Another grim milestone for troubled tech startup Theranos, once seen as the Cinderella story of medical technology: the company has voided all of the blood tests performed with its signature Edison machines, sending “tens of thousands of corrected blood test reports to doctors and patients,” according to the Wall Street Journal.
“The Edison machines were touted as revolutionary and were the main basis for the $9 billion valuation attained by the Palo Alto, Calif., company in a funding round in 2014. But Theranos has now told regulators that it threw out all Edison test results from 2014 and 2015,” the Journal reports.
University of Washington associate professor of laboratory medicine Geoffrey Baird told the WSJ there have been massive test recalls in the past, “but I’m not aware of one where a company recalled the entirety of the results from its testing platform.”
The Journal grimly notes that faulty Theranos test results might have “thrown off health decisions” made by patients and their doctors, citing one Phoenix, Arizona doctor who said she sent a patient to the emergency room after “receiving abnormally elevated test results from Theranos in late 2014.”
This seems pretty close to the worst-case scenario for a medical testing company, and while Theranos representatives are still keeping a brave face and insisting “excellence and quality and patient safety is our top priority,” the Journal finds federal regulators coming closer to the company, while its partners nervously back away.
Walgreens, for example, is threatening to terminate its relationship with Theranos unless it satisfies federal regulators. The increasingly tense relationship between the two companies was not improved when Theranos “declined to quantify to Walgreens the scale of its test corrections,” as the Journal puts it. That’s not the kind of information Walgreens executives wanted to obtain by reading the Wall Street Journal.
Ars Technica notes that Theranos “is preparing to open a new lab in Harrisburg, Pennsylvania – equipped with standard blood testing machines.”
That’s not going to please investors who poured astounding sums of money into the brash startup based on the promise of its revolutionary Edison technology, which could allegedly perform a full set of tests on just a few drops of blood, extracted with a pinprick of the finger.
The company’s detractors have argued those investors were also hypnotized by the remarkable personal story of young, female superstar CEO Elizabeth Holmes, and manipulated by the celebrity political talent recruited to the board of directors, at the expense of actual medical experience.
Theranos’ concession that its signature testing method was unreliable might also set off a few bombshells from disgruntled current and former employees, who have been depicted as waging a bitter internal war against company executives over quality control, particularly departed president and chief operating officer Sunny Balwani. The hour of “I Told You So” draws nigh.
Seeking Alpha bluntly declares Theranos to be a “fraud” whose intellectual property is “worth closer to $0, versus the $9 billion valuation it once had.”
The Wall Street Journal is credited with unraveling that fraud with its investigative reporting, before the company could go public – a lesson Seeking Alpha recommends investors should study carefully before taking a ride on tech unicorns.
Theranos defenders have argued the company was unfairly targeted by opportunistic federal regulators, looking to make some headlines by taking a splashy tech startup down. That argument is much harder to make, after the company announced it had to retract two years’ worth of blood tests.