How Startup Theranos Has Struggled With Its Blood-Test Technology

John Carreyrou, How Startup Theranos Has Struggled With Its Blood-Test Technology. The Wall Street Journal, 16 October 2015. “On Theranos Inc.’s website, company founder Elizabeth Holmes holds up a tiny vial to show how the startup’s “breakthrough advancements have made it possible to quickly process the full range of laboratory tests from a few drops of blood.” The company offers more than 240 tests, ranging from cholesterol to cancer. It claims its technology can work with just a finger prick. Investors have poured more than $400 million into Theranos, valuing it at $9 billion and her majority stake at more than half that. The 31-year-old Ms. Holmes’s bold talk and black turtlenecks draw comparisons to Apple Inc. cofounder Steve Jobs. But Theranos has struggled behind the scenes to turn the excitement over its technology into reality. At the end of 2014, the lab instrument developed as the linchpin of its strategy handled just a small fraction of the tests then sold to consumers, according to four former employees.”

Winner of the 2015 George Polk Award for Financial Reporting. “The award for Financial Reporting will go to John Carreyrou of The Wall Street Journal whose investigation of Theranos, Inc. raised serious doubts about claims by the firm and its celebrated 31-year-old founder, Elizabeth Holmes, that its new procedure for drawing and testing blood was a transformational medical breakthrough in wide use at the firm’s labs. Carreyrou’s well-researched stories, reported in the face of threats of lawsuits and efforts to pressure some sources to back off of their accounts, led to a reevaluation of Theranos’ prospects among investors and have been followed by regulatory actions against the company and widespread discussion that publications and institutions from Fortune and The New Yorker to Harvard and the White House may have been too quick to hail Holmes, a Stanford dropout whose personal wealth at the height of her startup’s rise was an estimated $4.5 billion, as a success story in the tradition of Steve Jobs, Bill Gates and Mark Zuckerberg.”

One former senior employee says Theranos was routinely using the device, named Edison after the prolific inventor, for only 15 tests in December 2014. Some employees were leery about the machine’s accuracy, according to the former employees and emails reviewed by The Wall Street Journal….

Theranos also hasn’t disclosed publicly that it does the vast majority of its tests with traditional machines bought from companies like Siemens AG….

Ms. Holmes, Theranos’s chairman and chief executive, declined interview requests from the Journal for more than five months. Last week, the company said she would be available to comment, but her schedule didn’t allow it before publication of this article….

Theranos began offering tests to the public in late 2013. It opened 42 blood-drawing “wellness centers” in the Phoenix area, two in California and one in Pennsylvania. Most are in Walgreens Boots Alliance Inc. drugstores.

Ms. Holmes successfully lobbied for an Arizona law that allows people to get tests without a doctor’s order. Theranos’s promise of fast results and prices that are “a fraction” of other labs pits it against Quest Diagnostics Inc. and Laboratory Corp. of America Holdings, which dominate the $75 billion-a-year blood-testing industry in the U.S….

Whether labs buy their testing instruments or develop them internally, all are required to prove to the federal Centers for Medicare and Medicaid Services that they can produce accurate results. The process is known as proficiency testing and is administered by accredited organizations that send samples to labs several times a year.

Labs must test those samples and report back the results, which aren’t disclosed to the public. If a lab’s results are close to the average of those in a peer group, the lab receives a passing grade.

In early 2014, Theranos split some of the proficiency-testing samples it got into two pieces, according to internal emails reviewed by the Journal. One was tested with Edison machines and the other with instruments from other companies.

The two types of equipment gave different results when testing for vitamin D, two thyroid hormones and prostate cancer. The gap suggested to some employees that the Edison results were off, according to the internal emails and people familiar with the findings.

Senior lab employees showed both sets of results to Sunny Balwani, Theranos’s president and chief operating officer. In an email, one employee said he had read “through the regulations more finely” and asked which results should be reported back to the test administrators and government.

Mr. Balwani replied the next day, copying in Ms. Holmes. “I am extremely irritated and frustrated by folks with no legal background taking legal positions and interpretations on these matters,” he wrote. “This must stop.”

He added that the “samples should have never run on Edisons to begin with.”

Former employees say Mr. Balwani ordered lab personnel to stop using Edison machines on any of the proficiency-testing samples and report only the results from instruments bought from other companies.

The former employees say they did what they were told but were concerned that the instructions violated federal rules, which state that a lab must handle “proficiency testing samples…in the same manner as it tests patient specimens” and by “using the laboratory’s routine methods.”

See also: Nick Bilton, How Elizabeth Holmes’s House of Cards Came Tumbling Down. Vanity Fair, 6 September 2016.