporting has never been one of their strong points. Another reason why this article is an interesting read.)

A side note: Ms Holmes kept on refusing to disclose, even to VCs, the blood analysis process as a technology too secret to share, even with fellow researchers to get verification and validation. And that led to very few truly major VCs investing in the formerly $9 bn valued company, a point Mr Bilton relishes.

The final revelations in the article–truly the lead–should scare anyone who values a free press. They are the bullying tactics taken by Theranos’ legal team led by that new governing board member, David Boies, to intimidate both Mr Carreyrou and the WSJ from their investigative reporting. Mr Bilton’s source describes the team marching into the WSJ office in June, threatening legal action on the proprietary information Mr Carreyrou supposedly had (he did have internal documents). After repeatedly denying all requests for an interview with Ms Holmes, the WSJ went with the story in October, and the rest is history. Mr Boies now has his hands full elsewhere with other types of letters: CMS, SEC, DOJ and FDA. And Ms Holmes is no longer making herself available to the media, even to her former friends in the tech press. The Secret Culprit in the Theranos Mess

If Silicon Valley were a rose, it would be wilting

Does this signal a new ‘trough of disillusionment’? The lead in this story is one of the major practice EHRs in the US–Practice Fusion. From a high valuation in 2013 of $635 million as a healthcare darling (free to doctors, ad supported), it burned through $4 million cash per month while revenue missed targets by 10 percent, chased after rainbows such as telemedicine, overhired, overperked and overpartied in the office. Now with a quarter of their staff pink-slipped, a new CEO is trying to bail them out. Most of the other examples aren’t healthcare, but huge deals by VCs are slowing, companies are discounting the price of their shares, taking on debt to not dilute shares, laying off employees and subletting their space. Adding to this is the glut in wearables and a slowdown in demand for single-purpose devices, leading to a 20 percent loss today in value in shares of Fitbit (MarketWatch). Like the ‘oil patch’ in the upper Midwest, the San Francisco area is feeling the chill that never really left the rest of the country. And ‘unicorns’ may become an endangered species. Wall Street Journal

Silicon Valley’s betting on ‘citizen doctors’, ‘citizen science’ and useful data

A fascinating and slightly cynical overview of Silicon Valley’s ideological view of health tech that will fix our ‘deeply flawed healthcare system’ and what is getting funded (or not) is in next month’s San Francisco magazine. It profiles the ‘citizen doctor’ founders of vital signs ‘tricorder’ Scanadu (Sam–who’s not often mentioned–and Walter De Brouwer), bacteria tracker uBiome, ‘personal data recorder’ and experience charter We Are Curious (founded by Linda Avey, a long-departed co-founder of 23andme) and touches on the Theranos debacle. While these stories are bracing and in the instance of the De Brouwers, courageous, the notion of ‘citizen science’ (defined as direct-to-consumer health data) and its companion, Dr Eric Topol’s patient-centered/controlled medicine, has its drawbacks, viewed through the slightly gimlety ‘digital doctor’ eye of UC San Francisco’s Dr Robert Wachter. “The overarching message—not just from Theranos but from other companies struggling to get a toehold—is that, ultimately, the laws of economic gravity hold. The companies will have to produce products that add real value, either to patients or to payers. If they don’t, the market—or the regulators—won’t treat them kindly.” Flatly, there aren’t enough Quantified Selfers right now to support these companies. And Mr Market is a hard master. 23andme is back in the good graces of the FDA after a two-year scuffle and back doing direct response TV here in the US. Scanadu’s two products, Vitals (formerly Scout) and Urine are still not through the long slog of FDA clearance. The jury’s out on Theranos. And all these companies, including ‘unicorn’ Theranos, are bleeding cash and nowhere near turning a profit. ModernLuxury. Hat tip to Dr Topol via Twitter, who had a patient-centered conversation with Dr Wachter that we covered back in September.  Another recent podcast with Dr Wachter is here (Community Health Center radio).

Update: ‘Citizen science’ is nothing new, as revealed by the Science Museum (London)–it’s over 300 years old. While it entered the OED in 2014, ‘in 1715, Edmund Halley used Philosophical Transactions to ask colleagues to help him observe a total solar eclipse, prompting observers from all over the country to respond.’ Other examples are from Benjamin Robins in the same publication in 1749 on fireworks, Charles Darwin and evolution, to the present day. The difference is the flow–similar to what we now call crowdsourcing versus the individual using the data to affect their care.

 

Is Theranos a $9 billion question mark?

Breaking News. According to an exposé published yesterday in The Wall Street Journal*, low-cost and fast growing small sample blood testing company Theranos [TTA 28 Aug] is not ‘doing what it says it does’. Four former employees allege that Theranos’ testing system, dubbed the Edison, which processes small finger-pricked blood samples collected in ‘nanotainers’, only handles a fraction of the tests claimed–19 out of 205. In a complaint to regulators, one Theranos employee accused the company of failing to report test results that raised questions about the precision of their proprietary Edison system–and that most of the tests were being run on traditional testing machines which required dilution of the tiny samples. The article reports on serious questions which have been raised on the accuracy of the Edison testing versus conventional testing, including the integrity of finger-pricked blood and sample dilution. Gaps in results were seen last year on tests for vitamin D, two thyroid hormones and prostate cancer, though Theranos has been reporting its tests to CMS in a process that all labs go through called proficiency testing, and has one test for herpes that has been FDA cleared.

In a follow up article, Theranos reportedly is no longer collecting nanotainers except for the FDA cleared herpes test.

Theranos is currently valued at $9 billion and has raised over $400 million in VC funding.

According to the first article, British biochemist Ian Gibbons, (more…)

The Internet.org initiative and the real meaning for health tech

Internet.org — Every one of us. Everywhere. Connected.

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2013/02/gimlet-eye.jpg” thumb_width=”150″ /]Much has been made of the Internet.org alliance (release). The mission is to bring internet access to the two-thirds of the world who supposedly have none. It is led, very clearly, by Mark Zuckerberg, founder and CEO of Facebook. Judging from both the website and the release, partners Ericsson, MediaTek, Nokia (handset sale to Microsoft, see below), Opera (browser), Qualcomm and Samsung, no minor players, clearly take a secondary role.  The reason given is that internet access is growing at only 9 percent/year. Immediately the D3H tea-leaf readers were all over one seemingly offhand remark made by Mr. Zuckerberg to CNN (Eye emphasis):

“Here, we use Facebook to share news and catch up with our friends but there they are going to use it to decide what kind of government they want, get access to healthcare for the first time ever, connect with family hundreds of miles away they haven’t seen for decades. Getting access to the internet is a really big deal. I think we are going to be able to do it”

Really? The Gimlet Eye thought that mobile phone connectivity and simple apps on inexpensive phones were already spreading healthcare, banking and simple communications to people all over the world. Gosh, was the Eye blind on this?

Looking inside the Gift Horse’s Mouth, and examining cui bono, what may be really behind this seemingly altruistic effort could be…only business. (more…)

Is Silicon Valley-style thinking right for healthcare?

The always thoughtful David Shaywitz writes about coming out on the other side of the Gartner hype curve (ever so familiar to this Editor) into the ‘plateau of productivity’.  He provides some anecdotal evidence from his Silicon Valley experience that you could possibly take the good parts of Hope and Hype and make them work for Health. His qualifiers lead this Editor to the following takeaways, with which Dr. Shaywitz might not necessarily agree:

  • You the entrepreneur may well be thinking about changing the world with your service or device, but you might be better off focusing on solving a specific problem (or in Clayton Christensen’s terms ‘a job to be done’) and then being gratified when you do, actually, find a way to change the world and yes, you make some money for your investors. The Epic EHR started quite modestly.
  • Silicon Valley observers are onto the hype cycle there– “the contrast between grandiose ambitions and disappointing delivery.” You should be too. If you’re in health tech, steer clear of the hypesters and the cocktail parties. In fact, be more like Dr. Shaywitz’s colleagues at MIT, understanding “the limitations of your work and the enormity of the unanswered questions remaining.”
  • Aim for more than tweaking something existing–the incessant efficiency innovations so attractive to VCs in this ‘stuck on stupid’ economy–and “learn how to develop profoundly improved therapies, that cure – or better yet, prevent – disease and disability. ” Break out of what Dr. Christensen’s ‘broken circle.’ [TTA 9 Nov 12]
  • Most startups fail, and to date there are far fewer successful exits in healthcare than in social media, which is why VCs like them ever so much more and they get the billion-dollar exits. More realistic is a modest return and a long development curve. So when seeking funding, be conservative and find alternate means.

Hope, Hype, And Health In Silicon Valley (Forbes)