TTA’s Blooming Spring 4: UnitedHealth’s CEO change doesn’t stop market pummeling, Omada’s IPO, Theranos redux, Holmes loses appeal, Synchron BCI and Apple, exec security cost, raises, more!

 

16 May 2025

One after another surprise this week. UnitedHealth Group changed out CEOs suddenly. The new one is a surprising ‘blast from the profitable past’ but that didn’t stop Mr. Market from taking the stock down down down. Another blast involves Elizabeth Holmes’ partner Billy Evans fronting a diagnostic testing-in-a-box startup. “Surprise, surprise!” No surprise that Holmes lost her appeal of an appeal–nor Omada Health filing for an IPO. Unfortunately, our investigator on all things Masimo met his own surprise walking on a sunny day–fortunately, Ted’s on the mend. More about BCIs with Apple integration, a chronic pain management startup, Parkinson’s data, two good raises, and what payers pay to keep their execs safe.

Short takes: Synchron BCI integrates with Apple devices, Shields Health partners with Duke on specialty pharmacy, raises for Cohere Health, Olio (More BCI action with Apple getting into it)

Theranos’ revenge? Holmes’ partner Billy Evans founds a startup for diagnostic testing, denies it is ‘Theranos 2.0’; Holmes loses Federal rehearing appeal. (Is Holmes advising long distance? Letters from a Texas Jail?)

News roundup: Omada Health files for IPO, UPMC-Redesign partner on chronic pain management, OK and PA AGs warn 23andMe users to delete data, Verily to build Parkinson’s dataset, what payers paid for exec security (Omada follows Hinge. But the last is surprising–between a lot and a little)

This just in: UnitedHealth Group CEO Andrew Witty steps down immediately, replaced by former CEO Stephen Hemsley (updated 15 May) (UHG may change out CEOs, but continues to be hammered by Mr. Market)

Best wishes to Strata-gee’s Ted Green on a fast recovery! (Ted, our ace Masimo investigator, was put rather suddenly in a bad place…use your eyes when you drive!)

From last week: This week’s drama was all about Masimo, developing literally as this Editor was writing. Their website outage was revealed to be from a cyberattack that took down nearly all their systems. Not good for a monitoring/tech company. But their good news was that they sold Sound United to Samsung–2/3rds off. The others deserving of more attention are Neuralink’s successful BCI implant in an ALS subject and UHG’s 1,000 app bet on AI. Not so dramatic: WeightWatchers’ prepackaged, quick bankruptcy, the NIH/CMS autism data project, and Amedisys divesting to salvage their UHG sale. 

Short takes: HHS forms NIH/CMS autism data project; Oscar Health beats Street w/Q1 $275M net; Centene’s $1.3B earnings; UHG has class action suit on earnings, 1K AI apps in production; Cedars-Sinai and Redesign Health partner on development; FDA, Lilly, Novo Nordisk win vs. compounders (Big step forward for autism research)

News roundup: WeightWatchers in 45-day prepackaged Ch. 11, Neuralink BCI successful in ALS subject, telehealth VR reduced TMD pain–study, AliveCor maxes up KardiaMobile 6L, TytoCare-Allina Health partnership, UHG-Amedisys divest some more (WW losing runway, a Neuralink win, Amedisys divesting to save their two-year-old UHG deal)

Breaking–Masimo Mystery SOLVED–cyberattack, website down for days, new websites up–and where’s the public explanations? Sound United sold. (Another cleanup on Aisle 10–the Sound United albatross flies off)

Holding this over: The weekend read: why SPACs came, went, and failed in digital health–the Halle Tecco analysis/memorial service; why OpenAI is going to be a bad, bad business (Grab the cuppa and lunch for a good read and podcast. Updated–Also Tecco’s blog post on why she quit being an angel investor.) 

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Theranos’ revenge? Holmes’ partner Billy Evans founds a startup for diagnostic testing, denies it is ‘Theranos 2.0’; Holmes loses Federal rehearing appeal.

The technologies may differ, but the functions remain the same. Haemanthus, a biologic testing startup founded by hotel heir Billy Evans—widely recognized as Elizabeth Holmes’ partner and father of her two children—has suddenly and bumpily emerged–kind of–from stealth mode. Coverage in the New York Times and NPR has drawn unfavorable comparisons to Theranos’ failed blood-testing venture and highlighted Evans’ connection to Holmes, who is currently serving an approximately 11 year sentence at the women’s Federal Prison Camp in Bryan, Texas.

Haemanthus, named after the Latin name for the blood lily plant, has developed a prototype box-like device (right) that uses Raman spectroscopy, using lasers, photonics, and other light technologies, coupled to AI-based software that analyzes biologic samples. The initial diagnostics will focus on pet diseases and the veterinary market before entering the human market, with the machine analyzing blood, saliva, and urine for biomarkers such as glucose and hormones. Deep learning models based in the software would then have the ability to detect diseases such as cancer and infections. Raman spectroscopy is already used in human diagnostics to analyze biomolecules like proteins, DNA, and lipids, as well as studying cell structure, tissue composition, and cellular processes. The company, in its investment materials, intends to develop a stamp-size, wearable device for humans.

The company, currently backed by Evans, has raised money from friends, family and other supporters so far, according to one of the sources quoted by NPR. The NYT stated that was a $3.5 million raise. This spring, Evans has been reaching out to other investors in Austin, where he lives with the children, and the Bay Area. The goal is eventually $50 million. To expand to humans after pets, their investor materials state that it will take three years and a total raise of $70 million.

James Breyer of the eponymous Breyer Capital was approached for investment but turned it down for the same reasons as he did Theranos, twice. Michael Dell also passed, according to the NYT. A local investor the NYT identified is Matthew E. Parkhurst, an investor who is also the part owner of a Mediterranean tapas bar in downtown Austin.

The NYT article brings up regulatory oversight. The USDA, the US Department of Agriculture, regulates veterinary medicine and diagnostics. Yet Mr. Evans sent to the NYT a partially redacted document from the USDA that said, “It does not appear that the proposed product is within the regulatory jurisdiction” of the Center for Veterinary Biologics, which is a part of the USDA.” 

What has created the most news is that the NPR article explicitly stated that Elizabeth Holmes was advising Evans on the startup, without specifics on what and how. The company reportedly has about 12 employees, some of whom worked at Evans’ prior venture, Luminar Technologies, a developer of autonomous vehicle sensors, according to the company’s patent and Delaware incorporation paperwork.

The two articles generated enough stir that Haemanthus took to X on 11 May to state in several tweets (samples below):

We’re Haemanthus. Yes, our CEO, Billy Evans, is Elizabeth Holmes’ partner. Skepticism is rational. We must clear a higher bar. When @nytimes contacted us, we invited them: see our lab, tech, and team. They declined. The headline was already written. Our reality inconvenient.
2/This is not Theranos 2.0. Theranos attempted to miniaturize existing tests. Our approach is fundamentally different. We use light to read the complete molecular story in biological fluids, seeing patterns current tests can’t detect. Not an improvement. A different paradigm.
3/ Setting the record straight. Elizabeth Holmes has zero involvement in Haemanthus. We’ve learned from her company’s mistakes, but she has no role, now or future. NYT & @NPR implied otherwise. We’ve stayed quiet to build real tech, not conceal. Demonstrating, not promising.

Fast Company and the Mercury News also review Haemanthus’ sudden emergence. Hat tip to HIStalk 5/12/25

Elizabeth Holmes will likely be remaining in Bryan for the remainder of her sentence. The Ninth Circuit US Court of Appeals rejected her petition last week to have a full en banc or original panel review of her fraud conviction appeal. The District Court’s sentence of both Holmes and Sunny Balwani were upheld in February [TTA 5 Mar]. “The full court has been advised of the petition for rehearing en banc, and no judge of the court has requested a vote on whether to rehear the matter en banc,” the panel said in its short, four-sentence order. Unless the US Supreme Court issues a highly unlikely writ of certiorari based on her petition, this is the end of her long-running courtroom drama. Her 11 year sentence is at this point at about two years served with additional reductions of two years and four months, now with a release date of 18 February 2032.  There is also a small matter of Holmes and Balwani paying back $452 million in restitution for their fraud. Courthouse News Service, CNBC  

The only discussion of Balwani’s separate petition for a review (Court Listener) has been on Reddit by legal maven mattschwink. Balwani’s argument for a rehearing is based upon an assertion that a witness, investor Brian Tolbert, lied on the stand about being told by Holmes on an investor call that the Theranos machines were being used on Afghanistan medevac helicopters. The investor call was not played, nor the testimony brought up at Balwani’s trial, which based on precedent may constitute withholding of exculpatory evidence. In his view, this is likely not enough to constitute a falsehood by the prosecution.

Regardless of whether Haemanthus’ denials of Holmes’ “advisory services” are true, it’s unlikely that Holmes could provide substantial guidance to the company beyond brief, casual talks during Billy Evans’ visits—especially considering whether such activities are allowed while residing in an FPC.

News roundup: MSK is ‘it’ with Hinge Health’s IPO filing, Vori Health’s $53M raise, Dario Health’s 33% revenue increase; CoachCare buys VitalTech, ModMed investor sells majority stake, Health NZ uses Excel–only; Holmes gets rehearing extension

Companies in MSK therapies (and more) were the ‘IT’ this week:

Hinge Health’s IPO filing this week the talk of healthcare finance. In the teeth of a roiling market (for no good reason at all in C), Hinge’s SEC S-1 filing of a preliminary prospectus has many agog. Hinge had a 33% 2024/2023 revenue growth to $390 million and $468 million in billings, 2,250 employer clients and approximately 20 million contracted lives as of the end of last year. Net loss was reduced substantially, to $11 million from 2023’s $108 million.

Not disclosed in the filing are the number of Class A shares on offer (on the NYSE under HNGE) or the pricing range. According to FierceHealthcare’s and TechCrunch’s IPO specialist source at Renaissance Capital, Hinge Health could raise $500 million in its IPO. It already has substantial funding through 10 rounds, the last 2021’s Series E of $400 million, totaling $826 million .(Crunchbase) Its backers who are prepping for a partial or full exit are 8% shareholders Coatue, Tiger Global Management, Whale Rock Capital Management, Bessemer Venture Partners, Insight Partners (19%), and Atomico (15%). Founders Daniel Perez (CEO) and Gabriel Mecklenburg (director) own 18.9% and 8.2%, respectively. It is one of the largest and most successful in a highly crowded market in MSK therapy and virtual physical therapy, with Sword Health its largest competitor–and also talking IPO. And like others, it has diversified into other medical areas: pain management (Enso) and female pelvic health.

Surprisingly, Hinge Health was first incorporated in 2012 as a private limited company in England and Wales. It was incorporated in Delaware in 2016. Release, Mobihealthnews

One of Hinge’s competitors, Vori Health, scored a $53 million Series B funding round. New Enterprise Associates (NEA) led this round along with previous investors  AlleyCorp, Intermountain Health’s Intermountain Ventures, Echo Health Ventures, and Max Ventures, bringing their total funding since 2020 to $109 million. Vori’s model is physician-led with patients working with a virtual care team organizing care from diagnosis to therapy, prescriptions, labs, and imaging. They claim results of 91.6% of patients reporting clinically significant pain improvement, 78-90% reduction in elective orthopedic surgeries, a 42% decrease in opioid utilization, and up to a 68% reduction in depression and anxiety among patients. The funding will be used to deepen its value-based care initiatives (including evolving toward models with two-sided population health risk), invest in advanced data analytics for more precise targeting of high-risk members, and enhance its AI-powered technology platform and clinical programs to benefit patients, employers, and health plan partners. Release, Mobihealthnews

Another competitor which has considerably branched out from MSK is Dario Health. Their 2024, marked by the dizzyingly funded acquisition of Twill telementalhealth [TTA 29 Feb 2024] bumped up in full-year by 32.9% to $27.0 million, from $20.4 million in 2023. Net loss was reduced to $42.7 million from 2023’s $59.4 million. While still in MSK, Dario has branched out into diabetes, hypertension, weight management including GLP-1 therapy with MedOrbis, and behavioral health in-person and app based management in a B2B2C model for members of health plans and other payers, self-insured employers, providers, and consumers. Back in January, they completed a $25.6 million private placement of 25,606 shares to extend their cash runway. Release, Mobihealthnews

NYC-based CoachCare is acquiring Carrolton, Texas-based VitalTech. Both companies monitor chronic conditions via remote patient monitoring (RPM) and are about the same size. Acquisition cost was not disclosed. VitalTech CEO Jeh Kazimi and the under 50 person VitalTech staff will be joining CoachCare. CoachCare claims that they cover 200,000 patients in 3,000 locations. Release

Investor Warburg Pincus sells majority stake in ModMed to Clearlake Capital. The investment was not disclosed, but reports indicated the valuation of the EHR and practice management system company is estimated now at $5.3 billion. Summit Partners and ModMed cofounders Daniel Cane and Michael Sherling maintain a minority share. ModMed has been for sale on and off since 2022, most recently in January, but was looking at acquisitions last fall. Original reporting was from the Financial Times. Axios, Bloomberg Law, Release

And you think you might be behind the times? Health New Zealand likes to keep it simple…very simple. They run all their financial management on a single Microsoft Excel spreadsheet. HNZ spends NZ $28 billion and replaced 20 district health boards to consolidate their efforts, increase efficiencies, and reduce costs. According to their health minister, HNZ operates an estimated 6,000 applications and 100 digital networks. The Deloitte survey found at least five major issues, from hard-coded financial data making updating and sourcing difficult to do and trace, to simple human errors. Is that all? So if you need a chuckle… TechRadar

And even more head-shaking is Theranos’ Elizabeth Holmes challenging the courts, yet again. A report through Reddit, posted by legal maven mattschwink, tells us that she, through her attorneys, two days after the Ninth Circuit upheld both her and Sunny Balwani’s verdicts [TTA 5 Mar], filed on 26 February to extend the time to file a motion for a rehearing. It was granted on 3 March. The filings are noted on the public site Court Listener. Given the track record of these courts, the likelihood of a rehearing by a larger panel in the Ninth Circuit or even by the US Supreme Court on finding some kind of error in both the original verdict and appeal is akin to a snowball lasting in the Bryan, Texas prison courtyard on July 4th. But she does get attention.

Theranos’ denouement: Holmes and Balwani lose their appeals

It’s been two years since Theranos was in the news. In April 2023, both Elizabeth Holmes and Ramesh ‘Sunny’ Balwani started serving their lengthy sentences for multiple charges of fraud (11 years, 3 months and 12 years, 9 months respectively, generally reduced to 85% of sentence). Last week, the three judges of the US Court of Appeals for the Ninth Circuit in San Francisco ruled to uphold both trials on investor fraud and the award of $452 million in restitution. The original verdicts were made in separate trials in the US District Court for the Northern District of California by Judge Edward Davila, but the appeals were considered together. [TTA 12 June 2024]

Neither appeal of the separate trials proved that any errors were significant enough, nor any testimony excluded, that would provide grounds to overturn the verdict.

The key issues centered on legal errors made by the District Court in allowing certain witnesses’ testimony to veer into ‘expert territory’, which is an error, but that “any error was harmless”. For instance, both defenses concentrated on Kingshuk Das, MD, the final Theranos lab director who worked there March 2016 to June 2018 and voided two years of Edison Lab tests. He testified about his experience at Theranos (fact witness) but in court was allowed to express his opinion as a scientist though he was not qualified by the court as an ‘expert witness’. That is a separate procedure that involves a special qualifications hearing (Daubert hearing) that did not take place with Dr. Das. The appeals panel found that Dr. Das should have been qualified as a expert witness and would have easily done so. Not doing so was an error that was not challenged by Holmes’ team at the time. But the court’s error was harmless. Dr. Das’ testimony on the Edison devices’ reliability and accuracy was supported by other testimony. The testimony regarding the device was one of many other misrepresentations made to investors that the jury had to review. 

Another issue was the CMS report on the labs, issued in January 2016 after much of the deception had already taken place. Holmes’ appeal team argued it should have been excluded as misleading to the jury. It was admitted into evidence as relevant to Holmes’ state of mind, intent, and knowledge about the labs’ conditions. The District Court did not “abuse its discretion” in permitting it for that limited purpose.

Holmes’ team also challenged the exclusion of statements from Sunny Balwani about “owning” the Theranos financial model.

Regarding restitution, the conclusion in the ruling summary was direct: “The panel concluded that any error was harmless because the district court’s factual findings compel the conclusion that the victims’ actual losses were equal to the total amount of their investments.”

The very tough decision was written by Judge Jacqueline H. Nguyen. Her fellow judges were Mary M. Schroeder and Ryan D. Nelson. The decision PDF is here. (It seems quite readable, but was not fully read by this Editor.)

Their chances for further appeal, either in the Ninth Circuit with a larger panel or by the US Supreme Court, as “very unlikely” for the first and “almost inconceivable” for the second, according to Stanford Law professor Robert Weisberg, quoted in the Mercury News.

This Editor recommends a review of the Reddit thread by mattschwink, “Annotating the 9th Circuit review of Holmes appeal”, which was (again) of great assistance in summarizing the appeal issues. He also confirmed for me that Sunny Balwani was moved from the limited facilities at Terminal Island FCI to Lompoc FCI, north of Santa Barbara and a stone’s throw from Vandenberg Space Force Base. Thank you, Matt, again! Press coverage has been minimal: Mercury News, AP, BBC

Immediately preceding the 9th Circuit Court’s decision was a People cover puff piece on Elizabeth Holmes. You may be able to read it all the way through without being amazed at her manipulation and lack of contrition on defrauding investors and patients. It doth make much of her claims that she was sexually abused not only at a college party but also in her years with Sunny Balwani, for which she is in therapy there. She is continuing to research and write patents for new healthcare inventions, presumably between law clerking, advocacy, teaching French, and weekend family visits. The Bryan FCI does not, even in her description, sound like ‘It’s Been Hell and Torture’. (Perhaps she’s seeking a Federal pardon?) More than likely, she will be enjoying the facilities and the visits until April 2032. And then there is the $452 million restitution to somehow scrape up.

No “equal time” exclusive interviews with Sunny Balwani, of course.

It strikes this Editor that, in the words that Orson Welles wrote for his character and that of Marlene Dietrich in ‘Touch of Evil’ that both Holmes’ and Balwani’s futures ‘are all used up’. That is, they will emerge from their respective prisons and live on, but as to any role in medical research, the parade will have long passed them by.

Postscript: The Mercury News published a rather anodyne interview with one of her prosecutors, John Bostic, who is now in private practice as a partner with Cooley in the Bay Area. It’s brief but interesting as to why he was chosen–he was a molecular biology major in college–which helped him to understand the technical aspects of Theranos and make them understandable to judge and jury. The strongest evidence against her? “There was evidence that Holmes knew some things that she was saying were not true, and there was also some evidence of document altering that I think was very easy for the jury to understand.” The one notable takeaway was that Silicon Valley and technology companies shouldn’t ‘fake it till they make it’, which is a lesson they’ve already learned.

Theranos’ Holmes and Balwani appeal fraud convictions, $450M investor restitution

An interesting Tuesday at the Ninth Circuit Court of Appeals in San Jose, California. A three-judge Federal appeals court held hearings yesterday (11 June) on separate appeals on the convictions found and restitution imposed on both Elizabeth Holmes and Ramesh ‘Sunny’ Balwani, the former CEO and president of Theranos. The Holmes hearing was 50 minutes before Judges Jacqueline Nguyen, Ryan Nelson, and Mary Schroeder.

Holmes is seeking a complete overturn of the trial and jury verdict primarily on the basis of Judge Edward Davila including evidence favorable to the prosecution and not including defense-favorable evidence. She was not there as serving her time to mid-August 2032 in Bryan, Texas. Representing her for the defense was Amy Saharia of Williams & Connolly LLP, considered to be one of the US’ top appellant litigators.

  • Favorable to the prosecution was Theranos’ chief scientist Kingshuk Das, MD’s testimony. Dr. Das was the final Theranos lab director who worked there March 2016 to June 2018–and voided two years of Edison Lab tests. Saharia is claiming that the prosecution was improper in putting him on the stand since he was not qualified by the court as an ‘expert witness’ and was allowed to express his opinion, specifically in statements allowed by Judge Davila including “I found these instruments to be unsuitable for clinical use.”

Going back to TTA’s original coverage of 11 Nov 2021 (which the coverage below largely has not), Dr. Das was hired to respond to CMS’ deficiency report that went to the prior lab director two months before. The subject line: “CONDITION LEVEL DEFICIENCIES – IMMEDIATE JEOPARDY.” The report went on to say that “it was determined that your facility is not in compliance with all of the Conditions required for certification in the CLIA program.” and concluded that “the deficient practices of the laboratory pose immediate jeopardy to patient health and safety.” After speaking with Holmes and dealing with her position that it wasn’t an instrument failure, but rather a quality control and quality assurance issue, he voided every Edison lab test made in 2014 and 2015–between 50,000 and 60,000. Holmes was told, but she didn’t believe Das or previous lab directors about the Edison problems. Also testifying was a contract offsite co-lab director in 2014-15 who expressed her reservations to one of Dr. Das’ predecessors –who also happened to be Sunny Balwani’s dermatologist. 

Judge Nelson said during the hearing that “There’s a pretty good story here for Ms. Holmes” and “They do have a pretty good basis for some unfairness here.” in how Judge Edward Davila allowed this testimony.  Judge Nguyen also seemed to agree with the defense position that Judge Davila went too far in allowing opinions from Dr. Das that under the rules would require his being vetted as an expert. Judge Nelson added that the conviction was supported by “pretty overwhelming evidence.” For Dr. Das, the conundrum was that he was called in as the former lab director to testify on Holmes’ knowledge of the problems the Edison lab had but he also had a level of expertise involving the labs. The Federal prosecutor on the appeal, Kelly Volkar, countered with how Judge Davila “carefully parsed” the Das testimony and sustained defense objections during the trial. While having concerns that Das strayed into opinions and Judge Davila allowed it, Judges Nguyen and Schroeder stated that much of Das’ testimony concerned what he observed at the company.

Reportedly, much of the hearing time focused on this one point. Saharia again insisted that “She [Holmes] in good faith believed in the accuracy of this technology” and did not knowingly misrepresent it.

  • Not including defense-favorable testimony was another alleged Davila mistake. In the defense presentation, Judge Davila allowed testimony from former laboratory director Adam Rosendorff without including more evidence of government investigations of his work after quitting Theranos in 2014. These were direct attacks on his competence in running a lab facility. However, in our 6 October 2021 coverage, the defense grilled Rosendorff on his work at uBiome and PerkinElmer; both came under Federal investigation during his tenure.

A final Holmes defense point was made on how these ‘errors’ made by Judge Davila unfairly shaped the jury decision, where she was found guilty by a jury on only four counts of the prosecution’s 11.

The panel did not provide any timeline for issuing a ruling, other than in ‘due course’. This can be anywhere from a few weeks to over a year. The track record for Federal Court appeals tends to be dismal for the defense. 

Far less coverage was given to the separate Sunny Balwani hearing. This centered on the fact that the restitution of $450 million to investors ordered by Judge Davila’s order was incorrect and part of the “nature of investing in a private company.”  His defense counsel, Patrick Looby, also representing Holmes, made a most interesting spin on how fraud did not rob Theranos of ‘residual value’. “The fact that the investors may have had difficulty selling their shares is not owing to the fraud.” Volkar for the prosecution stated that the investors had no opportunity to do any recouping of their losses. Looby also contended that the prosecution presented distorted evidence against Balwani in a different narrative than against Holmes. Balwani was convicted on all 12 charges and is serving 12.9 years at the Federal Terminal Island facility. No timeline for a ruling was reported.

Mercury News, AP, Yahoo Finance  The Ninth Circuit also has an unusual web page on the Holmes appeal with case information plus notifications of public proceedings.

Short takes: Holmes legal team appealing Tuesday 11 June; Steward Health asset sale OK’d, needs funding; fundings for Sword Health, Eko Health

Elizabeth Holmes may be in Bryan, Texas serving time, but the appeals go on. Her legal team will appear before the US Court of Appeals for the Ninth Circuit at 9am next Tuesday 11 June. Her initial appeal was filed in December 2022 [TTA 15 Dec 2022] with full 132-page legal briefs in April 2023 [TTA 19 Apr 2023].

Holmes’ team is seeking a complete overturn of the trial and verdict. The appeals center on an unjust conviction based on prosecutorial misrepresentations, such as Holmes being told that the Theranos technology worked and thus not misrepresenting it to investors at that time, and actions by Judge Edward Davila in the presentation of evidence in including evidence favorable to the prosecution and not including defense-favorable evidence. The appeal also includes, according to earlier reports, an accusation that Judge Edward Davila used the wrong legal standard in sentencing Ms. Holmes and thus over-sentenced her. Holmes will not be present for the appeal as is customary.

Her 11 year sentence is currently, based on Bureau of Prisons standards for good behavior, cut down to about 9 years. Her chances are slim that the appeal will succeed, based on overall rates, Judge Davila’s reputation for thoroughness, and his presiding over two identical cases, the other for ‘Sunny’ Balwani with the same evidence and a similar but longer sentence. There is no public word on whether Mr. Balwani is also appealing. He is serving his time at Terminal Island, California. Mercury News  Our back file on Theranos is best accessed through TTA’s search tab, keyword Theranos or Holmes.

Another fine legal mess is unfolding in Texas with the US Bankruptcy Court, Southern District of Texas, hearings on Steward Health’s dissolution.

  • On Monday 3 June, Judge Christopher Lopez approved a two part plan for the asset sale. Part 1 would be about the Massachusetts assets, with most of the system’s hospitals (eight) and its physician group. Bid deadline is 24 June and the first sale hearing is timed for 11 July. Massachusetts is the most contentious of the states Steward operated in, with state regulators taking the most actions against the company. Part 2 is the Florida and Texas asset sale, timed for a bid deadline of 12 August and first sale hearing of 22 August.
  • The US Department of Justice filed an objection 30 May to the sale, stating that it does not allow enough time for their regulatory review of the physician group sale to UnitedHealth Group’s Optum [TTA 18 Apr] and insisting that it must be reviewed before any sale. This effectively holds up the Part 1 sale. FierceHealthcare
  • The other spanner in the works for the DOJ is that Steward is flat out of money to run their hospital and practice assets. Without additional funds, on 14 June they will be broke, busted, skint by two Fridays from now. Steward’s lenders were before Judge Lopez yesterday (4 June) to try working that out. Current debtor-in-possession (DIP) Medical Properties Trust, which put up $75 million, won’t put up any more money until assets are sold. Other lenders want to put up only limited amounts of money. To lure lenders, Judge Lopez approved an emergency motion on Monday to permit a “commitment fee” offer of up to $6.75 million to third-party lenders and up to $750,000 to reimburse one or more lenders for expenses incurred during due diligence. Healthcare Dive. Will that attract another DIP? Only time, and not a lot of it, will tell.

In happier news, there are fundings for two health tech companies:

  • Sword Health announced a $130 million round in an unlabeled mix of primary and secondary sale. Their total funding is now $340 million, with lead from Khosla Ventures. Valuation is up to $3 billion, up 50% from its Series D valuation. The funding announcement was made in conjunction with a product announcement by the digital/remote MSK therapy company for Phoenix, the AI Care Specialist, which will be integrated across their entire offerings. Release
  • Eko Health’s Series D raised $41 million from ARTIS Ventures, Highland Capital Partners, NTTVC, and Questa Capital. Eko’s device and platform enhance the early detection of cardiac and pulmonary diseases during physical exams. Most recently, the FDA cleared Eko’s Low EF detection AI [TTA 5 Apr]. The new funding will be used for US expansion and expansion into key international markets, supported by new strategic investments from Double Point Ventures in the U.S., Singapore-based global investor EDBI (the corporate investment arm of the Singapore Economic Development Board), and LG Technology Ventures, backed by the LG Group of South Korea. Cardiac detection powered by AI are ‘perfect together’, at least for investors. Release, Axios

News roundup: Amwell faces NYSE delisting; Walmart Health slows Health Centers, except Texas; Novosound’s ultrasound patent; Eko’s Low EF AI; Universal Brain; Elizabeth Holmes in ‘Dropout’ + update

Amwell on a six-month NYSE notice to get stock price above $1.  Telehealth provider Amwell received an NYSE notice on 2 April that their Class A stock, in having an average closing price of below $1.00 over a consecutive 30 trading-day period, violated NYSE’s continued listing minimum price criteria. It dipped below $1.00 on 12 March and stayed there. The stock will not be delisted at this time and is now in a six-month ‘cure period’. Amwell has already confirmed its intent to cure the deficiency, including proposing at its upcoming 2024 annual meeting a reverse stock split, subject to stockholder and board of directors approval. Amwell (AMWL) closing price today was $0.72 which represents a 65% decline over the prior year. Amwell is largely owned by institutional shareholders–289–holding 149.2 million shares (Fintel). Amwell IPO’d in the palmy days for telehealth in September 2020, raising $742 million at the time with shares debuting over $25 [TTA 18 Sept 2020]. Amwell’s 2023 was as hard pressed as rival Teladoc’s with a $679 million net loss in 2023, up 150% from 2022’s $272 million loss. The 2024 is not much sunnier, with revenue in the range of $259 to $269 million and adjusted EBITDA in the (less) red between ($160) million to ($155) million, with no breakeven in sight until 2026. Amwell has also released 10% of staff since 2023. Eh, have times changed? Amwell release, Healthcare Dive

Walmart Health pressing the brakes on its Health Centers, concentrating on Texas. Walmart, generally superb at reading the weather, has decided to slow down openings of its primary and urgent care centers, located only in Walmart Supercenters. The previous plan was to open 30 or more centers in 2024, reduced now to 22. 18 of these will be in Texas: eight in the Houston metro starting this month and 10 in the Dallas/Fort Worth region. The remaining four will be in the Kansas City metro. The Health Centers target patients with no or poor insurance coverage in underserved areas and offer a range of services including labs, X-rays, and dental care. The goal of 75 centers has moved forward to early 2025. Healthcare Dive, Drug Store News

A potpourri of news around smaller companies and innovations:

Scotland’s Novosound has patented a wearable, WiFi-enabled ultrasound digital platform, its 21st. The Slanj (phonetic for sláinte, meaning health in Scottish Gaelic) uses thin film printed gel-free, disposable high-resolution sensors to be integrated into other wearables such as smartwatches and other monitors. Novosound’s patent covers both the US and UK. In 2022, they inked a commercial partnership with diagnostics and digital health company PAVmed Inc. for intravascular imaging. Novosound was the first spinoff from the University of the West of Scotland. Mobihealthnews

Also in cardiac, the FDA cleared Eko Health’s Low EF detection AI. This enables a provider to quickly diagnose Low EF (ejection fraction) in a physical exam to assess possible heart failure. The Eko stethoscope and module connects to a tablet and provides a reading within 15 seconds. Trained on a proprietary dataset of over 100,000 ECGs and echocardiogram pairs from unique patients, clinically validated in a multi-site, prospective clinical study of 3,456 patients, it requires only a minimum of specialized training as part of the SENSORA Cardiac Early Detection Platform that can be used just about anywhere. The Eko Low EF was developed in conjunction with the Mayo Clinic. Eko release, MedCityNews

Universal Brain, which has developed a range of wearables that measure brain activity, named three new executives:  Greg Hajcak, PhD, as tChief Scientific Advisor, Vangelis Lympouridis, PhD as Chief Product Officer, and K.T. Venkateswara-Rao, PhD, as Head of Operations. For psychiatric clinical drug trials and psychiatric diagnosis, there is an EEG wearable paired with a digital ERP interface, Neurotique. They also developed a patient neurofeedback treatment system (EEG wearable + digital therapeutic) to augment standard treatment by providing real-time feedback for depressive symptoms.  Release

And for UK Readers weekend viewing pleasure in the UK, the Elizabeth Holmes biopic, ‘The Dropout’ is now available on BBC iPlayer. Hulu produced and originally aired the eight-episode series in March of 2022 (our review here). Hat tip to Editor Emeritus Steve. For US Readers, it is still available on Hulu. Or if you have a VPN, you can set it to a UK-based server and sign up for BBC iPlayer. The only recent (January) news about Ms. Holmes is that the Department of Health and Human Services (HHS) Office of Inspector General (OIG) banned her and Sunny Balwani from all Federal health programs for 90 years, which does strike one as overkill as beyond their reasonable lifetimes. Ars Technica

Based on a Reddit posting on a pop culture chat, celeb Jen Shah, also at FPC Bryan, and Holmes were snapped ‘hanging out’ in the yard. Shah was convicted of heading a telemarketing financial scam that preyed on the elderly. She is serving 78 months in Federal prison and has to pay $6.6 million in restitution–numbers that could fit easily in Holmes’ 135-month sentence and $452 million restitution. And Sunny Balwani, about whom there are no pictures, no Reddit, is apparently still serving his time at Terminal Island near San Pedro, California, not in Atlanta.

‘The Simpsons’ takes on Theranos (by another name, glub glub)

Everyone into the ‘LifeBoat’! Episode #754 of the long-running (35 seasons!) series ‘The Simpsons’ is a complete send-up of The Theranos Story in 22 minutes. This episode, which aired in the US on 29 October, transmutes Elizabeth Holmes into Persephone Odair, the young college dropout creator of a can-sized device that converts salt water to drinkable fresh water. The retrospective documentary and ‘news stories’ framing the tale trace Persephone’s and LifeBoat’s rise to fame and riches, then their fall. Set in SimpsonsWorld, the chief financier is the owner of the local nuclear plant, the zillionaire Montgomery Burns, whom she marries. There is an endless supply of in-jokes and jabs, such as Persephone at a TEDtalk saying “The doubters call this goal impossible, but I prefer to say, ‘I’m possible.’” (=”First, they think you’re crazy…”) and the blatant coverup of the technology (=Edison Lab, but here, if anyone drank the water, a competitor could steal the aqua-tech from the urine). The ‘can of oats’ converter, Persephone’s backstory, and the water, of course, are complete fails. Lots of celebrities make guest appearances, but not Judge Edward Davila or John Carreyrou, the author of ‘Bad Blood’. The plotline of “Thirst Trap: A Corporate Love Story” is featured on the WikiSimpsons here and here. It can be viewed on various streamers and can be purchased on YouTube. SFGATE, Entertainment Weekly, Photo from SFGATE screenshotted via Fox. 

Theranos restitution status: Holmes’ defense claims $250/month repayment *after* release is unfair

Is this thinking ahead or a high-priced legal exercise in futility? The US District Court decisions by Judge Edward Davila pertaining to restitution were clear: $452 million is owed jointly by Elizabeth Holmes and Sunny Balwani to 14 victims, including Safeway and Walgreens [TTA 31 May]. The question is how it will be repaid. The original order by the District Court for Holmes stated only a $25 per month payment while she is at the Bryan FPC. The Justice Department has now requested that the error be amended to now stipulate a $250 per month payment, or at least 10% of her income, after completion of sentence. Holmes’ legal counsel has now filed papers objecting to this assessment, which will take place at least nine years in the future. They cite her “limited financial resources”.

It seems that Holmes will have more trouble paying the $25/month from Bryan, as her financial resources will be even more limited. By some estimations, $25 per quarter is the average earning from prison work. What’s also apparent: her legal counsel is costing her much more than that just for the filing.

Balwani, on the other hand, has been ordered to pay $1,000 per month after his release. The District Court also fined him $25,000 for reasons not disclosed in news sources. Holmes has not been fined. 

One wonders how the lenders will be repaid–proportional checks for pennies? Monthly or quarterly? This Editor is sure that the Murdoch family interests will be waiting eagerly for the payment, while the investments for Murdoch and most others were written off years ago. The small investors whose investment advisors bought shares on the secondary (resale) market get not even that penny.

Much has been made of her net worth circa 2015 when her Theranos stock was valued on the bubble at $4.5 billion, but that was then and this is now. The Feds continue to search for hidden assets held by both Holmes and Balwani. CBSNews, NY Post

Mid-week roundup: Holmes turns herself in, ChatGPT as good ER explainer, VA Spokane to cut staff to pay for Oracle Cerner EHR problems?, former Cerner campus conversion

Holmes’ time at Bryan begins. Today (30 May) in a Texas morning, Elizabeth Holmes self-surrendered to the Federal Prison Camp (FPC) at Bryan to begin her 135-month sentence (11 years+). With good behavior and enrollment in certain programs, she may serve about 85% or about 9.5 years as No. 24965-111. The ‘shakycam’ video link here from Sky News (scroll to 3:18) initially from across the street then at the fence shows her delivery in a NY state-plated Ford Expedition to the facility parking lot. Her parents give her paperwork to the officers, then she with the officers walk into the camp facility, with a goodbye wave by partner Billy Evans (ballcap by the car). After all the drama, the denouement is bog-standard save for the paparazzi. She is wearing glasses, a tan sweater and blue jeans, the latter two which will be exchanged for a uniform. Many might be surprised that the prison camp has green grass lawns and trees, without towers or impenetrable fences. This is a low security facility for 650 women on 37 acres, but it remains a prison with all the schedules and restrictions that entails.

Her appeals to the Ninth Circuit Court on her conviction and sentencing, with now the restitution, continue as does the puzzle of how to compensate the victims identified by the US District Court as being owed $452 million payable jointly by her and Sunny Balwani. The order of restitution is here (PDF) There are a dozen identified financial victims from the relatively small (the Eisenmans’ $150,000) to the $125 million of Keith Rupert Murdoch. Both Safeway ($14.5 million) and Walgreens ($40 million) are identified separately. At this point at Bryan, she will be earning between $0.12 and $1.15, earning perhaps $25 every four months based on older data. According to the BBC article today, half of that will go to her victims, said Randy Zelin, a professor at Cornell Law School. The Feds will continue to scrutinize for hidden assets. Mercury News

Our Theranos Saga that started in October 2015 now endeth here, except for news on appeals or changes in circumstances.

On a somewhat lighter note, this non-paywalled Insider article charts the up and downsides of using ChatGPT as an explainer to patients in the ER/ED.  Joshua Tamayo-Sarver, MD, has been an ER doctor for almost 14 years as well as a VP of innovation for two healthcare tech companies, Vituity and Inflect Health. He recently started using ChatGPT4 as an adjunct to treatment, to explain difficult emergency situations to patients and family in simple non-medical language. Dr. Tamayo-Sarver’s article in Fast Company provides a solid narrative of how the simplicity and empathy of ChatGPT’s explaining treatment (in this case of a 96 year old woman with lung edema and dementia) works and helps the staff de-escalate the situation developing with her children and give them a chance to start her correct treatment determined by the doctor, not ChatGPT. (What was her outcome?) As the doctor explains, working with ChatGPT is inadequate for diagnostics, but adequate for ‘hungover intern’ level actions: taking patient history, creating long-form communication for patients and staff, and explaining highly technical information with empathy and compassion.

Will the Spokane VA location which proved to be The Last Straw for the VA with Oracle Cerner from October 2022 pay for it with cuts in staff? This year, Mann-Grandstaff VA Medical Center is projected to run a budget deficit of about $35 million. In a March email, the Mann-Grandstaff director Robert Fischer stated that the Northwest VA VISN (regional) director said this will require Mann-Grandstaff to cut about 15% of staff. Yet the VA chief of VA health care, Shereef Elnahal, has denied this. The controversy around this has prompted VA’s secretary, Denis McDonough, to issue a statement that he will look into these reports but stopped short of confirming that no staff would be cut. Spokesman-Review (Spokane)  Hat tip to HISTalk 31 May

Cerner’s Continuous Campus in Kansas City, Kansas, apparently will be redeveloped. Two local developers are in contract with Oracle to buy the empty 63.5 acre property with twin nine-story office towers. Last week, local authorities approved rezoning with an amended master plan. Developer plans are to convert the north tower to 224 to 232 market-rate apartments above ground-floor commercial space. While the plan for the south tower is to stay as 660,000 square feet of office space plus parking, no interest has come from lessees. According to reports, Oracle’s purchase of Cerner and shutdown of many operations in the area dumped 4.1 million square feet of real estate in the area.  Fox4KC

Breaking & updated–Time’s Up! Ninth Circuit Court to Elizabeth Holmes: proceed to Federal prison. District Court: surrender 30 May, pay $452M in restitution with Sunny.

Breaking/Updated. With the bail pending appeal denied, it was back to Judge Davila and the US District Court to determine a new surrender date to a Federal penitentiary. That date is now 30 May. The Ninth Circuit Court of Appeals ruled Tuesday that Elizabeth Holmes’ appeal did not meet the standard for a further delay of her sentence–that it raised a substantial question of law or fact–and that her motion for bail pending appeal was denied. The ruling by the three-judge panel was brief and is here (PDF) with the pertinent text below:

Appellant’s motion for bail pending appeal (Docket Entry Nos. 36-38) is
denied. Appellant has not shown that: (1) the appeal raises a “substantial question”
of law or fact that is “fairly debatable,” and (2) if that question is decided in
appellant’s favor, the likely outcome is reversal, an order for a new trial on all
counts resulting in imprisonment, a sentence that includes no term of
imprisonment, or a sentence with a term of imprisonment less than time served
plus the expected duration of the appeal process. {USC and Hardy references snipped}

The existing briefing schedule remains in effect.

The appeal remains ongoing. The Ninth Circuit could require a new trial or a fresh sentence, but Holmes will be in prison serving time while the appeals court reviews it. Her chances of receiving any changes as a result of this appeal can be characterized as slim to none.

The defense requested self-surrender on 30 May (2 weeks) and Judge Davila granted it two hours later today (Wednesday). That motion is here with Judge Davila’s order is here. The judge had recommended the Federal Prison Camp (FPC) at Bryan, Texas, but a final assignment confirmation is to be confirmed by the Bureau of Prisons (BOP).  Mercury News

Also Tuesday, Judge Davila set the full amount of restitution to those defrauded by Theranos as $452 million. Both she and Sunny Balwani will be jointly liable for the restitution amount. It is higher than the $381 million the judge used for sentencing purposes [TTA 9 March] but this Editor notes that the AP stated that it is joint. There is an additional $25 million in promissory notes signed by Holmes which are part of a civil action [TTA 25 March]. How this restitution breaks out will require an examination of that restitution decision.

One wonders if Liz or Elizabeth (pictured above) will be the woman serving and paying off this amount, if one believes the incredible tale by Holmes in the New York Times two weeks ago. It’s a lot of bag lunches. Mercury News 

Breaking: Elizabeth Holmes’ surrender stayed by 9th Circuit Court of Appeals

This just in. As expected, Elizabeth Holmes will not be surrendering to Federal prison tomorrow, 27 April. Her defense filed yesterday for an emergency stay in the Ninth Circuit Court of Appeals. The court granted it on 25 April, yesterday. Since she was free on bail at the time of the filing, this emergency stay keeps it in effect until her motion for continued bail pending appeal is ruled on.

The PDF of the two-page notice is here.

While the surrender will be stayed based on the court’s rules, if the court follows the similar circumstances of Sunny Balwani’s stay and appeal, Holmes will have perhaps a month more freedom on bail before a further extension of bail is rejected. The main 100+ page appeal based on prosecutorial misrepresentations and actions by Judge Edward Davila in the presentation of evidence, plus oversentencing. will be reviewed by the court [TTA 19 April], which may take about a year. Neither the extension of bail or the appeal are given much chance of success.

Now what happens? The Daily Mail revealed that she and Billy Evans are living in an oceanfront San Diego rental, with their two children William and newborn Invicta, born on 9 February in San Diego. The residence is supposedly priced at $9 million. They have departed the rental in Silicon Valley and moved to Mr. Evans’ sunnier home town where the family will remain. Evans and his parents are readying a $3 million townhouse. They will be caring for the two children while the inevitable long trip to Bryan, TX–if Bryan will be the Federal facility–happens. To be updated.

Theranos’ Sunny Balwani reports to Federal prison

Ramesh ‘Sunny’ Balwani started serving his sentence at a Federal penitentiary in California. He surrended Thursday afternoon and will begin serving his 12 year and 9 month sentence at the Terminal Island Federal Correctional Institution (FCI) near San Pedro. Last December, he was convicted on all 12 counts of fraud and patient fraud.

His defense is continuing to appeal his conviction but lost on 6 April in the 9th Circuit Court of Appeals which ruled that Balwani would not remain free while appeals are pursued. Additionally, he is appealing his assignment to the Atlanta federal prison (USP). Both Terminal Island and the facility he would be sent to in Atlanta are classified as low-security facilities. However, Atlanta has a history of corruption, inmate suicides, and abuse, which may come from the fact that it also has a high-security facility. Atlanta was investigated by Congress in 2021 and 2022. It is also a very old facility dating back 120 years, hardly a country club or ‘Club Fed’.

Terminal Island FCI dates back to 1938 and is located near the ports of Los Angeles and Long Beach, situated on Federal land that includes a Coast Guard base. The island was a farming, fishing, and shipbuilding center and once housed Howard Hughes’ monster Hercules H-4 seaplane, a/k/a The Spruce Goose. Commercial businesses include canneries, docks, and SpaceX. Because of the prison’s location, it’s held more than its share of famous/infamous prisoners: mobsters Al Capone, Mickey Cohen, and ‘Goodfella’ Henry Hill; Watergate’s G. Gordon Liddy, LSD advocate Timothy Leary, murderer Charles Manson, and car executive John Z. DeLorean. During World War II, it was used to hold court-martialed Navy prisoners. It is relatively small as Federal prisons go and holds about 1,000 inmates. 

The coverage from CNN to local media tends to be light on details and heavy on a rerun of Theranos and Balwani’s involvement with Holmes. Holmes is due to surrender next week on 27 April, unless the Circuit Court of Appeals stays the start of sentence. KRON4, CNN, KTVU2

Theranos’ Holmes files appeal seeking to overturn ‘unjust’ conviction, ‘excessive’ sentence (updated)

With the clock ticking down on her freedom, the Holmes defense appeals. Elizabeth Holmes’ last-ditch appeal was filed on Monday in the Ninth Circuit US Court of Appeals. The defense filing claims that her conviction was ‘unjust’ and should be thrown out on multiple grounds, based on prosecutorial misrepresentations and actions by Judge Edward Davila in the presentation of evidence.

  • Holmes did not falsely represent the Theranos blood lab technology to investors–that ‘highly credentialed Theranos scientists told Holmes in real time the technology worked’ and that ‘Outsiders who reviewed the technology said that it worked’.

What the jury heard was that the company’s lab machines could only perform a few tests and even in those, had significant accuracy problems. Yet Holmes claimed in her testimony that the labs could perform multiple tests with high accuracy. She admitted falsifying documents with pharmaceutical company logos (Merck/Schering-Plough, Pfizer) on internal reports to add credence to these claims, which was documented in other testimony, notably from a former Schering-Plough employee. 

  • Judge Davila ‘flouted the Federal Rules of Evidence’ by allowing certain testimony to be heard and excluding other testimony, such as from Sunny Balwani during his pre-trial testimony that he was responsible for the fraudulent financial projections.

The appeal claims that the jury heard testimony from a supposed layman who was actually an expert witness, a federal regulator’s report on Theranos that was ‘unfairly prejudicial’ (CMS closing the lab in July 2016?), and that Theranos voided test results from its labs [see TTA 19 May 2016], confusing the jury in that it was an admission that the Theranos Edison labs didn’t work. Excluding Balwani’s testimony on the Theranos financials and projections given to investors was labeled abuse of judicial discretion.

“These errors—together with the exclusion of prior testimony from Holmes’ co-defendant taking sole responsibility for the company’s financial model—produced an unjust conviction,” the appeal reads.

The problem with this part of the appeal is that all these ‘misrepresentations’ were factual. Holmes as CEO was well acquainted with both the faulty labs and the financials. With that CEO title comes a sign that The Buck Stops Here.  

Plan B–the ‘excessive’ prison sentence. If the appeals court does not throw out the conviction, the appeal turns to over-sentencing. Returning to Judge Davila, he used the wrong legal standard about the number of victims and the amount of investor losses, using a “preponderance of evidence” standard instead of “clear and convincing”. The sentence was also excessive for a woman whom “unlike other white-collar defendants–neither sought nor gained any profit from the purported loss and was trying to improve patient health.” To this Editor’s recollection, Judge Davila bent over nearly backward to exclude from the trial the prosecutorial desire to highlight Holmes’ fame and high flying lifestyle, including expenses for air, hotel, and clothing.

The Ninth Circuit Court of Appeals will need to get eye prescriptions updated, since there are 10,000 pages of trial transcripts and 16,000 pages from other court records to review. This review may take months, a year–or more–and has only a small chance of success. Mercury News (may be paywalled)    Updated. The full appellant filing of 132 pages is located here.

To this Editor, who is not a lawyer nor plays one on TV, the effort to throw out the conviction is absurd. The prosecution piled high the fraud evidence to support each count. It was not difficult as there were a lot of investors. In the run-up to the trials, Judge Davila was meticulous and even-handed with both prosecution and defense. He was conservative in all aspects, from conduct during the trial to preventing over-aggressiveness by both sides in witness questioning to reining in the ‘Sunny as Svengali’ defense tack. Aside from this trial (but outside the appeal), there are other Theranos fraud cases at the Federal and state levels where awards were made to plaintiffs when the company still had money (see below; also Walgreens settled, see our Ch. 44). The appeals court might seriously consider the sentence issues. On the face of it, she was convicted of but four counts versus Balwani’s 12, yet is receiving very nearly the same length of sentence; however, these four counts were the heaviest (Ch. 16).  Though Judge Davila strictly considered the Federal sentencing guidelines and steered a middle course of 11.25 years between the 15 years (of 20 maximum) recommended by the prosecution and the nine years recommended by the probation officers, to be served concurrently, the appeals court may see an error, somewhere around losses–but it is unlikely, and even if there are errors, they may make no difference.

But to this Editor, one testimony says it all about the fraud. It was from Brian Grossman, then and now chief investment officer and CIO of PFM Health Sciences, a San Francisco firm that manages billions in public and private funds for early-stage healthcare investment. It is particularly damning. The firm invested $96 million based on the projections, the claims that it was a miniaturized lab capable of replacing thousands of feet of lab space into a box (the ‘steak’), of four-hour turnaround on lab results in retail, one hour in hospitals, and that a Stanford researcher of some prestige vetted it. From our article:

While Balwani nixed Grossman speaking with Walgreens and UnitedHealth, Channing Robertson of Stanford, who helped Holmes start Theranos, vetted their labs as extremely advanced technology–one with which competitors would spend years catching up–for a serious investor, sauce, potato, vegetables, and trimmings on that sizzling steak.

Unlike the picture the defense is painting of Balwani controlling Holmes, Grossman took care to note that Holmes, not Balwani, did most of the talking at the time. While he found the company highly secretive, he, unfortunately, discounted it. So in went PFM’s $96 million in February 2014, which included $2.2 million from a designated ‘friends and family fund’ which had investments from low-income people.

Three years later, PFM also won its own fraud case against Theranos, settling its lawsuit for about half–an estimated $40-50 million….The timing was good–it was while the company still had some money to claw back. 

Holmes is scheduled to surrender herself to the US Bureau of Prisons (BOP) on 27 April, less than two weeks from now. She will not be able to remain free while this appeal is pending, unless the defense files with the Ninth Circuit Court for a delay (expected) and the court agrees to stay the surrender for some time. A similar appeal was denied for Sunny Balwani, who surrendered on 20 April, a month later than his original date, to Terminal Island and will be held there indefinitely. Another major issue for the Balwani defense and being appealed is his assignment to the scandal-plagued Atlanta Federal Penitentiary. Judge Davila recommended that Holmes serve her sentence at Bryan, Texas, but the BOP has not confirmed that.

Still pending are the restitutions to be made by both Holmes and Balwani, separately, neither of whom have the $381 million (Judge Davila’s calculation for Holmes) or the $878 million that the prosecution has tallied. TTA 22 March

This Editor would like to give a hat tip with flourishes and trumpets to the moderator of the r/Theranos Reddit sub forum, mattshwink, and poster OldSchoolCSci, for clarification on many legal points of my analysis.  

The Theranos Two lose their fight for freedom on appeal as Federal prison surrender dates near

It was not a happy Easter weekend for either Elizabeth Holmes or Sunny Balwani. 

Late on Monday, Judge Edward Davila of the Federal Court, Northern District of California, ruled that Elizabeth Holmes would not be able to remain free on bail while appealing her trial and sentence. In his 11-page ruling, he dismissed the defense claims that evidence around Theranos’ technology was not presented to the jury and affirmed that the key charges were related to financial fraud, the company’s financial status, and the false claim that the technology was validated by pharmaceutical companies. “Whether the jury heard more or less evidence that tended to show the accuracy and reliability of Theranos technology does not diminish the evidence the jury heard of other misrepresentations Ms. Holmes had made to investors.” He also noted that her defense had not introduced anything to make a reversal of the decision or a new trial likely, such as new evidence.

It’s anticipated that Holmes’ defense will quickly file an appeal of Judge Davila’s decision to the 9th Circuit Court of Appeals. However, this is the same court that denied Sunny Balwani’s same appeal last Friday. Holmes’ surrender to Federal prison is scheduled for 2pm on 27 April, a little over two weeks from now. She will be serving her 11+ year sentence at the Federal prison in Bryan, Texas unless the Bureau of Prisons changes this recommendation to another Federal prison. 

Her defense has filed multiple appeals of Judge Davila’s rulings and the jury’s guilty verdict on four counts of fraud of 11 on various grounds, including errors made during the trial [TTA 15 Dec 22], with the goal of securing a new trial. Those appeals are with the 9th Circuit and could go on for years. What it now looks like is that Holmes will be serving her time in Texas while these appeals go through, not free or under house arrest. Serving time will not be easy for her in a cell with three other women and duties such as stuffing bag lunches. Mercury News (paywalled), CBS Bay Area, The Hill, TechCrunch

Sunny Balwani had a long Good Friday, receiving the bad news late Thursday that the 9th Circuit Court of Appeals denied his bid to remain free while on appeal. The court denied the appeal on the basis that Balwani had not raised any substantial questions of law or new evidence resulting in a reversal on some of the charges that would shorten his sentence. He was found guilty on all 12 counts and was sentenced to 12 years and nine months. Balwani’s lawyers now have requested from Judge Davila a new surrender date of 20 April, stating that their client needs time to get his “affairs in order”. His original surrender date was 16 March, delayed by the appeal. Where Balwani will serve his sentence is still up in the air. Judge Davila had recommended the Federal facility at Lompoc in Santa Barbara County, but the Bureau of Prisons recommended the Atlanta penitentiary which has been dogged by years of scandals, security lapses, and prisoner abuse allegations. His defense is appealing this assignment. As of now, Balwani will surrender to Terminal Island near San Pedro in Southern California in a little over a week. Mercury News (paywalled), CBS News Bay Area 

Some reports have indicated that Judge Davila has finished with all his rulings, but what is still not finalized is the restitution both Holmes and Balwani must make to investors. Those rulings are scheduled for this month. The amounts being debated are largely theoretical as neither Holmes nor Balwani has much in the way of assets left. TTA 22 March

Week-end update: Breaking–Theranos lab director suing Hulu, Disney for defamation; ‘green shoots’ for SonderMind, Cognito, Vital, MedArrive; 3 in Asia; Telstra Australia’s new CTO

Key Theranos prosecution witness suing Disney and Hulu for misrepresentation and defamation. It’s not only the FTC but also Adam Rosendorff, MD, the former lab director for Theranos who quit in late 2014, who is fighting against misrepresentation, in this case a fictionalized portrayal of the lab director character. l’affaire Theranos was lightly fictionalized in the docudrama ‘The Dropout” that ran on Hulu in 2022. Dr. Rosendorff is suing both Hulu, its corporate parent, Disney, plus other listed producers, in a New York State Supreme Court lawsuit (link and PDF) for defamation. The summons was filed in New York County (Manhattan) Thursday.

While his name was not used, the lab director named ‘Mark Roessler’ in “The Dropout” was portrayed, according to the summons, as unethical and unfit. He was “shown as covering up Theranos’ fraudulent scheme, thereby endangering patients’ lives … and as otherwise unfit to practice medicine,” “falsely portrayed as a perjurer, a criminal, and of being completely unfit to practice his profession.” In the docudrama, Roessler orders the destruction of damaging lab results, falsifies records, and engages in dishonest behavior. The reality was that Dr. Rosendorff testified against both Elizabeth Holmes and Sunny Balwani in their trials as an invaluable prosecution witness, detailing the failures of the lab tests in his testimony and affidavits [TTA 1 Oct and 6 Oct 2021]. He quit Theranos on these issues and more after 18 months when Holmes and Balwani refused to correct them. “Both the media and defendants’ reckless disregard is sufficient evidence of the malice which a public figure must show to establish claims for defamation.”

Being a whistleblower ain’t for sissies. Being tagged as part of Theranos’ demise and years in endless legal proceedings broke him professionally and fractured him mentally, as revealed after Holmes’ conviction. It became grist for yet more defense appeals that failed [TTA 20 Oct, 26 Oct 2022]. Reuters, New York Post

A (remainder) sale, partnership, and funding roundup–a few green shoots of spring

SonderMind buys out the remains of Mindstrong. The deal is for the remainder of Mindstrong’s tech assets and about 20 related staff. Price was not disclosed. Mindstrong ceased operations as of 10 March and announced they would lay off 100+ employees including the CEO and CFO no later than 15 April according to their filed WARN notice. It raised over $160 million since 2014 including a $100 million Series C in 2020. SonderMind is also in virtual mental health, assessing potential patients, matching them with a therapist in their state, who will see the patient virtually or in-person. According to SonderMind, Mindstrong’s tech will add to personalized care journeys, clinical notes templates, and improved measurement-based services.  SonderMind has had its own series of layoffs, with a 15% cut late in 2022. The deflation of telemental health continues. Mobihealthnews, Digital Health Business & Technology

Neurotech company Cognito Therapeutics raised $73 million in a Series B. It was led by FoundersX Ventures, adding new investors Starbloom Capital, Alzheimer’s Drug Discovery Foundation, WS Investment Company, and IAG Capital. Total funding is now $93 million. Cognito has developed an external neuromodulation device for neurologically degenerative diseases. It uses sensory stimulation to evoke gamma oscillations, which are believed to play a part in memory operations. It is concentrating on improving cognition and memory in Alzheimer’s Disease early-to-mid-stage patients. Cognito is being investigated as part of the HOPE study for Alzheimer’s Disease.  It received FDA Breakthrough Device Designation in 2021 and has completed a Phase 2 trial. Mobihealthnews, Business Wire release

Vital, a patient experience software developer, raised $24.7 million in a Series B. The funding was led by Transformation Capital, with support from Threshold Ventures, strategic health system investors and Vital CEO/Mint.com creator Aaron Patzer. Total funding is now over $40 million. Vital provides real-time patient updates and messaging services for patients and families admitted to hospitals and EDs, as well as follow-ups such as appointments. Business Wire release

MedArrive, an in-home care provider, is partnering with Ouma Health, for maternal-fetal care of women on Medicaid coverage. MedArrive deploys a field provider network for in-home care including testing, assessments, SDOH, and extension of provider services. The technology includes a fully integrated care management platform. Ouma Health is a maternal-fetal telehealth service including behavioral health. Release

And some Asia-Pacific updates…

In Vietnam, online pharmacy Medigo received $2 million in Series A funding, led by East Ventures, with participation from Pavilion Capital and Touchstone Partners. Intellect, a telemental health startup based out of Singapore, received undisclosed funding from global healthcare provider IHH Healthcare for its regional expansion. In India, EHR startup DocPlix raised Rs 5 crore ($600,000) in a pre-series A funding round led by Eris Lifesciences. Mobihealthnews

In Australia, Telstra Health’s new CTO is Farhoud Salimi. He joins in April from eHealth NSW where he held the position of Executive Director, Service Delivery (CTO) among others in a 15-year tenure. Mr. Salimi replaces Russel Duncan, who retired at the end of last year. Telstra release, Mobihealthnews