TTA’s Autumn Action 2: a Digital Health 150 Hot List, Bubble Watch, WOT for TB, EHR alla voce, and latest on Theranos

 

As the Big Chill of Autumn sets in, there’s a new Hot List of Digital Startups, an IPO for the Bubble Watch, a fresh term for your lexicon, and a voice-activated EHR in your future. And Theranos’ Elizabeth Holmes can’t pay her legal bills. (Sigh)

CB Insights names a Top 150 of digital health startups (Quite attention-getting)
WOT with Proteus found equal to or better than DOT in TB medication adherence trial (Wirelessly Observed Therapy a new add to the lexicon)
The Theranos Story, ch. 61: Elizabeth Holmes as legal deadbeat (Priorities, priorities)
Health tech bubble watch: Alphabet-backed One Medical reportedly prepping for 2020 IPO (Letting the IPO dust settle?)
Does healthcare need a new EHR system? A major health system thinks so. (Allscripts gets a Northwell boost, alla voce)

We reflect in this fall season on the overuse of AI versus machine learning terminology–and why the TEC/telehealth boats aren’t rising with the market tide.

The confusion within TEC/telehealth between machine learning and AI-powered systems (AI is trendy, but trendy is not necessarily good when non-techies are buying your system)
If the market’s expanding, where’s the telecare and TEC boom? (A question we’ve been asking for years.)

Editor Charles jumps on the Analogue versus Digital Soapbox. (One of our most commented articles)

Telecare – time to sweat the analogue assets, not dump them (Editor Charles asks that you do your homework before you cart in that shiny new digital kit and throw the old out the window)

Summer may be winding down but activity is winding up. Doro acquires Invicta, Amazon’s PillPack hits a data wall, Humana first payer to join CTA. Judge Leon finally blesses CVS-Aetna’s merger after 9 months. And events, including Digital Mental Health at the RSM 23 Sept.

News and event roundup: Amazon PillPack, Humana joins CTA, NH’s telemedicine go, Fitbit Lives Healthy in Singapore, supporting Helsinki’s older adults, events
Shock news: the CVS-Aetna merger officially approved after 9 months (Judge Leon’s Final Judgment delivered. But what about future healthcare mergers?)
Doro AB acquires Invicta Telecare from Clarion Housing, increasing to nearly 200,000 users (UK) (Consolidation continues)
Digital Mental Health for Adults – a one day conference at the RSM on 23 September 2019 in London (Sponsored by the RSM)

Being contrarian, we consider that AI and machine learning may be doing real damage both in its workings and in the quality of all that medical data being fed into it. Regrettably, telemedicine in nursing homes looks like a permanent failure. And CMS takes the lead in the PFS with three new telehealth codes on opioid treatment.

A realistic look at why telemedicine isn’t succeeding in nursing homes (It should, but it’s the economics of the business)
Are AI’s unknown workings–fed by humans–creating intellectual debt we can’t pay off? (Building dangerous error upon error with bad data, destroying theoretical thinking–and that’s for starters)
CMS’ three new proposed telehealth codes, changes on inclusions, in 2020 Medicare Physician Fee Schedule (US) (CMS takes initiative in opioid treatment)


Have a job to fill? Seeking a position? Free listings available to match our Readers with the right opportunities. Email Editor Donna.


Read Telehealth and Telecare Aware: http://telecareaware.com/  @telecareaware

Follow our pages on LinkedIn and on Facebook

We thank our present and past advertisers and supporters: Tynetec, Eldercare, UK Telehealthcare, NYeC, PCHAlliance, ATA, The King’s Fund, DHACA, HIMSS, Health 2.0 NYC, MedStartr, Parks Associates, and HealthIMPACT.

Reach international leaders in health tech by advertising your company or event/conference in TTA–contact Donna for more information on how we help and who we reach. See our advert information here. 


Telehealth & Telecare Aware: covering the news on latest developments in telecare, telehealth, telemedicine and health tech, worldwide–thoughtfully and from the view of fellow professionals

Thanks for asking for update emails. Please tell your colleagues about this news service and, if you have relevant information to share with the rest of the world, please let me know.

Donna Cusano, Editor In Chief
donna.cusano@telecareaware.com

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

The Theranos Story, ch. 61: Elizabeth Holmes as legal deadbeat

Did her lawyers expect otherwise? This weekend’s news of Elizabeth Holmes’ legal team at Cooley LLP withdrawing their representation services due to non-payment should not have caused much surprise. Cooley’s attorney team petitioned the court to withdraw from the case, stating that “Ms. Holmes has not paid Cooley for any of its work as her counsel of record in this action for more than a year.”

Cooley was representing Ms. Holmes in a class-action civil suit in Phoenix brought against her, former Theranos president Sunny Balwani, and Walgreens, charging fraud and medical battery. (When they withdraw, will she seek public representation based on poverty?)

Perhaps Ms. Holmes is the one who’s setting priorities, as the civil suit would be for monetary damages, and no money means there will be none for the plaintiffs to collect. The DOJ charges are a different story. She is on the hook for nine counts of wire fraud and two counts of conspiracy related to her actions at Theranos. Conviction on these could send her to Club Fed for 20 years plus a fine of $250,000 plus restitution for each charge. [TTA 16 June]

Last Wednesday, both Ms. Holmes and lawyers for her and Mr. Balwani were in Federal court in San Jose on the wire fraud and conspiracy charges, demanding that the government release documents from the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) that allegedly would clear them. After an hour, Judge Davila set 4 November as the next hearing date. 

Defending oneself does not come cheap, but after your company’s value crashes to $0 from $9bn, one might be looking for change in your Roche-Bobois couch and wondering if your little black Silicon Valley-entrepreneur formal pantsuit/white shirt ensembles will last through the trial. CNBC 2 Oct, CNBC 4 OctFox Business, Business Insider

The Theranos Story, ch. 59: there’s life left in the corporate corpse–patents! And no trial date in sight.

You can get blood out of this. Really! The US Patent and Trademark Office (USPTO) awarded five–count ’em, five!–patents to Theranos in March and April. All of them were filed between 2015 and 2016, when the whispers of fraud were getting louder, as were the legal threats.

The five patents are:

1. Systems, devices, and methods for bodily fluid sample collection, transport, and handling
2. Systems, devices, and methods for bodily fluid sample transport
3. Systems and methods for sample preparation using sonication
4. Systems and methods for sample preparation using sonication (cell disruption)
5. Rapid measurement of formed blood component sedimentation rate from small sample volumes

The CB Insights Research article has the details on what they cover, including patent application illustrations. It’s not stated, but looking back to TTA’s many articles, in this Editor’s judgment, the heir to these patents cannot be Elizabeth Holmes or her many investors now feeling the lint in their pockets, but the company holding the last note, the $65 million (not $100 million) loan from Fortress Investment Group LLC, part of Japan’s SoftBank Group [TTA 28 Dec 17]–collateralized by the portfolio of over 70 patents. Hat tip to HISTalk 19 April

If you hunger for a deep dive into the design of Theranos’ blood analyzers that never really worked, and can appreciate that the miniLab was what “one expert in laboratory medicine called “theater … not science”, this Design World article is for you: Schadenfreude for Theranos — and satisfaction in how engineering doesn’t lie

Meanwhile, back in the US District Court in San Jose, California, we learn that the trial of Ms. Holmes (now engaged to William “Billy” Evans, a 27-year-old heir to the Evans Hotel Group, which has three West Coast resort properties and who is also a techie) and former Theranos president Ramesh ‘Sunny’ Balwani has been delayed indefinitely. Originally reported to be summer entertainment with a start date of 8 July, the judge set the next status conference for the case for 1 July, but refused to set a trial date, which means that the trial may not begin till next year. According to the San Jose Mercury News, the defense is seeking materials from the FDA and CMS, which are, according to defense lawyer, lawyer Kevin Downey, are “in many instances exculpatory.”

Ms. Holmes’ lawyers are also seeking information on the communications between John Carreyrou of the Wall Street Journal, the FDA, and CMS. In a motion filed last week, they accused Mr. Carreyrou under the guise of investigative journalism of “exerting influence on the regulatory process in a way that appears to have warped the agencies’ focus on the company and possibly biased the agencies’ findings against it.” Stat

The bubbly Ms. Holmes and Not-So-Sunny Balwani are facing Federal charges of two counts of conspiracy to commit wire fraud and nine counts of wire fraud. They each face a maximum of 20 years in prison and up to $2.7 million in fines.

The Theranos Story, ch. 55: ‘Bad Blood’s’ altered reality on ‘Mad Money’; it was all Bad Blitzscaling

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2018/07/Rock-1-crop-2.jpg” thumb_width=”150″ /]

She lied and the lies got bigger and bigger and eventually the lies got so big relative to reality that it became a pretty massive fraud. 

The hyperbolic Jim Cramer of CNBC’s ‘Mad Money’ settled down for a chat with John Carreyrou, the author of ‘Bad Blood’, to dissect what Mr. Cramer touted as ‘the best business book since Phil Knight’s book about starting Nike, ‘Shoe Dog”. Mr. Carreyrou outlines Elizabeth Holmes and Sunny Balwani went ‘live’ with fingerstick tests far too prematurely, burned through money, lied to the board, and (schadenfreude alert!) lied to attack dog David Boies, her attorney. There was also a real lack of ‘due diligence’–real diligence–on the part of companies like Safeway and Walgreens. A reveal coming out of this interview is that Walgreens hired a lab consultant, Kevin Hunter, as early as 2010, who ‘smelled a rat’ even then–and Walgreens executives ignored him, frightened that Ms. Holmes would go to CVS. Wrapping Ms. Inexplicable Me up, Mr. Carreyrou attributes her mindset to ‘noble cause corruption’; she really did believe that her blood testing machine would do good because the outcome would be good for society. Thus every corner cut was justified….which explains a lot, but really excuses nothing. The ten-minute video is over at ValueWalk (the transcript is only partial).

LinkedIn’s hyperbolic co-founder Reid Hoffman, like him or not, does have a way with words, and this article in Fast Company is a decent discussion of a new term that he actually coined, ‘blitzscaling’ which is pursuing rapid growth by prioritizing speed over efficiency in the face of uncertainty. It’s quite a lure he sets out to his classes at Stanford, that the only way to have a successful business in winner-take-all (or most) markets is to do this, and if you do it right you’ll have the next Google, completely ignoring the fact that 99.99 percent of businesses don’t need to change the world, just to get to breakeven, get to profitability, and endure (or get bought out). He springboards off this to where Ms. Holmes and Mr. Balwani Went All Wrong. The answer? Product failure=Mortal Risk–to the patient. They needed to meet a Walgreens deadline thus went out prematurely with their nanotainer testing knowing it did not work. The best quote in the article?

There’s a big difference between being embarrassed and being indicted.

The Theranos Story, ch. 54: cue up ‘Tainted Love’ in the courtroom

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2018/07/Rock-1-crop-2.jpg” thumb_width=”150″ /]Tainted Love, Labs, and Lucre Indeed. Drop the needle on the Gloria Jones version from 1964 or the Soft Cell version from 1981.

Consider that the very fates of Ms. Elizabeth Holmes, the now not-so-Sunny Balwani, and the formerly $9 bn Unicorn Theranos may hinge on the nature of their personal relationship and its influence on the governance of the company.

There are two legal actions against the company and the two principals, one by the DOJ for criminal fraud [TTA 16 June] and by the SEC on (civil) securities fraud [TTA 15 March].  Both are out on $500,000 bail on the DOJ charges. The possibilities on the latter can be up to 20 years in Club Fed, plus $250,000 in fines and clawing back of investor funds, if any can be found.

While Ms. Holmes settled with the SEC, paying a fine and exiting the company, Mr. Balwani did not and is fighting the charges, though this declaration was made before the DOJ charges.

Bloomberg Markets brings up an interesting set of dynamics which can play well with potential jurors and make the prosecution’s case far more convincing for a Northern California jury. To wit, in 2009 when she started running out of money, Ms. Holmes turned to Mr. Balwani, her boyfriend, for a $12 million line of credit. In return, he became president and COO. The nature of their relationship was kept strictly hush-hush to the board and investors. Secrecy was ratcheted up at the company and management started to break down. And the timing: a week after Mr. Balwani left, the news of bad patient test results and problems with their lab started to break big.

Jurors, even in Silicon Valley, love drama and personal intrigue–especially the type that underscores deception and $900 million in fraud perpetrated by a Stanford dropout who clumsily attempted to channel Saint Jobs and a somewhat schlubby dude who Should Have Known Better. Far more than gullible corporate suits at Walgreens and hedge funds….add to it the personal stories of patients harmed by bad Theranos tests and you get an emotional story worthy of Law & Order.

Do expect Ms. Holmes to bring up her Saint Joan if not a female Saint Sebastian analogy. Burning at the stake versus being shot full of arrows are too memorable images which she’ll try out. Add a #MeToo spin of a young woman coerced by an older man–a tale of at least tit-for-tat to get the $12 million. 

The rompin’ soap opera is likely to start next year. Stay tuned…. 

The Theranos Story, ch. 53: No more blood to squeeze out of this particular rock

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2018/07/Rock-1-crop-2.jpg” thumb_width=”150″ /]Rock. On. The latest chapter in the Last Throes of Theranos is the action by plaintiffs Robert Colman, Hilary Taubman-Dye, and other indirect Theranos investors to settle their lawsuit before there is nothing left. The settlement was made late last week in the US District Court of Northern California for an undisclosed amount.

The plaintiffs originally proposed a class action which would have included about 200 other individuals investing through various funds.This was denied by the District Court in early June, but the ruling permitted individual lawsuits. The class action would have been under California state law, as indirect investors are not eligible through Federal securities law.

Mr. Colman was an early (2013) investor through Lucas Venture Group and Ms. Taubman-Dye was a third-party investor through SharesPost in 2015 [TTA 30 Nov 16]. Their charges centered around Theranos’ false and misleading statements made by the company, They were excluded from the share buyback a few months later when there were still some funds in the company [TTA 29 Mar 17] and before Fortress Investment Group put in their funding (December). Their legal action was brought not only against Theranos, former COO Sunny Balwani, and former CEO/founder Elizabeth Holmes but also–interestingly–the SEC (Law360). 

A sidelight to this is that there is an HBO documentary about Theranos in progress. The filmmaker Alex Gibney has sought to make public video depositions from two Theranos cases, according to the WSJ (paywalled). Judge Cousins ordered Theranos to work with Mr. Gibney’s lawyer to determine what excerpts of recordings will be released. Mr. Gibney better get his skates on while there’s still interest in the barely-breathing Theranos–or Ms. Holmes pulls the full Saint Joan reenactment in a Home for the Very, Very Nervous. MarketWatch, Bloomberg, Becker’s Hospital Review  Our TTA coverage is indexed here.

The Theranos Story, ch. 50: DOJ indicts Holmes, Balwani for fraud (updated)

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]The other shoe drops into this bottomless well. If Elizabeth Holmes and Sunny Balwani thought that the March SEC action [TTA 15 Mar] would be it, they were misinformed. Today, the Department of Justice, US Attorney’s Office for the Northern District of California, charged them with two counts of conspiracy to commit wire fraud and nine counts of wire fraud. According to CNBC, they were arraigned in US District Court in San Jose Friday morning. Both were released on $500,000 bond each and ordered to surrender their passports. Holmes’ parents appeared with her in court.

If found guilty, both Ms. Holmes and Mr. Balwani face up to 20 years in prison, plus $250,000 in fines and clawing back of investor funds. 

“Wire fraud” in US law is fraud that is enabled and takes place over phone lines or involves electronic communications. By appearing online, making phone calls, emailing materials such as marketing materials, statements to the media, financial statements, models, and other information, Ms. Holmes and Mr. Balwani defrauded potential investors. Patients and doctors were defrauded by ads and other types of solicitations to use Theranos’ blood testing services at Walgreens, despite the fact that they knew the test results were unreliable.

Both Ms. Holmes and Mr. Balwani will have plenty of time to explain their sincere belief that their test devices and methods would be validated with time…but they had to, in Silicon Valley parlance, fake it till they made it. Indictments of this type take about two years to conclude, especially if they are big (as a formerly $9 bn valued company is) and tangled. Ms. Holmes will undoubtedly release statements on how she is being martyred like Saint Joan, how this doesn’t happen to men in Silicon Valley, and that they are allowed to fail but she can’t. Perhaps she was under the spell of the 19 years-her-senior Svengali Balwani. (Minus the Jobsian black turtlenecks, one anticipates her next choice of wardrobe. Sackcloth tied with a rope? Chain mail?)

Expect the doors to shut soon. Fortress Investment Group, which loaned Theranos $65 million (of a reported $100 million) in December 2017, was reportedly coming for the assets (as they are wont to do) by the end of July, according to the Wall Street Journal and other sources. 

Ms. Holmes is–finally–removed as CEO. Theranos announced that David Taylor, the company’s general counsel, has been appointed CEO as well as general counsel, while Ms. Holmes will remain as founder and board chair. None of this is reflected on their website. In fact, Mr. Taylor is nowhere to be found on the website’s leadership page. 

The estimable John Carreyrou, who broke the story in the WSJ and is the author of Bad Blood [TTA 13 June], on The Street’s Technically Speaking podcast at 06:00 shared this insight on how Theranos got away with bad tests. While both FDA and CMS highly regulate lab testing and the machines that perform them, neither actively police “lab-developed tests, which refer to tests fashioned with their own methods and devices” for blood testing. Basically, according to Mr. Carreyrou, Holmes and Balwani, our Bonnie and Clyde, “drove a truck right thru that loophole and took advantage of it.” Far beyond B&C, $1 bn of investors’ money is the Federal Reserve of banks.

On the indictment: WSJ, CNBC. The Northern District release on the indictment is here. Another essay by Mr. Carreyrou published 18 May is available to those who can get past the paywall. Hat tip to Bill Oravecz of WTO Consultants.

Updated: For additional coverage of what’s next in the legal vein for Holmes and Balwani, see the NY Times on potential defense strategies for the duo, including that they truly believed what they were saying to investors was true and they were bamboozled like everyone else, ‘materiality’–that investors didn’t use the statements as a basis for investing, and ‘prove it’. Will they take a plea deal? Stay tuned. 

The Theranos Story, ch. 49: CEO Holmes reportedly raising funds for a new company–and feeling like Joan of Arc

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]Here’s the place where your money will go if you’re an investor. John Carreyrou has now compiled his reporting for the Wall Street Journal on Theranos into a new book, Bad Blood: Secrets and Lies in a Silicon Valley Startup, and it is a Must Read for this Editor and anyone interested in the nexus of Tech, Healthcare, and Hype. (The link goes to AbeBooks, a worthy marketplace for independent booksellers.)

According to Mr. Carreyrou, the founder/CEO Miss Elizabeth Holmes–still leading the company despite settling with the SEC on fraud charges, surrendering her voting control, barred from serving as a public company director or officer for 10 years, and still fighting civil lawsuits–is raising fresh funds for a new venture.

Your eyes did not fool you.

Theranos was a Dogpile of Deceit. From hacking standard Siemens blood testing machines to work with tiny samples, falsifying test results, faking up the Edison test machine, to company financials, it was one lie on the other, chronicled for our Readers in nearly 50 chapters and multiple references. 

Mr. Carreyrou was asked by former Timesman and Vanity Fair reporter Nick Bilton whether, in this unmistakable pattern, Ms. Holmes was a sociopath. Mr. Carreyrou wisely refrained from diagnosis based on a used DSM-V, being a reporter and not her psychiatrist. From Mr. Bilton’s interview podcasted on ‘Inside the Hive’:

“At the end of my book, I say that a sociopath is described as someone with no conscience. I think she absolutely has sociopathic tendencies. One of those tendencies is pathological lying. I believe this is a woman who started telling small lies soon after she dropped out of Stanford, when she founded her company, and the lies became bigger and bigger,” Carreyrou said. “I think she’s someone that got used to telling lies so often, and the lies got so much bigger, that eventually the line between the lies and reality blurred for her.”

Mr. Carreyrou, and by inference anyone who doubted her, like her CFO, and especially those who went public with criticism–well, we are the Bad Guys:

“She has shown zero sign of feeling bad, or expressing sorrow, or admitting wrongdoing, or saying sorry to the patients whose lives she endangered,” he said. He explained that in her mind, according to numerous former Theranos employees he has spoken to, Holmes believes that her entourage of employees led her astray and that the bad guy is actually John Carreyrou. “One person in particular, who left the company recently, says that she has a deeply engrained sense of martyrdom. She sees herself as sort of a Joan of Arc who is being persecuted,” he said.

Mr. Carreyrou was set upon by this ‘martyr’s’ legal pitbulls, one David Boies, until he wisely exited stage left with a bushelful of worthless stock [TTA 21 Nov 16].

(And what is it about Stanford University that fosters people like Ron Gutman, recently ousted from HealthTap over employee abuse and intimidation charges in what may be a Silicon Valley First? [TTA 3 May] Here we have someone who plays with people’s lives and health in vital blood testing. Aren’t some ethics courses long overdue?) 

Mr. Bilton makes the extremely fine point that Silicon Valley will continue to be magnetically attracted to founders equipped with a ‘reality-distortion field’ (as he termed Steve Jobs). SV will relegate Theranos to a biotech outlier. Yet as long as Silicon Valley MoneyMen like Tim Draper will back the likes of Elizabeth Holmes as long as they have a good line of (stuff), despite being embarrassingly proven not just (and only) wrong, but now perpetrating fraud, the Jobsian Myth and black turtlenecks will rise again like Dracula. (Another analogy comes to mind, but precocious children might be reading this.)

We haven’t heard the last of her.

An excellent interview by Tom Dotan of Mr. Carreyrou is podcasted on The Information’s 411 in “You’re So Vein”, which gets the award for Title of the Week (trial signup required, or listen on SoundCloud). Starting at 15:00, interesting comments on the why of Sunny Balwani and Ms. Holmes’ series of ‘marks’ including George Shultz. Also Gizmodo and Politico’s Morning eHealth newsletter.

The Theranos Story, ch. 47: the post-mortem, blaming–and ghost chasing–begin

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/04/Yak_52__G-CBSS_FLAT_SPIN.jpg” thumb_width=”150″ /]Now that Elizabeth Holmes is the former CEO of Theranos, many of the publications who huzzahed their ‘revolutionary’ blood testing system three short years ago are publishing their post-mortem analyses, often of how the wool was pulled over their eyes.

Jenny Gold from Kaiser Health News and NPR has a short ‘alarming’ tale of her press visit in November 2014 to a Theranos testing site at a Palo Alto Walgreens for an NPR feature. At Walgreens, she spoke with patients on the record and was invited to witness their blood draw–not the finger prick Theranos (and Walgreens) promoted, but a standard volume blood draw. After multiple and telling upset reactions from her company press handlers, including demanding Ms. Gold erase her audio recording (!) and accusing her of harassment, alarms went off at the Walgreens store for a non-existent fire. She was baited with an interview with Ms. Holmes–which never happened–and wound up with a corporate attorney instead who made unsupported statements. Ms. Gold canceled her story, which if she tracked the bad smell would have been likely the first press shot across the bow. What this post-mortem tells us is the extent of the coverup and the sheer (and unethical) fawning flackery that appeared in places like the New Yorker, Forbes, Inc., and Fortune.  NPR

The FT further digs into our gullibility, our wanting to believe that someone in a black turtleneck could put the Big Labs out of business,  how we in the press hungered for a new and female Steve Jobs to shake up the status quo. Andrew Hill: “Trouble often hits, though, when leaders stick to their story after it has diverged from reality, swerving into embellishment, mythmaking and, in Ms Holmes’s case, apparently fraud.”

But we were no smarter than those who gave Ms. Holmes and Mr. Ramesh ‘Sunny’ Balwani $700 million in Mad Money. (more…)

The Theranos Story, ch. 46: “F for Fake.” SEC’s fraud charges force Elizabeth Holmes out (finally).

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]Our New Year’s 2018 prediction (after December’s $100 million loan from Fortress Investment Group): “Ms. Holmes will be removed and replaced, then the company will be reorganized and/or renamed.”

Fortress did not have to wait long or get their hands dirty. Today, the Securities and Exchange Commission (SEC) charged both founder and now former CEO Elizabeth Holmes and past CEO/president Ramesh ‘Sunny’ Balwani with securities fraud. While Mr. Balwani will fight the charges, Ms. Holmes escaped trading her black turtleneck for an orange jumpsuit by agreeing to pay a penalty of $500,000 to the SEC, give back 18.9 million shares to the company, give up her uniquely Silicon Valley perk of super-voting equity rights, and is now barred from serving as a public company director or officer for 10 years. From the Theranos release: “As part of the settlement, neither the Company nor Ms. Holmes admitted or denied any wrongdoing.”

This penalty may seem puny in the light of other securities fraud cases, but it appears that Ms. Holmes took little salary out of the company, with most of her long-gone billions in presently worthless remaining stock. 

The exact meaning of fraud, as determined by the SEC in cases like these, is not casual. We can say that we never believed the Edison or miniLabs would work despite the press hype. We can observe that patients and doctors were misled in test results, resulting in major human cost (our Ch. 22).  The fraud here is directly tied to representations made to investors that enabled Theranos’ massive funding, in multiple rounds, of over $700 million between 2013 to 2015. These misleading representations included demonstrations, reports on the functioning of its analyzers, inflating its relationships such as with the DOD, and its regulatory status with the FDA.

It also does not matter that all the funds were privately raised. The SEC in its statement firmly stated that it will treat private equity as it does public when it comes to investments (pay attention, health tech companies): (more…)

The Theranos Story, ch. 39: good news, bad news, and the ugly lawsuit news

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]It’s that darn well again! Theranos‘ News of the Week ran the gamut from cheap, to expensive, to potentially business terminating.

Cheap was the settlement of the Center for Medicare and Medicaid Services (CMS) civil penalty against the company for a pinprick of $30,000. What remains: that Theranos cannot own or operate any labs for the next two years. As the company has downsized and done the Silicon Valley pivot to developing labs and testing platforms, the settlement is the barn door closing after the horse has exited and crossed the state line. Theranos press release,

Expensive was the settlement of the Arizona legal action brought by the state Attorney General, Mark Brnovich. $4.65 million settled matters, providing full refunds for 175,940 Arizona consumers who ordered between 2013 and 2016 approximately 1.5 million blood tests and 7.8 million results. Also on the tab are $200,000 in civil penalties, $25,000 in attorneys’ fees, and a claims administrator to dole out the refunds. While it was estimated that only 10.5 percent of tests were inaccurate, the consumer fraud charges were easier for Theranos to settle without admitting wrongdoing. A solid win for the AG as well. Background on this in Ch. 33. Ars Technica, Bloomberg, Theranos press release

Potentially disastrous is the go-ahead given to one of the many lawsuits against Theranos, also charging Elizabeth Holmes and former CEO Ramesh ‘Sunny’ Balwani. The US District Court for the Northern District of California ruled in the case brought by two shareholders, Robert Colman and Hilary Taubman-Dye, represented by Hagens Berman (Ch. 27), that most of the claims of investor fraud would proceed. Theranos’ sole success was having the charge of misrepresentation of securities under the California Corporations Code dismissed on the technicality of purchase from a third party seller. The more damning claims of direct misrepresentation by Ms Holmes and Mr Balwani, mentioning news articles and their advertising campaign, were upheld. Interestingly, the plaintiffs must now show cause why the third party sellers (Lucas Venture Group, Celadon Technology Fund, SharePost), should not be included as defendants. The stage is now set for a class-action lawsuit with potentially thousands of other investors. Theranos page on Hagens Berman website, District Court ruling document.

The final countdown is at the bank. In March, Theranos reported $150 million in cash (ch. 38), down from $200 million in January. Subtract $30,000 to CMS, $4.65 million to Arizona, legal fees, pending lawsuits, and running expenses–with no investors and revenue in–and a burn of about $50 million a quarter, it will be Taps for Theranos before end of year.

The Theranos Story, ch. 25: is the nadir the $400,000 harassment of whistleblower Tyler Shultz?

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]A story to make your blood…boil. Tyler Shultz is a 26 year old Stanford University grad with a biology undergraduate degree. He ‘fell in love’ with the Theranos vision of quick small blood sample testing after visiting his grandfather’s home near the campus and meeting, of all people, Elizabeth Holmes in 2011. Tyler snagged a summer internship and then a full time job during their salad and steak days (September 2013). He worked on the assay validation team, which verified the accuracy of blood tests run on Edison machines before they were deployed in the lab for use with patients.

Then it all went sideways…and down. Ms Holmes was at his grandfather’s because he is George Shultz, 95 year old former secretary of state and Fellow at the Hoover Institution based at Stanford. Mr Shultz was one of the numerous Washington alumni lending luster to the Theranos board (now advisers), such as Henry Kissinger, Sam Nunn, James Mattis and Bill Frist (the last the only one with an MD).

Tyler Shultz soon discovered, like many new graduates, that his dream job wasn’t all that it was cracked up to be. Except that it wasn’t the hours or the quality of the snacks. He discovered that the Edison machines had highly variable results when tests were rerun with the same blood sample–and they routinely discarded the outliers from the validation reports. Edison testing for a sexually-transmitted infectious disease had a claimed 95 percent sensitivity. “But when Mr. Shultz looked at the two sets of experiments from which the report was compiled, they showed sensitivities of 65% and 80%.” It only got worse when he moved to the production team, where quality control standards were routinely flunked and President Sunny Balwani pressed lab employees to run the tests anyway. Mr Shultz went directly to Ms Holmes, twice, received a nastygram from Mr Balwani for the second, and quit–but not before anonymously sending results to the New York officials who administered a proficiency-testing program and who confirmed that the results sounded like ‘PT cheating’.

The rest of the story by John Carreyou is one of corporate harassment and family estrangement: legal harassment (including private investigators) by none other than David Boies’ law firm on the pretext of ‘confidential information’; the manipulation, currying of favor and misleading of a great but aged man; and a family’s trust fractured if not broken, despite the grandson being proven right, ironically, by the same Washington agencies that his grandfather so loyally served. Mr Shultz is now working on the Cloud DX team for the VITALITI Diagnostic Android Application in the running for the Qualcomm Tricorder XPRIZE. Wall Street Journal  See here for the 24 previous TTA chapters in this Continuing Saga.

The Theranos Story, ch. 19: the dramatic denouement, including human tragedy

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/04/Yak_52__G-CBSS_FLAT_SPIN.jpg” thumb_width=”150″ /]The deconstruction of Theranos continues, con il dramma, rounding back to those who touted it. There isn’t all that much new in Nick Bilton’s Vanity Fair article, but it adds context and color to this (literally) Bloody House of Smoke and Mirrors. (Ah, where’s Christopher Lee when you need him?–Ed.) There’s the usual Inside Baseball of closed-door meetings in ‘war rooms’, G150 jetting to awards, bodyguards, threatening lawyers, crisis managers, COO ‘enforcers’ (Sunny Balwani) and playing the Silicon Valley investor game (with Google Ventures taking a very smart pass). Where this gets unusual is the portrait of Elizabeth Holmes as an obsessive, secretive, blondined Steve Jobs knockoff from the age of 19, with a hot idea that never matched scientific reality from the start, but with a great line of ‘making the world a better place’ magnified by Silicon Valley’s incessant, We’re The Top And You’re Not narcissism.

Even Narcissus ultimately saw a fool in that pool. Played and tarred to a greater or lesser degree were: the only major SV VC lured in, Draper Fisher Jurvetson, and off-SV investors like mutual funds and private equity have lost it all; Fortune, Forbes, CNN plus much of the tech and financial press; and respected people lured to the board like Marine Gen. James Mattis, who had initiated the pilot program in DOD, Henry Kissinger and former Senator Bill Frist MD. Then the alphabet agencies marched in after the author: FDA, CMS, SEC and DOJ.

Oh yes, that Zika test announced in early August? Withdrawn at end of August. Ms Holmes is appealing her two year lab ban. But she still has absolute control of what’s left of the business. Business Insider

Finally, the lede in many articles is the suicide of British chief scientist Ian Gibbons and Ms Holmes reaction. Already ill with cancer, (more…)

Nail in the coffin hammers home: Theranos voids, corrects 2 years of test results

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/04/Yak_52__G-CBSS_FLAT_SPIN.jpg” thumb_width=”150″ /]Tens of thousands of lab results 2013-2015 voided, “corrections” sent. L’affaire Theranos continues, with the not-so-surprising action of Theranos to void all of its Edison machine testing results, from all labs, as well as many processed on conventional equipment during those years.

According to the Wall Street Journal, Theranos told CMS during its lab inspections that they ran 890,000 tests a year, so we are between 1.5 and 2 million tests being, at minimum, voided. The Edison was used for 12 out of 200 tests, at least initially, with conventional machines performing the rest.

The voiding was verified by John Carreyrou of the WSJ by cross-checking his sources with Phoenix-area medical practices (the Walgreens marketing area), which confirmed receiving corrected test reports. One doctor reported that many of the voided results were for calcium, estrogen and testosterone tests. Here is where it cuts to danger levels: “The doctor said one corrected report is for a patient she sent to the emergency room after receiving abnormally elevated test results from Theranos in late 2014. The corrected report from Theranos now shows normal values for those tests, according to the doctor.”

But how can you send corrected results, which would require a rerun, of samples at least a year and perhaps two years old? It’s not clear if this pertains to standard tests run on miscalibrated machines (see below on Siemens) or somehow Edison tests were re-evaluated.

This reads like a last ditch effort to stay out of the Alphabet Monster’s clutches (CMS, FDA, DOJ, SEC), or at least survive their squeeze. COO Sunny Balwani was bid adieu last week, along with the company adding three members with scientific expertise to one of its many boards. Of course, as we previously noted, these boards are Silicon Valley Sock Puppets. The one to watch is legal Attack Dog David Boies (to whom the First Amendment and a free press are so much tissue paper to be ripped) who also sits on the governing board–politically well wired and the kind of bully attorney you call in when you are facing Big Trouble and need Big Defense–or Offense.

Walgreens Boots–reportedly fit to be tied, because Theranos won’t disclose the extent of the corrections, and surely assessing its legal options. Siemens must be equally unhappy that its equipment was 1) miscalibrated by Theranos and 2) Theranos didn’t monitor test water purity; thus they have become inadvertently tainted.

One must wonder if founder Ms Holmes is considering the fit and finish of orange turtlenecks, or residency in a country with no US extradition treaty. For the company, the flat spin above is likely non-recoverable. Sadly, Clipper Theranos will crash down on other, far more honest innovative companies lined up on the runway. Wall Street Journal (if paywalled, copy and search on the headline); Forbes, Ars Technica. Our Theranos dossier here.