TTA’s week: PHI risky business, VA’s Cerner award challenged, Microsoft closes digital divide, more

Can population health and data sharing put PHI at risk? Microsoft uses TV to close the digital divide in rural health. VA’s EHR award challenged. Philips indexes Future Health. Tenders and Scottish Challenges. Apple gets sensored for health. And who put the bark in telemedicine?

Last chance to book Connected Health Summit 2017 in San Diego–save 20%. See below.

User consent, security questioned in Higi and Interpreta’s data mix partnership (Risky business with your PHI)
VA EHR award to Cerner contested by CliniComp (They’ve done it before–and won)
Tender Alert: Tameside and Nottingham (East Midlands) (Preliminary info)
Can unused “TV white spaces” close the rural and urban broadband–and telehealth–gap? (The digital divide bridged by Microsoft)
Telemedicine for all creatures great and small? Veterinarians debate. (Consent not same as with humans)
More creepy monitoring: USAA collecting health information from patient portals (But with consent–for now)
Apple’s patent on camera plus sensors for health measurements (Another Apple feint?)
Philips publishes second annual Future Health Index on access, integration and tech adoption (You will need a pot of coffee and several breaks to digest this)
Tender Alert: Scotland CAN DO Challenge, Bootle needs assistive tech (Scotland’s 8 part challenge–and we will skip the Bootle jokes)

Will the doctor’s office go the way of the retail store, even in NJ (the home of the mall)? Can we improve population health through telephone call centers? Will the UK get its mojo back in digital health innovation? Blockchain fund startups? Can the VA implement Cerner by 2019? And will ATA appoint a new CEO before then?

Beyond crowdfunding–startup funding through blockchain cryptocurrency, smart contracts (The Next Big Funding Thing?)
Commonwealth Fund case study on Spanish-speaking telemedicine services (MX, PH, US) (Population health south–and north–of the border)
Tender Alert: Torbay and South Devon NHS Foundation Trust for TECS (Looking for innovative telehealth)
VA’s Shulkin: Cerner rollout start by mid-2019? (The decision was a relief)
Innovate UK’s £35m Digital Health Technology Catalyst competition opens–apply now! (Another opportunity in UK healthcare)
Weekend Big Read: will telemedicine do to retail healthcare what Amazon did to retail? (Except there’s regulation…)
Tender Alerts: NHS Wales, Southend-on-Sea (More for innovative companies in UK)
Analyses of New Jersey’s new telemedicine regulations (Not quite parity, but a forward leap)
Some reflections on ATA and a future CEO–your ‘nominations’ wanted! (Name that CEO!)

Winners and losers…VA implements more telehealth, Israel gets its first aging services venture fund. Charterhouse loses equity in Tunstall, ATA’s Linkous leaves, Siemens delays the Healthineers and Theranos plays for time.

VA unveils several ‘anywhere’ new telehealth services for veterans (VA tech moves fast under Dr. Shulkin)
First aging services tech investment fund debuts in Israel (3rd Age tech)
Change at the top at ATA: CEO Jon Linkous departs after 24 years (Didn’t give notice either)
Charterhouse lost half its equity in Tunstall debt refinancing–Sunday Times report (updated) (Not unexpected)
Siemens plans IPO of Healthineers during 2018, possibly in US: reports (Expectations delayed)
The Theranos Story, ch. 44: Walgreens settles lawsuit, cash box empties further (The spiral to Flat Brokedom continues)


Connected Health Summit: Engaging Consumers analyzes the roles of connected health technologies and innovations in driving changes in consumer behaviors and business models. Now in its fourth year in beautiful San Diego, this event is focused on data-driven, human-centric patient experience and engagement. Keynoters include executives from Aetna, UnitedHealth, ShareCare and Geisinger. Readers save 20 percent! For more information, click on the advert or here.


It’s an IoT Black Hat hackfest, Facebook bots learn argot, AI is debated after a fashion by ‘giants’, and Tunstall gets a partner that opens doors.

It’s all hackable by Black Hats: pacemakers, Amazon Echo, trains, heart monitors, prison cells! (Increasingly easy pickings)
AI good, AI bad (part 2): the Facebook bot dialect scare (Not all that…)
AI good, AI bad. Perhaps a little of both? (Top six effects) 
Tunstall pairing with Inhealthcare digital health for NHS remote monitoring (A shot of digital high-octane for the Big T?)

Recent articles of continued interest….

CTE found in 99% of former, deceased NFL players’ brains: JAMA study (News in both health and sports sections)
Shouldn’t we be concentrating on digital therapeutics rather than ‘health apps’? (A different look at the future of digital health)
The King’s Fund 2017 Digital Health Congress: videos, presentations now posted (Catch up!)
Fitbit’s smartwatch on track; Intel exits the game (Were they ever in?)
Can Google Glass’ enterprise iteration solve the patient documentation crisis? (Hands off help for hands-on workers)
Toyota’s $14 million bet on Intuition Robotics’ social companion robot (JP/IL/US) (ElliQ’s growing up)
TSA appoints new chair (Paul Shead takes the helm)

Creepy data mining on medical conditions run wild: where’s the privacy? (Ethically dubious practices)
“Crazy”: StartUp Health’s 2nd Q digital health funding breaks record (Another round of champs and roses! Can it last?)

‘Record-shattering’ Q2 for digital health deals: Rock Health’s volte-face (Suddenly it’s wine and roses!)
The Nightingale-H2020 project for wireless acute care (UK/EU) (Major initiative, get on it before tender)


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, HIMSS, MedStartr, HealthIMPACT, and Parks Associates.

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

Subscribe here to receive this Alert as an email on Wednesdays with occasional Weekend Updates. It’s free–and we don’t lend out or sell our list–no spam here!

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

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TTA’s week: pop health en español, ATA’s choice, VA’s Cerner, de-retailing healthcare, more

Will the doctor’s office go the way of the retail store, even in NJ? Can we improve population health through telephone call centers? Will the UK get its mojo back in digital health innovation? Can the VA implement Cerner by 2019? And will ATA appoint a new CEO before then?

Only two weeks to go to Connected Health Summit 2017 in San Diego–save 20%. See below.

Beyond crowdfunding–startup funding through blockchain cryptocurrency, smart contracts (The Next Big Funding Thing?)
Commonwealth Fund case study on Spanish-speaking telemedicine services (MX, PH, US) (Population health south–and north–of the border)
Tender Alert: Torbay and South Devon NHS Foundation Trust for TECS (Looking for innovative telehealth)
VA’s Shulkin: Cerner rollout start by mid-2019? (The decision was a relief)
Innovate UK’s £35m Digital Health Technology Catalyst competition opens–apply now! (Another opportunity in UK healthcare)
Weekend Big Read: will telemedicine do to retail healthcare what Amazon did to retail? (Except there’s regulation…)
Tender Alerts: NHS Wales, Southend-on-Sea (More for innovative companies in UK)
Analyses of New Jersey’s new telemedicine regulations (Not quite parity, but a forward leap)
Some reflections on ATA and a future CEO–your ‘nominations’ wanted! (Name that CEO!)

Winners and losers…VA implements more telehealth, Israel gets its first aging services venture fund. Charterhouse loses equity in Tunstall, ATA’s Linkous leaves, Siemens delays the Healthineers and Theranos plays for time.

VA unveils several ‘anywhere’ new telehealth services for veterans (VA tech moves fast under Dr. Shulkin)
First aging services tech investment fund debuts in Israel (3rd Age tech)
Change at the top at ATA: CEO Jon Linkous departs after 24 years (Didn’t give notice either)
Charterhouse lost half its equity in Tunstall debt refinancing–Sunday Times report (updated) (Not unexpected)
Siemens plans IPO of Healthineers during 2018, possibly in US: reports (Expectations delayed)
The Theranos Story, ch. 44: Walgreens settles lawsuit, cash box empties further (The spiral to Flat Brokedom continues)

It’s an IoT Black Hat hackfest, Facebook bots learn argot, AI is debated after a fashion by ‘giants’, and Tunstall gets a partner that opens doors.

It’s all hackable by Black Hats: pacemakers, Amazon Echo, trains, heart monitors, prison cells! (Increasingly easy pickings)
AI good, AI bad (part 2): the Facebook bot dialect scare (Not all that…)
AI good, AI bad. Perhaps a little of both? (Top six effects) 
Tunstall pairing with Inhealthcare digital health for NHS remote monitoring (A shot of digital high-octane for the Big T?)


Connected Health Summit: Engaging Consumers analyzes the roles of connected health technologies and innovations in driving changes in consumer behaviors and business models. Now in its fourth year in beautiful San Diego, this event is focused on data-driven, human-centric patient experience and engagement. Keynoters include executives from Aetna, UnitedHealth, ShareCare and Geisinger. Readers save 20 percent! For more information, click on the advert or here.


Confirming football CTE, thinking ‘digital therapeutics’. Glass reboots, Fitbit and social robotics back up, TSA changes guard. Mindful (or mind your?) drinking, and catch up with The King’s Fund.

CTE found in 99% of former, deceased NFL players’ brains: JAMA study (News in both health and sports sections)
Shouldn’t we be concentrating on digital therapeutics rather than ‘health apps’? (A different look at the future of digital health)
The King’s Fund 2017 Digital Health Congress: videos, presentations now posted (Catch up!)
Fitbit’s smartwatch on track; Intel exits the game (Were they ever in?)
Can Google Glass’ enterprise iteration solve the patient documentation crisis? (Hands off help for hands-on workers)
Toyota’s $14 million bet on Intuition Robotics’ social companion robot (JP/IL/US) (ElliQ’s growing up)
Come along to London’s first mindful drinking festival! (Hic!)
TSA appoints new chair (Paul Shead takes the helm)

Recent articles of continued interest….

Creepy data mining on medical conditions run wild: where’s the privacy? (Ethically dubious practices)
UDG Healthcare buys American, adds Vynamic, Cambridge BioMarketing for up to $67 million (Acquisition trend for healthcare consultancies and marketing)
“Crazy”: StartUp Health’s 2nd Q digital health funding breaks record (Another round of champs and roses! Can it last?)

‘Record-shattering’ Q2 for digital health deals: Rock Health’s volte-face (Suddenly it’s wine and roses!)
Conference & Tender Alert: Perth & Kinross TEC event, Flintshire (Wales) tender (UK) (TEC event Sept 26, tender Aug 4)
‘Let me die at home’. The human and financial cost of ending telehealth (Cornwall UK) (A familiar, no less wrenching story to those who’ve worked in telehealth–the books don’t balance)

The Nightingale-H2020 project for wireless acute care (UK/EU) (Major initiative, get on it before tender)


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, HIMSS, MedStartr, HealthIMPACT, and Parks Associates.

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

Subscribe here to receive this Alert as an email on Wednesdays with occasional Weekend Updates. It’s free–and we don’t lend out or sell our list–no spam here!

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

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The Theranos Story, ch. 44: Walgreens settles lawsuit, cash box empties further

click to enlargeWalgreens realizes Theranos’ funds are not bottomless. Confirming the June Wall Street Journal report [TTA 26 June] that Theranos had advised its investors of a negotiated settlement with Walgreens Boots Alliance, Tuesday’s announcement offered few specifics. According to the Theranos release, the settlement resolves all claims by Walgreens and dismisses the lawsuit, with no finding or implication of liability. Terms were not formally disclosed, but sources told the WSJ (FoxBusiness) that the settlement was over $25 million. In June, it was estimated to be less than $30 million, so the over/under wasn’t very wide. Payment timing was not disclosed.

As we noted in June, Walgreens had invested an estimated $140 million between direct funding (a $40 million loan convertible into equity), and an “innovation fund’ designed to fund the store location rollout. The lawsuit filed last November was intended to recoup that amount. The thorn that Walgreens and its attorneys grasped was that even with insurance, there was not $140 million left in Theranos and nothing of equivalent non-cash interest. As a public company, certainly the realization that putting $25 million on the books this year was better than nothing. It is also likely that $110+ million has already been written off.

Not much left in Theranos’ till, other than some dollar bills and coins. In June, Theranos disclosed that their cash on hand was $54 million with a monthly burn of $10 million, leaving as of today $44 million. Even if the Walgreens settlement is covered 100 percent by insurance, at best Theranos has about four months of life–if nothing extraordinary happens. There are also ongoing SEC and DOJ investigations, plus the Colman/Taubman-Dye suit in California, which may result in more fines and settlements.

While Theranos makes much of its new management structure and commercializing new technologies (of which there is no word), there are no signs that beyond recapitalization earlier this year that there is fresh investment. Reports indicate they are trying, at long last, to exit real estate they no longer need–subleasing their expansive (and expensive) Palo Alto headquarters and relocating to their former lab in an industrial park in less tony Newark, California. As this Editor concluded in June, it is increasingly difficult to see a future for Theranos without Chapters 11 or 7 in it. It is rapidly arriving at a familiar place for startups, but not former Unicorns: Flat Brokedom.

Meanwhile, Walgreens Boots Alliance, barely dented in the exchequer, has closed on a $1.4 bn joint investment with KKR for institutional pharmacy company PharMerica. Drug Store News

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

click to enlargeWhile 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. 42: the 2-for-1 share offer to investors closes, clock ticks

click to enlargeIs this a sincere and generous offer, or staving off the inevitable? Theranos reported this week that it closed its 2:1 new preferred share offer. This was offered only to C-1 and C-2 round investors, the 2014-2015 $600 million round which bought in at about $15-17/per share. The hold on this was released when Theranos settled with Partners Fund Management on 1 May for an undisclosed amount [TTA 2 May].

Theranos claimed that “Holders of more than 99 percent of the shares eligible for the transaction elected to participate. Participants received new shares of the Company’s preferred stock in exchange for their existing preferred stock.” By accepting the offer, they also released any potential claims against Theranos.  Release

Fortune mostly recaps previous events such as the CMS and Arizona settlements. One interesting snippet we missed: when the investor offer was first made in April, there were reports that Ms. Holmes owed her company $25 million, which would have been the exchange basis for the return of her shares. This Editor considers that company survival drove this un-Silicon Valley-like founder equity drain, but perhaps with favorable tax or financial outcomes for Ms. Holmes.

The company buys time, but where is their technology and how much is left in the bank? The clock ticks….  Our index of previous Theranos coverage is here.

Breaking-The Theranos Story, ch. 41: settling, not fighting, with Partners Fund on fraud

click to enlargeBreaking News and Updated. Settled–but not settled? Theranos’ May Day celebration was an announcement of a settlement with investor Partner Fund Management (PFM) LP on their two lawsuits alleging investor fraud. PFM’s funds had invested $96.1 million in Theranos’ February 2014 funding round. The amount and terms of the settlement were, as usual, not disclosed.

PFM’s original filing in Delaware Chancery Court in October claiming fraud on various representations that Theranos had made, such as 98 percent reliability on its small sample Edison labs. The second filing in April [Ch. 40] temporarily blocked Theranos’ added equity offer to investors, an offer which had the important condition of blocking further legal action once accepted [Ch. 38]. PFM had powerful and damaging evidence on its side from 22 deposed former employees and directors to bolster its allegations of investor fraud, which was revealed in snippets from unsealed documents last week.

This settlement, according to reports, ends both court actions and permits Theranos to continue their equity offer to investors. According to Theranos, 99 percent of investors were willing to accept it, which neatly heads off additional legal actions. The offer to C-1 and C-2 investors expires 15 May. Theranos release.

Yet the depositions obtained in this case appear to have taken on a life of their own. Digging down into the WSJ report (not yet paywalled if you go in through the ‘What people are talking about’ right-hand sidebar on LinkedIn, or if you have a subscription) is the interesting tidbit that “Federal investigators have obtained depositions taken in the Partner Fund litigation, including those of former Theranos employees and directors, according to a person familiar with the matter.” The WSJ also filed to have the depositions unsealed on Monday (1 May), which an outside entity can request under the rules of the Delaware Chancery Court even after a case is closed.

Despite settlements with PFM, the state of Arizona, and CMS, Theranos still faces a live investigation from the Securities and Exchange Commission (SEC) and the Justice Department (DOJ). There are also major lawsuits from Walgreens Boots seeking to recoup its $140 million investment (and remove the egg on their corporate face) and the Colman/Taubman-Dye suit in California. The latter action has the potential to become a much larger lawsuit, as the US District Court in Northern California has requested a show-cause from the plaintiffs on including third-party sellers (Lucas Venture Group, Celadon Technology Fund, SharePost) as defendants. It also personally charges Elizabeth Holmes and former CEO Ramesh ‘Sunny’ Balwani (ch. 39).

Time and money are running out–and with a Federal investigation in the mix, the future of Theranos still resembles our picture above.

  • In March, Theranos reported $150 million in cash holdings. With another settlement, how much is left in the bank?
  • That equity offer, expiring in two weeks, may be a moot maneuver. After investors do the math and look at the calendar, they may decide that legal action may be a better way of capturing whatever’s left, before it’s all gone or tied up in Chapter 11. Perhaps PFM is smart indeed in moving to settle early.
  • Federal investigations usually do not end happily, unless you are Mayor De Blasio of NYC. Who knows what high-powered maneuvering is going on behind the scenes to prevent Ms. Holmes’ black turtleneck from becoming orange? And where in the world is co-defendant ‘Sunny’ Balwani?

Additional coverage: TechCrunch, Bloomberg  Our index of Theranos coverage is here.

The Theranos Story, ch. 40: investor fraud revealed in equipment, fake demos, testing

click to enlargeTheranos’ ‘Big Dig’ is larger than this German art installation representing a Hole to China. It was as smooth as the turf depicted. Set up some shell companies, buy equipment from Siemens, modify it to take the mini-samples for the Theranos Edison mini-lab–and run their customers’ blood tests on them. Get incentives from a credulous Arizona governor and legislature. Run fake tests for investors on this equipment. Promise $1 bn in 2014 gross profits. Then, when it all comes undone, tell the investors to take additional equity shares and not to sue, or else it’s Chapter 11. Oh yes, and settle with Arizona for nearly $5 million and CMS for $30,000 [Ch. 39].

The latest reveal in the Theranos Saga took place in busy Delaware Chancery Court in a lawsuit brought by investor Partner Fund Management (PFM) LP and two other associated funds, which invested over $96 million in 2014. The unsealed documents, part of the follow-up to a lawsuit originally filed in October 2016 [Ch. 21] and another filed this month to block the equity offer to investors, contain depositions from 22 former employees and (hold the presses) directors. The (paywalled) Wall Street Journal article revealed that Theranos bought commercial blood testing lab equipment from reputable companies including Siemens, modified them to take the miniature samples that Theranos collected, used them to conduct both customer testing and from the filing, “fake ‘demonstrations tests’ for prospective investors and business partners”. Theranos used a shell company, Protegic Procurement Company, to make the purchases. Former director Adm. Gary Roughead, USN (Ret.), was quoted as being unaware of the fact that there were “extensive commercial analyzers in use.”

Now it is not uncommon for competitors’ equipment to be used for reference purposes and testing, especially when the company still is in process for their regulatory approvals. However, the lawsuit claims that customer tests were run on these labs, and not for a limited time as Theranos claims. The demonstration test claims are even more damning as they show fraudulent intent to investors.

The other part of the PFM lawsuit alleges that Theranos investors, including them, were pressured to not sue and take the additional equity deal [Ch. 38] by an attorney representing Theranos, who suggested that the alternative was to seek Chapter 11 bankruptcy protection. “Theranos officials engineered the share offer in a way that would make it impossible for the funds to obtain “any recovery” as part of its bankruptcy filing.” The PFM filing to block was successful. On April 11, Theranos was stopped from going forward with the share-exchange plan, with that hearing scheduled for June 26, not ideal for a company which is buying time before the money runs out. Bloomberg

The ‘cherry on the fraud cake’ is Theranos’ wildly inflated projection of a $1 billion gross profit in 2014. Theranos, of course, states that “The suit is without merit, the assertions are baseless, and the plaintiff is engaging in revisionist history.” Is ‘fake news’ the next claim? Ars Technica, TechCrunch, Fortune, Engadget.

Rest assured that there are many other chapters to come, as the lawsuits continue, including one for $140 million by Walgreens Boots, and the Colman/Taubman-Dye suit in California. Our Theranos and related articles are indexed here.

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

click to enlargeIt’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. 38: take our shares, but don’t sue us; Murdoch writes it off

click to enlargeWhat? They’re not toast yet? Far from it. We’ve missed the impossibly twisty soap opera called Theranos, and our latest episode holds to the previous high standard.

CEO and controlling shareholder Elizabeth Holmes is offering shareholders, supposedly from her personal holdings, about two additional shares for each one purchased. This has been offered to the investors in the 2014-2015 $600 million round who bought in at about $15-17/share (ch. 27), such as Cox and Bechtel. The deal dilutes their share cost to about $5. The caveat? Don’t sue Theranos. According to the Wall Street Journal‘s report (Yahoo Finance as WSJ is paywalled), it was approved by Theranos’s board in February, and most investors have ‘signaled that they will sign off on it’. Others are the family of US Education Secretary Betsy DeVos, the Waltons of Wal-Mart Stores Inc. and John Elkann, the Italian industrialist who controls Fiat Chrysler Automobiles NV.

One who is washing his hands is News Corp. executive chairman Rupert Murdoch. He reached a separate settlement for a nominal sum–rumored to be $1–to sell back his shares and legally write off his $125 million investment.

Others are not so lucky. Early investors before that round are not included. (more…)

The Theranos Story, ch. 37: the Object Lessons for future healthcare entrepreneurs

click to enlargeThere’s an interesting take on the Theranos debacle in Entrepreneur by management consultant/author Steve Tobak. He takes a step back from the healthcare technology that didn’t work, the big money lost and the puffery, where most of us have concentrated. Mr Tobak instead sketches a case study of a Startup House of Cards as an Object Lesson in how entrepreneurialism is NOT supposed to work.

Theranos was a Top Ten List of fatal errors. This Editor’s summary:

  1. They generated no revenue. In just over a decade, Theranos blew through hundreds of millions in funding (he says $700 million, the WSJ has estimated $900 million).
  2. They weren’t anywhere near break-even. By the time Theranos was in 40 Walgreens Wellness Centers, it should have been on a road to break-even and scalable.
  3. The company was built as a fraud from the start or near-start, much like Enron and WorldCom
  4. The company was doomed by a culture of utter secrecy (Editor’s note: none of their technology was peer reviewed, tested or published)
  5. The company was doomed by Ms Holmes’ falsity and hubris in not having a backup plan; black turtlenecks aren’t it
  6. The company was doomed by its own hype: a PR machine AND gullible press, who created a Steve Jobs-esque icon sans accomplishments out of Ms Holmes
  7. The company sold a bill of goods to EVERYONE, including multiple Federal regulators, patients and the public (Editor’s note: he doesn’t mention the Board of Directors and Stanford University!)
  8. Investors, swept up in the private equity bubble, didn’t do their due diligence (though some did)
  9. Ms Holmes had no ability to run this business, but she controlled it 100 percent so no one said boo
  10. “This is what happens when people treat ventures so casually and callously that risk becomes immaterial.”–Mr Tobak

Perhaps we should be grateful that the Edison lab didn’t actually work with all these dysfunctions on parade!

The close to this article is sobering: “Today, there are 186 venture-backed startups valued at $1 billion or more and countless companies valued above $100 million, according to CB Insights. Not too long ago, Theranos was near the top of that unicorn list with a valuation of $9 billion. We still have no idea if it’s a one-off or the beginning of a trend. Remember the Theranos saga as a cautionary tale. Nothing about it is the way business should be. Nothing.” And it will continue, because $900 million makes Theranos a Big Cautionary Tale. Hat tip to our Eye on Theranos, Bill Oravecz of Stone Health Innovations.

See here for the 36 previous TTA chapters in this Continuing, Consistently Amazing Saga

The Theranos Story, ch. 36: Their money–and time–are running out

click to enlargeA garage sale soon for Theranos? A report in the Wall Street Journal, citing sources on a January investor call, revealed that Theranos has $200 million on hand, but zero revenue in 2015 and 2016. $200 million on hand sounds like–and is–a lot. But Theranos is, once again, oh so special. It’s less than 25 percent of their over $900 million raise. They’ve made no money in the past two years and are likely to make none in 2017 with an unapproved miniLab. Their CEO cannot run a lab by Federal action. They’ve laid off all but 200+ employees, all of whom with any shred of intelligence are job hunting. Then think of all the lawsuits: Walgreens Boots seeking to claw back its $140 million, individual and class actions on behalf of other investors, and the looming Arizona state fraud action. It’s a mere pittance when Theranos has to hire armies of attorneys who charge Billable Hours Galore and will likely lose some if not all of the lawsuits. This Editor is making an educated guess that at least one legal team is working on a bankruptcy filing. Fortune, TechCrunch, Business Insider

Forbes, like TechCrunch once a hyper-overdrive cheerleader for Ms Elizabeth Holmes and Theranos, offers up a profile of John P.A. Ioannidis, MD, DSC who holds the C.F. Rehnborg Chair in Disease at Stanford University and is director of the Stanford Prevention Research Center at the School of Medicine. Dr Ioannidis, according to the article, was the first to raise questions about Theranos’ methodology based on the obvious–that Theranos had published nothing in scientific journals. Theranos’ general counsel then reached out to suggest co-authoring an article with Ms Holmes in a major journal. Per Dr Ioannidis, it would support “the company view that FDA clearance offered the highest possible level of evidence for any diagnostics blood test technology.” They also said, “recant your existing views and writings about these misgivings.” He did neither, to his credit. The article interestingly does not explore the heat he, in as prestigious a position as he was, must have received, based on the close ties this Editor and others have noted between Stanford and Ms Holmes. Hat tip to Bill Oravecz of Stone Health Innovations

“This is the way the world ends/Not with a bang but a whimper.” T.S. Eliot puts a fine point on a Hollow Company, indeed.

See here for the 35 previous TTA chapters in this Continuing, Consistently Amazing Saga.

The Theranos Story, ch. 35: Arizona lab in violation, is there a biotech ‘Theranos effect’?

click to enlargeAnd we were starting to grow nostalgic for our Weekly Episodes! One would expect Nary A Peep from Theranos until the lawsuits start to move forward, they set up another Board of Experts, and/or if the Alphabet Agencies (FDA, SEC, DOJ) decide to take their own actions. A short article out of the (thoroughly paywalled) Wall Street Journal, summed up in MarketWatch, confirms that as suspected, the September 2016 Federal inspection of the Scottsdale, Arizona lab turned up multiple lab and patient notification violations. According to a Federal inspection report cited in the WSJ article, lab staff inaccurately configured a machine processing blood coagulation tests; “Theranos additionally failed to verify that devices’ precision or accuracy were in line with their manufacturer’s instructions for tests such as those for blood-glucose, pregnancy and triglycerides.” Patients were not notified of potentially inaccurate diabetes test results. This provides an extra entreé for the dining pleasure of the Arizona Office of the Attorney General (OAG), which last month put out a bid solicitation for outside counsel to assist in planned actions against Theranos for fraudulent blood testing [Ch. 33]. Hat tip to Bill Oravecz of Stone Health Innovations

No Theranos Effect? The biotech, VC and investor community has put on its Game Face and declared everything’s just fine, and move on. Theranos–now seen as an outlier. After all, they didn’t present their data and kept everything tightly under wraps. (But two years ago, who questioned that? Few.) Unicorns continue to romp, with the Business Insider article mentioning Samumed’s $12 billion valuation for alopecia and wrinkle drugs, none past Phase 2 clinical trials, plus others like Neon Therapeutics and Unity Biotechnology with sizable raises. So no more Theranoses…till the next time.

See here for the 34 previous TTA chapters in this Continuing, Consistently Amazing Saga.

The Theranos Story, ch. 34: It’s a conspiracy! It’s a vendetta!

click to enlargeUpdated Well, that is what one of her major investors says, and he would know! Just when we thought that a week would go by with not a peep about Theranos, we get three. Peeps, that is.

First, the Conspiracy Theory. This is being propounded by early Theranos investor Tim Draper of Silicon Valley VC Draper Fisher Jurvetson. It was all John Carreyrou’s ‘strange vendetta’ against her, to wit: “Elizabeth is the victim of a witch hunt.” The Wall Street Journal reporter set off a cascade of press coverage that compelled, nay, forced Federal regulators (FDA, CMS, SEC, DOJ) and state counterparts to go after Theranos and CEO Elizabeth Holmes. Mr Draper bluntly accused Mr Carreyrou of doing it for money; “the guy is getting $4 million to continue this charade”, referring to the advance on his book proposal “Bad Blood”. The most nauseating part of the Ars Technica interview is this mock-libertarian rejoinder from Mr Draper: “It’s the press creating a series of events that negatively impact technology, progress and our economy.”

So it was all a mistake, an illusion–there was nothing significantly wrong with the Edison Lab, or Theranos’ business practices! (Hat tip to Bill Oravecz of Stone Health Innovations)

Mr Draper perhaps did not consider that Mr Carreyrou’s reporting blew up the $100 million investment of the WSJ‘s owner, Rupert Murdoch (Ch. 27), not just DFJ’s. And SafewayWalgreens, Larry Ellison, Cox Enterprises, Bechtel Group….

Second, the belated reporting of deficiencies at the Scottsdale lab found by CMS (Centers for Medicare and Medicaid Services) on 29 September. According to the Wall Street Journal report (co-authored by Mr Carreyrou), “Theranos responded to the inspection findings in Arizona with a plan to correct its lab deficiencies, but the lab regulator in November rejected the plan and proposed sanctions for the Arizona lab as well.”  This preceded the closing of all labs and the ‘refocusing’ of Theranos on the miniLab. Their general counsel stated, “After months of careful consideration, and prior to CMS’s unannounced inspection in Arizona, Theranos decided to close its laboratories.” Usually, these CMS reports are issued after 90 days. Theranos is appealing the sanctions arising from the California lab inspection with an administrative law judge, which include lab license revocation and a two-year ban on Ms Holmes from blood-testing operations.

Third, Theranos announced an eight-person Technology Advisory Board (TAB) to be led by Dr. Channing Robertson and Howie Rosen. The academics, executives, and entrepreneurs will be charged with “reviewing specific Theranos technology initiatives associated with product development, design and deployment” as well as four other mandates. Analogies concerning horses, roads and the status of barn doors come to mind. Release.

And finally another Theranos Washington connection, besides new SecDef and ‘Warrior Monk’ James Mattis, now an alumnus. It seems that the vetting of Betsy DeVos, nominee for Secretary of the Department of Education, uncovered that she has an investment in Theranos of more than $1 million. However, the Office of Government Ethics also reported her whopping earnings of less than $201. Since others like Rupert Murdoch, Bechtel, Walgreens, Cox, and others ponied up $50 to $100 million, hers is a mere bag of shells by comparison. MedCityNews, who has dubbed it the ‘As Theranos Turns’ soap opera. Hat tip to Bill Oravecz of Stone Health Innovations.

See here for the 33 previous TTA chapters in this Continuing, Consistently Amazing Saga, including Arizona’s lawyering up for a prospective Theranos lawsuit (Ch. 33) the firing of 155 remaining staff (Ch. 32), the resignation of now-DOD Secretary General Mattis from the BOD (Ch. 31), and Theranos’ annus horribilis (Ch. 30).

The Theranos Story, ch. 33: Arizona gets its lawsuits on

click to enlargeThe state of Arizona is lawyering up to sue Theranos for consumer fraud. TechCrunch found a bid solicitation on Arizona’s state procurement website from the Office of the Arizona Attorney General (AGO). It requests bids for outside counsel to assist the AGO in legal action against Theranos for fraudulent blood testing. From the Outside Counsel RFP:

The purpose of this contract is to retain Outside Counsel to aid the Arizona Attorney General’s Office (the AGO) in commencing legal action against Theranos, Inc. and its closely related subsidiaries for violations of the Arizona Consumer Fraud Act arising out of Theranos Inc.’s long-running scheme of deceptive acts and misrepresentations relating to the capabilities and operation of Theranos blood testing equipment, including but not limited to deceptive acts and misrepresentations made to Arizona consumers in connection with Theranos Wellness Centers in Arizona and California. Upon retention, Outside Counsel will assist the AGO on a contingency fee basis per the terms set forth in this Request for Proposal.

Arizona’s involvement with Theranos went above and beyond ‘deceptive acts and misrepresentations’ made to Arizona consumers. As we noted last September in Chapter 20, in early 2015 lawmakers quickly deregulated blood testing to permit direct consumer order of blood tests, after Elizabeth Holmes and company swept in and turned the governor and legislators quite ga-ga. It turns out the unimpressed Arizona Medical Association was on the mark in their objections. So undoubtedly this first move by a state entity is Powered by Embarrassment.

One wonders which law firm out of their lengthening list Theranos will choose. (See Chapter 29) Bids are due by 27 Jan. Hat tip to Bill Oravecz of Stone Health Innovations.

See here for the 32 previous TTA chapters in this Continuing, Consistently Amazing Saga, including the firing of 155 remaining staff (Ch. 32), the resignation of General Mattis from the BOD (Ch. 31), and Theranos’ annus horribilis (Ch. 30).

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

click to enlargeEndlessly, 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).

The Theranos Story, ch. 31: subtract one Marine general from the Board

click to enlargeThe Warrior Monk has left the building, to paraphrase what was said post-performance of Elvis (birthday, 8 January). Yes, James Mattis, General, USMC (ret.), has finally resigned from the Theranos Board of Directors, which was reorganized last month [TTA 3 Dec]. According to the Wall Street Journal relying on its usual ‘persons close to the matter’, he “left Theranos partly because he believed he was no longer a good fit after a broader board overhaul”.

In preparation for Senate hearings on his Secretary of Defense nomination, which begin 12 Jan, Gen. Mattis resigned from all corporate boards save General Dynamics, which was retained as to not be presumptuous of confirmation. His confirmation is more complicated than usual because he requires a Senate waiver of the seven years post-retirement requirement. Even with this, his confirmation is expected, and the resignation from the Theranos board mitigates a sticky set of questions.

The WSJ article rehashes in some detail the 2012 review of the Theranos lab which Gen. Mattis proposed while head of Central Command (CENTCOM), which ultimately was derailed at Fort Detrick, home of the US Army Medical Research and Materiel Command. However, reports are that little money was actually expended and Gen. Mattis accepted the decision.

Theranos, having shuttered its labs, is appealing the regulatory sanctions, including CMS’ ban on Elizabeth Holmes’ operating labs, and is reportedly cooperating with a myriad of civil and criminal investigations, both by an alphabet soup of Federal agencies (CMS, DOJ, FDA, SEC) and state regulators.

If the WSJ article is paywalled, search on the headline “Trump Defense Nominee James Mattis Resigns From Theranos Board”. Also MarketWatch. See here for the 30 previous TTA chapters in this Continuing, Consistently Amazing Saga, including Theranos’ annus horribilis (Ch. 30) and the law firm feeding frenzy (Ch. 29). Hat tip to reader Bill Oravecz.