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, who was hired in 2005 by founder Elizabeth Holmes to create and refine the tests, after 19 patents key to the business model, committed suicide in 2013. His widow alleges that in reference to the tests, he told his wife that ‘nothing was working.’ Even more disturbing, Theranos sent attorneys and notice to her that any further public statements by her to the press would mean a lawsuit.

Wired also muses on how the Silicon Valley SOP of startup hype is inappropriate for healthcare where lives aren’t for casual testing. Healthcare tech companies have to prove their worth first, not vice versa. The substantial disclosure and validation of results of Theranos’ diagnostic performance that one would expect, according to both articles, are missing–but the extreme hype is not.

Hat tips are many: @drdave01 Dr David Albert of AliveCor, @clarkmike Mike Clark, @SkipFleshman Skip Fleshman, @haroldsmith3rd Harold Smith III who questions the very notion of a 10-year ‘stealth’ technology in this area.

*If link is paywalled, try search on headlines “Hot Startup Theranos Has Struggled With Its Blood-Test Technology” and “Hot Startup Theranos Dials Back Lab Tests at FDA’s Behest”.

Related: Theranos defends itself (Business Insider, TechCrunch, CNBC); one very interesting conversation on the YCombinator news bulletin board (grab the coffee and Tylenol for this)

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